12/31/2017 12/31/2016
Par value of consolidated obligations of the FHLBank $ 44,953
$ 42,481

Par value of consolidated obligations of all FHLBanks $ 1,034,260
$ 989,311

FHFA regulations provide that we must maintain aggregate assets of the following types, free from any lien or pledge, in an amount at least equal to the amount of our consolidated obligations outstanding:


▪	~~Cash;~~


▪	~~Obligations of, or fully guaranteed by, the U.S government;~~


▪	~~Secured advances;~~


▪	~~Mortgages that have any guaranty, insurance or commitment from the U.S. government or any agency of the U.S. government; and~~


▪	Investments described in Section 16(a) of the Bank Act, which, among other items, includes securities that a fiduciary or trust fund may purchase under the laws of the state in which the FHLBank is located.

▪Cash;

▪Obligations of, or fully guaranteed by, the U.S. government;

▪Secured advances;

▪Mortgages that have any guaranty, insurance or commitment from the U.S. government or any agency of the U.S. government; and

▪Investments described in Section 16(a) of the Bank Act, which, among other items, includes securities that a fiduciary or trust fund may purchase under the laws of the state in which the FHLBank is located.

Table 42 illustrates our compliance with the FHFA’s regulations for maintaining aggregate assets at least equal to the amount of consolidated obligations outstanding as of December 31, ~~2017~~2023 and ~~2016~~2022 (dollar amounts in thousands):

Table 42


	12/31/2023		12/31/2022
Total non-pledged assets	$	74,514,009	$	71,641,535
Total carrying value of consolidated obligations	$	69,790,738	$	67,281,243
Ratio of non-pledged assets to consolidated obligations	1.07		1.06

12/31/2017 12/31/2016
Total non-pledged assets $ 47,924,667
$ 44,510,028
Total carrying value of consolidated obligations $ 44,935,119
$ 42,497,676
Ratio of non-pledged assets to consolidated obligations 1.07
1.05

The Office of Finance has responsibility for facilitating and executing the issuance of the consolidated obligations on behalf of the FHLBanks. It also prepares the FHLBanks’ Combined Quarterly and Annual Financial Reports, services all outstanding debt, serves as a source of information for the FHLBanks on capital market developments and manages the FHLBanks’ relationship with the ~~NRSROs~~nationally recognized statistical ratings organizations (NRSRO) with respect to ratings on consolidated obligations. In addition, the Office of Finance administers two tax-exempt government corporations, the Resolution Funding Corporation and the Financing Corporation, which were established as a result of the savings and loan crisis of the 1980s.

Consolidated Obligation Bonds: Consolidated obligation bonds are primarily used to satisfy our ~~term~~ funding needs. Typically, the maturities of these bonds range from less than one year to 30 years, but the maturities are not subject to any statutory or regulatory limit. Consolidated obligation bonds can be issued and distributed through negotiated or competitively bid transactions with approved underwriters or selling group members.

Consolidated obligation bonds generally are issued with either fixed or variable rate payment terms that use a variety of standardized indices for interest rate resets including, but not limited to, ~~LIBOR, Constant Maturity Swap, U.S. Prime~~SOFR and Three-Month U.S. Treasury Bill Auction Yield. In addition, to meet the specific needs of certain investors in consolidated obligations, both fixed and variable rate bonds may also contain certain embedded features, which result in complex coupon payment terms and call features. Normally, when such a complex consolidated obligation bond is issued, we simultaneously enter into a derivative containing mirror or offsetting features to synthetically convert the terms of the complex bond to a simple variable rate callable bond tied to one of the standardized indices. We also simultaneously enter into derivatives containing offsetting features to synthetically convert the terms of some of our fixed rate callable and bullet bonds and floating rate bonds to a simple variable rate callable or bullet bond tied to one of the standardized indices.

Consolidated Obligation Discount Notes: The Office of Finance also sells consolidated obligation discount notes on behalf of the FHLBanks that generally are used to meet short-term funding needs. These securities have maturities up to one year and are offered daily through certain securities dealers in a discount note selling group. In addition to the daily offerings of discount notes, the FHLBanks auction discount notes with fixed maturity dates ranging from 4 to 26 weeks through competitive auctions held twice a week utilizing the discount note selling group. The amount of discount notes sold through the auctions varies based upon market conditions, investor demand, and/or on the funding needs of the FHLBanks. Discount notes are ~~generally~~ sold at a discount and mature at par.

~~Use of~~ Derivatives

~~The~~ FHLBank’s Risk Management Policy (RMP) establishes guidelines for our use of derivatives. Interest rate swaps, ~~swaptions,~~ interest rate cap and floor agreements, calls, puts, ~~futures, forward contracts,~~ and other derivatives can be used as part of our interest rate risk management and funding strategies. ~~This policy,~~The RMP, along with FHFA regulations, prohibits trading in, or the speculative use of, derivatives and limits credit risk to counterparties that arises from derivatives. In general, we have the ability to use derivatives to reduce funding costs for consolidated obligations and to manage other risk elements such as interest rate risk and mortgage prepayment ~~risk, unsecured credit risk, and foreign currency~~ risk.

Generally, we use derivatives by designating them as either a fair value or cash flow hedge of an underlying financial instrument, firm commitment, or forecasted transaction and in asset/liability management (i.e., economic hedge). Economic hedges are defined as derivatives hedging specific or non-specific underlying assets, liabilities, or firm commitments that do not qualify for hedge accounting, but are acceptable hedging strategies under our RMP. For example, we use derivatives in our overall interest rate risk management to adjust the interest rate sensitivity of consolidated obligations to approximate more closely the interest rate sensitivity of assets, including advances, investments and mortgage loans, and/or to adjust the interest rate sensitivity of advances, investments, and mortgage loans to approximate more closely the interest rate sensitivity of liabilities. We also use derivatives to manage embedded options in assets and liabilities, to hedge the market value of existing assets, liabilities, and anticipated transactions, to hedge the duration risk of prepayable instruments, to mitigate adverse impacts to earnings from the contraction or extension of certain assets (e.g., advances or mortgage assets) and liabilities, and to reduce funding costs as discussed below.

We often execute derivatives concurrently with the issuance of consolidated obligation bonds (collectively referred to as swapped consolidated obligation bond transactions) to reduce funding costs or to alter the characteristics of our liabilities to more closely match the characteristics of our assets. At times, we also execute derivatives concurrently with the issuance of consolidated obligation discount notes in order to create synthetic variable rate debt at a cost that is often lower than funding alternatives and comparable variable rate cash instruments issued directly by us. This strategy of issuing consolidated obligations while simultaneously entering into derivatives enables us to more effectively fund our variable rate and short-term fixed rate assets. It also allows us, in some instances, to offer a wider range of advances at more attractive prices than would otherwise be possible. Swapped consolidated obligation transactions depend on price relationships in both the FHLBank consolidated obligation market and the derivatives market, primarily the interest rate swap market. If conditions in these markets change, we may adjust the types or terms of the consolidated obligations issued and derivatives utilized to better match assets, meet customer needs, and/or improve our funding costs.

We frequently purchase interest rate caps with various terms and strike rates to manage embedded interest rate cap risk associated with our variable rate MBS and CMO portfolios. Although these derivatives are valid economic hedges against the prepayment and option risk of our portfolio of MBS and CMOs, they are not specifically linked to individual investment securities and therefore do not receive fair value or cash flow hedge accounting. The derivatives are marked to fair value through earnings. We may also use interest rate caps and floors, swaptions, and callable swaps to manage and hedge prepayment and option risk on MBS, CMOs and mortgage loans.

See Item 7A – “Quantitative and Qualitative Disclosures About Market ~~Risk – Interest Rate Risk Management”~~Risk” for further information on derivatives.

Deposits

The Bank Act allows us to accept deposits from our members, housing associates, any institution for which we are providing correspondent services, other FHLBanks, and other government instrumentalities. We offer several types of deposit programs, including demand, overnight, and term deposits.

Liquidity Requirements: To support deposits, FHFA regulations require us to have at least an amount equal to current deposits received from our members invested in obligations of the U.S. government, deposits in eligible banks or trust companies, or advances with remaining maturities not exceeding five years. In addition, we must meet the additional liquidity policies and guidelines outlined in our RMP. See Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Risk Management – Liquidity Risk Management” for further discussion of our liquidity requirements.

Capital, Capital Rules and Dividends

FHLBank Capital Adequacy and Form Rules: We must comply with regulatory requirements for total regulatory capital, leverage capital, and risk-based capital. Our RMP requires that we also maintain a ratio of total regulatory capital to total assets of not less than 4.6 percent of total assets, total capital stock to total assets of 2 percent, and permanent capital must exceed our risk-based capital requirement. To satisfy these capital requirements, we maintain a capital plan. The Gramm-Leach-Bliley Act (GLB Act) allows us to have two classes of stock, and each class may have sub-classes. Under our capital plan, we have two classes of authorized stock – Class A Common Stock and Class B Common Stock. Both classes have $100 par value per share. Class A Common Stock is ~~conditionally redeemable on six months’ written notice from the member, and~~required for membership. Class B Common Stock supports member activities with us, to the extent Class A Common Stock is ~~conditionally redeemable on five years’ written notice from~~insufficient to support the member, subject in each case to certain conditions and limitations that may restrict our ability to effectuate such redemptions. Membership is voluntary. However, other than non-member housing associates (see Item 1 – “Business – Advances”), membership is required in order to utilize our credit and mortgage finance products. Members that withdraw may not reapply for membership for five years.

calculated activity requirement. The GLB Act and the FHFA rules and regulations define total capital for regulatory capital adequacy purposes as the sum of an FHLBank’s permanent capital, plus the amounts paid in by its stockholders for Class A Common Stock; any general loss allowance, if consistent with U.S. generally accepted accounting principles (GAAP) and not established for specific assets; and other amounts from sources determined by the FHFA as available to absorb losses. The GLB Act and FHFA regulations define permanent capital for the FHLBanks as the amount paid in for Class B Common Stock plus the amount of an FHLBank’s retained earnings, as determined in accordance with GAAP.

Under the GLB Act and the FHFA rules and regulations, we are subject to risk-based capital rules. Only permanent capital can satisfy our risk-based capital requirement. In addition, the GLB Act specifies a five percent minimum leverage capital requirement based on total FHLBank capital, which includes a 1.5 weighting factor applicable to permanent capital, and a four percent minimum total capital requirement that does not include the 1.5 weighting factor applicable to permanent capital. We may not redeem or repurchase any of our capital stock without FHFA approval if the FHFA or our ~~Board~~board of ~~Directors~~directors determines that we have incurred, or are likely to incur, losses that result in, or are likely to result in, charges against our capital, even if we are in compliance with our minimum regulatory capital requirements. Therefore, a member’s right to have its excess shares of capital stock redeemed is conditional on, among other factors, the FHLBank maintaining compliance with ~~the three~~ regulatory capital ~~requirements: risk-based, leverage,~~requirements.

See Item 5 – “Market for Registrant’s Common Equity – Related Stockholder Matters and ~~total capital.~~

~~Following are highlights from our capital plan:~~


▪	~~Two classes of authorized stock - Class A Common Stock and Class B Common Stock;~~


▪	~~Both classes have $100 par value per share and both are defined as common stock;~~


▪	Class A Common Stock is required for membership. The membership or asset-based stock requirement for each member is currently 0.1 percent of that member's total assets at the end of the prior calendar year, with a minimum requirement of 10 shares ($1,000) and a cap of 5,000 shares ($500,000);

▪

To the extent a member’s asset-based requirement in Class A Common Stock is insufficient to support its calculated activity-based requirement, Class B Common Stock must be purchased in order to support that member’s activities with us. The activity-based stock requirement is the sum of the stock requirements for each activity less the asset-based stock requirement in Class A Common Stock and is calculated whenever a member enters into a transaction, such as an advance (4.5 percent of outstanding advances (range = 4.0 to 6.0 percent));


▪	~~Excess stock is calculated daily. We may exchange excess Class B Common Stock for Class A Common Stock, but only if we continue to meet our regulatory capital requirements after the exchange;~~

▪

A member may hold excess Class A Common Stock or Class B Common Stock, subject to our right to repurchase excess stock or to exchange excess Class B Common Stock for Class A Common Stock, or may ask to redeem all or part of its excess Class A Common Stock or Class B Common Stock. A member may also ask to exchange all or part of its excess Class A Common Stock or Class B Common Stock for Class B Common Stock or Class A Common Stock, respectively, but all such exchanges are completed at our discretion;


▪	As a member increases its activities with us above the amount of activity supported by its asset-based requirement, excess Class A Common Stock is first exchanged for Class B Common Stock to meet the activity requirement prior to the purchase of additional Class B Common Stock;

▪

Under the plan, the Board of Directors establishes a dividend parity threshold that is a rate per annum expressed as a positive or negative spread relative to a published reference interest rate index (e.g., LIBOR, Federal funds, etc.) or an internally calculated reference interest rate based upon any of our assets or liabilities (e.g., average yield on advances, average cost of consolidated obligations, etc.);


▪	Class A Common Stock and Class B Common Stock share in dividends equally up to the dividend parity threshold, then the dividend rate for Class B Common Stock can exceed the rate for Class A Common Stock, but the Class A Common Stock dividend rate can never exceed the Class B Common Stock dividend rate;


▪	~~A member may submit a redemption request to us for any or all of its excess Class A Common Stock and/or Class B Common Stock;~~

▪

Within five business days of receipt of a redemption request for excess Class A Common Stock, we must notify the member if we decline to repurchase the excess Class A Common Stock, at which time the six-month waiting period will apply. Otherwise, we will repurchase any excess Class A Common Stock within five business days, though it is usually repurchased on the same date as the member’s redemption request;

▪

Within five business days of receipt of a redemption request for excess Class B Common Stock, we must notify the member if we decline to repurchase the excess Class B Common Stock, at which time the five-year waiting period will apply. Otherwise, we will repurchase any excess Class B Common Stock within five business days, though it is usually repurchased on the same date as the member’s redemption request;

▪

A member may cancel or revoke its written redemption request prior to the end of the redemption period (six months for Class A Common Stock and five years for Class B Common Stock) or its written notice of withdrawal from membership prior to the end of a six-month period starting on the date we received the member’s written notice of withdrawal from membership. Our capital plan provides that we will charge the member a cancellation fee in accordance with a schedule where the amount of the fee increases with the passage of time. There is no grace period after the submission of a redemption request during which the member may cancel its redemption request without being charged a cancellation fee; and


▪	~~Each required share of Class A Common Stock and Class B Common Stock is entitled to one vote subject to the statutorily imposed voting caps.~~

~~See~~Issuer Purchases of Equity Securities,” Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources - Capital” and Note 11 of the Notes to Financial Statements under Item 8 – “Financial Statements and Supplementary Data” for additional information regarding capital.

Dividends: We may pay dividends from unrestricted retained earnings and current income. (For a discussion regarding restricted retained earnings, please see Joint Capital Enhancement Agreement under this Item 1.) Our ~~Board~~board of ~~Directors~~directors may declare and pay dividends in either cash or capital stock. Under our capital plan, all dividends that are payable in capital stock must be paid in the form of Class B Common Stock, regardless of the class of stock upon which the dividend is being paid.

Consistent with FHFA guidance in Advisory Bulletin (AB) 2003-AB-08, Capital Management and Retained Earnings,,and other respective guidance, we adopted guidelines to establish a minimum or threshold level for our retained earnings in light of alternative possible future financial and economic scenarios, which are currently included under our RMP. ~~Our~~The calculation of our minimum (threshold) level of retained earnings ~~is calculated quarterly~~incorporates regulatory-based estimates of market risk and ~~re-evaluated by the Board of Directors as part of each quarterly dividend declaration. The retained earnings threshold effective~~credit risk, and includes estimates for ~~the period presented ending March 31, 2017~~risk exposure from operational risk, settlement risk related to unsettled consolidated obligations, and ~~all subsequent periods includes detailed calculations of five components:~~


▪	~~Market risk, which is calculated using a Monte Carlo simulation where the 99 percent confidence level result over a 90-day simulation horizon will represent the minimum market risk exposure level;~~


▪	Credit risk, which requires that retained earnings be sufficient to credit-enhance all of our assets from their actual rating levels to the equivalent of triple-A ratings (where advances are considered to be triple-A rated);

▪

Pre-settlement risk, which is based upon the pre-settlement risk exposure associated with recently issued and unsettled debt issuance and is based on the current daily potential maximum price risk exposure, based on the 99^th percentile of daily price risk calculated on the most recent 10 years of daily activity. For periods presented prior to March 31, 2017, pre-settlement risk was not a component of the retained earnings threshold;


▪	Operations risk, which is calculated using a combination of: (1) the Basel II standardized approach; and (2) our operational risk event loss history, taking into consideration operational loss events reported by the FHLBank System that could impact us in the future; and

▪

Net income volatility, which is calculated using: (1) the largest net loss on derivative hedging activities under 100-basis-point interest rate shock scenarios (maximum derivative hedging loss under up or down shocks); and (2) dividend payment risk, computed as four times the dollar amount of dividends paid on all stock (including mandatorily redeemable capital stock) for the most recently paid quarterly dividend.

The retained earnings threshold was considered by the Board of Directors when dividends were declared during the last two years, but the retained earnings threshold calculated in accordance with the RMP did not significantly affect the amount of dividends declared and paid. Tables 5 and 6 reflect the quarterly retained earnings threshold calculations utilized during 2017 and 2016 (in thousands), respectively, compared to the actual amount of retained earnings at the end of each quarter:

~~Table 5~~

Retained Earnings Component (based upon prior quarter end) 12/31/2017 09/30/2017 06/30/2017 03/31/2017
Market Risk $ 79,542
$ 82,124
$ 62,341
$ 67,921
Credit Risk 63,776
65,358
71,237
64,813
Pre-settlement Risk 30,000
30,000
30,000
30,000
Operations Risk 27,384
27,382
27,347
26,535
Net Income Volatility 119,162
121,098
118,954
109,766
Total Retained Earnings Threshold 319,864
325,962
309,879
299,035
Actual Retained Earnings as of End of Quarter 840,406
816,141
790,406
767,556
Overage $ 520,542
$ 490,179
$ 480,527
$ 468,521

~~Table 6~~

Retained Earnings Component (based upon prior quarter end) 12/31/2016 09/30/2016 06/30/2016 03/31/2016
Market Risk $ 99,953
$ 89,400
$ 70,709
$ 57,193
Credit Risk 45,031
49,862
49,825
49,421
Operations Risk 26,453
26,442
26,383
26,174
Net Income Volatility 95,366
85,903
92,173
85,950
Total Retained Earnings Threshold 266,803
251,607
239,090
218,738
Actual Retained Earnings as of End of Quarter 735,196
713,229
685,029
673,102
Overage $ 468,393
$ 461,622
$ 445,939
$ 454,364

Under our retained earnings policy, any shortage of actual retained earnings with respect to the retained earnings threshold is to be met over a period generally not to exceed one year from the quarter-end calculation. The policy also provides that meeting the established retained earnings threshold has priority over the payment of dividends, but that the Board of Directors must balance dividends on capital stock against the period over which the retained earnings threshold is met.net income volatility. The retained earnings threshold level fluctuates from period to period because it is a function of the size and composition of our balance sheet and the risks contained therein at that point in time. As of December 31, 2023, our retained earnings threshold was $0.7 billion. Retained earnings of $1.4 billion exceeded our retained earnings threshold by $0.7 billion at December 31, 2023.

The retained earnings threshold is calculated quarterly and considered by the board of directors as part of each quarterly dividend declaration. The RMP also provides that meeting the established retained earnings threshold has priority over the payment of dividends, but that the board of directors must balance dividends on capital stock against the period over which the retained earnings threshold is met. During the year ended December 31, 2023, the threshold did not significantly affect the amount of dividends declared and paid.

Joint Capital Enhancement Agreement (JCE Agreement) – We, along with the other FHLBanks, entered into a JCE Agreement intended to enhance the capital position of each FHLBank. More specifically, the intent of the JCE Agreement is to allocate a portion of each FHLBank’s earnings to a Separate Restricted Retained Earnings Account (RRE Account) at that FHLBank. Thus, in accordance with the JCE Agreement, each FHLBank allocates 20 percent of its net income to an RRE Account and will do so until the balance of the account equals at least one percent of that FHLBank’s average balance of outstanding consolidated obligations ~~for~~calculated as of the ~~previous~~last day of each calendar quarter.

~~Key provisions under~~ Additionally, the JCE Agreement provides that amounts in restricted retained earnings in excess of 150 percent of an FHLBank's restricted retained earnings minimum (i.e., one percent of that FHLBank's average balance of outstanding consolidated obligations calculated as of the last day of each calendar quarter) may be released from restricted retained earnings. Restricted retained earnings are ~~as follows:~~not available to pay dividends and are presented separately on the Statements of Condition.

▪

Under the JCE Agreement, each FHLBank will build its RRE Account to a minimum of one percent of its total outstanding consolidated obligations through the 20 percent allocation. For this purpose, total outstanding consolidated obligations is based on the most recent quarter's average carrying value of all consolidated obligations for which an FHLBank is the primary obligor, excluding hedging adjustments (Total Consolidated Obligations). Under the JCE Agreement, an FHLBank may make voluntary allocations above 20 percent of its net income and/or above the targeted balance of one percent of its Total Consolidated Obligations.

▪

The JCE Agreement provides that any quarterly net losses of an FHLBank may be netted against its net income, if any, for other quarters during the same calendar year to determine the minimum required year-to-date or annual allocation to its RRE Account. Any year-to-date or annual losses must first be allocated to the unrestricted retained earnings of an FHLBank until such retained earnings are reduced to a zero balance. Thereafter, any remaining losses may be applied to reduce the balance of an FHLBank’s RRE Account, but not below a zero balance. In the event an FHLBank incurs a net loss for a cumulative year-to-date or annual period that results in a decrease to the balance of its RRE Account below the balance of the RRE Account as of the beginning of that calendar year, such FHLBank’s quarterly allocation requirement will thereafter increase to 50 percent of quarterly net income until the cumulative difference between the allocations made at the 50 percent rate and the allocations that would have been made at the regular 20 percent rate is equal to the amount of the decrease to the balance of its RRE Account at the beginning of that calendar year.

▪

If the size of an FHLBank’s balance sheet would decrease and consequently, Total Consolidated Obligations would decline, the percent allocated could exceed the targeted one percent of Total Consolidated Obligations. The JCE Agreement provides that if an FHLBank's RRE Account exceeds 1.5 percent of its Total Consolidated Obligations, such FHLBank may transfer amounts from its RRE Account to the unrestricted retained earnings account, but only to the extent that the balance of its RRE Account remains at least equal to 1.5 percent of the FHLBank’s Total Consolidated Obligations immediately following such transfer. Finally, the JCE Agreement provides that during periods in which an FHLBank’s RRE Account is less than one percent of its Total Consolidated Obligations, such FHLBank may pay dividends only from unrestricted retained earnings or from the portion of quarterly net income not required to be allocated to its RRE Account.

▪

The JCE Agreement can be voluntarily terminated by an affirmative vote of two-thirds of the boards of directors of the FHLBanks, or automatically after the occurrence of a certain event after following certain proscribed procedures (Automatic Termination Event). An Automatic Termination Event means: (1) a change in the FHLBank Act, or another applicable statute, that will have the effect of creating a new, or higher, assessment or taxation on net income or capital of the FHLBanks; or (2) a change in the FHLBank Act, or another applicable statute, or relevant regulations that will result in a higher mandatory allocation of an FHLBank’s quarterly net income to any retained earnings account other than the annual amount, or total amount, specified in an FHLBank’s capital plan. An FHLBank’s obligation to make allocations to the RRE Account terminates after it has been determined that an Automatic Termination Event has occurred and one year thereafter the restrictions on paying dividends out of the RRE Account, or otherwise reallocating funds from the RRE Account, are also terminated. Upon the voluntary termination of the JCE Agreement, an FHLBank’s obligation to make allocations to its RRE Account is terminated on the date written notice of termination is delivered to the FHFA, and restrictions on paying dividends out of the RRE Account, or otherwise reallocating funds from the RRE Account, terminate one year thereafter.

Tax Status

WeSection 1433 of the Bank Act provides that we and the other FHLBanks are exempt from all federal, state and local taxation except for real property taxes.

Assessments

We are subject to a regulatory AHP assessment based on a percentage of our earnings. The FHLBanks are required to set aside annually the greater of an aggregate of $100 million or 10 percent of their current year’s income ~~before charges for~~subject to assessment to be contributed to the following year's AHP. In accordance with FHFA guidance for the calculation of AHP expense, interest expense on mandatorily redeemable capital stock is added back to income before charges for AHP.

Other Mission-Related Activities

~~In addition to supporting residential mortgage lending, one~~One of our core missions is to provide funding to support ~~related~~and sustain affordable housing and community ~~development.~~lending in our district. We administer and fund a number of ~~targeted~~ programs specifically designed to fulfill that mission. These programs provide housing opportunities for thousands of very low-, low- and moderate-income households and strengthen communities primarily in Colorado, Kansas, Nebraska, and Oklahoma.

As we continue to look for opportunities to support our members, we have made a growing commitment to our voluntary programs designed to support and sustain affordable housing and community lending in our district. In 2024, we are providing 2.5 percent of our 2023 net income before our AHP assessment. In 2025 and thereafter, the commitment will increase to 5 percent. The 2024 funds will support the Native American Housing Initiative (NAHI) program, Homeownership Possibilities Expanded (HOPE), and AHP Extra. Each of our programs are detailed below.

Affordable Housing Program: Amounts specified by the AHP requirements described in Item 1 – “Business – Assessments” are reserved for this program. AHP provides cash grants to members in partnership with sponsors (i.e., housing authorities, for-profit and not-for-profit organizations, developers, etc.) to finance the purchase, construction, or rehabilitation of very low-, low-, and moderate-income owner occupied or rental housing. As a competitive program, applications are scored based on commitments made to supports housing needs in our district.

We will provide additional funding beyond our regulatory requirement to support affordable housing projects in our district through AHP Extra. AHP Extra is a voluntary contribution to supplement FHLBank's statutory AHP. AHP Extra provides competitive grants to members in partnership with affordable housing developers, including non-profit and for‐profit organizations, and housing authorities that are engaged in creating or rehabilitating affordable housing. AHP Extra extends the amount of funding available beyond the regulatory contribution to meet the needs of our district.

In addition to the competitive AHP program funds, we provide funding for TurnKey, a ~~customized~~suite of products designed to support homeownership ~~set-aside program called the~~ in our district in partnership with our members. The programs offered under TurnKey are as follows:

•Homeownership Set-aside Program (HSP) ~~is offered under the AHP.~~: The HSP provides down payment, closing cost, and purchase-related repair assistance to very low-, low-, and moderate-income first-time ~~homebuyers~~households in Colorado, Kansas, Nebraska, and ~~Oklahoma.~~Oklahoma;

•Homeownership Set-aside Program Plus (HSP+): HSP+ provides additional subsidy to very low-, low-, and moderate-income first-time households in High-Cost Areas and non-metropolitan Difficult Development Areas in our district; and

•Homeownership Possibilities Expanded (HOPE): Providing access to homeownership to the “missing middle,” we will support households in our district that traditionally do not receive assistance but need subsidy to make homeownership accessible and affordable. HOPE is not limited to first-time homebuyers, and income limitations are expected to serve a wider range of households.

Community Investment Cash Advance (CICA) ~~Program.~~ Program:CICA loans to members specifically target underserved markets in both rural and urban areas. CICA loans represented ~~3.5~~1.2 percent, ~~3.9~~1.4 percent and ~~3.9~~3.0 percent of total advances outstanding as of December 31, ~~2017, 2016,~~2023, 2022, and ~~2015,~~2021, respectively. Programs offered during ~~2017~~2023 under the CICA Program, which is not funded through the AHP, include:

▪

~~Community Housing Program (CHP) –~~CHP makes loans available to members for financing the construction, acquisition, rehabilitation, and refinancing of owner-occupied housing for households whose incomes do not exceed 115 percent of the area’s median income and rental housing occupied by or affordable for households whose incomes do not exceed 115 percent of the area’s median income. For rental projects, at least 51 percent of the units must have tenants that meet the income guidelines, or at least 51 percent of the units must have rents affordable to tenants that meet the income guidelines. We provide advances for CHP-based loans to members at our estimated cost of funds for a comparable maturity plus a mark-up for administrative costs; and

▪

~~Community Development Program (CDP) –~~CDP provides advances to members to finance CDP-qualified member financing including loans to small businesses, farms, agri-businesses, public or private utilities, schools, medical and health facilities, churches, day care centers, or for other community development purposes that meet one of the following criteria: (1) loans to firms that meet the Small Business Administration’s definition of a qualified small business concern; (2) financing for businesses or projects located in an urban neighborhood, census tract or other area with a median income at or below 100 percent of the area median; (3) financing for businesses, farms, ranches, agri-businesses, or projects located in a rural community, neighborhood, census tract, or unincorporated area with a median income at or below 115 percent of the area median; (4) firms or projects located in a Federal Empowerment Zone, Enterprise Community or Champion Community, Native American Area, Brownfield Area, Federally Declared Disaster Area, United States Department of Agriculture Drought Area, or Community Adjustment and Investment Program Area; (5) businesses in urban areas in which at least 51 percent of the employees of the business earn at or below 100 percent of the area median; or (6) businesses in rural areas in which at least 51 percent of the employees of the business earn at or below 115 percent of the area median. We provide advances for CDP-based loans to members at our estimated cost of funds for a comparable maturity plus a mark-up for administrative costs.

~~Other~~•Community Housing Program (CHP) – CHP makes loans available to members for financing the construction, acquisition, rehabilitation, and refinancing of owner-occupied housing for households whose incomes do not exceed 115 percent of the median income for the area and rental housing occupied by or affordable for households whose incomes do not exceed 115 percent of the median income for the area. For rental projects, at least 51 percent of the units must have tenants that meet the income guidelines, or at least 51 percent of the units must have rents affordable to tenants that meet the income guidelines. We provide advances for CHP-based loans to members at our estimated cost of funds for a comparable maturity plus a mark-up for administrative costs; and

•Community Development ~~Programs.~~ Program (CDP) – CDP provides advances to members to finance CDP-qualified member financing including loans to small businesses, small farms, small agribusiness or for community development purposes that meet one of the following criteria: (1) loans to firms that meet the Small Business Administration’s (SBA) definition of a small business concern; (2) financing for businesses or projects located in an urban neighborhood, Census tract or other area with a median income at or below 100 percent of the area median; (3) financing for businesses, farms, ranches, agribusinesses, or projects located in a rural community, neighborhood, Census tract, or unincorporated area with a median income at or below 115 percent of the area median; (4) firms or projects located in a Native American Area or any Federally Declared Disaster Area; (5) projects in urban areas in which at least 51 percent of the employees of the project, or at least 51 percent of the families benefiting from or receiving services from the project, earn at or below 100 percent of the area median; or (6) projects in rural areas in which at least 51 percent of the employees of the project, or at least 51 percent of the families benefiting from or receiving services from the project, earn at or below 115 percent of the area median. We ~~have established~~provide advances for CDP-based loans to members at our estimated cost of funds for a comparable maturity plus a mark-up for administrative costs.

Native American Housing Initiatives Grants Program (NAHI): The NAHI program is a new, voluntary grant program that provides Native American tribes and tribally designated housing entities with access to grant funds intended to ~~promote homebuyer education~~build their communities in support of housing for tribal members in FHLBank’s district. NAHI supports tribal organizations working at the grassroots level, which are in the best position to identify tribal needs. With a successful inaugural round in 2023, we will continue to offer the NAHI program to support the needs of tribal communities in our district. The Rural First-time Homebuyer Education Program provides up to $75,000 annually to support rural homeownership education and counseling while actively encouraging participating organizations to seek supplemental funding from other sources. The goal of the program is to support rural education and counseling in all four states in the district, especially in those areas with HSP-participating members. This program is not funded through AHP funds.

Competition

Advances: Demand for advances is affected by, among other things, the cost of alternative sources of liquidity available to our members, including deposits from members’ customers and other sources of liquidity that are available to ~~members.~~members, including the Federal Reserve Bank’s discount window. Members mostly access alternative funding other than advances through Federal funds purchased, the brokered deposit market, and ~~through~~ repurchase agreements with ~~commercial customers.~~financial counterparties. Large members may have broader access to funding through repurchase agreements with investment banks and commercial banks as well as access to the national and global credit markets. ~~While~~On March 12, 2023, the Federal Reserve announced a plan to make available additional funding to eligible depository institutions to help assure that they have the ability to meet the needs of all their depositors, through eased access to the discount window and the creation of a new Bank Term Funding Program (BTFP). The BTFP offers eligible banks an additional source of liquidity collateralized with high-quality securities at par to eliminate the need to sell securities to meet the needs of depositors. The BTFP is a temporary measure that is set to expire on March 11, 2024 and is intended to be utilized in conjunction with other liquidity sources to ensure banks have the ability meet liquidity needs resulting from the loss of deposits. The availability of alternative funding sources to members can influence member demand for advances, with the cost of the alternative funding relative to advances isbeing the primary consideration when accessing alternative funding. Other considerations include product availability through ~~the~~ FHLBank, dividend rates on FHLBank stock, the member’s creditworthiness, ease of execution, level of diversification, and availability of member collateral for other types of borrowings. We believe our advance product offerings are evolving to meet member demand as market conditions in the competitive environment change. All product development initiatives involve an evaluation of the market opportunity relative to the operational requirements of offering the product while maintaining high levels of risk management and regulatory compliance. Certain product initiatives may also require the filing of a New Business Activity Notice with and non-objection by our regulator.

Mortgage Loans: We are subject to competition in purchasing conventional, conforming fixed rate residential mortgage loans and government-guaranteed residential mortgage loans. We face competition in ~~customer service,~~ the prices paid for these assets, customer service, and in ancillary services such as automated underwriting. The most direct competition for purchasing residential mortgage loans comes from the other housing GSEs, which also purchase conventional, conforming fixed rate mortgage loans, specifically Fannie Mae and Freddie Mac. To a lesser extent, we also compete with regional and national financial institutions that buy and/or invest in mortgage loans. Depending on market conditions, these investors may seek to hold, securitize, or sell conventional, conforming fixed rate mortgage loans. We continuously reassess our potential for success in attracting and retaining members for our mortgage loan products and services, just as we do with our advance products. We compete for the purchase of mortgage loans primarily on the basis of price, products and product features, and services offered.

Debt Issuance: We compete with the U.S. government (including debt programs explicitly guaranteed by the U.S. government), U.S. government agencies, Fannie Mae, Freddie Mac, and other GSEs, as well as corporate, sovereign, and supranational entities for funds raised through the issuance of unsecured debt in the national and global capital markets. Collectively, Fannie Mae, Freddie Mac, and the FHLBanks are generally referred to as the housing GSEs, and the cost of the debt of each can be positively or negatively affected by political, financial, or other news that reflects upon ~~any of the three housing GSEs.~~government and government agency debt. If the supply of competing debt products increases without a corresponding increase in demand, our debt costs may ~~increase, or less debt may be issued.~~increase. We compete for the issuance of debt primarily on the basis of rate, term, ~~and~~ structure of the debt, ~~but also on~~liquidity of the ~~liquidity position~~instrument, and perceived risk of the issuer.

Derivatives: The ~~sale~~issuance of callable debt and the simultaneous execution of callable interest rate swaps with options that mirror the options in the debt have been an important source of competitive funding for us. As such, the depth of the markets for callable debt and mirror-image derivatives is an important ~~determinant~~factor of our relative cost of funds. There is considerable competition among high-credit-quality issuers, especially among the three housing GSEs, for callable debt and for derivatives. There can be no assurance that the current breadth and depth of these markets will be sustained.

Regulatory Oversight, Audits and Examinations

General: Our business is subject to extensive regulation and supervision. As discussed throughout this Form 10-K, the laws, regulations, and regulatory guidance to which we are subject cover all key aspects of our business, and directly and indirectly affect our product and service offerings, collateral practices, pricing, competitive position, relationship with members and third parties, capital structure, and liquidity practices. As a result, such laws and regulations have a significant effect on our results of operations and financial condition. For a discussion of risks relating to the complex body of laws and regulations to which we are subject, see Item 1A – “Risk Factors – Business Risk – Legislative and Regulatory”. For a discussion of recent regulatory and legislative developments impacting us, see “Legislative and Regulatory Developments” under this Item 1.

We are supervised and regulated by the FHFA, ~~which is~~ an independent agency in the executive branch of the U.S. government. The FHFA is responsible for providing supervision, regulation and housing mission oversight of the FHLBanks to ~~promote~~ensure they fulfill their ~~safety~~mission by operating in a safe and ~~soundness so they~~sound manner to serve as a reliable source of liquidity and funding for housing finance and community investment. The FHFA is headed by a Director appointed by the President of the United States for a five-year term, with the advice and consent of the Senate. The Federal Housing Finance Oversight Board advises the Director with respect to overall strategies and policies in carrying out the duties of the Director. The Federal Housing Finance Oversight Board is comprised of the Secretary of the Treasury, Secretary of HUD, Chair of the Securities and Exchange Commission (SEC), and the Director, who serves as the Chairperson of the Board. The FHFA is funded in part through assessments from the FHLBanks, with the remainder of its funding provided by Fannie Mae and Freddie Mac; no tax dollars or other appropriations support the operations of the FHFA or the FHLBanks. To assess our safety and soundness, the FHFA conducts comprehensive annual ~~on-site~~ examinations, as well as periodic ~~on-site and off-site~~ reviews. Additionally, we are required to submit monthly information onabout our financial condition and results of operations to the FHFA. This information is available to all FHLBanks.

Before a government corporation issues and offers obligations to the public, the Government Corporation Control Act provides that the Secretary of the Treasury ~~shall~~will prescribe the form, denomination, maturity, interest rate, and conditions of the obligations; the manner and time issued; and the selling price. The Bank Act also authorizes the Secretary of the Treasury, at ~~his or her~~their discretion, to purchase consolidated obligations up to an aggregate principal amount of $4 billion. No borrowings under this authority have been outstanding since 1977.

The U.S. Treasury receives the FHFA’s annual report to Congress, monthly reports reflecting securities transactions of the FHLBanks, and other reports reflecting the operations of the FHLBanks.

~~Audits and Examinations:~~ We have an internal audit department and our Board of Directors has an audit committee. The Chief Audit Executive reports directly to the audit committee. In addition, an independent registered public accounting firm audits our annual financial statements and effectiveness of internal controls over financial reporting. The independent registered public accounting firm conducts these audits following standards of the Public Company Accounting Oversight Board (United States) and ~~Government Auditing Standards~~ ~~issued by the Comptroller General of the United States. The FHLBanks, the FHFA, and Congress all receive the audit reports.~~ We must submit annual management reports to Congress, the President of the United States, the Office of Management and Budget, and the Comptroller General. These reports include a statement of financial condition, a statement of operations, a statement of cash flows, a statement of internal accounting and administrative control systems, and the report of the independent public accounting firm on the financial statements.

Audits and Examinations: We have an internal audit department and our board of directors has an audit committee. The Chief Audit Executive reports directly to the audit committee. In addition, an independent registered public accounting firm audits our annual financial statements and effectiveness of internal controls over financial reporting. The independent registered public accounting firm conducts these audits following standards of the Public Company Accounting Oversight Board (United States) and Government Auditing Standards issued by the Comptroller General of the United States. The FHLBanks, the FHFA, and Congress all receive the audit reports.

The Comptroller General has authority under the Bank Act to audit or examine the FHFA and the individual FHLBanks and to decide the extent to which they fairly and effectively fulfill the purposes of the Bank Act. Furthermore, the Government Corporation Control Act provides that the Comptroller General may review any audit of the financial statements conducted by an independent registered public accounting firm. If the Comptroller General conducts such a review, ~~then he or she must report~~ the results of the review and ~~provide his or her~~any recommendations must be reported to Congress, the Office of Management and Budget, and the applicable FHLBank. The Comptroller General may also conduct ~~his or her own~~an audit of any financial statements of any individual FHLBank.

~~Personnel~~Human Capital Resources

Our workforce is a vital contributor to the success of our strategic business objectives. In managing our people, we focus on our workforce profile and the various programs and philosophies described below.

Workforce Profile: Our workforce is primarily comprised of corporate employees, with our principal operations in one location. As of ~~February 28, 2018,~~December 31, 2023, we had ~~233~~253 full-time and 5 part-time employees. As of December 31, 2023, approximately 49 percent of our workforce identifies as female and 50 percent identifies as male. As of December 31, 2023, 86 percent are non-minority and 14 percent are minority. Our workforce is appropriately staffed, and generally includes a number of longer-tenured employees. We strive to both develop talent from within the organization and supplement with external hires. We believe that developing talent internally results in institutional strength and continuity and also promotes loyalty and commitment in our employee base, which strengthens our success. Adding new employees contributes to new ideas, continuous improvement, and our goals of having a diverse and inclusive workforce with a sense of belonging and an equitable workplace. As of December 31, 2023, the average tenure of our employees was 9.8 years. There are ~~not represented by a~~no collective bargaining ~~unit, and we have a good relationship~~agreements with our employees.

~~Legislative~~Total Rewards: We seek to attract, develop and ~~Regulatory Developments~~retain talented employees to achieve our strategic business initiatives, enhance business performance, increase shareholder value and provide members a reasonable return on their investment in FHLBank. To achieve this objective, we focus on a combination of development programs, benefits and employee wellness programs and strive to recognize and reward performance. Specifically, our programs include:

~~FHFA Final Rule~~•Cash compensation – competitive base salary, performance-based incentives and other cash subsidies;

•Benefits – health insurance, life and accidental death and dismemberment insurance, supplemental life insurance, and a 401(k) retirement savings plan with a competitive employer match;

•Wellness program – employee assistance program, interactive education sessions focused on ~~Minority~~employee total health, and ~~Women Inclusion.~~ ~~On July 13, 2017,~~sporting events sponsorships;

•Time away from work – including paid time off for vacation, illness, personal, holiday, and volunteer opportunities;

•Culture and Development – various cultural and inclusion initiatives and leadership development opportunities; internal educational and development opportunities and fee reimbursement for external development programs; employee engagement opportunities to drive our Employer of Choice vision; and educational assistance programs;

•Work/Life balance – flexible work arrangements, including a hybrid work schedule allowing a balance between in-office and remote work, two-thirds paid salary continuation for short-term disability, 100 percent paid parental, military, bereavement, jury duty and court appearances leave;

•Management succession planning – our board of directors and leadership actively engage in management succession planning, with a defined plan for our Executive Team, which is reviewed and adjusted annually, to support a smooth transition of operations in the ~~FHFA issued~~event of an unplanned or planned absence of executives and to help assure the successor executives are fully qualified to assume responsibility for ongoing operations; and

•Our Performance Management framework includes planned quarterly, documented discussions coordinated between manager and employee. At the start of every quarter, managers and employees work together to set new goals or update existing goals and review the previous quarter’s goals. In addition to encouraging goal alignment with ever-changing business needs, this quarterly framework also is intended to provide a ~~final rule, effective August 24, 2017, amending its~~natural opportunity for feedback and development conversations to occur between employee and manager throughout the year.

Diversity, Equity, Inclusion and Belonging: Diversity, Equity, Inclusion and Belonging (DEIB) is a strategic business priority for us and one of our defined corporate Values. Our Office of Minority and Women Inclusion ~~regulations~~(OMWI) Officer, Chief Human Resources and Inclusion Officer, is a member of our Executive Team, reports to ~~clarify~~our Chief Executive Officer (CEO), and serves as a liaison to the ~~scope~~board of directors. We believe that diversity increases capacity for innovation and creativity; equity helps ensure that we are intentional in recognizing and addressing our employees’ individual needs and in providing opportunities to optimize success; inclusion is how we create an environment where all employees feel like they can be themselves authentically to leverage the ~~FHLBanks' obligation~~unique perspectives of all employees to ~~promote diversity~~help ensure optimal decision-making and ~~ensure inclusion. The final rule updates~~strengthen our retention efforts; and belonging is the ~~existing FHFA regulations aimed at promoting diversity~~outcome where employees feel like they are integral and necessary to our overall success. We operationalize our commitment through the development and execution of a three-year DEIB strategic plan that includes quantifiable metrics to measure success and we report regularly on our performance to management and the ~~inclusion and participation~~board of minorities, women, and individuals with disabilities, and the businesses they own ("MWDOB") in all FHLBank business and activities, including management, employment, customer outreach and access, MWDOB participation in financial transactions with the FHLBanks, and contracting. The final rule encourages the FHLBanks to expand contractingdirectors. We offer a range of opportunities for ~~MWDOBs~~our employees to connect and ~~minorities, women,~~grow personally and ~~individuals with disabilities~~professionally through ~~subcontracting arrangements~~our DEIB Program including our Inclusion, Diversity, and ~~to track the cumulative spend associated with such diverse subcontracting arrangements. In addition, the final rule requires each FHLBank to:~~


▪	Develop stand-alone, board-approved diversity and inclusion strategic plans or incorporate diversity and inclusion principles into its existing strategic planning processes and adopt strategies for promoting diversity and ensuring inclusion;


▪	~~Amend its policies on equal opportunity in employment by adding sexual orientation, gender identity, and status as a parent to the list of protected classifications;~~


▪	~~Establish a process to grant or deny requests for accommodations to employees and job applicants based on their religious beliefs or practices;~~

▪

Provide information in its annual reports to the FHFA about its efforts to advance diversity and inclusion through identifying and selecting MWDOB firms for participation in financial transactions with the FHLBank, identifying ways in which it may give consideration to MWDOB business with the FHLBank when reviewing and evaluating vendor contract proposals, and enhancing customer access by MWDOB businesses (including through the FHLBank's affordable housing and community investment programs;


▪	~~Report data regarding the number of diverse individuals currently in supervisory or managerial positions and its strategies for promoting the diversity of supervisors and managers;~~


▪	Classify and provide additional data in its annual reports about the number of, and amounts paid under, its MWDOB contracts, as well as demographic data regarding the categories of MWDOB entities to which it awards vendor contracts; and


▪	Provide data to the FHFA regarding the type of contracts it considers exempt from these diversity and inclusion requirements, as well as the criteria and rationale for establishing such exemptions and an analysis of any potential negative or adverse impact such exemptions might have on contracting opportunities for MWDOB businesses or diverse individuals.

Equity Advisory council. We do not expect this final rule to materially affect our financial condition or results of operations, but we anticipate that it may result in increased costs and substantially increase the amount of data tracking, monitoring, and reporting that will be required of us.

~~FHFA Proposed Rule on Capital Requirements.~~ On July 3, 2017, the FHFA published a proposed rule to adopt, with amendments, the Federal Housing Finance Board regulations pertaining to the capital requirements for the FHLBanks. The proposed rule would carry over most of the existing regulations without material change, but would substantively revise the credit riskconsider learning an important component of ~~the risk-based capital requirement, as well as the limitations on extensions of unsecured credit~~our DEIB strategy and ~~derivative exposure. The main revisions would remove requirements that the FHLBanks calculate credit risk capital charges~~regularly offer educational opportunities to our employees and unsecured credit limits based on ratings issued by an NRSRO, and instead require that the FHLBanks establish and use their own internal rating methodology. With respect to derivatives, the proposed rule would impose a new capital charge for cleared derivatives, which under the existing rule do not carry a capital charge, and would change the way that the capital charge and risk limits are calculated for uncleared derivatives, in both cases to align with the Dodd-Frank Act’s clearing mandate and derivatives reforms. The proposed rule also would revise the percentages used in the regulation’s tables to calculate credit risk capital charges for advances and for non-mortgage assets. The FHFA proposes to retain for now the percentages used in the tables to calculate capital charges for mortgage-related assets, and to address at a later date the methodology for residential mortgage assets. While a March 2009 regulatory directive pertaining to certain liquidity matters would remain in place, the FHFA also proposes to rescind certain minimum regulatory liquidity requirements and address these liquidity requirements in a new regulatory directive.

~~We submitted a joint comment letter with the other FHLBanks on August 31, 2017. We continue~~strive to evaluate ~~the proposed rule but do not expect this rule, if adopted~~equitable and inclusive behaviors as ~~proposed, to materially affect~~part of our ~~financial condition or results of operations.~~

~~Information Security Management Advisory Bulletin.~~ On September 28, 2017, the FHFA issued Advisory Bulletin 2017-02, which supersedes previous guidance on an FHLBank’s information security program. The advisory bulletin describes three main components of an information security programrecruiting, promotion and reflects the expectation that each FHLBank will use a risk-based approach to implement its information security program. The advisory bulletin contains expectations related to: (1) governance, including guidance related to roles and responsibilities, risk assessments, industry standards, and cyber-insurance; (2) engineering and architecture, including guidance on network security, software security, and security of endpoints; and (3) operations, including guidance on continuous monitoring, vulnerability management, baseline configuration, asset life cycle, awareness and training, incident response and recovery, user access management, data classification and protection, oversight of third parties, and threat intelligence sharing.

succession planning processes. We do not expect this advisory bulletin to materially affect our financial condition or results of operations, but we anticipate that it may result in increased costs relating to enhancements to our information security program.

~~Federal Reserve Board (FRB), Federal Deposit Insurance Corporation~~ (~~FDIC) and Office of the Comptroller of the Currency (OCC) Final Rules on Mandatory Contractual Stay Requirements for Qualified Financial Contracts (QFCs).~~ On September 12, 2017, the FRB published a final rule, effective November 13, 2017, requiring certain global systemically important banking institutions (GSIBs) regulated by the FRB to amend their covered QFCs to limit a counterparty’s immediate termination or exercise of default rights under the QFCs in the event of bankruptcy or receivership of the GSIB or an affiliate of the GSIB. Covered QFCs include derivatives, repurchase agreements and reverse repurchase agreements, and securities lending and borrowing agreements. On September 27, 2017, and on November 29, 2017, the FDIC and OCC respectively adopted final rules that are both substantively identical to the FRB rule, both effective January 1, 2018, with respect to QFCs entered into with certain FDIC- and OCC-supervised institutions.

~~Although we are not a covered entity under these rules,~~also incorporate DEIB as a ~~counterparty~~key component of our incentive plan framework to ~~covered entities under QFCs, we may be required to amend QFCs entered into with FRB-regulated GSIBs or applicable FDIC-~~recognize our organizational focus and ~~OCC-supervised institutions. These rules may impact our ability to terminate business relationships with covered entities~~individual and could adversely impact the amount we recover in the event of the bankruptcy or receivership of a covered entity. However, we do not expect these final rules, or the proposed amendments to the Swap Margin Rules, to materially affect our financial condition or results of operations. We do not expect this final rule to materially affect our financial condition or results of operations.collective accountability.

~~OCC, FRB, FDIC, Farm Credit Administration, and FHFA Proposed Rule on Margin and Capital Requirements for Covered Swap Entities~~. On February 21, 2018, OCC, FRB, FDIC, Farm Credit Administration, and FHFA published a joint proposed amendment to each agency’s final rule on Margin and Capital Requirements for Covered Swap Entities (“Swap Margin Rules”) to conform the definition of “eligible master netting agreement” in such rules to the FRB’s, OCC’s, and FDIC’s final QFC rules, and to clarify that a legacy swap will not be deemed to be a covered swap under the Swap Margin Rules if it is amended to conform to the QFC Rules.

Comments on the proposed rule are due by April 23, 2018. We continue to evaluate the proposed rule, but we do not expect this rule, if adopted substantially as proposed, to materially affect our financial condition or results of operations.

Where to Find Additional Information

We file our annual, quarterly, and current reports and related information with the ~~SEC.~~Securities and Exchange Commission (SEC). You may read and copy such material at the public reference facilities maintained by the SEC at 100 F Street, NE, Washington, DC 20549. Please call the SEC at 1-800-732-0330 for more information on the public reference room. You can ~~also~~ find our SEC filings at the SEC’s website at www.sec.gov. Additionally, on our website at www.fhlbtopeka.com, you can find a link to the SEC’s website which can be used to access free of charge our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) ~~or 15(d)~~ of the Securities Exchange Act of 1934 (Exchange Act), as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. Except for the documents specifically incorporated by reference into this Annual Report on Form 10-K, information contained on our website or that can be accessed through our website is not incorporated by reference into this Annual Report on Form 10-K. Reference to our website is made as an inactive textual reference.

Legislative and Regulatory Developments

Significant regulatory actions and developments for the period covered by this report not previously disclosed are summarized below.

FHFA’s Review and Analysis of the FHLBank System.Commencing in the fall of 2022, and over a period of several months, the FHFA undertook a review and analysis of the FHLBank System, in part through a series of public listening sessions, regional roundtable discussions, and receipt of comments from stakeholders and the public. This review covered such areas as the FHLBanks’ mission and purpose in a changing marketplace; their organization, operational efficiency, and effectiveness; their role in promoting affordable, sustainable, equitable, and resilient housing and community investment; their role in addressing the unique needs of rural and financially vulnerable communities; member products, services, collateral requirements; and membership eligibility and requirements.

On November 7, 2023, the FHFA issued its written report titled “FHLBank System at 100: Focusing on the Future”, presenting its review and analysis of the FHLBank System and the actions and recommendations that it plans to pursue in service of its vision for the future of the FHLBank System.The report focused on four broad themes: (1) the mission of the FHLBank System; (2) the FHLBank System as a stable and reliable source of liquidity; (3) housing and community development; and (4) FHLBank System operational efficiency, structure, and governance. The FHFA expects its initiative to continue as a multi-year, collaborative effort with the FHLBanks, their member institutions, and other stakeholders to address the recommended actions in the report and has stated that it can implement some of the recommendations from the report through ongoing supervision, guidance, or rulemaking, as well as through statutory changes by proposing specific requests for Congressional action.

Among other things, the FHFA has indicated that it plans to:

▪Update and clarify its regulatory statement of the FHLBanks’ mission to explicitly incorporate its view of the core objectives of the FHLBanks’ mission, which are: (1) providing stable and reliable liquidity to members; and (2) supporting housing and community development;

▪Clarify the FHLBanks’ liquidity role and take steps that the FHFA believes will better position the FHLBanks to perform their liquidity function, including enhancing FHFA oversight of FHLBank credit risk evaluation of their members and establishing protocols for large depository members to borrow from the Federal Reserve discount window;

▪Expand the FHLBanks’ housing and community development focus by requiring the establishment of mission-oriented collateral programs, re-evaluating the definition of long-term advances, exploring revisions to the Community Support Requirements, and reviewing the AHP, Community Investment Programs, and CICA Programs to encourage greater use in a safe and sound manner. FHFA will also recommend that Congress consider amending the FHLBank Act to at least double the statutory minimum required annual AHP contributions by the FHLBanks; and

▪Review the FHLBanks’ operational efficiencies through encouraging collaboration among the FHLBanks, evaluating the size and structure of FHLBank boards, considering the structure of FHLBank districts and composition of their membership, and studying whether realignment or consolidation are necessary for the efficiency of the FHLBank System.

We continue to evaluate the report and are not able to predict what actions will ultimately result from the FHFA’s recommendations in the report, the timing of these actions, the extent of any changes to FHLBank or the FHLBank System, or the ultimate effect on FHLBank or the FHLBank System in the future. We plan to continue to engage with the FHFA and other stakeholders to ensure that the FHLBank System remains well positioned to serve its members and their communities. For a further discussion of related risks, see “Part I. Item 1A – Risk Factors.”

Federal Reserve Bank Term Funding Program. On March 12, 2023, in response to prevailing concerns about the ability of banks to meet the needs of all their depositors, the Federal Reserve announced the implementation of a BTFP as an additional source of liquidity for eligible borrowers, including any U.S. federally insured depository institution or U.S. branch or agency of a foreign bank that is eligible for primary credit with the Federal Reserve. The BTFP offers up to one-year term loans to be secured by eligible collateral owned by eligible borrowers as of March 12, 2023. Such loans can be requested until March 11, 2024. The BTFP is subject to $25 billion in credit protection by the U.S. Department of Treasury. On January 24, 2024, the Federal Reserve announced that the BTFP will cease making new loans as scheduled on March 11, 2024.

Consumer Financial Protection Bureau (CFPB) Final Rule. On March 30, 2023, the CFPB issued a final rule requiring certain covered financial institutions to collect and report small business lending data. Small businesses are businesses with $5 million or less in gross annual revenue in the preceding fiscal year. An FHLBank will be subject to data collection and reporting obligations if the FHLBank has originated a minimum of 100 “covered credit transactions” to small businesses in each of the two preceding calendar years. The final rule implements phased-in compliance dates, beginning on October 1, 2024, based on the number of originations the covered financial institution makes to small businesses within a specified timeframe. FHLBank is assessing to which extent the obligations will be triggered for FHLBank and what operational changes will be necessary for compliance. While FHLBank is still analyzing the impact of the final rule, it does not believe these changes will have a material effect on its financial condition or results of operations. Under a federal court order in a related litigation, the CFPB has been enjoined from implementing and enforcing the final rule against covered financial institutions nationwide and all deadlines for compliance with the final rule have been stayed.

FHFA Proposed Rule on Fair Lending, Fair Housing, and Equitable Housing Finance Plans. On April 26, 2023, the FHFA published a proposed rule that specifies requirements related to FHLBank compliance with fair housing and fair lending laws and prohibitions on unfair or deceptive acts or practices. The fair housing and fair lending laws would be the Fair Housing Act, the Equal Credit Opportunity Act, and those acts’ implementing regulations. Further, the proposed rule would outline the FHFA’s enforcement authority. We are evaluating the potential impact of the proposed rule on the FHLBank and its operations.

Office of the Comptroller of the Currency, Federal Reserve, and Federal Deposit Insurance Corporation Joint Proposed Rule to Revise Capital Requirements for Certain Large Banking Organizations. On September 18, 2023, the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve, and the Federal Deposit Insurance Corporation (FDIC) published a joint notice of proposed rulemaking that would substantially revise the regulatory capital requirements applicable to certain large banking organizations and banking organizations with significant trading activity (Covered Banks), generally consistent with changes to international capital standards issued by the Basel Committee on Banking Supervision, known as Basel III. The proposed rulemaking will amend the calculation of risk-based capital requirements in an attempt to better reflect the risks of these banking organizations’ exposures, reduce the complexity of the framework, enhance the consistency of requirements across these banking organizations, and facilitate more effective supervisory and market assessments of capital adequacy. For certain collateralized transactions under existing capital requirements, debt securities issued by a GSE such as the FHLBanks are afforded a lower market price volatility haircut than higher risk non-GSE investment-grade securities. The proposed rules would increase the market price volatility haircuts applicable to the debt securities of the GSEs (including the FHLBanks) by applying to these debt securities the same haircuts as non-GSE investment-grade securities. FHLBank continues to evaluate the potential impact of the proposed rulemaking on its financial condition and results of operation. The proposed change to market price volatility haircuts applicable to debt securities of the FHLBanks may harm liquidity for FHLBank debt securities in the market, impact general demand for FHLBank debt securities, and increase the FHLBanks’ cost of funding due to potential higher interest rates as a result of the foregoing. The proposal was open for public comment through January 16, 2024, and the FHLBank System submitted a comment letter.

SEC Final Rule on the Enhancement and Standardization of Climate-Related Disclosures for Investors. On March 6, 2024, the SEC adopted a final rule that will require registrants to disclose certain climate-related information in annual reports. The final rule requires disclosure of, among other things: material climate-related risks and their material impacts; activities to mitigate or adapt to such risks; information about a registrant’s board of directors’ oversight of climate-related risks and management’s role in managing material climate-related risks; and information on any climate-related targets or goals that are material to the registrant’s business, results of operations, or financial condition. In addition, certain disclosures related to severe weather events and other natural conditions will be required in a registrant’s audited financial statements. We will be subject to the applicable requirements of the rule in our annual reports for fiscal years beginning in 2027. We continue to review the final rule and evaluate its impact on FHLBank or FHLBank’s financial condition or results of operations, including the effect on costs and complexities associated with SEC reporting.

Item 1A: Risk Factors

Business Risk - General

Changes in economic conditions, or federal fiscal and monetary policy could impact our business. Our net income is sensitive to changes in market conditions that can impact the interest we earn and pay and introduce volatility in other income (loss). These conditions include, but are not limited to, the following: (1) changes in interest rates; (2) fluctuations in both debt and equity capital markets; (3) conditions in the financial, credit, mortgage, and housing markets; (4) the willingness and ability of financial institutions to expand lending; and (5) the strength of the U.S. economy and the local economies in which we conduct business. Our financial condition, results of operations, and ability to pay dividends could be negatively affected by changes in one or more of these conditions. Additionally, our business and results of operations and that of our members may be affected by the fiscal and monetary policies of the federal government and its agencies, including the Federal Reserve, which regulates the supply of money and credit in the U.S. The Federal Reserve’s policies directly and indirectly influence the yield on interest-earning assets and the cost of interest-bearing liabilities for us and our members, which could adversely affect our financial condition, results of operations, and ability to pay dividends. The Federal Open Market Committee (FOMC) has maintained the target Federal funds rate into 2024, citing lower inflation and stable employment statistics. FOMC economic projections indicate that further tightening of monetary policy is unlikely in 2024, but decreases in the policy rate will be dependent on trends in employment levels and inflation and financial and international developments. Adverse trends in regional or national economic activity, prolonged inflation, extended U.S. government shutdown, geopolitical instability or conflicts (including Russia’s ongoing war against Ukraine, the war in Gaza between Israel and Hamas, and tensions or conflicts between China and Taiwan and/or China and the U.S.), trade disruptions, pandemics, and economic or other sanctions could adversely affect overall economic conditions (including on a state or local level). If economic and market conditions deteriorate, it could have an adverse effect on our business, including the demand for our products and services, and the value of the collateral securing advances, investments, and mortgage loans held for portfolio.

The impacts of climate change and/or natural disasters in the FHLBank’s region could have a material adverse impact on our members and our business. Portions of our region are subject to risks from tornadoes, floods, drought, or other natural disasters. Climate change is increasing the frequency and intensity of these weather events. These natural disasters, including those resulting from significant climate changes, could damage or destroy our properties (headquarters or business resiliency center), damage or dislocate the facilities of our members, damage or destroy collateral that members have pledged to secure advances or mortgages, damage or destroy collateral securing certain securities, disrupt business for us or our members, negatively impact the livelihood of borrowers of members, or otherwise could cause significant economic dislocation in the affected areas of our region. Any of these situations may adversely impact our financial condition and results of operations.

Climate change regulation and market reactions to climate change could adversely impact our members and our business, including the potential for an increase in climate risk assessment, disclosure, and supervision by our regulators. Furthermore, increased focus on climate change and other environmental, social, and governance matters has led to heightened legislative and regulatory attention in these areas, including the potential for new requirements on climate change-related risk assessment, risk management, and disclosure. New or modified laws and regulations, along with increased stakeholder expectations, related to these matters may increase the costs of compliance for us and our members and alter the environment in which they conduct their businesses, which could adversely affect our business. The shift toward a lower-carbon economy, driven by policy regulations, low-carbon technology advancement, consumer sentiment, and/or liability risks, may negatively impact our business model and/or the business models of our members, asset valuations, and operating costs.

Business Risk - Legislative and Regulatory

Our business has been, and may continue to be, adversely impacted by legislation and other ongoing actions by the U. S. government in response to periodic disruptions in the financial markets. To the extent that any actions by the U.S. government in response to an economic downturn, recession, inflation or other macro-level events or conditions cause a significant decrease in the aggregate amount of advances, investments, or mortgage loans or increase our operating costs, our financial condition and results of operations may be adversely affected. Our primary regulator, the FHFA, also continues to issue proposed and final regulatory and other ~~requirements as a result~~requirements. Additionally, potential legislative and regulatory changes affecting our members, investors, and dealers of consolidated obligations could adversely affect our business activities, financial condition, and results of operations. Policymakers and regulators have been examining potential policy measures intended to improve the ~~Recovery Act,~~resilience of money market funds and broader short-term funding markets in recent years, including in response to the ~~Dodd-Frank Act~~market stress experienced in the short-term funding markets in March 2020 caused by the COVID-19 pandemic. In December 2021, the SEC proposed additional money market fund reform in an effort to improve the resilience and ~~other mandates.~~transparency of money market funds. We cannot predict the effect of any new regulations or other regulatory guidance, including money market reforms, on our operations. Changes in regulatory requirements could result in, among other things, an increase in our cost of funding or overall cost of doing business, or a decrease in the size, scope or nature of our membership base, or our lending, investment, or mortgage loan activity, which could negatively affect our financial condition and results of operations. See Item 1 – “Business – Legislative and Regulatory Developments” for more information on potential future legislation and other regulatory activity affecting us.

We are subject to a complex body of laws and regulatory and other requirements that could change in a manner detrimental to our operations. The FHLBanks are GSEs organized under the authority of the Bank Act, and, as such, are governed by federal laws, regulations and other guidance adopted and applied by the ~~FHFA.~~FHFA, which serves as the federal regulator of the FHLBanks and the Office of Finance, Fannie Mae, and Freddie Mac. There is a risk that actions by the FHFA toward Fannie Mae and Freddie Mac may have an unfavorable impact on the FHLBanks’ operations and/or financial condition because of the significant difference in their business models compared to ours. In addition, Congress may amend the Bank Act or pass other legislation that significantly affects the rights, obligations, and permissible activities of the FHLBanks and the manner in which the FHLBanks carry out their housing-finance and liquidity missions and business operations. The U.S. Congress is considering broad legislation for reform of GSEs as a result of the disruptions in the financial and housing markets and the conservatorships of Fannie Mae and Freddie Mac. We do not know how, when, or to what extent GSE reform legislation will be adopted, and if adopted, how it would impact the business or operations of ~~the~~ FHLBank or the FHLBank System. We are, or may also become, subject to further regulations promulgated by the SEC, Commodity Futures ~~Trading~~Trade Commission (CFTC), Federal Reserve ~~Board,~~Bank, Financial Crimes Enforcement Network, or other regulatory agencies.

We cannot predict whether new regulatory or other requirements will be promulgated by the FHFA or other regulatory agencies, or whether Congress will enact new legislation, and we cannot predict the effect of any new regulatory requirements or legislation on our operations. Changes in regulatory, statutory or other requirements could result in, among other things, an increase in our cost of funding and the cost of operating our business, a change in our permissible business activities, or a decrease in the size, scope or nature of our membership or our lending, investment or mortgage loan activities, which could negatively affect our financial condition and results of operations.

~~We share a regulator with Fannie Mae and Freddie Mac~~. The FHFA currently serves as the federal regulator of the FHLBanks and the Office of Finance, Fannie Mae, and Freddie Mac. Because the business models of Fannie Mae and Freddie Mac are significantly different from that of the FHLBanks, there is a risk that actions by the FHFA toward Fannie Mae and Freddie Mac may have an unfavorable impact on the FHLBanks’ operations and/or financial condition. In addition, there is a risk that our funding costs and access to funds could be adversely affected by changes in investors’ perception of the systemic risks associated with Fannie Mae and Freddie Mac.

~~Changes to our balance sheet management strategies could adversely impact our results~~Following a comprehensive review that began in the fall of ~~operations.~~ ~~In 2015,~~2022, the FHFA issued ~~an advisory bulletin establishing~~the “FHLBank System at 100: Focusing on the Future” report on November 7, 2023, presenting its review and analysis of the FHLBank System and the actions and recommendations that it plans to pursue over a ~~CMA ratio~~multi-year effort, in service of its vision for the FHLBank System. The report focused on four broad themes: (1) the mission of the FHLBank System; (2) the FHLBank System as a stable and reliable source of liquidity; (3) housing and community development; and (4) FHLBank System operational efficiency, structure, and governance. Many of the recommendations from the report may be implemented by the FHFA through ongoing supervision, guidance, or rulemaking within its existing statutory authority, while other recommendations may require legislative action for further study. We are not able to predict what actions will ultimately result from the FHFA’s recommendations, the timing of any actions, the extent of any changes to FHLBank or the FHLBank System, or the ultimate effect on FHLBank or the FHLBank System in the future. Potential changes resulting from the FHFA’s recommendations (including changes relating to the FHLBanks’ mission, liquidity role, membership and lending requirements, affordable housing contributions, and support for community investment, or operations, structure, and governance) could increase our operational costs and expenses, result in heightened scrutiny of the FHLBanks and their mission and activities, and impact our business, which may affect our financial condition, or results of operations, and/or the value of membership in the FHLBanks. The extent to which the report ultimately results in changes to regulatory requirements or supervisory expectations that impact or limit the use of our advances by members or our ability to lend to members may have a significant negative impact on our financial condition or results of operations.

For more details on this FHFA ~~will assess each FHLBank’s core mission achievement. Core mission achievement is determined using a ratio~~report, see “Part I. Item 1: Business – Recent Regulatory and Legislative Developments - FHFA’s Review and Analysis of ~~primary mission assets, which includes~~ the ~~average par balances~~Federal Home Loan Bank System.”

A majority of ~~advances~~the states, and some municipalities, have enacted laws prohibiting mortgage loans ~~acquired from members,~~considered predatory or abusive. Some of these laws impose liability for violations not only on the originator, but also upon purchasers and assignees of mortgage loans. We take measures that we consider reasonable and appropriate to ~~the average par balance~~reduce our exposure to potential liability under these laws and are not aware of ~~consolidated obligations. Any adjustments to our balance sheet to meet and/~~any potential or ~~maintain CMA ratios~~pending claim, action, or proceeding asserting that we are liable under these laws. However, there can be no assurance that we will never have any liability under predatory or abusive lending laws. This may ~~result in lower net income and, therefore, adversely~~negatively impact our financial condition and results of operations ~~as we continue to implement~~ and ~~maintain a core mission asset balance sheet.~~

~~An increase in required AHP contributions could adversely affect our results of operations, our ability to pay dividends, or our ability to redeem or repurchase capital stock.~~ The FHLBank Act requires each FHLBank to contribute to its AHP the greater of: (1) 10 percent of the FHLBank’s net earnings for the previous year; or (2) that FHLBank’s pro rata share of an aggregate of $100 million, the proration of which is based on the net earnings of the FHLBanks for the previous year. A failure of the FHLBanks to make the minimum $100 million annual AHP contribution in a given year could result in an increase in our required AHP contribution, which could adversely affect our results of operations, our ability to pay dividends, or our ability to redeem or repurchase capital stock.

~~We may not be able to pay dividends at rates consistent with past practices.~~ Our Board of Directors may only declare dividends on our capital stock, payable to members, from our unrestricted retained earnings and current net income. Our ability to pay dividends also is subject to statutory and regulatory requirements, including meeting all regulatory capital requirements. The potential promulgation of regulations or other requirements by the FHFA that would require higher levels of required or restricted retained earnings could lead to higher levels of retained earnings, and thus, lower amounts of unrestricted retained earnings available to be paid out to our members as dividends. Failure to meet any of our regulatory capital requirements would prevent us from paying any dividend.

Events such as changes in our market risk profile, credit quality of assets held, and increased volatility of net income caused by the application of certain GAAP accounting guidance may affect the adequacy of our retained earnings and may require us to increase our threshold level of retained earnings and correspondingly reduce our dividends from historical payout ratios to achieve and maintain the threshold amounts of retained earnings under our RMP. Additionally, FHFA regulations on capital classifications could restrict our ability to pay dividends. Further, our ability to pay dividends at historical rates is impacted directly by our net income, so a decline in net income could result in a decline in dividend rates.

~~Changes in our credit ratings may adversely affect our business operations.~~ As of March 13, 2018, we are rated Aaa with a stable outlook by Moody’s and AA+ with a stable outlook by S&P. Adverse revisions to or the withdrawal of our credit ratings could adversely affect us in a number of ways. It might influence counterparties to limit the types of transactions they would be willing to enter into with us or cause counterparties to cease doing business with us. We have issued letters of credit to support deposits of public unit funds with our members. In some circumstances, loss of or reduction in any of our current ratings could result in our letters of credit no longer being acceptable to collateralize public unit deposits or other transactions. We have also executed various standby bond purchase agreements (SBPA) in which we provide a liquidity facility for bonds issued by the HFAs by agreeing to purchase the bonds in the event they are tendered and cannot be remarketed in accordance with specified terms and conditions. If our current short-term ratings are reduced, suspended, or withdrawn, the issuers will have the right to terminate these SBPAs, resulting in the loss of future fees that would be payable to us under these agreements.

~~Changes in the credit standing of the U.S. Government or other FHLBanks, including the credit ratings assigned to the U.S. Government or those FHLBanks, could adversely affect us.~~ Pursuant to criteria used by S&P and Moody’s, the FHLBank System’s debt is linked closely to the U.S. sovereign rating because of the FHLBanks’ status as GSEs and the public perception that the FHLBank System would be likely to receive U.S. government support in the event of a crisis. The U.S. government’s fiscal challenges could impact the credit standing or credit rating of the U.S. government, which could in turn result in a revision of the rating assigned to us or the consolidated obligations of the FHLBank System.

The FHLBanks issue consolidated obligations that are the joint and several liability of all FHLBanks. Significant developments affecting the credit standing of one or more of the other FHLBanks, including revisions in the credit ratings of one or more of the other FHLBanks, could adversely affect the cost of consolidated obligations. An increase in the cost of consolidated obligations would adversely affect our cost of funds andpotentially negatively affect our financial condition. As of March 13, 2018, the consolidated obligations of the FHLBanks are rated Aaa/P-1 by Moody’s and AA+/A-1+ by S&P. All of the FHLBanks are rated Aaa with a stable outlook by Moody’s and AA+ with a stable outlook by S&P. Changes in the credit standing or credit ratings of one or more of the other FHLBanks could result in a revision or withdrawal of the ratings of the consolidated obligations by the rating agencies at any time, which may negatively affect our cost of funds and our ability to issue consolidated obligations for our benefit.

~~We may become liable for all or a portion of the consolidated obligations of one or more of the other FHLBanks.~~ We are jointly and severally liable with the other FHLBanks for all consolidated obligations issued on behalf of all FHLBanks through the Office of Finance. We cannot pay any dividends to members or redeem or repurchase any shares of our capital stock unless the principal and interest due on all our consolidated obligations have been paid in full. If another FHLBank were to default on its obligation to pay principal or interest on any consolidated obligation, the FHFA may allocate the outstanding liability among one or more of the remaining FHLBanks on a pro rata basis or on any other basis the FHFA may determine. As a result, our ability to pay dividends to our members or to redeem or repurchase shares of our capital stock could be affected not only by our own financial condition, but also by the financial condition of one or more of the other FHLBanks.

~~The yield on, or value of, our MBS investments may be adversely affected by increased delinquency rates and credit losses related to mortgage loans that back our MBS investments.~~ Trends in unemployment, home price growth, and foreclosure inventory have generally been moving in a positive direction for the past several years, which has supported the underlying health of our MBS investments. However, if one or more of these macroeconomic variables deteriorates noticeably, delinquency and/or default rates on the underlying collateral supporting these investments will likely increase, and we could experience reduced yields or losses on our MBS investments. Any increase in delinquency rates and credit losses related to mortgage loans pooled into MBS/CMO and HFA securities, which are insured by one of the monoline mortgage insurance companies, could adversely affect the yield on or value of our MBS/CMO and HFA investments. The magnitude of potential losses in the home mortgage loan market could potentially overwhelm one or more of the monoline mortgage insurance companies resulting in such company’s failure to perform. If collateral losses exceed the coverage ability of the insurance company, the MBS/CMO or HFA bondholders could experience losses of principal. Furthermore, market illiquidity has, from time to time, increased the amount of management judgment required to value private-label MBS and certain other securities. Subsequent valuations may result in significant changes in the value of private-label MBS and other investment securities. If we decide to sell securities due to credit deterioration, the price we may ultimately realize will depend on the demand and liquidity in the market at that time and may be materially lower than the fair value reflected in our financial statements.

~~Loan modification and liquidation programs could have an adverse impact on the value of our MBS investments.~~ Efforts of mortgage servicers to modify delinquent loans in order to mitigate losses may include reductions in interest rates and/or principal on these loans. Losses from such loan modifications may be allocated to investors in MBS backed by these loans in the form of lower interest payments and/or reductions in future principal amounts received. In addition, efforts by the U.S. government to address delinquent mortgage loans could result in reductions in interest rates and/or principal and may also result in additional foreclosures that could result in an adverse impact on the value of our MBS investments.

Many servicers are contractually required to advance principal and interest payments on delinquent loans backing MBS investments, regardless of whether the servicer has received payment from the borrower, provided that the servicer believes it will be able to recoup the advanced funds from the underlying property securing the mortgage loan. Once the related property is liquidated, the servicer is entitled to reimbursement for these advances and other expenses incurred while the loan was delinquent. Such reimbursements may result in higher losses than we may have expected or experienced to date being allocated to our MBS investments backed by such loans, which may have an adverse impact on our results of operations and financial condition.

~~Defaults by one or more of our institutional counterparties on its obligations to us could adversely affect our results of operations or financial condition.~~ We have a high concentration of credit risk exposure to financial institutions as counterparties, the majority of which are located within the United States, Canada, Australia, and Europe. Our primary exposures to institutional counterparty risk are with: (1) obligations of mortgage servicers that service the loans we have as collateral on our credit obligations; (2) third-party providers of credit enhancements on the MBS that we hold in our investment portfolio, including mortgage insurers, bond insurers, and financial guarantors; (3) third-party providers of PMI and SMI for mortgage loans purchased under the MPF Program; (4) uncleared derivative counterparties; (5) third-party custodians and futures commission merchants associated with cleared derivatives; and (6) unsecured money market and Federal funds investment transactions. A default by a counterparty with significant obligations to us could adversely affect our ability to conduct operations efficiently and at cost-effective rates, which in turn could adversely affect our results of operations and financial condition.

~~A default by a derivatives clearinghouse on its obligations could adversely affect our results of operations or financial condition~~. The Dodd-Frank Act and implementing CFTC regulations require all clearable derivatives transactions to be cleared through a derivatives clearinghouse. As a result of such statutes and regulations, we are required to centralize our risk with the derivatives clearinghouses as opposed to the pre-Dodd-Frank Act methods of entering into derivatives transactions that allowed us to distribute our risk among various counterparties. A default by a derivatives clearinghouse: (1) could adversely affect our financial condition in the event the derivatives clearinghouse is unable to make payments owed to us or return our posted initial margin; (2) jeopardize the effectiveness of derivatives hedging transactions; and (3) adversely affect our operations as we may be unable to enter into certain derivatives transactions or do so at cost-effective rates.

~~Our funding depends on our ability to access the capital markets.~~ Our primary source of funds is the sale of consolidated obligations in the capital markets, including the short-term discount note market. Our ability to obtain funds through the sale of consolidated obligations depends in part on prevailing conditions in the capital markets (including investor demand) at the time. Our counterparties in the capital markets are also subject to additional regulation following the financial crisis that ended in 2010. These regulations could alter the balance sheet composition, market activities, and behavior of our counterparties in a way that could be detrimental to our access to the capital markets and overall financial market liquidity, which could have a negative impact on our funding costs and results of operations. Further, we rely on the Office of Finance for the issuance of consolidated obligations, and a failure or interruption of services provided by the Office of Finance could hinder our ability to access the capital markets. Accordingly, we cannot make any assurance that we will be able to obtain funding on terms acceptable to us in the future, if we are able to obtain funding at all in the case of another severe financial, economic, or other disruption. If we cannot access funding when needed, our ability to support and continue our operations would be adversely affected, negatively affecting our financial condition and results of operations.

~~Changes in interest rates could significantly affect our earnings.~~ Changes in interest rates that are detrimental to our investment and debt positions could negatively affect our financial condition and results of operations. Like many financial institutions, we realize income primarily from earnings on our invested capital as well as the spread between interest earned on our outstanding advances, mortgage loans, and investments and interest paid on our borrowings and other liabilities. Although we use various methods and procedures to monitor and manage our exposures to risk due to changes in interest rates, we may experience instances when our interest-bearing liabilities will be more sensitive to changes in interest rates than our interest-earning assets, or vice versa. These impacts could be exacerbated by prepayment and extension risk, which is the risk that mortgage-related assets will be refinanced in low interest-rate environments or will remain outstanding at below-market yields when interest rates increase.

~~Changes to and replacement of the LIBOR benchmark interest rate could adversely affect our business, results of operations, and financial condition.~~ In July 2017, the United Kingdom's Financial Conduct Authority announced that it plans to phase out the regulatory oversight of LIBOR interest rate indices by 2021. Other financial services regulators and industry groups are evaluating alternative interest rate indices or reference rates, but there is no definitive information regarding the future utilization of LIBOR or of any particular replacement rate. Many of our assets and liabilities are indexed to LIBOR, so the impact of such a transition could adversely affect our business, results of operations, and financial condition.

We rely on derivatives to lower our cost of funds and reduce our interest rate, option and prepayment risk, and we may not be able to enter into effective derivative instruments on acceptable terms; thus, these derivatives may adversely affect our results of operations. We use derivatives to: (1) obtain funding at more favorable rates; and (2) reduce our interest rate risk, option risk and mortgage prepayment risk. Management determines the nature and quantity of hedging transactions using derivatives based on various factors, including market conditions and the expected volume and terms of advances or other transactions. As a result, our effective use of derivatives depends on management’s ability to determine the appropriate hedging positions considering: (1) our assets and liabilities; and (2) prevailing and anticipated market conditions. In addition, the effectiveness of our hedging strategies depends on our ability to enter into derivatives with acceptable counterparties or through derivative clearinghouses, on terms desirable to us and in the quantities necessary to hedge our corresponding obligations, interest rate risk or other risks. The cost of entering into derivative instruments has increased as a result of: (1) consolidations, mergers and bankruptcy or insolvency of financial institutions, which have led to fewer counterparties, resulting in less liquidity in the derivatives market; and (2) increased uncertainty related to the potential changes in legislation and regulations regarding over-the-counter derivatives including increased margin and capital requirements, and increased regulatory costs and transaction fees associated with clearing and custodial arrangements. If we are unable to manage our hedging positions properly, or are unable to enter into derivative hedging instruments on desirable terms or at all, we may incur higher funding costs, be required to limit certain advance product offerings, and be unable to effectively manage our interest rate risk and other risks, which could negatively affect our financial condition and results of operations.

The use of derivatives also subjects us to earnings volatility caused primarily by the changes in the fair values of derivatives that do not qualify for hedge accounting and, to a lesser extent, by hedge ineffectiveness, which is the difference in the amounts recognized in our earnings for the changes in fair value of a derivative and the related hedged item. If we are unable to apply hedge accounting due to changes in standards or other changes in circumstances that impact our ability to utilize hedge accounting, the result could be an increase in the volatility of our earnings from period to period. Such increases in earnings volatility could affect our ability to pay dividends, our ability to meet our retained earnings threshold, and our members’ willingness to hold the capital stock necessary for membership and/or lending activities with us.reputation.

~~Lack of a public market and restrictions on transferring our stock could result in an illiquid investment for the holder.~~ Under the GLB Act, FHFA regulations and our capital plan, our Class A Common Stock may be redeemed upon the expiration of a six-month redemption period and our Class B Common Stock after a five-year redemption period following our receipt of a redemption request. Only capital stock in excess of a member’s minimum investment requirement, capital stock held by a member that has submitted a notice to withdraw from membership, or capital stock held by a member whose membership has been terminated may be redeemed at the end of the redemption period. Further, we may elect to repurchase excess capital stock of a member at any time at our sole discretion.Business Risk - Strategic

We cannot guarantee, however, that we will be able to redeem capital stock even at the end of the redemption periods. The redemption or repurchase of our capital stock is prohibited by FHFA regulations and our capital plan if the redemption or repurchase of the capital stock would cause us to fail to meet our minimum regulatory capital requirements. Likewise, under such regulations and the terms of our capital plan, we could not honor a member’s capital stock redemption request if the redemption would cause the member to fail to maintain its minimum capital stock investment requirement. Moreover, since our capital stock may only be owned by our members (or, under certain circumstances, former members and certain successor institutions), and our capital plan requires our approval before a member may transfer any of its capital stock to another member, we can provide no assurance that a member would be allowed to sell or transfer any excess capital stock to another member at any point in time.

We may also suspend the redemption of capital stock if we reasonably believe that the redemption would prevent us from maintaining adequate capital against a potential risk, or would otherwise prevent us from operating in a safe and sound manner. In addition, approval from the FHFA for redemptions or repurchases is required if the FHFA or our Board of Directors were to determine that we have incurred, or are likely to incur, losses that result in, or are likely to result in, charges against our capital. Under such circumstances, we cannot guarantee that the FHFA would grant such approval or, if it did, upon what terms it might do so. We may also be prohibited from repurchasing or redeeming our capital stock if the principal and interest due on any consolidated obligations that we issued through the Office of Finance has not been paid in full or if we become unable to comply with regulatory liquidity requirements to satisfy our current obligations.

Accordingly, there are a variety of circumstances that would preclude us from redeeming or repurchasing our capital stock that is held by a member. Since there is no public market for our capital stock and transfers require our approval, we cannot guarantee that a member’s purchase of our capital stock would not effectively become an illiquid investment.

~~We may not be able to meet our obligations as they come due or meet the credit and liquidity needs of our members in a timely and cost-effective manner.~~ We seek to be in a position to meet our members’ credit and liquidity needs and to pay our obligations without maintaining excessive holdings of low-yielding liquid investments or being forced to incur unnecessarily high borrowing costs. In addition, in accordance with the FHFA’s requirement to maintain five calendar days of contingent liquidity, we maintain a contingency liquidity plan designed to protect against temporary disruptions in access to the FHLBank debt markets in response to a rise in capital market volatility. Our efforts to manage our liquidity position, including carrying out our contingency liquidity plan, may not enable us to meet our obligations and the credit and liquidity needs of our members, which could have an adverse effect on our net interest income, and thereby, our financial condition and results of operations.

We rely on financial models to manage our market and credit risk, to make business decisions, and for financial accounting and reporting purposes. The impact of financial models and the underlying assumptions used to value financial instruments may have an adverse impact on our financial condition and results of operations. We make significant use of financial models for managing risk. For example, we use models to measure and monitor exposures to interest rate and other market risks, including prepayment risk, as well as credit risk. We also use models in determining the fair value of financial instruments for which independent price quotations are not available or reliable. The degree of management judgment in determining the fair value of a financial instrument is dependent on the availability of quoted market prices or observable market parameters. For financial instruments that are actively traded and have quoted market prices or parameters readily available, there is little to no subjectivity in determining fair value. If market quotes are not available, fair values are based on discounted cash flows using market estimates of interest rates and volatility or on dealer prices or prices of similar instruments. Pricing models and their underlying assumptions are based on management's best estimates for discount rates, prepayments, market volatility, and other factors. These assumptions may have a significant effect on the reported fair values of assets and liabilities, including derivatives, the related income and expense, and the expected future behavior of assets and liabilities. While the models we use to value instruments and measure risk exposures are subject to regular validation by independent parties, rapid changes in market conditions could impact the value of our instruments. The use of different models and assumptions, as well as changes in market conditions, could impact our financial condition and results of operations.

The information provided by these models is also used in making business decisions relating to strategies, initiatives, transactions, and products, and in financial statement reporting. We have adopted policies, procedures, and controls to monitor and manage assumptions used in these models. However, models are inherently imperfect predictors of actual results because they are based on assumptions about future performance. Changes in any models or in any of the assumptions, judgments, or estimates used in the models may cause the results generated by the model to be materially different. If the results are not reliable due to inaccurate assumptions, judgments, or estimates, we could make poor business decisions, including asset and liability management, or other decisions, which could result in an adverse financial impact. Furthermore, any strategies that we employ to attempt to manage the risks associated with the use of models may not be effective.

~~We rely heavily on information systems and other technology.~~ We rely heavily on information systems and other technology to conduct and manage our business. If key technology platforms become obsolete, or if we experience disruptions, including difficulties in our ability to process transactions, our revenue and results of operations could be materially adversely affected. To the extent that we experience a failure or interruption in any of these systems or other technology, we may be unable to conduct and manage our business effectively, including, without limitation, our funding, hedging, and advance activities. Additionally, a failure in or breach of our operational or security systems or infrastructure, or those of third parties with which we do business, including as a result of cyber attacks, could disrupt our systems or data necessary for the operation of our business and/or result in the disclosure or misuse of confidential or proprietary information, or the unavailability of systems or data that are necessary for the operation of our business. While we have implemented disaster recovery, business continuity, and legacy software reduction plans, we can make no assurance that these plans will be able to prevent, timely and adequately address, or mitigate the negative effects of any such failure or interruption. A failure to maintain current technology, systems, and facilities or an operational failure or interruption could significantly harm our customer relations, risk management, and profitability, which could negatively affect our financial condition and results of operations.

~~Our controls and procedures may fail or be circumvented, and risk management policies and procedures may be inadequate.~~ We may fail to identify and manage risks related to a variety of aspects of our business, including without limitation, operational risk, legal and compliance risk, human capital risk, liquidity risk, market risk, and credit risk. We have adopted controls, procedures, policies, and systems to monitor and manage these risks. Our management cannot provide complete assurance that such controls, procedures, policies, and systems are adequate to identify and manage the risks inherent in our business and because our business continues to evolve, we may fail to fully understand the implications of changes in our business, and therefore, we may fail to enhance our risk governance framework to timely or adequately address those changes. Failed or inadequate controls and risk management practices could have an adverse effect on our financial condition, results of operations or reputation.

~~We may be unable to attract and retain a highly qualified and diverse workforce, including key management.~~ Our success depends on the talents and efforts of our employees, and particularly our management. We may be unable to retain key management or to attract other highly qualified employees, particularly if we do not offer employment terms that are competitive with the rest of the market. Failure to attract and retain highly qualified and diverse employees, or failure to develop and implement an adequate succession plan for key members of management, could adversely affect our financial condition and results of operations.

~~Reliance on FHLBank of Chicago as MPF Provider could have a negative impact on our business if FHLBank of Chicago were to default on its contractual obligations owed to us.~~As part of our business, we participate in the MPF Program with FHLBank of Chicago. In its role as MPF Provider, FHLBank of Chicago provides the infrastructure, operational support, and maintenance of investor relations for the MPF Program and is also responsible for publishing and maintaining the MPF Guides, which include the requirements PFIs must follow in originating or selling and servicing MPF mortgage loans. If FHLBank of Chicago changes its MPF Provider role, ceases to operate the MPF Program, or experiences a failure or interruption in its information systems and other technology, our mortgage loan assets could be adversely affected, and we could experience a related decrease in our net interest margin and profitability. In the same way, we could be adversely affected if any of FHLBank of Chicago's third-party vendors engaged in the operation of the MPF Program, or investors that purchase mortgages under the MPF Program, were to experience operational or other difficulties that prevent the fulfillment of their contractual obligations.

We face competition for loan demand, purchases of mortgage loans and access to funding, which could adversely affect our earnings. Our primary business is making advances to our members. We compete with other suppliers of wholesale funding, both secured and unsecured, including investment banks, commercial banks, and, in certain circumstances, other FHLBanks. Our members have access to alternative funding sources that may offer more favorable terms than we offer on our advances, including more flexible credit or collateral standards. In addition, many of our competitors are not subject to the same regulations that are applicable to us. This enables those competitors to offer products and terms that we are not able to offer.

The availability of alternative funding sources to our members may significantly decrease the demand for our advances. Any change we might make in pricing our advances, ~~in order~~ to compete more effectively with competitive funding sources, may decrease our profitability on advances. A decrease in the demand for our advances or a decrease in our profitability on advances, would negatively affect our financial condition and results of operations.

Likewise, our acquisition of mortgage loans is subject to competition. The most direct competition for purchases of mortgage loans comes from other buyers of conventional, conforming, fixed rate mortgage loans, such as Fannie Mae and Freddie Mac. Increased competition can result in the acquisition of a smaller market share of the mortgage loans available for purchase and, therefore, lower income from this business activity.

We also compete in the capital markets with Fannie Mae, Freddie Mac, and other GSEs, as well as corporate, sovereign, and supranational entities for funds raised through the issuance of consolidated obligations and other debt instruments. Our ability to obtain funds through the issuance of debt depends in part on prevailing market conditions in the capital markets (including investor demand), such as effects on the reduction in liquidity in financial markets, which are beyond our control. Accordingly, we may not be able to obtain funding on terms that are acceptable to us. Increases in the supply of competing debt products in the capital markets may, in the absence of increases in demand, result in higher debt costs to us or lesser amounts of debt issued at the same cost than otherwise would be the case. Although our supply of funds through issuance of consolidated obligations has always kept pace with our funding needs, we cannot guarantee that this will continue in the future, especially in the case of financial market disruptions when the demand for advances by our members typically increases.

Member mergers or consolidations, failures, changes in member eligibility, or other changes in member business with us may adversely affect our financial condition and results of operations. The financial services industry periodically experiences consolidation, which may occur as a result of various factors including adjustments in business strategies and increasing expense and compliance burdens. If future consolidation occurs within our district, it may reduce the number of current and potential members in our district, resulting in a loss of business to us and a potential reduction in our profitability. Member failures and out-of-district consolidations, as well as members being deemed ineligible for continued FHLBank membership, also can reduce the number of current and potential members in our district. The resulting loss of business could negatively impact our financial condition and the results of operations, as well as our operations generally. If our advances are concentrated in a smaller number of members, our risk of loss resulting from a single event (such as the loss of a member’s business due to the member’s acquisition by a ~~non-member)~~non-member or a member being deemed ineligible for continued membership) would become proportionately greater.

Further, while member failures may cause us to liquidate pledged collateral if the outstanding advances are not repaid, historically, failures have been resolved either through repayment directly from the FDIC or through the purchase and assumption of the advances by another surviving financial institution. Liquidation of pledged collateral by us may cause financial statement losses. Additionally, if members become financially distressed, we may, at the request of their regulators, decrease lending limits or, in certain circumstances, cease lending activities to certain members if they do not have adequate eligible collateral to support additional borrowings. If members are unable to obtain sufficient liquidity from us, that member's financial position may continue to deteriorate. This may negatively impact our reputation and, therefore, negatively impact our financial condition and results of operations.

A high proportion of advances and capital is concentrated with a few members, and a loss of, or change in business activities with, such institutions could adversely affect us. We have a ~~high~~ concentration of advances (see Table ~~27)~~21) and capital with a few institutions. A reduction in advances by such institutions, or the loss of membership by such institutions, whether through merger, consolidation, withdrawal, or other action, may result in a reduction in our total assets and a possible reduction of capital as a result of the repurchase or redemption of capital stock. The reduction in assets and capital may also reduce our net income.

Changes in our credit ratings may adversely affect our business operations. As of February 29, 2024, we are rated Aaa with a negative outlook by Moody’s and AA+ with a stable outlook by S&P. Adverse revisions to or the withdrawal of our credit ratings could adversely affect us in a number of ways. It might influence counterparties to limit the types of transactions they would be willing to enter into with us or cause counterparties to cease doing business with us. We have issued letters of credit to support deposits of public unit funds with our members. In some circumstances, loss of or reduction in any of our current ratings could result in our letters of credit no longer being acceptable to collateralize public unit deposits or other transactions. We have also executed various standby bond purchase agreements (SBPA) in which we provide a liquidity facility for bonds issued by the HFAs by agreeing to purchase the bonds in the event they are tendered and cannot be remarketed in accordance with specified terms and conditions. If our current short-term ratings are reduced, suspended, or withdrawn, the issuers will have the right to terminate these SBPAs, resulting in the loss of future fees that would be payable to us under these agreements.

Changes in the credit standing of the U.S. Government or other FHLBanks, including the credit ratings assigned to the U.S. Government or those FHLBanks, could adversely affect us. Pursuant to criteria used by S&P and Moody’s, the FHLBank System’s debt is linked closely to the U.S. sovereign rating because of the FHLBanks’ status as GSEs and the public perception that the FHLBank System would be likely to receive U.S. government support in the event of a crisis. The U.S. government’s fiscal challenges could impact the credit standing or credit rating of the U.S. government, which could in turn result in a revision of the rating assigned to us or the consolidated obligations of the FHLBank System.

The FHLBanks issue consolidated obligations that are the joint and several liability of all FHLBanks. Significant developments affecting the credit standing of one or more of the other FHLBanks, including revisions in the credit ratings of one or more of the other FHLBanks, could adversely affect the cost of consolidated obligations. An increase in the cost of consolidated obligations would adversely affect our cost of funds and negatively affect our financial condition. As of February 29, 2024, the consolidated obligations of the FHLBanks are rated Aaa/P-1 by Moody’s and AA+/A-1+ by S&P. All of the FHLBanks are rated Aaa with a negative outlook by Moody’s and AA+ with a stable outlook by S&P. Moody’s negative outlook for the FHLBank’s aligns with Moody’s negative outlook on the ratings of the U.S. government. Changes in the credit standing or credit ratings of one or more of the other FHLBanks could result in a revision or withdrawal of the ratings of the consolidated obligations by the rating agencies at any time, which may negatively affect our cost of funds and our ability to issue consolidated obligations for our benefit. A negative rating action on the U.S. government would likely result in the same rating action for the FHLBanks.

We may become liable for all or a portion of the consolidated obligations of one or more of the other FHLBanks. We are jointly and severally liable with the other FHLBanks for all consolidated obligations issued on behalf of all FHLBanks through the Office of Finance. We cannot pay any dividends to members or redeem or repurchase any shares of our capital stock unless the principal and interest due on all our consolidated obligations have been paid in full. If another FHLBank were to default on its obligation to pay principal or interest on any consolidated obligation, the FHFA may allocate the outstanding liability among one or more of the remaining FHLBanks on a pro rata basis or on any other basis the FHFA may determine. As a result, our ability to pay dividends to our members or to redeem or repurchase shares of our capital stock could be affected not only by our own financial condition, but also by the financial condition of one or more of the other FHLBanks.

Credit Risk

Declines in U.S. home prices or in activity in the U.S. housing market or rising delinquency or default rates on mortgage loans could result in credit losses and adversely impact our business operations and/or financial condition. A deterioration of the U.S. housing market and national decline in home prices could adversely impact the financial condition of a number of our borrowers, particularly those whose businesses are concentrated in the mortgage industry. One or more of our borrowers may default on their obligations to us for a number of reasons, such as changes in financial condition, a reduction in liquidity, operational failures, or insolvency. In addition, the value of residential mortgage loans pledged to us as collateral may decrease. If a borrower defaults, and we are unable to obtain additional collateral to make up for the reduced value of such residential mortgage loan collateral, we could incur losses. A default by a borrower lacking sufficient collateral to cover its obligations to us could result in significant financial losses, which would adversely impact our results of operations and financial condition.

Defaults by one or more of our institutional counterparties on its obligations to us could adversely affect our results of operations or financial condition. We have a high concentration of credit risk exposure to financial institutions as counterparties, some of which are outside of the United States. Our primary exposures to institutional counterparty risk are with: (1) obligations of mortgage servicers that service the loans we have as collateral on our credit obligations; (2) third-party providers of credit enhancements on the MBS that we hold in our investment portfolio, including mortgage insurers, bond insurers, and financial guarantors; (3) third-party providers of PMI and SMI for mortgage loans purchased under the MPF Program; (4) uncleared derivative counterparties; (5) third-party custodians and futures commission merchants associated with cleared derivatives; and (6) unsecured money market and Federal funds investment transactions. A default by a counterparty with significant obligations to us could adversely affect our ability to conduct operations efficiently and at cost-effective rates, which in turn could adversely affect our results of operations and financial condition.

A default by a derivatives clearinghouse on its obligations could adversely affect our results of operations or financial condition. The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) and implementing CFTC regulations require all clearable derivatives transactions to be cleared through a derivatives clearinghouse. As a result of such statutes and regulations, we are required to centralize our risk with the derivatives clearinghouses as opposed to the pre-Dodd-Frank Act methods of entering into derivatives transactions that allowed us to distribute our risk among various counterparties. A default by a derivatives clearinghouse could: (1) adversely affect our financial condition in the event the derivatives clearinghouse is unable to make payments owed to us or return our posted initial margin; (2) jeopardize the effectiveness of derivatives hedging transactions; and (3) adversely affect our operations as we may be unable to enter into certain derivatives transactions or do so at cost-effective rates.

Securities or loans pledged as collateral by our members or collateral securing mortgage loans or MBS investments could be adversely affected by the devaluation of, or inability to liquidate, the collateral in the event of a default. Although we seek to obtain sufficient collateral on our credit obligations to protect ourselves from credit losses, changes in market conditions, uninsured or underinsured natural disasters, or other factors may cause the collateral to deteriorate in value, which could lead to a credit loss in the event of a default by a member or a borrower and adversely affect our financial condition and results of operations. If borrowers are unable to pledge additional collateral to fully secure their obligations, whether due to significant financial stress, market volatility, or otherwise, advance levels could decrease and/or credit risk could increase. During economic downturns or periods of significant economic and financial disruptions and uncertainties, the number of members exhibiting significant financial stress may increase, which may expose us to additional member credit risk. A reduction in liquidity in the financial markets or otherwise could have the same effect.

Our funding depends on our ability to access the capital markets. Our primary source of funds is the sale of consolidated obligations in the capital markets, including the short-term discount note market. Our ability to obtain funds through the sale of consolidated obligations depends in part on prevailing conditions in the capital markets (including investor demand) at the time. Our counterparties in the capital markets are also subject to regulations that could alter the balance sheet composition, market activities, and behavior of our counterparties in a way that could be detrimental to our access to the capital markets and overall financial market liquidity, which could have a negative impact on our funding costs and results of operations. Further, we rely on the Office of Finance for the issuance of consolidated obligations, and a failure or interruption of services provided by the Office of Finance could hinder our ability to access the capital markets. Accordingly, we cannot make any assurance that we will be able to obtain funding on terms acceptable to us in the future, if we are able to obtain funding at all in the case of future severe financial, economic, geopolitical, or other disruptions. If we cannot access funding when needed, our ability to support and continue our operations would be adversely affected, negatively affecting our financial condition and results of operations.

Market Risk

Our profitability may be adversely affected if we are not successful in managing our interest rate risk. Like most financial institutions, our results of operations are significantly affected by our ability to manage interest rate risk. We use a number of tools to monitor and manage interest rate risk, including income simulations and duration/market value sensitivity analyses. Key assumptions used in our market value sensitivity analyses include interest rate volatility, mortgage prepayment projections and the future direction of interest rates, among other factors. Key assumptions used in our income simulations include projections of advance volumes and pricing, mortgage loan volumes and pricing, market conditions for our debt, prepayment speeds and cash flows on mortgage-related assets, the level of short-term interest rates, and other factors. These assumptions are inherently uncertain and, as a result, the measures cannot precisely estimate net interest income or the market value of our equity nor can they precisely predict the effect of higher or lower interest rates or changes in other market factors on net interest income or the market value of our equity. Actual results will most likely differ from simulated results due to the timing, magnitude, and frequency of interest rate changes and changes in market conditions and management strategies, among other factors. The increase in interest rates from 2022 to 2023 resulted in spread compression between the interest earned on our interest-earning assets and the interest paid on our interest-bearing liabilities. Our ability to maintain a positive spread between the interest earned on our earning assets and the interest paid on our interest-bearing liabilities may be affected by the unpredictability of changes in interest rates.

Prepayment risk is the risk that the principal amount or a portion thereof outstanding of a mortgage loan or debt security is paid back prior to maturity, which can reduce income if we are unable to reinvest prepaid cash flows at favorable rates. Extension risk is the risk that the expected life of a loan will lengthen, typically observed in rising rate environments, thereby creating fair value and funding risk. The direction of interest rate changes, either actual or perceived, can impact prepayment and extension risk on fixed rate mortgage loans and mortgage-related securities and callable advances. Residential mortgage-related assets typically have no restrictions on prepayment, while commercial mortgage-related assets typically charge a yield maintenance or prepayment fee structured to compensate the security holder for the loss of income resulting from the prepayment and thereby reduce reinvestment risk. Other external factors, such as property values or credit scores, can also impact prepayment and extension risk, as both impact the ability of the borrower to refinance. Although the factors impacting prepayments are observable and we generally expect prepayment and extension behavior in certain environments, the timing and volume of prepayments, particularly in commercial mortgage-related assets, can be difficult to predict.

We rely on derivatives to lower our cost of funds and reduce our interest rate, option and prepayment risk, and we may not be able to enter into effective derivative instruments on acceptable terms; thus, these derivatives may adversely affect our results of operations. We use derivatives to: (1) obtain funding at more favorable rates; and (2) reduce our interest rate risk, option risk and mortgage prepayment risk. Management determines the nature and quantity of hedging transactions using derivatives based on various factors, including market conditions and the expected volume and terms of advances or other transactions. As a result, our effective use of derivatives depends on management’s ability to determine the appropriate hedging positions considering: (1) our assets and liabilities; and (2) prevailing and anticipated market conditions. In addition, the effectiveness of our hedging strategies depends on our ability to enter into derivatives with acceptable counterparties, or through derivative clearinghouses, on terms desirable to us and in the quantities necessary to hedge our corresponding obligations, interest rate risk or other risks. If we are unable to manage our hedging positions properly, or are unable to enter into derivative hedging instruments on desirable terms or at all, we may incur higher funding costs, be required to limit certain advance product offerings, and be unable to effectively manage our interest rate risk and other risks, which could negatively affect our financial condition and results of operations.

The use of derivatives also subjects us to earnings volatility caused primarily by the changes in the fair values of derivatives that do not qualify for hedge accounting and, to a lesser extent, by hedge ineffectiveness, which is the difference in the amounts recognized in our earnings for the changes in fair value of a derivative and the related hedged item. If we are unable to apply hedge accounting due to changes in accounting guidance or other changes in circumstances that impact our ability to utilize hedge accounting, the result could be an increase in the volatility of our earnings from period to period. Such increases in earnings volatility could affect our ability to pay dividends, our ability to meet our retained earnings threshold, and our members’ willingness to hold the capital stock necessary for membership and/or lending activities with us.

Liquidity and Capital Risk

We may not be able to meet our obligations as they come due or meet the credit and liquidity needs of our members in a timely and cost-effective manner. We seek to be in a position to meet our members’ credit and liquidity needs and to pay our obligations without maintaining excessive holdings of low-yielding liquid investments or being forced to incur unnecessarily high borrowing costs. In addition, we are subject to various regulatory liquidity requirements, including a contingency funding plan designed to protect against temporary access disruptions to the FHLBank debt markets in response to a rise in capital market volatility. Our efforts to manage our liquidity position, including carrying out our contingency funding plan and the related costs, may not enable us to meet our obligations and the credit and liquidity needs of our members, which could have an adverse effect on our net interest income, and thereby, our financial condition and results of operations.

An increase in required AHP contributions could adversely affect our results of operations, our ability to pay dividends, or our ability to redeem or repurchase capital stock. The Bank Act requires each FHLBank to contribute to its AHP the greater of: (1) 10 percent of that FHLBank’s net earnings for the previous year; or (2) that FHLBank’s pro rata share of an aggregate of $100 million, the proration of which is based on the net earnings of the FHLBanks for the previous year. A failure of the FHLBanks to make the minimum $100 million annual AHP contribution in a given year or new or modified legislation could result in an increase in our required AHP contribution, which could adversely affect our results of operations, our ability to pay dividends, or our ability to redeem or repurchase capital stock.

We may not be able to pay dividends at rates consistent with past practices. Our board of directors may only declare dividends on our capital stock, payable to members, from our unrestricted retained earnings and current net income. Our ability to pay dividends also is subject to statutory and regulatory requirements, including meeting all regulatory capital requirements. The potential promulgation of regulations or other requirements by the FHFA that would require higher levels of required or restricted retained earnings could lead to higher levels of retained earnings, and thus, lower amounts of unrestricted retained earnings available to be paid out to our members as dividends. Failure to meet any of our regulatory capital requirements would prevent us from paying any dividend.

Events such as changes in our market risk profile, credit quality of assets held, and increased volatility of net income caused by the application of certain GAAP may affect the adequacy of our retained earnings and may require us to increase our threshold level of retained earnings and correspondingly reduce our dividends from historical payout ratios to achieve and maintain the threshold amounts of retained earnings under our RMP. Additionally, FHFA regulations on capital classifications could restrict our ability to pay dividends. Further, our ability to pay dividends at historical rates is impacted directly by our net income, so a decline in net income could result in a decline in dividend rates. A decline in dividend rates may diminish members’ interest in holding FHLBank capital stock and could decrease demand for advances, AMA, or letters of credit.

Lack of a public market and restrictions on transferring our stock could result in an illiquid investment for the holder. Under the GLB Act, FHFA regulations and our capital plan, our Class A Common Stock may be redeemed upon the expiration of a six-month redemption period and our Class B Common Stock after a five-year redemption period following our receipt of a redemption request. Only capital stock in excess of a member’s minimum investment requirement, capital stock held by a member that has submitted a notice to withdraw from membership, or capital stock held by a member whose membership has been terminated may be redeemed at the end of the redemption period. Further, we may elect to repurchase excess capital stock of a member at any time at our sole discretion.

We may also suspend the redemption of capital stock if we reasonably believe that the redemption would prevent us from maintaining adequate capital against a potential risk, or would otherwise prevent us from operating in a safe and sound manner. In addition, approval from the FHFA for redemptions or repurchases is required if the FHFA or our board of directors were to determine that we have incurred, or are likely to incur, losses that result in, or are likely to result in, charges against our capital. Under such circumstances, we cannot guarantee that the FHFA would grant such approval or, if it did, upon what terms it might do so. We may also be prohibited from repurchasing or redeeming our capital stock if the principal and interest due on any consolidated obligations that we issued through the Office of Finance has not been paid in full or if we become unable to comply with regulatory liquidity requirements to satisfy our current obligations.

Operational Risk

We rely on financial models to manage our market and credit risk, to make business decisions, and for financial accounting and reporting purposes. The impact of financial models and the underlying assumptions used to value financial instruments may have an adverse impact on our financial condition and results of operations. We make significant use of financial models for managing risk. For example, we use models to measure and monitor exposures to interest rate and other market risks, including prepayment risk and credit risk. We also use models in determining the fair value of financial instruments for which independent price quotations are not available or reliable. The degree of management judgment in determining the fair value of a financial instrument is dependent on the availability of quoted market prices or observable market parameters. For financial instruments that are actively traded and have quoted market prices or parameters readily available, there is little to no subjectivity in determining fair value. If market quotes are not available, fair values are based on discounted cash flows using market estimates of interest rates and volatility or on dealer prices or prices of similar instruments. Pricing models and their underlying assumptions are based on management's best estimates for discount rates, prepayments, market volatility, and other factors. These assumptions may have a significant effect on the reported fair values of assets and liabilities, including derivatives, the related income and expense, and the expected future behavior of assets and liabilities. While the models we use to value instruments and measure risk exposures are subject to regular validation by independent parties, rapid changes in market conditions could impact the value of our instruments. The use of different models and assumptions, as well as changes in market conditions, could impact our financial condition and results of operations.

We rely heavily on information systems and other technology. A failure, interruption, or security breach, including events caused by cyberattacks, of our information systems or those of critical vendors and third parties, such as the Federal Reserve Banks,could disrupt our business or adversely affect our reputation. We rely heavily on information systems and other technology to conduct and manage our business, and we rely on vendors and other third parties to perform certain critical services. If key technology platforms become obsolete, if we fail to keep pace with technological changes or innovation, including artificial intelligence and/or machine learning, or if we experience disruptions, including difficulties in our ability to process transactions, our revenue and results of operations could be materially adversely affected. To the extent that we or one of our critical vendors experience a failure or interruption in any of these systems or other technology, including events caused by cyberattacks, we may be unable to conduct and manage our business effectively, including, without limitation, our funding, hedging, and advance activities. Additionally, such failure or breach could disrupt our systems or data necessary for the operation of our business and/or result in the disclosure or misuse of confidential or proprietary information, or the unavailability of systems or data that are necessary for the operation of our business. While we have implemented business resiliency and legacy software reduction plans, we can make no assurance that these plans will be able to prevent, timely and adequately address, or mitigate the negative effects of any such failure or interruption. Cyberattacks, in particular those on financial institutions or financial market infrastructures, have become more frequent, sophisticated, and difficult to detect or prevent. There may be an increased risk of cyberattacks as a result of geopolitical conflicts. A failure to maintain or keep pace with current technology, systems, and facilities or an operational failure or interruption could significantly harm our customer relations, risk management, and profitability, which could negatively affect our financial condition and results of operations. There were no material failures or breaches to disclose for the period.

For additional information on information system and security threats, see “Risk Management – Operations Risk Management” under Item 7. For additional information on cybersecurity, see “Item 1C – “Cybersecurity.”

Our controls and procedures may fail or be circumvented, and risk management policies and procedures may be inadequate. We may fail to identify and manage risks related to a variety of aspects of our business, including without limitation, operational risk, legal and compliance risk, human capital risk, liquidity risk, market risk, and credit risk. We have adopted controls, procedures, policies, and systems to monitor and manage these risks. Our management cannot provide complete assurance that such controls, procedures, policies, and systems are adequate to identify and manage the risks inherent in our business and because our business continues to evolve, we may fail to fully understand the implications of changes in our business, and therefore, we may fail to enhance our risk governance framework to timely or adequately address those changes. Failed or inadequate controls and risk management practices could have an adverse effect on our financial condition, results of operations or reputation.

For additional information on internal controls, see “Risk Management – Operations Risk Management” under Item 7.

We may be unable to attract and retain a highly qualified and diverse workforce, including key management. Our success depends on the talents and efforts of our employees, and particularly our management. We have experienced higher employee turnover and increased competition in hiring and retaining skilled key personnel in 2023, attributed to the disruptions and changes to the U.S. labor market triggered by the COVID-19 pandemic. We may be unable to retain key management or to attract other highly qualified and diverse employees, particularly if we do not offer employment terms that are competitive with the rest of the market. Failure to attract and retain highly qualified and diverse employees, or failure to develop and implement an adequate succession plan for key members of management, could adversely affect our financial condition and results of operations.

Reliance on FHLBank Chicago as MPF Provider could have a negative impact on our business if FHLBank Chicago were to default on its contractual obligations owed to us.As part of our business, we participate in the MPF Program with FHLBank Chicago. In its role as MPF Provider, FHLBank Chicago provides the infrastructure, operational support, and maintenance of investor relations for the MPF Program and is also responsible for publishing and maintaining the MPF Guides, which include the requirements PFIs must follow in originating or selling and servicing MPF mortgage loans. If FHLBank Chicago changes its MPF Provider role, ceases to operate the MPF Program, or experiences a failure or interruption in its information systems and other technology, our mortgage loan assets could be adversely affected, and we could experience a related decrease in our net interest margin and profitability. In the same way, we could be adversely affected if any of FHLBank Chicago's third-party vendors engaged in the operation of the MPF Program, or investors that purchase mortgages under the MPF Program, were to experience operational or other difficulties that prevent the fulfillment of their contractual obligations.

Item 1B: Unresolved Staff Comments

Not applicable.

Item 1C: Cybersecurity

FHLBank is subject to cybersecurity incident and threat risk. A cybersecurity incident is an unauthorized occurrence, or a series of related unauthorized occurrences, through information systems that jeopardizes the confidentiality, integrity, or availability of our information systems or any information residing therein. Cybersecurity threats are potential unauthorized occurrences on or conducted through information systems that may result in adverse effects on the confidentiality, integrity, or availability of information systems or any information residing therein. Information systems are any electronic information resources, owned or used by FHLBank, including physical or virtual infrastructure controlled by such information resources, or their components, organized for the collection, processing, maintenance, use, sharing, dissemination, or disposition of our information to maintain or support our operations. Please refer to Item 1A – “Risk Factors” for a description of cybersecurity incident and threat risk. We have implemented processes for assessing, identifying, and managing material risks from cybersecurity threats or incidents that may directly or indirectly impact our business strategy, results of operations, or financial condition.

Our cybersecurity risk management framework for assessing, identifying, and managing material risks from cybersecurity threats is designed to protect the confidentiality, integrity, and availability of the information technology assets and data under our control.

Cybersecurity risk management is part of our Enterprise Risk Management (ERM) Program, which includes specific controls and processes for mitigation, monitoring and reporting associated with those risks. Those controls and processes include the Enterprise Security Policy, the Security Incident Response Plan, and the Business Resiliency Management Policy. The Risk Oversight committee of the board of directors oversees and annually reviews and recommends for approval and the full board of directors annually reviews and approves our Enterprise Security Policy, Security Incident Response Plan, and Business Resiliency Management Policy.

The Enterprise Security Policy establishes administrative, technical, and physical safeguards designed to protect the security, confidentiality, and integrity of FHLBank physical and information assets in accordance with the GLB Act and the interagency guidelines issued thereunder, and applicable laws.

The Security Incident Response Plan determines how cybersecurity threats and incidents are identified, classified, and escalated, including for the purposes of reporting, and providing relevant information to the Risk Oversight committee and the full board of directors. The Security Incident Response Plan also requires assessment of materiality of the threat or incident for the purposes of public disclosure.

The Business Resiliency Management Policy is designed to ensure our critical business functions remain available during business disruptions and to minimize the impact of such disruptions, including the unavailability of information technology assets due to unintentional events like fire, power loss, and other technical incidents such as hardware failures. The Business Resiliency Management Policy includes, among other items, business impact analysis for developing effective plans and a disaster recovery plan to respond, recover, resume, and restore technology assets critical for FHLBank to operate.

We regularly engage with third parties to assist in the testing, maintenance, and development of our cybersecurity risk management practices and to assess, identify, and manage cybersecurity incident and threat risk.

Our cyber incident response plan includes third-party cybersecurity incidents and threats. Through our vendor management program, we undertake due diligence of third-party systems with which we will interact and vendors with whom we will interact, including regular reviews and oversight of these service providers through performance and technological reviews and escalation of any unsatisfactory reviews.

During the period covered by this report, risks from cybersecurity threats did not have a material impact on our strategy, results of operations, or financial condition. We have experienced cybersecurity incidents in the past, though none have had a material effect on our financial condition or results of operations.

Additional cybersecurity incidents may occur in the future and any such cybersecurity incident could result in significantly harmful consequences to us, our members, and their customers. We assess the materiality of any such cybersecurity incident from several perspectives including, but not limited to, our ability to continue to service our members and protect the privacy of the data their customers have entrusted to us, lost revenue, disruption of business operation, increased operating costs, litigation, and reputational harm.

Cybersecurity Governance

Our board of directors devotes significant time and attention to data and systems protection, including cybersecurity and information security risk. Our board of directors oversees the Enterprise Risk Management (ERM) Program, the Enterprise Security Program and Information Security through policies and principles including the Enterprise Security Policy, the Security Incident Response Plan, and the Business Resiliency Management Policy. The board of directors oversees management’s approach to staffing, policies, processes, and practices to gauge and address cybersecurity and information security risk.

Our board of directors has oversight of our ERM Program, the Enterprise Security Program, and Information Security areas which include risks from cybersecurity threats and has approved specific controls for the mitigation, monitoring and reporting associated with those risks. The Risk Oversight Committee and Operations Committee of the board of directors receive regular reporting (at least quarterly) on the risks and are responsible for overseeing the risks, including receiving Enterprise Security Program updates from the information security officer (ISO), Information Technology status updates, and reviewing enterprise risk analysis and status information, and annually reviews the Business Resiliency Management Policy and Program.

Our Enterprise Security Program is led by the ISO. The ISO reports to the Chief Risk Officer (CRO). FHLBank’s Information Security area is led by the Director of Information Security, who reports to the Chief Information Officer. The Business Resiliency Management Program is led by the Director of Vendor Risk and Business Resiliency, who reports to the Associate CRO.

We have a Technology Committee, which reviews and discusses all technology-related methodologies and initiatives related to information/cybersecurity, among other topics. The Technology Committee is a management committee and reports to the Strategic Operations Management Committee (SOMC). We also have an Operations Risk Committee (ORC), which is a management committee, and is the secondary venue for reviewing enterprise security initiatives. The ORC also serves as the primary governance venue for the Business Resiliency Management Program and escalates business resiliency concerns and risk issues, among other matters, to the Strategic Risk Management Committee (SRMC). The ORC, is responsible for annually reviewing and providing recommendations on FHLBank’s Security Incident Response Plan and receives monthly updates on the Enterprise Security Program. The ISO is a required member of both the Technology Committee and the ORC.

The SOMC and SRMC are comprised of senior leadership and executive-level officers, including FHLBank’s CRO and Chief Information Officer. The SOMC is responsible for receiving reports on issues escalated from the Technology Committee. The SRMC is responsible for management of operational risk and implementation of the cybersecurity risk management framework within the ERM Program as approved by the board of directors and receives reports on issues escalated from the ORC.

The Executive Team, comprised of chief-level officers, annually reviews and provides recommendations on the Enterprise Security Policy, Security Incident Response Plan, and the Business Resiliency Management Policy. The President and CEO annually approves each policy for submission to the board of directors for its consideration and ultimate approval.

In addition to the board of directors and management committees, we have an Information Security Working Group (ISWG). Membership in the ISWG consists of leadership and business partners from a cross section of areas, including operational risk, information security, information technology, legal, operations, and others throughout FHLBank. The breadth and depth of experience of members of the ISWG allows for detailed discussions on information security trends and emerging risks which can be elevated to the Technology Committee for action or further discussion, as necessary and appropriate.

We have an Information Security area of the Information Technology department comprised of specialized professionals responsible for the day-to-day, hands-on management of cybersecurity risk. The area handles processes and procedures to mitigate and implement protective, proactive and reactive measures to protect FHLBank against cybersecurity risks and is responsible for the practices designed to prevent unauthorized access, use, disclosure, disruption, modification, inspection, recording or destruction of information.

Those responsible for assessing and managing FHLBank’s material risks from cybersecurity threats have expertise and experience relevant to their roles. FHLBank’s CIO has served in technology and leadership roles for over 30 years, including almost 26 years of experience with FHLBank. During the last 12 years, the CIO has provided oversight and strategic direction for the Information Security area of the Information Technology department. The ISO has more than 25 years of information technology experience, including 24 in the financial industry, and 22 years of experience managing information security. The ISO has a Bachelor of Science degree in Computer Science Information Systems. The Director of Information Security is a retired United States Air Force Lt. Colonel whose primary career focus was in intelligence analysis. The Director of Information Security also has 13 years experience building and leading cybersecurity programs, including cyber threat intelligence programs and cyber regulatory compliance; 16 years of cyber intelligence analysis experience, including military and civilian; five years of continuity of operations and business continuity program development; and holds a Master of Arts degree in Strategic Intelligence Studies and is a Certified Information System Security Professional.

The Technology Committee and ORC, as appropriate, receive regular and prompt information from the Information Security area as reported by the ISO, which in turn provide periodic, regular and prompt reporting to the SRMC and SOMC on topics such as threat intelligence, major cybersecurity risk areas, technologies and best practices, and any cybersecurity incidents that may have impacted FHLBank, as applicable and needed. The SRMC and SOMC may escalate reporting as applicable and needed to the Executive Team or board of directors.

The board of directors receives prompt and timely information from the Security Incident Response Team, which includes the CRO, CIO, ISO, and Director of Information Security, among others, as set forth in the Security Incident Response Plan, on any cybersecurity or information security incident that may pose significant risk to FHLBank and continues to receive regular reports on the incident until its conclusion. The board of directors, Risk Oversight Committee and Operations Committee each receive regular presentations and reports throughout the year on cybersecurity and information security risk. These presentations and reports address a broad range of topics, including updates on technology trends, regulatory developments, legal issues, policies and practices, information security resources and organization, the threat environment and vulnerability assessments, and specific and ongoing efforts to prevent, detect, and respond to internal and external incidents and critical threats. At least quarterly, the board discusses cybersecurity and information security risks with the ISO and CRO.

Item 2: Properties

~~Construction of our new 95,000 square foot facility was completed during January 2018.~~ We own ~~this property and have relocated~~ our ~~operations to this~~primary facility located at 500 SW Wanamaker Road, Topeka, Kansas. ~~We also maintain~~Our facility has Leadership in ~~Topeka a leased off-site back-up facility~~Energy and Environment Design Certified Gold status, in alignment with ~~approximately 3,000 square feet.~~our commitment to sustainability, energy efficiency, and natural resource conservation.

Item 3: Legal Proceedings

We are subject to various pending legal proceedings arising in the normal course of business. After consultation with legal counsel, management does not anticipate that the ultimate liability, if any, arising out of these matters will have a material adverse effect on our financial condition or results of operations. Additionally, management does not believe that we are subject to any material pending legal proceedings outside of ordinary litigation incidental to our business.

Item 4: Mine Safety Disclosures

Not applicable.

PART II

Item 5: Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

As a cooperative, members own almost all of our Class A Common Stock and Class B Common Stock with the remainder of the capital stock held by former members that are required to retain capital stock ownership to support outstanding advance and mortgage loan activity the former members executed while they were members. ~~Note, however, that~~However, the portion of our capital stock subject to mandatory redemption is treated as a liability and not as capital, including the capital stock of former members. There is no public trading market for our capital stock.

All of our member directors are elected by and from the membership, and we conduct our business in advances and mortgage loan acquisitions almost exclusively with our members. Depending on the class of capital stock, it may be redeemed at par value either six months (Class A Common Stock) or five years (Class B Common Stock) after we receive a written request by a member, subject to regulatory limits and to the satisfaction of any ongoing stock investment requirements applying to the member under our capital plan. We may repurchase shares held by members in excess of the members’ required stock holdings at our discretion at any time at par value. Par value of all common stock is $100 per share. As of ~~March 13, 2018,~~February 29, 2024, we had ~~740~~679 stockholders of record and ~~2,383,024~~3,298,033 shares of Class A Common Stock and ~~14,952,521~~20,687,257 shares of Class B Common Stock outstanding, including ~~19,748~~2,677 shares of Class A Common Stock and ~~32,280~~no shares of Class B Common Stock subject to mandatory redemption by members or former members. ~~"Classes"~~“Classes” of stock are not registered under the Securities Act of 1933, ~~(as amended).~~as amended. The Recovery Act amended the Exchange Act to require the registration of a class of common stock of each FHLBank under Section 12(g) of the Exchange Act and for each FHLBank to maintain such registration and to be treated as an “issuer” under the Exchange Act, regardless of the number of members holding such a class of stock at any given time. Pursuant to an FHFA regulation, we voluntarily registered one of our classes of stock pursuant to Section 12(g)(1) of the Exchange Act.

We paid quarterly stock dividends during the years ended December 31, 2017 and 2016, which excludes dividends treated as interest expense for mandatorily redeemable shares. Dividends paid on capital stock are outlined in Table 7 (dollar amounts in thousands):

~~Table 7~~

Class A Common Stock Class B Common Stock
Percent
Dividends Paid in Cash¹
Dividends Paid in Class B Common Stock
Total Dividends Paid²
Percent
Dividends Paid in Cash¹
Dividends Paid in Class B Common Stock
Total Dividends Paid²
12/31/2017 1.25 % $ 38
$ 669
$ 707
6.50 % $ 30
$ 23,361
$ 23,391
09/30/2017 1.25
36
636
672
6.50
30
23,077
23,107
06/30/2017 1.00
38
507
545
6.50
31
22,192
22,223
03/31/2017 1.00
36
479
515
6.50
28
20,813
20,841
12/31/2016 1.00
38
496
534
6.00
35
18,838
18,873
09/30/2016 1.00
39
506
545
6.00
34
19,444
19,478
06/30/2016 1.00
39
486
525
6.00
33
19,217
19,250
03/31/2016 1.00
39
443
482
6.00
34
18,638
18,672


¹	~~The cash dividends listed are cash dividends paid for partial shares and dividends paid to former members. Stock dividends are paid in whole shares.~~


²	~~Excludes dividends paid on mandatorily redeemable capital stock classified as interest expense.~~

Dividends may be paid in cash or shares of Class B Common Stock as authorized under our capital plan and approved by our ~~Board~~board of ~~Directors.~~directors. FHFA regulation prohibits any FHLBank from paying a stock dividend if excess stock outstanding will exceed one percent of its total assets after payment of the stock dividend. We ~~were able to~~consistently manage our excess capital stock position ~~in the past two years in order~~to be able to pay stock dividends.

~~We anticipate paying a 1.25 percent dividend~~Base stock dividends on Class A Common Stock and ~~a 6.50 percent dividend on~~ Class B Common Stock ~~for the first quarter of 2018. Historically, dividend~~are anticipated to remain at or near current levels ~~have been~~in 2024 relative to what was paid in 2023. Dividend rates are influenced by ~~several factors, including: (1) an objective of moving dividend rates gradually over time; (2) an objective of having dividends reflective of the level of current short‑term interest rates;~~capital levels and ~~(3) an objective of managing~~ the balance of ~~retained earnings to appropriate levels as set forth~~the rates we offer members on advances and the dividend rates we pay on activity-based stock. Historically, dividend rates have moved directionally with short-term interest rates but the pace of interest rate increases slowed at the end of 2023, so further increases in ~~the retained earnings policy.~~dividend rates may be limited. Market conditions and movements in short-term interest rates can be unpredictable. Adverse changes in FHLBank’s financial results may result in lower dividend rates in future periods. See Item 1 – “Business – Capital, Capital Rules and Dividends” for more information regarding our retained earnings policy, and also see Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources - Capital” for a discussion of restrictions on dividend payments in the form of capital stock.

Our retained earnings balances have been significantly above the threshold set forth in the retained earnings policy and were not a factor in determining dividend declarations in 2017 and 2016. There is a possibility that the retained earnings threshold level could change and be a greater consideration for dividend levels in the future because the threshold is a function of the size and composition of our balance sheet.

Item 6: ~~Selected Financial Data~~[Reserved]

~~Table 8 presents Selected Financial Data for the periods indicated (dollar amounts in thousands):~~

~~Table 8~~

12/31/2017 12/31/2016 12/31/2015 12/31/2014 12/31/2013
Statement of Condition (as of period end):
Total assets $ 48,076,605
$ 45,216,749
$ 44,426,133
$ 36,853,977
$ 33,950,304
Investments¹
13,998,599
13,609,653
13,606,080
9,620,399
8,704,552
Advances 26,295,849
23,985,835
23,580,371
18,302,950
17,425,487
Mortgage loans, net²
7,286,397
6,640,725
6,390,708
6,230,172
5,949,480
Total liabilities 45,570,502
43,254,301
42,584,381
35,268,710
32,149,084
Deposits 461,769
598,931
759,366
595,775
961,888
Consolidated obligation discount notes, net³
20,420,651
21,775,341
21,813,446
14,219,612
10,889,565
Consolidated obligation bonds, net³
24,514,468
20,722,335
19,866,034
20,221,002
20,056,964
Total consolidated obligations, net³
44,935,119
42,497,676
41,679,480
34,440,614
30,946,529
Mandatorily redeemable capital stock 5,312
2,670
2,739
4,187
4,764
Total capital 2,506,103
1,962,448
1,841,752
1,585,267
1,801,220
Capital stock 1,640,039
1,226,675
1,208,947
974,041
1,252,249
Total retained earnings 840,406
735,196
651,782
627,133
567,332
Accumulated other comprehensive income (loss) (AOCI) 25,658
577
(18,977 ) (15,907 ) (18,361 )
Statement of Income (for the year ended):
Net interest income 270,008
257,184
239,680
225,165
217,773
(Reversal) provision for credit losses on mortgage loans (186 ) (109 ) (1,909 ) (1,615 ) 1,926
Other income (loss) 15,987
(13,830 ) (80,089 ) (55,850 ) (30,818 )
Other expenses 67,036
63,706
57,762
53,143
52,762
Income before assessments 219,145
179,757
103,738
117,787
132,267
AHP 21,934
17,984
10,378
11,783
13,229
Net income 197,211
161,773
93,360
106,004
119,038
Selected Financial Ratios and Other Financial Data (for the year ended):
Dividends paid in cash⁴
267
291
296
299
291
Dividends paid in stock⁴
91,734
78,068
68,415
45,904
32,697
Weighted average dividend rate⁵
5.77 % 5.29 % 5.26 % 4.22 % 2.42 %
Dividend payout ratio⁶
46.65 % 48.44 % 73.60 % 43.59 % 27.71 %
Return on average equity 8.18 % 7.45 % 4.78 % 6.29 % 6.37 %
Return on average assets 0.37 % 0.33 % 0.21 % 0.30 % 0.33 %
Average equity to average assets 4.55 % 4.47 % 4.45 % 4.82 % 5.24 %
Net interest margin⁷
0.51 % 0.53 % 0.55 % 0.64 % 0.61 %
Total capital ratio⁸
5.21 % 4.34 % 4.14 % 4.30 % 5.31 %
Regulatory capital ratio⁹
5.17 % 4.34 % 4.19 % 4.36 % 5.37 %
Ratio of earnings to fixed charges¹⁰
1.39
1.56
1.46
1.58
1.59


¹	~~Includes trading securities, available-for-sale securities, held-to-maturity securities, interest-bearing deposits, securities purchased under agreements to resell, and Federal funds sold.~~


²	~~The allowance for credit losses on mortgage loans was $1,208,000, $1,674,000, $1,972,000, $4,550,000, and $6,748,000 as of December 31, 2017, 2016, 2015, 2014, and 2013, respectively.~~


³	Consolidated obligations are bonds and discount notes that we are primarily liable to repay. See Note 17 to the financial statements for a description of the total consolidated obligations of all FHLBanks for which we are jointly and severally liable.


⁴	Dividends reclassified as interest expense on mandatorily redeemable capital stock and not included as dividends recorded in accordance with GAAP were $195,000, $79,000, $39,000, $40,000, and $25,000 for the years ended December 31, 2017, 2016, 2015, 2014, and 2013, respectively.


⁵	~~Dividends paid in cash and stock on both classes of stock as a percentage of average capital stock eligible for dividends.~~


⁶	Ratio disclosed represents dividends declared and paid during the year as a percentage of net income for the period presented, although the FHFA regulation requires dividends be paid out of known income prior to declaration date.


⁷	~~Net interest income as a percentage of average earning assets.~~


⁸	~~GAAP capital stock, which excludes mandatorily redeemable capital stock, plus retained earnings and AOCI as a percentage of total assets.~~


⁹	~~Regulatory capital (i.e., permanent capital and Class A Common Stock) as a percentage of total assets.~~


¹⁰	~~Total earnings divided by fixed charges (interest expense including amortization/accretion of premiums, discounts and capitalized expenses related to indebtedness).~~

Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is intended to assist the reader in understanding our business and assessing our operations both historically and prospectively. This discussion should be read in conjunction with our audited financial statements and related notes presented under Item 8 of this ~~annual report on Form 10-K.~~report. Our MD&A includes the following sections:


▪	~~Executive Level Overview - a general description of our business and financial highlights;~~


▪	~~Financial Market Trends - a discussion of current trends in the financial markets and overall economic environment, including the related impact on our operations;~~


▪	~~Critical Accounting Policies and Estimates - a discussion of accounting policies that require critical estimates and assumptions;~~


▪	~~Results of Operations - an analysis of our operating results, including disclosures about the sustainability of our earnings;~~


▪	~~Financial Condition - an analysis of our financial position;~~


▪	~~Liquidity and Capital Resources - an analysis of our cash flows and capital position;~~


▪	~~Risk Management - a discussion of our risk management strategies; and~~


▪	~~Recently Issued Accounting Standards.~~

▪Executive Level Overview - tabular presentation of selected financial data and a general description of our business and financial highlights;

▪Financial Market Trends - a discussion of current trends in the financial markets and overall economic environment, including the related impact on our operations;

▪Critical Accounting Policies and Estimates - a discussion of accounting policies that require critical estimates and assumptions;

▪Results of Operations - an analysis of our operating results, including disclosures about the sustainability of our earnings;

▪Financial Condition - an analysis of our financial position;

▪Liquidity and Capital Resources - an analysis of our cash flows and capital position;

▪Risk Management - a discussion of our risk management strategies; and

▪Recently Issued Accounting Standards.

Additionally, refer to Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2022 Annual Report on Form 10-K for our MD&A for the fiscal year 2022 compared to fiscal year 2021.

Executive Level Overview

Table 3 presents selected financial data for the periods indicated (dollar amounts in thousands):

Table 3


	12/31/2023			12/31/2022			12/31/2021			12/31/2020			12/31/2019
Statement of Condition (as of period end):
Total assets	$	74,946,985		$	71,992,842		$	48,021,238		$	52,591,712		$	63,276,654
Investments1	20,486,846			19,261,151			16,058,574			17,251,975			20,086,473
Advances	45,444,769			44,262,750			23,484,288			21,226,823			30,241,315
Mortgage loans, net	8,352,713			7,905,135			8,135,046			9,205,207			10,633,009
Total liabilities	71,056,333			68,316,298			45,306,972			49,923,945			60,485,603
Deposits	752,200			711,061			946,207			1,229,361			790,640


Consolidated obligations, net2	69,790,738			67,281,244			44,199,598			48,530,494			59,461,225

Total capital	3,890,652			3,676,544			2,714,266			2,667,767			2,791,051
Capital stock	2,607,683			2,507,709			1,499,301			1,574,004			1,766,456
Retained earnings	1,401,940			1,253,105			1,142,650			1,051,455			999,809

Statement of Income (for the year ended):
Net interest income	460,051			362,991			296,648			251,012			256,064

Other income (loss)	47,947			(13,942)			(41,434)			(40,148)			22,973
Other expenses	97,008			80,854			77,529			80,407			72,816
Income before assessments	411,631			267,485			178,435			131,173			205,834
AHP	41,164			26,749			17,845			13,123			20,597
Net income	370,467			240,736			160,590			118,050			185,237
Selected Financial Ratios and Other Financial Data (for the year ended):

Dividends paid	221,632			130,281			69,395			70,824			99,450
Weighted average dividend rate3	8.47		%	6.47		%	4.49		%	4.38		%	6.46		%
Dividend payout ratio4	59.83		%	54.12		%	43.21		%	59.99		%	53.69		%
Return on average equity	9.56		%	7.47		%	5.88		%	4.50		%	7.32		%
Return on average assets	0.49		%	0.39		%	0.33		%	0.21		%	0.33		%
Average equity to average assets	5.10		%	5.28		%	5.54		%	4.59		%	4.45		%
Net interest margin5	0.61		%	0.60		%	0.61		%	0.44		%	0.45		%
Total capital ratio6	5.19		%	5.11		%	5.65		%	5.07		%	4.41		%
Regulatory capital ratio7	5.35		%	5.22		%	5.50		%	5.00		%	4.38		%

1 Includes trading securities, available-for-sale securities, held-to-maturity securities, interest-bearing deposits, securities purchased under agreements to resell, and Federal funds sold.

2 Consolidated obligations are bonds and discount notes that we are primarily liable to repay. See Note 15 to the financial statements for a description of the par amount of consolidated obligations of all FHLBanks for which we are jointly and severally liable.

3 Dividends paid in cash and stock on both classes of stock as a percentage of average capital stock eligible for dividends.

4 Ratio disclosed represents dividends declared and paid during the year as a percentage of net income for the period presented. FHFA regulation requires dividends be paid out of known income prior to declaration date.

5 Net interest income as a percentage of average earning assets.

6 GAAP capital stock, which excludes mandatorily redeemable capital stock, plus retained earnings and accumulated other comprehensive income (AOCI) as a percentage of total assets.

7 Regulatory capital (i.e., permanent capital and Class A Common Stock) as a percentage of total assets.

We are a regional wholesale bank that makes advances (loans) to, purchases mortgage loans from, and provides limited other financial services primarily to our members. ~~The FHLBanks, together with the Office~~Our mission is to be a reliable source of ~~Finance, a joint office~~liquidity and low-cost funding for our members in support of residential mortgage lending and related housing and economic development needs of the ~~FHLBanks, make up the FHLBank System, which consists of 11 district FHLBanks.~~communities served by our members. As an independent, member-owned ~~cooperatives, the FHLBanks~~cooperative, we seek to maintain a balance between ~~their~~our public purpose and ~~their~~our ability to provide adequate returns on the capital supplied by ~~their~~our members. ~~The FHLBanks are supervised~~Our members include commercial banks, savings institutions, credit unions, insurance companies, and ~~regulated by the FHFA, an independent agency in the executive branch of the U.S. government. The FHFA’s mission is~~CDFIs.

2023 Financial Highlights:

•Net interest income/margin: Net interest income increased $97.1 million to ~~ensure that the housing GSEs operate in a safe and sound manner so that they serve as a reliable source of liquidity and funding for housing finance and community investment.~~

Our primary funding source is consolidated obligations issued through the FHLBanks’ Office of Finance that facilitates the issuance and servicing of the consolidated obligations. The FHFA and the U.S. Secretary of the Treasury oversee the issuance of FHLBank debt. Consolidated obligations are debt instruments that constitute the joint and several obligations of all FHLBanks. Although consolidated obligations are not obligations of, nor guaranteed by, the U.S. government, the capital markets have traditionally viewed the FHLBanks’ consolidated obligations as “Federal agency” debt. As a result, the FHLBanks have historically had ready access to funding at relatively favorable spreads to U.S. Treasuries. Additional funds are provided by deposits (received from both member and non-member financial institutions), other borrowings, and the issuance of capital stock.

We serve eligible financial institutions in Colorado, Kansas, Nebraska, and Oklahoma (collectively, the Tenth District of the FHLBank System), who are also the member-owners of the FHLBank. Initially, a member is required to purchase shares of Class A Common Stock based on the member’s total assets subject to a per member cap of $500 thousand. Each member may be required to purchase activity-based capital stock (Class B Common Stock) as it engages in certain business activities with the FHLBank, including advances, standby letters of credit, and AMA, at levels determined by management with the Board of Director’s approval and within the ranges stipulated in the Capital Stock Plan. Currently, our capital increases when members are required to purchase additional capital stock in the form of Class B Common Stock to support an increase in their advance borrowings. In the past, capital stock also increased when members sold additional mortgage loans to us; however, members are no longer required to purchase capital stock for AMA activity, as the mortgage loans are supported by the retained earnings of the FHLBank (former members previously required to purchase AMA activity-based stock are subject to the prior requirement as long as there are UPBs outstanding). At our discretion, we may repurchase excess stock if there is a decline in a member’s advances. We believe it is important to manage our business and the associated risks so that we strive to provide franchise value by maintaining a core mission asset focus and meeting the following objectives: (1) achieve our liquidity, housing finance and community development missions by meeting member credit needs by offering advances, supporting residential mortgage lending through the MPF Program and through other products; (2) periodically repurchase excess capital stock in order to appropriately manage the size of our balance sheet; and (3) pay acceptable dividends.

~~Net income for the year ended December 31, 2017 was $197.2 million compared to $161.8~~$460.1 million for the year ended December 31, ~~2016.~~2023 compared to $363.0 million for the year ended December 31, 2022. The ~~$35.4 million~~ increase in net interest income ~~was driven primarily by~~resulted from increased average balances on advances and investments at higher interest rates, combined with the impact of higher interest rates on fair value ~~fluctuations~~hedges and a continued decline in premium amortization on ~~derivatives~~mortgage-related assets. Net interest margin increased one basis point for the current quarter, from 0.60 percent for the year ended December 31, 2022 to 0.61 percent for the year ended December 31, 2023.

•Total assets: Total assets increased from $72.0 billion as of December 31, 2022 to $74.9 billion as of December 31, 2023, driven by the $1.8 billion increase in long-term investments between periods and ~~hedging activities~~a $1.1 billion increase in advances. The average balance of interest-earning assets increased $14.9 billion between the year ended December 31, 2023 and ~~trading securities, which resulted~~the same period in the prior year, driven by a ~~net~~$11.9 billion increase in the average balance of ~~$31.0 million~~advances and $2.9 billion increase in the average balance of short- and long-term investments.

•Primary Mission Assets: Advances to members and housing associates and mortgage loans purchased from members are Primary Mission Assets because they are fundamental to the business and mission of FHLBank. The Primary Mission Asset ratio, as defined by the FHFA under its core mission achievement guidance, is calculated as average advances and average mortgage loans to average consolidated obligations (less certain U.S. Treasury securities), based on year-to-date averages. As of December 31, 2023 and December 31, 2022, our Primary Mission Asset ratio was 81 percent and 80 percent, respectively.

•Advances: Advances increased to $45.4 billion at December 31, 2023 compared to $44.3 billion at December 31, 2022, representing 60.6 percent of total assets as of December 31, 2023, compared to 61.5 percent as of December 31, 2022. The average balance of advances increased $11.9 billion, or 34.6 percent, to $46.2 billion for the year ended December 31, 2023 when compared to the prior year period. The increase in the LIBOR swap curve between periods had a positive impact on the net interest settlements on interest rate swaps, which accounted for a large part of the net increase in unrealized gains on derivatives and hedging activities for year ended December 31, 2017 when compared to the prior year. The positive fair value fluctuations on trading securities were generally due to changes in the relative level of interest rates. Net interest income increased $12.8 million for the year ended December 31, 2017 as a result of continued growth in advances and mortgage loans, along with the corresponding increase in investments. Further, the replacement of matured and called consolidated obligations at a lower cost during the last half of 2016 partially offset the increase in the cost of debt resulting from the increase in market interest rates in 2017. Despite the increase in net interest income, net interest margin decreased slightly for the year ended December 31, 2017 due to increases in the average rate on borrowings between periods, which was largely offset by increases in the average yield on interest-earning assets between periods. Increases to net income were partially offset by increases in compensation and benefits, software expenses, and AHP funds available to members. Detailed discussion relating to the fluctuations in net gains (losses) on derivatives and hedging activities, net gains (losses) on trading securities, net interest income, and operating expenses can be found under this Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Results of Operations.”

Total assets increased $2.9 billion, or 6.3 percent from December 31, 2016 to December 31, 2017, resulting primarily from continued strong demand for advances and growth in our mortgage loan portfolio, which allowed for additional growth in our investments. The average balance of advances increased by $2.1 billion, or 7.1 percent, during 2017 compared to 2016 (see Table 12 under this Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Results of Operations”). We have been increasing dividends incrementally since 2014; the weighted average dividend rate increased to 5.77 percent in 2017, compared to 2.42 percent in 2013. The increase in dividends lowers the effective borrowing cost of advances, which has contributed to increased utilization of advances, especially the line of credit product, which increased $2.0 billion between ~~December 31, 2016 and December 31, 2017. Our mortgage loan portfolio increased $0.6 billion, or 9.7 percent, from December 31, 2016 to December 31, 2017, to $7.3 billion, with recent growth~~periods was largely attributed to the ~~addition~~funding needs of ~~high-production PFIs~~depository members. FHLBank continues to execute its liquidity mission by serving as a reliable source of liquidity and ~~program enhancements that provide PFIs with additional~~ funding ~~opportunities.~~for members.

•Mortgage loans: Mortgage loans increased $0.5 billion from $7.9 billion at December 31, 2022 to $8.4 billion as of December 31, 2023, representing 11.1 percent of total assets as of December 31, 2023, compared to 11.0 percent as of December 31, 2022. The average balance of mortgage loans increased ~~$0.4~~$56.5 million to $8.1 billion ~~from~~for the year ended December 31, ~~2016~~2023 when compared to ~~December 31, 2017. We strive~~the prior year period. Interest income continues to ~~maintain a ratio of average advances~~be positively impacted by lower premium amortization and average mortgage loans to average consolidated obligations (CMA ratio), based on par balances, of 70 to 80 percent, so increases in the average balance of both advances and mortgages allows for growth in non-mission assets while maintaining our desired CMA ratio. Although our investments represent non-mission assets, they are utilized to provide liquidity and primary and secondary market support for the U.S. housing securities market.

Total liabilities increased $2.3 billion, or 5.4 percent, from December 31, 2016 to December 31, 2017. This increase was attributable to a $3.8 billion increase in consolidated obligation bonds, partially offset by a $1.4 billion decrease in discount notes. Our funding mix generally is driven by asset composition, but we may also shift our debt composition as a result of market conditionsoriginations at interest rates higher than that ~~impact the cost of consolidated obligations swapped or indexed to LIBOR. Short-term advances, including line of credit advances, represent the majority~~ of the assets funded by term discount notes. We also use term discount notes to fund overnight investments to maintain liquidity sufficient to meet the advance needs of members. During the last half of 2016, the spread to LIBOR began to improve and as a result, we began increasing our allocation of floating rate consolidated obligation bonds and decreased our allocation of discount notes. During the last half of 2017, we increased our allocation of floating rate consolidated obligation bonds to increase liquidity in response to uncertainty surrounding the pending Congressional budget resolution and debt ceiling deadline. For additional information, see Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Financial Condition.”existing portfolio.

•Performance ratios: Return on average equity (ROE) increased to ~~8.18~~9.56 percent for the year ended December 31, ~~2017~~2023 compared to ~~7.45~~7.47 percent for the prior year ~~period. The~~due to the increase in net income ~~resulted in an~~for the current year, partially offset by the increase in ~~ROE~~average capital.

•Dividends: The Class A Common Stock dividend rate of 4.26 percent per annum and the Class B Common Stock dividend rate of 9.12 percent per annum combined for a weighted average dividend rate of 8.47 percent for the year ended December 31, ~~2017 despite the increase in~~2023 compared to a weighted average ~~capital caused by the increase in advances.~~

~~Dividends paid to members totaled $92.0 million~~dividend rate of 6.47% for the year ended December 31, 2017 compared to $78.4 million for the prior year. The dividend rate for Class A Common Stock increased to 1.25 percent from 1.00 percent for the last two quarters of 2017, and the dividend rate for Class B Common Stock increased to 6.50 percent from 6.00 percent for all of 2017. Differences in the weighted average dividend rates between the last five years are due to the difference in the mix of outstanding Class A Common Stock and Class B Common Stock between those periods and the increases in the dividend rates. Other factors impacting the outstanding stock class mix and, therefore, the average dividend rates, include weekly exchanges of excess Class B Common Stock to Class A Common Stock and periodic repurchases of excess Class A Common Stock (see “Liquidity and Capital Resources - Capital” under this Item 7 and Item 5 – “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities”).2022.

Our strategic business plan is structured in such a way that our business activities are intended to achieve our mission consistent with the FHFA’s CMA guidance. Our CMA ratio was 77 percent for 2017. We intend to manage our balance sheet with an emphasis towards maintaining a CMA ratio within the range of 70 to 80 percent during 2018. However, this ratio is dependent on several variables such as member demand for our advance and mortgage loan products, so it is possible that we will be unable to maintain this level indefinitely.

Financial Market Trends

The primary external factors that affect net interest income are market interest rates and the general state of the ~~economy.~~economy, as discussed in greater detail below.

General discussion of the level of market interest rates:

Table 94 presents selected market interest rates as of the dates or for the periods shown.

Table 94


Market Instrument	Average Rate for		Average Rate for		12/31/2017		12/31/2016
	2017		2016		Ending Rate
Market Instrument

						Average Rate
						Average Rate

Secured Overnight Financing Rate1

Secured Overnight Financing Rate1

Secured Overnight Financing Rate1
Federal funds effective rate¹	1.00	%	0.39	%	1.33	%	0.55	%
Federal Reserve interest rate on excess reserves¹	1.10		0.51		1.50		0.75
Federal funds effective rate1
Federal funds effective rate1
Federal Reserve interest rate on reserve balances1
Federal Reserve interest rate on reserve balances1
Federal Reserve interest rate on reserve balances1
3-month U.S. Treasury bill¹	0.94		0.31		1.38		0.50
3-month LIBOR¹	1.26		0.74		1.69		1.00
3-month U.S. Treasury bill1
3-month U.S. Treasury bill1
2-year U.S. Treasury note1
2-year U.S. Treasury note1
2-year U.S. Treasury note¹	1.39		0.83		1.89		1.20
5-year U.S. Treasury note¹	1.91		1.33		2.21		1.94
5-year U.S. Treasury note1
5-year U.S. Treasury note1
10-year U.S. Treasury note¹	2.33		1.84		2.41		2.45
30-year residential mortgage note rate²	4.22		3.87		4.22		4.39
10-year U.S. Treasury note1
10-year U.S. Treasury note1
30-year residential mortgage note rate1,2
30-year residential mortgage note rate1,2
30-year residential mortgage note rate1,2

2017
Advances Investments Mortgage Loans Consolidated Obligation Discount Notes Consolidated Obligation Bonds Other Total
Impact of derivatives and hedging activities in net interest income:
Net amortization/accretion of hedging activities $ (5,381 ) $ —
$ (1,577 ) $ —
$ —
$ —
$ (6,958 )
Net interest received (paid) (43,547 ) (9,271 ) —
(15 ) 14,514
—
(38,319 )
Subtotal (48,928 ) (9,271 ) (1,577 ) (15 ) 14,514
—
(45,277 )
Net gains (losses) on derivatives and hedging activities:

Fair value hedges:
Interest rate swaps (486 ) (2,589 ) —
(36 ) (741 ) —
(3,852 )
Economic hedges – unrealized gains (losses) due to fair value changes:
Interest rate swaps —
15,448
—
—
3,965
—
19,413
Interest rate caps —
(3,848 ) —
—
—
—
(3,848 )
Mortgage delivery commitments —
—
2,207
—
—
—
2,207
Economic hedges – net interest received (paid) —
(20,147 ) —
—
5,004
—
(15,143 )
Price alignment amount on derivatives for which variation margin is daily settled —
—
—
—
—
(22 ) (22 )
Subtotal (486 ) (11,136 ) 2,207
(36 ) 8,228
(22 ) (1,245 )
Net impact of derivatives and hedging activities (49,414 ) (20,407 ) 630
(51 ) 22,742
(22 ) (46,522 )
Net gains (losses) on trading securities hedged on an economic basis with derivatives —
5,863
—
—
—
—
5,863
TOTAL $ (49,414 ) $ (14,544 ) $ 630
$ (51 ) $ 22,742
$ (22 ) $ (40,659 )

~~Table 15~~

2016
Advances Investments Mortgage Loans
Consolidated
Obligation Discount Notes
Consolidated
Obligation Bonds
Total
Impact of derivatives and hedging activities in net interest income:

Net amortization/accretion of hedging activities $ (5,867 ) $ —
$ (2,189 ) $ —
$ —
$ (8,056 )
Net interest received (paid) (85,793 ) (11,878 ) —
(67 ) 31,559
(66,179 )
Subtotal (91,660 ) (11,878 ) (2,189 ) (67 ) 31,559
(74,235 )
Net gains (losses) on derivatives and hedging activities:

Fair value hedges:

Interest rate swaps 6,858
(340 ) —
(270 ) (521 ) 5,727
Economic hedges – unrealized gains (losses) due to fair value changes:

Interest rate swaps —
37,734
—
(4 ) (14,099 ) 23,631
Interest rate caps —
(956 ) —
—
—
(956 )
Mortgage delivery commitments —
—
(952 ) —
—
(952 )
Economic hedges – net interest received (paid) —
(43,803 ) —
4
4,722
(39,077 )
Subtotal 6,858
(7,365 ) (952 ) (270 ) (9,898 ) (11,627 )
Net impact of derivatives and hedging activities (84,802 ) (19,243 ) (3,141 ) (337 ) 21,661
(85,862 )
Net gains (losses) on trading securities hedged on an economic basis with derivatives —
(14,862 ) —
—
—
(14,862 )
TOTAL $ (84,802 ) $ (34,105 ) $ (3,141 ) $ (337 ) $ 21,661
$ (100,724 )

~~Table 16~~

2015
Advances Investments Mortgage Loans
Consolidated
Obligation Discount Notes
Consolidated
Obligation Bonds
Total
Impact of derivatives and hedging activities in net interest income:
Net amortization/accretion of hedging activities $ (8,267 ) $ —
$ (2,128 ) $ —
$ (9 ) $ (10,404 )
Net interest received (paid) (117,079 ) (1,657 ) —
215
69,222
(49,299 )
Subtotal (125,346 ) (1,657 ) (2,128 ) 215
69,213
(59,703 )
Net gains (losses) on derivatives and hedging activities:
Fair value hedges:

Interest rate swaps (779 ) 636
—
306
(3,041 ) (2,878 )
Economic hedges – unrealized gains (losses) due to fair value changes:
Interest rate swaps —
12,239
—
4
(1,446 ) 10,797
Interest rate caps —
(4,159 ) —
—
—
(4,159 )
Mortgage delivery commitments —
—
1,067
—
—
1,067
Economic hedges – net interest received (paid) —
(56,455 ) —
44
8,741
(47,670 )
Subtotal (779 ) (47,739 ) 1,067
354
4,254
(42,843 )
Net impact of derivatives and hedging activities (126,125 ) (49,396 ) (1,061 ) 569
73,467
(102,546 )
Net gains (losses) on trading securities hedged on an economic basis with derivatives —
(47,577 ) —
—
—
(47,577 )
TOTAL $ (126,125 ) $ (96,973 ) $ (1,061 ) $ 569
$ 73,467
$ (150,123 )

As reflected in Tables ~~14 through 16,~~10 and 11, the majority of the ~~derivative~~ net unrealized gains and losses on derivatives are related to changes in the fair values of economic ~~hedges, such as interest rate swaps matched to GSE debentures or MBS classified as trading securities and interest rate caps and floors, which do not qualify for hedge accounting treatment under GAAP.~~derivatives. Net interest payments or receipts on these economic ~~hedges~~derivatives flow through net gains (losses) on derivatives ~~and hedging activities~~ instead of net interest income, which does not reflect the full economic impact of the swaps on yields, especially for trading investments that are swapped to variable rates. ~~Ineffectiveness on fair value hedges contributes to unrealized gains and losses on derivatives, but to a lesser degree. In the past, we~~We generally ~~recorded~~record net unrealized gains on derivatives when the overall level of interest rates ~~would rise~~rises over the period and ~~recorded~~record net unrealized losses when the overall level of interest rates ~~would fall~~falls over the period, due to the mix of the economic hedges. However, the mix of our economic hedges changed in mid-2015, as a result the general level of interest rates is no longer expected to be the primary factor impacting the net unrealized gains (losses) on derivatives.period. Net unrealized gains or losses on derivatives will continue to be a function of the general level of ~~LIBOR~~ swap rates ~~and~~but are also impacted by swap spreads in relationship to the spread between the LIBOR swap curve and the GSE interest rate curve (interest rates swaps that are economic hedges of GSE debentures held in trading), but will also be affected by the spread between the LIBOR swap curve and mortgage rates (interest rates swaps that are economic hedges of fixed rate GSE MBS held in trading).relevant index rate.

For the ~~years~~year ended December 31, ~~2017~~2023 and ~~2016,~~2022, net ~~unrealized~~ gains and losses on derivatives and hedging activities ~~decreased net~~resulted in other income ~~by $1.2~~of $14.9 million and ~~$11.6~~$86.5 million, respectively. ~~Net interest paid of $15.1 million and $39.1 million on economic interest rate swaps for the years ended December 31, 2017 and 2016, respectively, drove the net loss~~The decrease between periods ~~as changes in the LIBOR swap curve over the respective periods resulted in positive~~was attributed to fair value fluctuations ~~on most~~resulting from an increase in the level of ~~our derivatives.~~swap index rates. The increase in ~~LIBOR~~swap index rates between ~~periods resulted in~~years positively impacted the ~~decrease of $24.0 million in~~ net interest settlements on economic hedges, as they were in a pay position of $13.7 million for the prior year ~~over year. Changes in the LIBOR swap curve over the respective periods resulted in positive fair value fluctuations on most interest rate swaps during 2016~~ and ~~2017, as spreads began to tighten mid-2016 from the significant widening experienced during the latter half~~a receive position of 2015. The increases in swap spreads during the second half of 2015 and into the first half of 2016 caused fair value decreases for many of our derivatives, but especially interest rate swaps economically hedging multi-family GSE MBS recorded as trading securities. These spreads improved significantly during the last half of 2016 and continued into 2017, resulting in unrealized gains of $7.1$35.0 million for the year ended December 31, ~~2017, compared~~2023.

The fair value gains and losses (excluding related net interest settlements) on the economic interest rate swaps hedging the multifamily GSE MBS, U.S. Treasury obligations, and GSE debentures were largely offset by the fair value gains and losses attributable to ~~unrealized gains of $12.9 million for~~ the ~~year ended December 31, 2016. Unrealized gains of $8.4 million and $24.9 million~~associated securities for the years ended December 31, ~~2017~~2023 and 2016, respectively, were attributable to the fair value changes of our interest rate swaps matched to GSE debentures as a result of the passage of time, as several derivatives approached maturity (reducing the overall loss position of the derivatives), changes in interest rates for their respective maturities (pay fixed rate swap), and increases in three-month LIBOR (receive variable rate swap). These fluctuations were offset by unrealized losses of $4.7 million and $20.3 million for the years ended December 31, 2017 and 2016, respectively, attributable to the swapped GSE debentures,2022, which are recorded in net gains (losses) on trading ~~securities.~~securities (see Table ~~17 presents the relationship between the swapped~~12). Unrealized gains and losses on trading securities are generally driven by movements in intermediate interest rates between periods and ~~the associated interest rate swaps that do not qualify for hedge accounting treatment by investment type (in thousands):~~are discussed in greater detail below.

Table 1712


	2023						2022


	Gains (Losses) on Derivatives		Gains (Losses) on Trading Securities		Net		Gains (Losses) on Derivatives		Gains (Losses) on Trading Securities		Net
U.S. Treasury obligations	$	(4,384)	$	3,767	$	(617)	$	19,411	$	(21,239)	$	(1,828)
GSE debentures	(6,971)		4,983		(1,988)		25,412		(26,963)		(1,551)
GSE MBS	(11,431)		10,829		(602)		61,887		(63,904)		(2,017)
TOTAL	$	(22,786)	$	19,579	$	(3,207)	$	106,710	$	(112,106)	$	(5,396)

2017 2016 2015
Gains (Losses) on Derivatives Gains (Losses) on Trading Securities Net Gains (Losses) on Derivatives Gains (Losses) on Trading Securities Net Gains (Losses) on Derivatives Gains (Losses) on Trading Securities Net
GSE debentures $ 8,369
$ (4,748 ) $ 3,621
$ 24,873
$ (20,344 ) $ 4,529
$ 35,482
$ (42,952 ) $ (7,470 )
GSE MBS 7,079
10,611
17,690
12,861
5,482
18,343
(23,243 ) (4,625 ) (27,868 )
TOTAL $ 15,448
$ 5,863
$ 21,311
$ 37,734
$ (14,862 ) $ 22,872
$ 12,239
$ (47,577 ) $ (35,338 )

For additional detail regarding gains and losses on trading securities, see Table 13 and related discussion under this Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Results of Operations.”

See Tables 6143 and 6244 under Item 7A – “Quantitative and Qualitative Disclosures About Market Risk” for additional detail regarding notional and fair value amounts of derivative instruments.

Net Gains (Losses) on Trading Securities: Our trading portfolio is comprised primarily of fixed rate U.S. Treasury obligations, GSE debentures, and fixed rate multifamily GSE MBS, with a small percentage of variable rate single-family GSE MBS. Periodically, we also invest in short-term securities classified as trading. In general, the fixed rate securities are related to economic hedges in the form of interest rate swaps that convert fixed rates to variable rates on the fixed rate securities and the related economic hedges. The fair values of the fixed rate GSE debentures are affected by changes in intermediate term interest rates and credit spreads and are swapped on an economic basis to SOFR. The fair values of the fixed rate multifamily GSE MBS are affected by changes in mortgage rates and credit spreads are swapped on an economic basis to SOFR. The fair values of the U.S. Treasury obligations are affected by changes in intermediate term Treasury rates and swapped on an economic basis to the Overnight Index Swap rate (OIS) or SOFR.

All unrealized gains and losses related to trading securities are recorded in other income (loss) as net gains (losses) on trading securities; however, only gains and losses relating to trading securities that are related to economic hedges are included in ~~Tables 14 through 17.~~Table 12. Unrealized gains (losses) fluctuate as the fair value of our trading portfolio fluctuates. There are a number of factors that can impact the fair value of a trading security including the movement in interest rates, changes in credit spreads, the passage of time, and changes in price volatility. Table 1813 presents the major components of the net gains (losses) on trading securities (in thousands):

Table 1813


	2023		2022


Trading securities not hedged:



U.S. obligation MBS and GSE MBS	$	(25)	$	(419)
Short-term securities	—		(23)
Total trading securities not hedged	(25)		(442)
Trading securities hedged on an economic basis with derivatives:
U.S. Treasury obligations	3,767		(21,239)
GSE debentures	4,983		(26,963)
GSE MBS	10,829		(63,904)
Total trading securities hedged on an economic basis with derivatives	19,579		(112,106)
TOTAL	$	19,554	$	(112,548)

2017 2016 2015
Trading securities not hedged:
GSE debentures $ 799
$ 1,634
$ (148 )
U.S. Treasury note —
—
(16 )
U.S. obligation and GSE MBS 268
(481 ) (240 )
Short-term money market securities (16 ) —
(10 )
Total trading securities not hedged 1,051
1,153
(414 )
Trading securities hedged on an economic basis with derivatives:
GSE debentures (4,748 ) (20,344 ) (42,952 )
GSE MBS 10,611
5,482
(4,625 )
Total trading securities hedged on an economic basis with derivatives 5,863
(14,862 ) (47,577 )
TOTAL $ 6,914
$ (13,709 ) $ (47,991 )

Our trading portfolio is comprised primarily of variable and fixed rate GSE debentures and fixed rate multi-family GSE MBS, with a small percentage of variable rate GSE MBS. Periodically, we also invest in short-term money market securities classified as trading for liquidity purposes. In general, the fixed rate securities are related to economic hedges in the form of interest rate swaps that convert fixed rates to variable rates (see Table 17 for the association between the gains (losses) on the fixed rate securities and the related economic hedges). The fair values of the fixed rate GSE debentures are affected by changes in intermediate interest rates and credit spreads, and are swapped to three-month LIBOR. The fair values of the fixed rate multi-family GSE MBS are affected by changes in mortgage rates and credit spreads, and these securities are swapped to one-month LIBOR. The unrealized gains on our fixed rate multi-family GSE MBS investments increased $5.1 million for the year ended December 31, 2017 compared to the year ended December 31, 2016, due to a decrease in mortgage-related interest rates and credit spreads at December 31, 2017 compared to the prior year. The continued increase in intermediate interest rates resulted in unrealized losses on the ~~fixed rate GSE debentures~~securities in the trading portfolio for ~~all periods, although~~the current period reflect the increase in intermediate term Treasury and mortgage rates relative to ~~a lesser extent~~the prevailing yields at the end of the prior period, especially relative to the unrealized losses recognized in ~~2017 as a result of a decrease~~the prior year periods. The increase in ~~GSE spreads.~~Treasury and mortgage rates was more substantial for the prior year period. In addition to interest rates and credit spreads, the value of these securities is affected by time decay. The fixed rate GSE debentures possess coupons that are well above current market rates for similar securities and, therefore, are currently valued at substantial premiums. As these securities approach maturity, their prices will convergeprice convergence to par ~~resulting~~which results in a decrease in their current premium price (i.e., time decay). Given that the variable rate GSE debentures re-price monthly, they generally account for a small portion of the net gains (losses) on trading securities unless current market spreads on these variable rate securities diverge from the spreads at the time of our acquisition of the securities.

~~Controllable Operating~~Other Expenses: ~~Controllable operating~~Other expenses, ~~include~~which includes compensation and benefits and other operating expenses, ~~as presented in~~increased $16.1 million to $97.0 million for the Statements of Income included under Item 8 – “Financial Statements and Supplementary Data.” As reflected in Table 19, approximately two-thirds of our operating expenses consist of compensation and benefits expense, which has been increasing in part dueyear ended December 31, 2023, compared to ~~increases in market salaries in~~$80.9 million for the ~~industry in general, and the hiring of additional employees and related incentive compensation.~~year ended December 31, 2022. Compensation and benefits ~~expense between 2016~~expenses increased $7.4 million due to hiring for new and ~~2015 was also impacted by an increase in our pension~~open positions, contribution ~~related~~ to the ~~low interest rate environment, executive severance expense,~~pension, and ~~an increase in~~higher incentive ~~compensation~~accruals based on incentive plan goal attainment. Other operating expenses increased $4.4 million primarily due to software implementation costs, which are expected to decrease slightly in 2024 as the systems are placed into production. Further, in 2023, we committed $3.0 million to a ~~high level of goal achievement~~voluntary grant program for Native American Tribes and Tribally Designated Housing Entities and announced an anticipated voluntary 50 percent increase to our annual contribution to affordable housing and community development initiatives throughout Colorado, Kansas, Nebraska, and Oklahoma in 2016. We expect to remain at or near current levels of compensation and benefits expense for 2018. We expect a moderate increase in occupancy expense during 2018 as we completed construction of a new office building and will begin depreciating that building during 2018. Increases in other operating expense are primarily related to new software due to planned software implementations. Table 19 presents operating expenses for the last three years (dollar amounts in thousands):upcoming years.

~~Table 19~~

For the Year Ended December 31, Percent Increase (Decrease)
2017 2016 2015 2017 vs. 2016 2016 vs. 2015
Compensation and benefits $ 39,105
$ 38,089
$ 33,175
2.7 % 14.8 %
Occupancy cost 1,863
1,737
2,092
7.3
(17.0 )
Other operating expense 15,156
14,002
13,183
8.2
6.2
TOTAL CONTROLLABLE OPERATING EXPENSES $ 56,124
$ 53,828
$ 48,450
4.3 % 11.1 %

~~FHFA and Office of Finance Expenses:~~ We, together with the other FHLBanks, are charged for the cost of operating the FHFA and the Office of Finance. The FHFA’s operating costs are also shared by Fannie Mae and Freddie Mac, and the Recovery Act prohibits assessments on the FHLBanks for operating costs in excess of the costs and expenses related to the FHLBanks.

~~AHP Assessments:~~ AHP expense is based on a percentage of net income and fluctuates accordingly. Each FHLBank is required to establish, fund and administer an AHP. As part of our AHP, we provide subsidies in the form of direct grants or below-market interest rate advances to members which use the funds to assist in the purchase, construction or rehabilitation of housing for very low-, low- and moderate-income households (see Item 1 – “Business – Other Mission-Related Activities” for the specific programs funded through the AHP). The required annual AHP funding is charged to earnings and an offsetting liability is established.

Non-GAAP Measures: We fulfill our mission by: (1) providing liquidity to our members through the offering of advances to finance housing, economic development and community lending; (2) supporting residential mortgage lending through the MPF Program and purchases of MBS; and (3) providing regional affordable housing programs that create housing opportunities for very low-, low- and moderate-income families. ~~In order to~~To effectively accomplish our mission, we must obtain adequate funding ~~amounts~~ at acceptable interest rate levels. We use derivatives as tools to reduce our funding costs and manage interest rate risk and prepayment risk. We also acquire and classify certain investments as trading securities for liquidity and asset-liability management purposes. Although we ~~strive~~use these transactions to manage interest rate risk and prepayment risk, ~~utilizing these transactions for asset-liability tools,~~ we do not manage the ~~fluctuations in the~~ fair value fluctuations of our derivatives or trading securities. We are ~~essentially~~principally a “hold-to-maturity” investor, and we transact derivatives only for hedging ~~purposes, even though some~~purposes. Some derivative hedging relationships do not qualify for hedge accounting under GAAP (referred to as economic hedges) and therefore can add significant volatility to our GAAP net income.

~~Because our business model is primarily one of holding assets and liabilities to maturity, we~~

We believe that certain non-GAAP financial measures are helpful infor understanding our operating results and provide meaningful period-to-period comparison of our long-term economic value in contrast to GAAP results, which ~~can be~~are impacted by fair value ~~changes driven by market volatility~~fluctuations, gains/losses on instrument sales, non-recurring transactions, or transactions that are not routine or are considered ~~unpredictable or not routine.~~unpredictable. We report the following non-GAAP financial measures that we believe are useful to stakeholders as key measures of our operating performance: (1) adjusted income, (2) adjusted net interest ~~margin, and~~income, (3) adjusted ROE. Reconciliations of these non-GAAP financial measures to the most comparable GAAP measure are included below. Although we calculate our non-GAAP financial measures consistently from period to period using appropriate GAAP components, non-GAAP financial measures are not required to be uniformly appliednet interest margin, (4) adjusted ROE, and are not audited. Another material limitation associated with the use of non-GAAP financial measures is that they have no standardized measurement prescribed by GAAP and may not be comparable to similar non-GAAP financial measures used by other companies. While we believe the non-GAAP measures contained in this report are frequently used by our stakeholders in the evaluation of our performance, such non-GAAP measures have limitations as analytical tools and should not be considered in isolation or as a substitute for analyses of financial information prepared in accordance with GAAP.

~~Our~~(5) adjusted ~~income is defined as our~~ROE spread. We adjust net income reported in accordance with GAAP for the impact of: (1) AHP assessments (equivalent to an effective minimum income tax rate of 10 percent); (2) fair value changes on trading securities and derivatives and hedging activities ~~(excludes~~(excluding net interest ~~settlements related to derivatives not qualifying for hedge accounting)~~settlements); (3) prepayment ~~fees~~and yield maintenance fees; (4) non-routine and/or unpredictable items, such as gains/losses on ~~advances;~~securities; and ~~(4) other~~(5) non-recurring items, ~~excluded because they are not considered a part of our routine operations,~~ such as gains/losses on retirement of debt and gains/losses on mortgage loans held for ~~sale, and gains/losses on securities. We use adjusted~~sale. The result is referred to as “adjusted income,” which is a non-GAAP measure of income. Adjusted income is used to compute an adjusted ROE that is then compared to the average overnight Federal funds effective rate, with the difference referred to as ~~adjusted~~“adjusted ROE spread.” Components of adjusted income and adjusted ROE spread are used: (1) to measure performance under our incentive compensation plans; (2) as a measure in determining the level of quarterly dividends; and (3) in strategic planning. While we utilize adjusted income as a key measure in determining the level of dividends, we consider GAAP net income volatility caused by gains (losses) on derivatives and hedging activities and trading securities in determining the adequacy of our retained earnings as determined under GAAP. Because the adequacy of GAAP retained earnings is considered in setting the level of our quarterly dividends, gains (losses) on derivatives and hedging activities and trading securities can come into consideration when setting the level of our quarterly dividends. Because we are primarily a “hold-to-maturity” investor and do not trade derivatives, weWe believe that adjusted income, adjusted ROE, and adjusted ROE spread are ~~helpful in understanding our operating results~~useful metrics for measurement and ~~provide a meaningful period-to-period comparison.~~comparison because we generally hold securities to maturity and do not trade derivatives or trading securities speculatively. In contrast, the same metrics as calculated under GAAP ~~net income, ROE based on GAAP net income and ROE spread based on GAAP net income~~ can vary significantly from period to period because of ~~fair value changes on derivatives and certain other items that management excludes when evaluating operational performance.~~the volatility caused by the aforementioned excluded items. Management believes such volatility ~~prevents~~hinders a consistent and comparable measurement analysis.

Derivative and hedge accounting under GAAP affects the timing of income or expense from ~~derivatives. However, when the derivatives are held to maturity or call dates, there is no economic income or expense impact from these~~ derivatives. For example, interest rate caps are purchased with an upfront fixed cost to provide protection against the risk of rising interest rates. Under ~~derivative accounting guidance,~~GAAP, these instruments are then marked to fair value each month, which can result in ~~having to recognize~~recognition of significant fair value gains and losses from year to year, producing volatility in our GAAP net income. However, if held to maturity, the sum of such gains and losses over the term of a derivative will equal its original purchase price.

In addition to impacting the timing of income and expense, ~~from derivatives,~~ derivative accounting ~~also~~under GAAP impacts the presentation of fair value fluctuations (unrealized gains and losses) and net interest settlements on derivatives and hedging activities. ~~This presentation differs under~~Under GAAP, ~~for economic hedges when compared to hedges that qualify for hedge accounting. Net~~unrealized gains and losses and net interest settlements on economic hedges ~~are included with the economic derivative fair value changes and~~ are recorded in net gains (losses) on derivatives while unrealized gains and ~~hedging activities while the~~losses and net interest settlements on qualifying fair value ~~or cash flow~~ hedges are ~~included~~recorded in net interest margin. Therefore, only the economic derivative fair value changes and the ineffectiveness for qualifying hedges included in the net gains (losses) on derivatives and hedging activities are removed to arrive at adjusted income (i.e., netincome. Net interest settlements ~~on economic hedges, which~~ represent actual cash inflows or outflows and do not create fair value ~~volatility, are not removed).~~

~~Adjusted net income increased $33.2 million~~volatility. Therefore, for ~~the year ended December 31, 2017 compared to the same period in the prior year. The increase was due primarily to increased~~ adjusted net interest income ~~which includes the impact of~~presentation purposes, unrealized gains and losses on designated hedges are removed from net interest income and net interest settlements on ~~derivatives not qualifying for hedge accounting, partially offset by an increase in other expenses, as discussed previously. Adjusted~~economic hedges are added to net interest income, ~~increased for~~ the ~~year ended December 31, 2017 compared to the same period in 2016 primarily to the increase in LIBOR between periods, the impact~~result of which is ~~more apparent when~~used to calculate adjusted net interest settlements of economic hedges are presented with the other components of net interest income because it reflects the impact of LIBOR repricing on both the asset and liability. Adjusted net interest margin, which is calculated withmargin. Management uses adjusted net interest income increased by three basis points for the year ended December 31, 2017 compared to the year ended December 31, 2016. Under GAAP, the net interest amount that converts fixed rate investments that are economically swapped to a variable rate is recorded as part of Net Gains/Losses on Derivatives and ~~Hedging Activities rather than net interest income. For the purpose of calculating~~ adjusted net interest margin ~~these fixed rate investments~~to evaluate performance.

While we believe the non-GAAP measures contained in this report are useful to our stakeholders in the evaluation of our performance, such non-GAAP measures have limitations as analytical tools and should not be considered ~~to be variable rate investments and the corresponding net interest amount~~ in ~~adjusted net interest income reflects the widening of the spread between the variable rate assets created by the economic hedge and the variable rate liabilities funding them~~isolation or as a ~~result~~substitute for analyses of financial information prepared in accordance with GAAP. Non-GAAP financial measures have no standardized measurement prescribed by GAAP, are not audited, and may not be comparable to similar non-GAAP financial measures used by other companies. We calculate our non-GAAP financial measures consistently from period to period using appropriate GAAP components. Reconciliations of these non-GAAP financial measures to the ~~increase in LIBOR between periods. Under~~most comparable GAAP ~~an increase in LIBOR causes the spread to tighten between fixed rate assets and variable rate liabilities and therefore causes a decrease in net interest margin. Tables 20 and 21 present~~measure are included below.

Table 14 presents a reconciliation of GAAP net income to adjusted income (a non-GAAP measure) (in thousands):

Table 14


	2023		2022


Net income, as reported under GAAP	$	370,467	$	240,736
AHP assessments	41,164		26,749
Income before AHP assessments	411,631		267,485
Derivative (gains) losses1	2,748		(133,531)
Trading (gains) losses	(19,554)		112,548
Prepayment/yield maintenance fees2	(88)		(7,436)
Net (gains) losses on sale of held-to-maturity securities	—		89


Total excluded items	(16,894)		(28,330)
Adjusted income (a non-GAAP measure)	$	394,737	$	239,155

1 Consists of fair value changes on all derivatives and hedging activities excluding net interest settlements on economic hedges and price alignment amount.

2 Includes prepayment fees on advances and yield maintenance fees on debt securities.

Table 15 presents a reconciliation of GAAP net interest income and GAAP net interest ~~income~~margin to adjusted net interest income and adjusted net interest margin (non-GAAP measures) (in thousands):

Table 2015

2017 2016 2015
Net income, as reported under GAAP $ 197,211
$ 161,773
$ 93,360
AHP assessments 21,934
17,984
10,378
Income before AHP assessments 219,145
179,757
103,738
Derivative (gains) losses¹
(13,898 ) (27,450 ) (4,827 )
Trading (gains) losses (6,914 ) 13,709
47,991
Prepayment fees on terminated advances (1,461 ) (2,295 ) (2,410 )
Net (gains) losses on sale of held-to-maturity securities —
—
(390 )
Total excluded items (22,273 ) (16,036 ) 40,364
Adjusted income (a non-GAAP measure) $ 196,872
$ 163,721
$ 144,102


	2023			2022


Net interest income, as reported under GAAP	$	460,051		$	362,991
(Gains) losses on derivatives qualifying for hedge accounting recorded in net interest income	(16,563)			(33,192)
Net interest received (paid) on derivatives not qualifying for hedge accounting	35,033			(13,661)
Prepayment/yield maintenance fees1	(88)			(7,436)
Adjusted net interest income (a non-GAAP measure)	$	478,433		$	308,702

Net interest margin, as calculated under GAAP	0.61		%	0.60		%
Adjusted net interest margin (a non-GAAP measure)	0.63		%	0.51		%


¹	~~Consists of fair value changes on derivatives and hedging activities excluding net interest settlements (see next table) on derivatives not qualifying for hedge accounting.~~

1 Includes prepayment fees on advances and yield maintenance fees on debt securities.

~~Table 21~~

2017 2016 2015
Net interest income, as reported under GAAP $ 270,008
$ 257,184
$ 239,680
Net interest settlements on derivatives not qualifying for hedge accounting (15,143 ) (39,077 ) (47,670 )
Prepayment fees on terminated advances (1,461 ) (2,295 ) (2,410 )
Adjusted net interest income (a non-GAAP measure) $ 253,404
$ 215,812
$ 189,600

Net interest margin, as calculated under GAAP for the period 0.51 % 0.53 % 0.55 %
Adjusted net interest margin (a non-GAAP measure) 0.48 % 0.45 % 0.43 %

Table 2216 presents a comparison of adjusted ROE (a non-GAAP ~~financial~~ measure) to the average overnight Federal funds rate, which we use as a key measure of effective utilization and management of members’ capital. The increase in adjusted ROE between the comparative periods is mostly a function of increases in adjusted net interest income, despite the increase in average capital as a result of the increase in advances. Adjusted ROE spread ~~for the years ended December 31, 2017, 2016, and 2015~~(a non-GAAP measure) is calculated as follows (dollar amounts in thousands):

Table 2216


	2023			2022


Average GAAP total capital	$	3,873,461		$	3,222,987
ROE, based upon GAAP net income	9.56		%	7.47		%
Adjusted ROE, based upon adjusted income (a non-GAAP measure)	10.19		%	7.42		%
Average overnight Federal funds effective rate	5.03		%	1.68		%
GAAP ROE as a spread to average overnight Federal funds effective rate	4.53		%	5.79		%
Adjusted ROE as a spread to average overnight Federal funds effective rate (a non-GAAP measure)	5.16		%	5.74		%

2017 2016 2015
Average GAAP total capital for the period $ 2,412,303
$ 2,171,334
$ 1,951,708
ROE, based upon GAAP net income 8.18 % 7.45 % 4.78 %
Adjusted ROE, based upon adjusted income 8.16 % 7.54 % 7.38 %
Average overnight Federal funds effective rate 1.00 % 0.39 % 0.13 %
Adjusted ROE as a spread to average overnight Federal funds effective rate 7.16 % 7.15 % 7.25 %

Financial Condition

Overall: Total assets increased $2.9 billion, or 6.3 percent, from December 31, 2016 to December 31, 2017. This growth was due primarily to continued growth in advances, mostly in our line of credit and adjustable rate callable advances, and continued steady growth in our mortgage loan portfolio, along with the corresponding increase in investments. Our mortgage loan portfolio reached $7.3 billion during the year ended December 31, 2017, with certain of the growth attributed to the addition of high-production PFIs and program enhancements that provide PFIs with additional funding opportunities. We increased the dividend rates on Class A Common Stock and Class B Common Stock during 2017, and member awareness of the benefit of higher dividends that serve to reduce the effective borrowing cost of advances has resulted in increased utilization of advances, especially the line of credit product. We strive to maintain a CMA ratio of over 70 percent, so increases in the average balance of both advances and mortgage loans allows for growth in non-mission assets while maintaining our desired CMA ratio. Although our investments represent non-mission assets, they are utilized to provide liquidity and primary and secondary market support for the U.S. housing securities market.

As a percentage of assets at December 31, 2017 compared to December 31, 2016, advances, investment securities, and mortgage loans increased, while short-term investments decreased. Advance balances fluctuate seasonally and tend to trend down at the end of a quarter, but the average balance of advances increased by $2.1 billion, or 7.1 percent, during 2017 compared to 2016. In terms of liabilities, we increased the allocation of consolidated obligation bonds relative to total consolidated obligation discount notes and bonds at December 31, 2017 compared to December 31, 2016, and we increased the allocation of floating rate consolidated obligation bonds with longer-term structures to increase liquidity in response to the uncertainty surrounding the Federal budget and the Federal debt ceiling deadline at that time. We continue to fund our short-term advances and overnight investments with term discount notes. Table 2317 presents the percentage concentration of the major components of our Statements of Condition:

~~Table 23~~

Component Concentration
12/31/2017 12/31/2016
Assets:
Cash and due from banks 0.6 % 0.5 %
Interest-bearing deposits, securities purchased under agreements to resell and Federal funds sold 9.9
12.2
Investment securities 19.2
17.9
Advances 54.7
53.0
Mortgage loans, net 15.2
14.7
Overnight loans to other FHLBanks —
1.3
Other assets 0.4
0.4
Total assets 100.0 % 100.0 %

Liabilities:
Deposits 1.0 % 1.3 %
Consolidated obligation discount notes, net 42.5
48.2
Consolidated obligation bonds, net 51.0
45.8
Other liabilities 0.3
0.4
Total liabilities 94.8
95.7

Capital:
Capital stock outstanding 3.4
2.7
Retained earnings 1.7
1.6
Accumulated other comprehensive income (loss) 0.1
—
Total capital 5.2
4.3
Total liabilities and capital 100.0 % 100.0 %

Table 2417


	Component Concentration
	12/31/2023		12/31/2022
Assets:
Cash and due from banks	0.1	%	0.1	%
Interest-bearing deposits, securities purchased under agreements to resell and Federal funds sold	10.1		11.3
Investment securities	17.2		15.4
Advances	60.6		61.5
Mortgage loans, net	11.1		11.0

Other assets	0.9		0.7
Total assets	100.0	%	100.0	%

Liabilities:
Deposits	1.0	%	1.0	%
Consolidated obligation discount notes, net	27.7		34.4
Consolidated obligation bonds, net	65.4		59.0

Other liabilities	0.7		0.5
Total liabilities	94.8		94.9

Capital:
Capital stock outstanding	3.5		3.5
Retained earnings	1.9		1.7
Accumulated other comprehensive income (loss)	(0.2)		(0.1)
Total capital	5.2		5.1
Total liabilities and capital	100.0	%	100.0	%

Table 18 presents changes in the major components of our Statements of Condition (dollar amounts in thousands):

Table 2418


	Increase (Decrease) in Components
	12/31/2023 vs. 12/31/2022
	Dollar Change		Percent Change
Assets:
Cash and due from banks	$	98	0.4	%
Interest-bearing deposits, securities purchased under agreements to resell and Federal funds sold	(579,863)		(7.1)
Investment securities	1,805,558		16.2
Advances	1,182,019		2.7
Mortgage loans, net	447,578		5.7

Other assets	98,753		18.4
Total assets	$	2,954,143	4.1	%

Liabilities:
Deposits	$	41,139	5.8	%
Consolidated obligation discount notes, net	(4,032,156)		(16.3)
Consolidated obligation bonds, net	6,541,650		15.4

Other liabilities	189,402		58.5
Total liabilities	2,740,035		4.0

Capital:
Capital stock outstanding	99,974		4.0
Retained earnings	148,835		11.9
Accumulated other comprehensive income (loss)	(34,701)		(41.2)
Total capital	214,108		5.8
Total liabilities and capital	$	2,954,143	4.1	%

Increase (Decrease)
in Components
12/31/2017 vs. 12/31/2016

Dollar
Change
Percent
Change
Assets:
Cash and due from banks $ 60,796
29.3 %
Investments¹
388,946
2.9
Advances 2,310,014
9.6
Mortgage loans, net 645,672
9.7
Overnight loans to other FHLBanks (600,000 ) (100.0 )
Other assets 54,428
31.4
Total assets $ 2,859,856
6.3 %

Liabilities:

Deposits $ (137,162 ) (22.9 )%
Consolidated obligations, net 2,437,443
5.7
Other liabilities 15,920
10.1
Total liabilities 2,316,201
5.4

Capital:
Capital stock outstanding 413,364
33.7
Retained earnings 105,210
14.3
Accumulated other comprehensive income (loss) 25,081
4,346.8
Total capital 543,655
27.7
Total liabilities and capital $ 2,859,856
6.3 %

¹~~Investments also include interest-bearing deposits, Federal funds sold and securities purchased under agreements~~Total assets increased between periods, from $72.0 billion at December 31, 2022 to ~~resell.~~

~~Advances:~~ ~~Our advance products are developed, as authorized in the Bank Act and regulations established~~$74.9 billion at December 31, 2023, driven by the ~~FHFA,~~increase in investments and advances between those periods. Asset composition remained relatively consistent from December 31, 2022 to ~~meet~~December 31, 2023, with a slight increase in long-term investments to 17.2 percent of total assets compared to 15.4 percent as of December 31, 2022. Mortgage loans increased by $447.6 million from December 31, 2022 to December 31, 2023, and increased slightly as a percent of total assets, from 11.0 percent as of December 31, 2022 to 11.1 percent of total assets as of December 31, 2023. Advances declined slightly as a percent of total assets compared to December 31, 2022 despite the ~~specific~~increase in advance balances, as growth in investment securities exceeded growth in advances over the period. Total liabilities increased $2.7 billion from December 31, 2022 to December 31, 2023, which corresponded to the increase in assets, but the composition of debt shifted between periods. Consolidated obligation bonds and discount notes represented 63.2 percent and 36.8 percent of total consolidated obligations, respectively, at December 31, 2022 compared to 70.3 percent and 29.7 percent at December 31, 2023. This composition shift is mostly due to an increase in swapped callable and swapped bullet consolidated obligation bonds and a decrease in discount notes. Total capital increased $214.1 million, or 5.8 percent, from December 31, 2022 to December 31, 2023 due to an increase in required and excess capital stock and net income in excess of dividends paid.

Advances: Advances are one of the primary ways we fulfill our mission of providing liquidity ~~and term funding needs of our members. As a wholesale provider of funds, we compete with brokered certificates of deposit and security repurchase agreements. We strive to price our advances relative~~ to our ~~marginal cost of funds while trying~~members and constituted the largest asset on our balance sheet at December 31, 2023 and 2022. Advance par value increased by 2.3 percent, from $44.7 billion at December 31, 2022 to ~~remain competitive with the wholesale funding markets. While there is typically less competition in the long-term maturities, member~~$45.7 billion at December 31, 2023 (see Table 19). In March 2023, our members’ demand for advances increased temporarily in ~~these maturities~~response to the stress placed on the banking industry and financial markets resulting from the financial difficulties experienced by some depository institutions. This stress has ~~historically been lower than~~largely subsided; however, members continue to hold elevated levels of advances. Although members are shifting from overnight advances to term advances, the composition of the advance portfolio remains concentrated in advances that either reprice or mature on a relatively short-term basis. We began offering a new putable advance product in April of 2023 to further expand fixed rate advance offerings, the balance of which totaled $2.1 billion at December 31, 2023. Standard fixed rate advances also increased $2.1 billion from $10.3 billion at December 31, 2022 to $12.4 billion at December 31, 2023.

As of December 31, 2023 and 2022, 65.1 percent and 64.4 percent, respectively, of our members carried outstanding advance balances. Advance balances may be impacted by rising interest rates intended to curb inflationary pressures and the related inflationary effects on member balance sheets, including decreased loan demand and the inability to grow or retain deposit balances. Members also have access to other wholesale funding sources, including the BTFP, which may impact the demand for advances on the basis of relative cost.

Rather than match-funding long-term, fixed rate advances, we elect to swap a significant portion of advances with ~~short-~~longer maturities to short-term indices to synthetically create adjustable rate advances. When coupled with the volume of our short-term advances, advances that effectively re-price at least every three months represent 95.9 percent and ~~medium-term maturities. Nonetheless, long-term~~92.9 percent of our total advance portfolio as of December 31, 2023 and 2022, respectively. We anticipate continuing the practice of swapping advances ~~are also priced at relatively low spreads~~with longer maturities to ~~our cost of funds.~~short-term indices.

Table 2519 summarizes advances outstanding by product (dollar amounts in thousands):

~~Table 25~~

12/31/2017 12/31/2016
Dollar Percent Dollar Percent
Adjustable rate:

Standard advance products:

Line of credit $ 11,672,583
44.4 % $ 9,634,491
40.2 %
Regular adjustable rate advances 275,000
1.0
75,000
0.3
Adjustable rate callable advances 7,242,025
27.5
6,161,835
25.7
Standard housing and community development advances:

Regular adjustable rate advances 15,000
0.1
—
—
Adjustable rate callable advances 84,252
0.3
99,002
0.4
Total adjustable rate advances 19,288,860
73.3
15,970,328
66.6
Fixed rate:

Standard advance products:

Short-term fixed rate advances 187,525
0.7
452,545
1.9
Regular fixed rate advances 4,733,715
18.0
5,084,882
21.2
Fixed rate callable advances 14,455
0.1
39,445
0.2
Standard housing and community development advances:

Regular fixed rate advances 431,540
1.6
400,412
1.7
Fixed rate callable advances 4,831
—
4,000
—
Total fixed rate advances 5,372,066
20.4
5,981,284
25.0
Convertible:

Standard advance products:

Fixed rate convertible advances 853,150
3.2
1,147,392
4.8
Amortizing:

Standard advance products:

Fixed rate amortizing advances 398,293
1.5
409,926
1.7
Fixed rate callable amortizing advances 19,589
0.1
23,239
0.1
Standard housing and community development advances:

Fixed rate amortizing advances 385,559
1.5
419,587
1.8
Fixed rate callable amortizing advances 7,707
—
8,759
—
Total amortizing advances 811,148
3.1
861,511
3.6
TOTAL PAR VALUE $ 26,325,224
100.0 % $ 23,960,515
100.0 %

~~Note that an~~. An individual advance may be reclassified to a different product type between periods due to the occurrence of a triggering event such as the passing of a call date (i.e., from fixed rate callable advance to regular fixed rate advance) or conversion of an advance (i.e., from fixed rate convertible advance to adjustable rate callable advance).

Advances are one of the primary ways we fulfill our mission of providing liquidity to our members and constituted the largest asset on our balance sheet at December 31, 2017 and 2016. The 9.9 percent increase in advance par value from December 31, 2016 to December 31, 2017 (see Table ~~25) was due mostly to an increase in our line of credit and adjustable~~19


	12/31/2023				12/31/2022
	Dollar		Percent		Dollar		Percent
Line of Credit:
Overnight line of credit1	$	11,747,448	25.7	%	$	15,682,310	35.1	%

Adjustable rate:
Standard advance products:
Regular adjustable rate advances	4,418,750		9.7		2,504,950		5.6
Adjustable rate callable advances	1,616,400		3.5		1,700,299		3.8


Standard housing and community development advances:

Adjustable rate callable advances	22,262		0.1		22,262		0.1
Total adjustable rate term advances	6,057,412		13.3		4,227,511		9.5
Fixed rate:
Standard advance products:
Short-term fixed rate advances2	12,313,627		27.0		12,988,848		29.1
Regular fixed rate advances	12,359,319		27.1		10,290,760		23.1
Fixed rate callable advances	68,402		0.2		64,071		0.1
Fixed rate putable advances	2,071,800		4.5		—		—
Fixed rate convertible advances	113,400		0.3		309,650		0.7
Standard housing and community development advances:
Regular fixed rate advances	291,064		0.6		356,035		0.8
Fixed rate callable advances	458		—		458		—
Total fixed rate term advances	27,218,070		59.7		24,009,822		53.8
Amortizing:
Standard advance products:
Fixed rate amortizing advances	415,568		0.9		465,181		1.0
Fixed rate callable amortizing advances	18,367		—		19,370		—
Standard housing and community development advances:
Fixed rate amortizing advances	202,036		0.4		238,773		0.6
Fixed rate callable amortizing advances	11,401		—		11,748		—
Total amortizing advances	647,372		1.3		735,072		1.6
TOTAL PAR VALUE	$	45,670,302	100.0	%	$	44,654,715	100.0	%

1 Represents fixed rate ~~callable advances. Changes in interest rates could reduce the benefit of~~ line of credit advances to our members, which could cause a significant decline in advances. We expect advances as a percent of total assets to remain near current levels as part of our core mission asset focus and continued efforts to promote awareness of the benefits of higher dividends (see “Executive Level Overview”~~under this Item 7), but we cannot predict member demand for our advance products.~~with daily maturities.

As of December 31, 2017 and 2016, 64.5 percent and 65.7 percent, respectively, of our members carried outstanding advance balances. The overall demand for our advances can typically be attributed to the demand for loans that our depository members are experiencing in their communities and their ability to fund those2 Representsnon-amortizing, non-prepayable loans with ~~deposit growth. It is also influenced by our insurance company members’ need for operational liquidity and the ability of both depository and insurance company members~~terms to profitably invest advance funding. The demand for advances is also influenced by the impact our dividends have on the effective cost of advances. Dividend yields have trended higher since the last half of 2014, which has provided members with more opportunitiesmaturity from 3 to profitably invest advance funding, resulting in historically high levels of advances outstanding. The majority of the growth in advances experienced is a result of a small number of large members increasing short-term advances. We anticipate demand for advances to remain steady with these members. Advances with other members could decline or remain flat until greater levels of funding can be reallocated from short-term liquid assets into higher-yielding loans or assets. If our members reduce the volume of their advances, we expect to continue our past practice of repurchasing excess capital stock. In addition, when, and if, member advance demand changes, a few larger members could have a significant impact on the amount of total outstanding advances, much like what has occurred since the latter half of 2014.93 days.

Rather than match-funding long-term, fixed rate, large dollar advances, we elect to swap a significant portion of large dollar advances with longer maturities to short-term indices (one- or three-month LIBOR) to synthetically create adjustable rate advances. When coupled with the volume of our short-term advances, advances that effectively re-price at least every three months represent 88.5 percent and 87.5 percent of our total advance portfolio as of December 31, 2017 and 2016, respectively.

Our potential credit risk from advances is concentrated in commercial banks, ~~and~~ savings institutions, and insurance companies in our four-state district, but also includes potential credit risk exposure to ~~insurance companies,~~ credit unions, housing associates and a small number of non-members. Table 2620 presents advances outstanding by borrower type (in thousands):

~~Table 26~~

12/31/2017 12/31/2016
Member advances:
Commercial banks $ 13,761,822
$ 12,546,952
Savings institutions 8,597,082
7,780,718
Insurance companies 2,476,915
2,114,810
Credit unions 1,295,569
1,425,359
CDFI 4,000
4,300
Total member advances 26,135,388
23,872,139

Non-member advances:
Housing associates 95,085
61,005
Non-member borrowers¹
94,751
27,371
Total non-member advances 189,836
88,376

TOTAL PAR VALUE $ 26,325,224
$ 23,960,515


¹	~~Includes former members that have merged into or were acquired by non-members.~~

Table 2720


	12/31/2023		12/31/2022
Member advances:
Commercial banks	$	21,969,321	$	17,944,987
Savings institutions	12,842,164		14,368,319
Insurance companies	7,469,328		6,941,648
Credit unions	3,268,583		5,298,334
CDFIs	26,404		19,929
Total member advances	45,575,800		44,573,217

Non-member advances:
Housing associates	94,502		81,498

Total non-member advances	94,502		81,498

TOTAL PAR VALUE	$	45,670,302	$	44,654,715

Table 21 presents information on our five largest borrowers (dollar amounts in thousands). We ~~have~~do not expect to incur any credit losses on these advances based on our rights to collateral with an estimated fair value in excess of the book value of these ~~advances and, therefore, do~~advances. We have not ~~expect to incur any~~experienced a credit ~~losses~~loss on ~~these advances.~~an advance since the inception of FHLBank.

~~Table 27~~

12/31/2017 12/31/2016
Borrower Name
Advance
Par Value
Percent of Total
Advance Par
Advance
Par Value
Percent of Total
Advance Par
BOKF, N.A. $ 5,100,000
19.4 % $ 4,800,000
20.0 %
MidFirst Bank 5,100,000
19.4
4,340,000
18.1
Capitol Federal Savings Bank 2,175,000
8.2
2,275,000
9.5
United of Omaha Life Insurance Co. 659,091
2.5
670,000
2.8
Mutual of Omaha Bank 655,000
2.5
556,000
2.3
TOTAL $ 13,689,091
52.0 % $ 12,641,000
52.7 %

Table 2821


	12/31/2023				12/31/2022
Borrower Name	Advance Par Value		Percent of Total Advance Par		Advance Par Value		Percent of Total Advance Par
MidFirst Bank	$	9,585,000	21.0	%	$	10,740,000	24.1	%
BOKF, N.A.	7,675,000		16.8		4,700,000		10.5
Capitol Federal Savings Bank	2,375,410		5.2		2,650,082		5.9
United of Omaha Life Insurance Co.	2,278,283		5.0		1,946,896		4.4
First United Bank & Trust Co.	1,881,516		4.1
Security Life of Denver Insurance Co.					1,650,000		3.7

TOTAL	$	23,795,209	52.1	%	$	21,686,978	48.6	%

Table 22 presents ~~the~~ accrued interest income associated with the five borrowers ~~providing~~with the highest ~~amount of~~ interest income for the periods presented (dollar amounts in thousands).

~~Table 28~~

2017 2016
Borrower Name Advance Income
Percent of Total
Advance Income¹
Advance Income
Percent of Total
Advance Income¹
Capitol Federal Savings Bank $ 69,087
15.6 % $ 64,056
20.4 %
MidFirst Bank 66,775
15.0
23,198
7.4
BOKF, N.A. 66,428
15.0
33,158
10.6
American Fidelity Assurance Co. 14,300
3.2
15,985
5.1
United of Omaha Life Insurance Co. 11,112
2.5
7,689
2.5
TOTAL $ 227,702
51.3 % $ 144,086
46.0 %


¹	Total advance income by borrower excludes net interest settlements on derivatives hedging the advances. Total advance income for all borrowers was $400.6 million for 2017 and $227.6 million for 2016, net of interest receipts/(payments) on derivatives hedging advances of $(43.5) million in 2017 and $(85.7) million in 2016.

~~Table 11 presents~~ If the borrower was not one of our top five borrowers for whom we accrued the highest amount of interest income for one of the periods presented, the applicable columns are left blank.

Table 22



	Year Ended
	12/31/2023				12/31/2022
Borrower Name	Advance Income		Percent of Total Advance Income1		Advance Income		Percent of Total Advance Income1
MidFirst Bank	$	585,147	27.1	%	$	179,164	24.8	%
BOKF, N.A.	314,616		14.5		37,990		5.3
Capitol Federal Savings Bank	107,137		5.0		73,661		10.2
United of Omaha Life Insurance Co.	81,285		3.8
Security Life of Denver Insurance Co.	79,684		3.6		26,901		3.7
Pacific Life Insurance Co.					32,484		4.5


TOTAL	$	1,167,869	54.0	%	$	350,200	48.5	%

1 Total advance income by borrower excludes: (1) changes in unrealized gains (losses) from qualifying fair value hedging relationships; (2) net interest settlements on ~~advances as a percentage of total interest income for~~derivatives hedging the ~~years ended December 31, 2017, 2016,~~advances; and ~~2015.~~(3) prepayment fees received.

Prepayment Fees - Advances are priced based on our marginal cost of issuing matched-maturity funding while considering our related administrative and operating costs, pricing on other funding alternatives available to members, and desired profitability targets. Advances with a maturity or repricing period greater than three months that do not include call features that can be exercised at the option of the member generally incorporate a fee sufficient to make us ~~financially~~economically indifferent should the borrower decide to prepay the advance.

Letters of Credit - We also issue letters of credit for members. Members must collateralize letters of credit in accordance with the same requirements as for advances. Letters of credit are generally issued or confirmed on behalf of a member to: (1) ~~provide liquidity or other funding;~~collateralize public unit deposits: (2) facilitate residential housing finance; or (3) facilitate community ~~lending that may also be secured by state and local government securities.~~lending; (4) manage assets/liabilities; or (5) provide liquidity or other funding. Outstanding letters of credit balances totaled ~~$3.4~~$7.2 billion and ~~$3.0~~$6.5 billion as of December 31, ~~2017~~2023 and ~~2016,~~2022, respectively.

Housing Associates - We are permitted under the Bank Act to make advances to housing associates, which are non-members that are approved mortgagees under Title II of the National Housing Act. All outstanding advances to housing associates are to state housing finance authorities. Totals as of December 31, ~~2017~~2023 and ~~2016,~~2022, which are noted in Table ~~26,~~20, represent less than one percent of total advance par values for each period presented.

MPF Program: The MPF Program is a secondary mortgage market alternative for our members, ~~especially~~predominately utilized by the smaller institutions in our district. We participate in the MPF Program through the MPF Provider, a division of FHLBank of Chicago. Under the MPF Program, participating members can sell us conventional and government ~~single-family~~ residential mortgage loans.

The mortgage loan portfolio increased $0.5 billion between periods, from $7.9 billion at December 31, 2022 to $8.4 billion at December 31, 2023. Mortgage rates continued to trend upward in response to market conditions, which has reduced origination volume and refinancing incentive for borrowers and slowed prepayments in recent periods, although purchase volume has exceeded principal repayments during 2023. Net mortgage loans as a percentage of total assets increased, from 11.0 percent as of December 31, 2022 to 11.1 percent as of December 31, 2023. Mortgage loans are generally one of the highest net spread assets on our balance sheet so shifts in the balance sheet concentration of mortgage loans will impact net interest income. The principal amount of new mortgage loans acquired and held on our balance sheet from our PFIs during the year ended December 31, ~~2017~~2023 was ~~$1.6~~$1.2 billion. ~~These new originations and acquisitions, net of loan payments received, resulted in an increase of 9.7 percent~~

Future growth in the ~~outstanding net~~MPF portfolio is a function of asset size and composition, most notably the balance of ~~our mortgage loan portfolio from December 31, 2016 to December 31, 2017. Net mortgage loans~~advances, and capital level, as a percentage of total assets increased slightly from 14.7 percent as of December 31, 2016 to 15.2 percent as of December 31, 2017. Table 11 presents the amount of interest income on mortgage loans held for portfolio as a percentage of total interest income for the years ended December 31, 2017, 2016, and 2015. Although mortgage loan balances grew to $7.3 billion during 2017, the percentage of mortgage loan interest income to total interest income has declined, predominantly due to an increasegrowth in ~~average advance balances as a percentage of average~~advances impacts our total assets and capital level, which allows the ~~resulting increase in advance interest income.~~

~~Recent growth in~~balance of mortgage loans ~~held for portfolio is attributed primarily~~ to the addition of high-production PFIs, but we have also made enhancements to pricing structures that provide PFIs with additional funding opportunities. During 2017, we began offering PFIs the option to receive credit enhancement as a one-time upfront fee paid at purchase. Recent reductions in the required CE obligation against current and past production may reduceincrease while maintaining our ~~PFIs' risk-based capital requirements and result in additional MPF portfolio growth.~~targeted AMA risk tolerance. The ~~primary~~other factors that may influence future growth in our mortgage loans held for portfolio include: (1) the ~~number~~level of ~~new~~interest rates and ~~delivering PFIs;~~the shape of the yield curve; (2) the mortgage loan origination volume of current PFIs; (3) refinancing activity; (4) ~~the level of interest rates and the shape of the yield curve; (5)~~ the relative competitiveness of MPF pricing to the prices offered by other buyers of residential mortgage loans; ~~and (6)~~(5) a PFI's level of excess risk-based capital relative to the required risk-based capital charge associated with the PFI's CE obligations on MPF mortgage ~~loans. In~~loans; and (6) the number of new and delivering PFIs.

The MPF Xtra product is an ~~effort~~off-balance sheet product structured to ~~manage~~facilitate the sale of mortgage loans from our PFIs to FHLBank Chicago and simultaneously to Fannie Mae. During 2023 and 2022, we had MPF Xtra loan volume of $0.1 billion and $0.2 billion, respectively. The decrease in MPF Xtra volume from 2022 to 2023 reflects: (1) the relative attractiveness of our on-balance sheet MPF product; and (2) the level of market interest rates (reduction in refinance volume when mortgage rates move higher; increase in purchase and refinance volume when mortgage rates decline). The MPF Government MBS product is an off-balance sheet product structured to facilitate the sale of government loans onfrom our ~~books, management has researched~~PFIs to FHLBank Chicago, which are then aggregated and ~~continues to review options including participating loan~~pooled into securities guaranteed by Ginnie Mae. We had volume ~~or selling whole loans to other FHLBanks, members or other investors. As described below, we have pursued participations~~of $0.1 billion and ~~although~~$0.2 billion in the MPF Government MBS product during 2023 and 2022, respectively.

Although we may determine to sell whole loans from time to time, we have not identified any specific loans to be sold as of December 31, ~~2017.~~2023.

~~The MPF Xtra product is a structure where our PFIs sell~~Table 23 presents the unpaid principal balance of mortgage loans according to ~~FHLBank~~the amortization schedule based on the contractual terms of ~~Chicago and simultaneously to Fannie Mae. We receive a counterparty fee from FHLBank of Chicago (Fannie Mae seller-servicer) for our PFIs participating~~the loan (in thousands). Scheduled repayments are reported in the ~~MPF Xtra product. During 2016~~maturity category in which the payment is due. Prepayments may shorten the amortization period and 2017, we had MPF Xtra loan volume of $357.6 million and $252.6 million, respectively. The MPF Government MBS product is a structure where our PFIs sell government loans to FHLBank of Chicago that are aggregated and pooled into securities guaranteed by Ginnie Mae. During 2016, we received approval fromlate payments may extend the ~~FHFA to offer this product to our customers. We had volume of $46.4 million and $0.4 million in the MPF Government MBS product during 2017 and 2016, respectively.~~

Historically, we have used the MPF Xtra product and mortgage loan participations with another FHLBank to effectively restrict the growth in mortgage loans held for portfolio and provide management with adequate means to control the amount of mortgage loan portfolio volume retained on our balance sheet to maintain our desired asset composition. We discontinued our mortgage loan participations with another FHLBank in the first quarter of 2014 because of lower origination volumes with PFIs, but we continue to consider and develop other options to manage the sizeprincipal amortization of the ~~mortgage loan portfolio while maintaining reliable support of our members’ residential lending programs. During 2015, we received approval from~~late payments to the ~~FHFA to offer participation interests in risk-sharing MPF loan pools to member institutions. This option may further enhance our ability to manage mortgage loan portfolio volume.~~maturity date.

Table 2923


Redemption Term	12/31/2023		12/31/2022
Due in one year or less	$	310,706	$	305,406
Due after one year through five years	1,279,640		1,267,141
Due after five years through fifteen years	3,232,396		3,147,613
Thereafter	3,460,409		3,110,018
TOTAL UNPAID PRINCIPAL BALANCE	$	8,283,151	$	7,830,178

Table 24 presents the outstanding balances of mortgage loans sold to us, net of participations, from our top five PFIs and the percentage of those loans to total mortgage loans outstanding (dollar amounts in thousands). If the ~~member~~borrower was not one of our top five PFIs for one of the periods presented, the applicable columns are left blank.

~~Table 29~~

12/31/2017 12/31/2016

Mortgage
Loan Balance
Percent of Total
Mortgage Loans
Mortgage
Loan Balance
Percent of Total
Mortgage Loans
FirstBank of Colorado $ 319,936
4.5 % $ 273,386
4.2 %
Tulsa Teachers Credit Union 273,744
3.8
242,312
3.7
ENT Federal Credit Union 198,132
2.8

Fidelity Bank 188,534
2.6

Mid-America Bank 158,733
2.2
131,419
2.0
Mutual of Omaha Bank 152,264
2.3
SAC Federal Credit Union 141,992
2.2
TOTAL $ 1,139,079
15.9 % $ 941,373
14.4 %

Table 3024


	12/31/2023				12/31/2022
	Mortgage Loan Balance		Percent of Total Mortgage Loans		Mortgage Loan Balance		Percent of Total Mortgage Loans
Fidelity Bank	$	366,733	4.4	%	$	325,530	4.2	%
Farmers Bank & Trust	338,745		4.1
Tulsa Teachers Credit Union	304,925		3.7		326,491		4.2
West Gate Bank	267,101		3.2		227,649		2.9
Community National Bank & Trust	226,466		2.7		233,975		3.0
Mid-America Bank					176,792		2.3

TOTAL	$	1,503,970	18.1	%	$	1,290,437	16.6	%

Table 25 presents ~~information regarding the asset quality of our~~ mortgage loan portfolio ~~(in thousands):~~

~~Table 30~~

2017 2016 2015 2014 2013
Nonaccrual, past due and restructured loans:
Nonaccrual loans, UPB¹
$ 16,456
$ 14,897
$ 15,878
$ 20,045
$ 21,142
Loans past due 90 days or more and still accruing interest, UPB 6,031
4,962
7,637
6,367
8,290

Allowance for credit losses on mortgage loans:
Beginning balance $ 1,674
$ 1,972
$ 4,550
$ 6,748
$ 5,416
Charge-offs/recoveries²
(280 ) (189 ) (669 ) (583 ) (594 )
Provision (reversal) for mortgage loan losses (186 ) (109 ) (1,909 ) (1,615 ) 1,926
Ending balance $ 1,208
$ 1,674
$ 1,972
$ 4,550
$ 6,748

Interest income shortfall for nonaccrual loans:
Gross amount of interest income that would have been recorded based on original terms $ 894
$ 859
$ 1,017
$ 1,304
$ 1,372
Interest recognized in income during the period (661 ) (687 ) (813 ) (957 ) (1,016 )
Shortfall $ 233
$ 172
$ 204
$ 347
$ 356

Conventional residential mortgage loans are classified as nonaccrual when they are contractually past due 90 days or more at which time interest is no longer accrued. Interest continues to accrue on government-insured residential mortgage loans (e.g., FHA, VA, HUD and RHS loans) that are contractually past due 90 days or more. Nonaccrual loans include troubled debt restructurings of $1.5 million, $1.4 million, $1.4 million, $1.5 million, and $1.5 million as of December 31, 2017, 2016, 2015, 2014, and 2013, respectively. Troubled debt restructurings are restructurings in which we, for economic or legal reasons related to the debtor’s financial difficulties, grant a concession to the debtor that it would not otherwise consider.


²	~~The ratio of net charge-offs/recoveries to average loans outstanding was approximately one basis point or less for the periods ending December 31, 2017, 2016, 2015, 2014, and 2013.~~

~~The serious delinquency rate~~credit ratios and the components of the mortgage loan portfolio did not materially change from December 31, 2016 to December 31, 2017 (see Table 31). According to the December 31, 2017 Mortgage Bankers Association (MBA) National Delinquency Survey, the weighted average of all conventional residential mortgage loans 90 days or more past due using third quarter MBA data (data is published with a one-quarter lag) was 1.9 percent. This is approximately ten times the level of seriously delinquent loans in our mortgage loan portfolio. Table 31 presents delinquency informationratio calculation for the ~~unpaid principal of conventional mortgage loans in our traditional MPF products~~periods presented (dollar amounts in thousands):

Table 3125


	12/31/2023			12/31/2022
Average loans outstanding during the period, unpaid principal balance	$	8,002,681		$	7,934,465
Mortgage loans held for portfolio, unpaid principal balance	8,283,151			7,830,178
Nonaccrual loans, unpaid principal balance	19,002			22,095
Allowance for credit losses	5,531			6,378
Net charge-offs (recoveries)	206			(351)

Ratio of net charge-offs (recoveries) to average loans outstanding during the period	—		%	—		%
Ratio of allowance for credit losses to mortgage loans held for portfolio	0.07			0.08
Ratio of nonaccrual loans to mortgage loans held for portfolio	0.23			0.28
Ratio of allowance for credit losses to nonaccrual loans	29.11			28.87

12/31/2017 12/31/2016
30 to 59 days delinquent and not in foreclosure $ 36,689
$ 39,377
60 to 89 days delinquent and not in foreclosure 7,750
7,585
90 days or more delinquent and not in foreclosure¹
9,399
8,391
In process of foreclosure²
4,132
4,367
Total conventional mortgage loans delinquent or in process of foreclosure $ 57,970
$ 59,720

Real estate owned (carrying value) $ 2,539
$ 2,608

Serious delinquency rate³
0.2 % 0.2 %


¹	Includes all troubled debt restructurings regardless of delinquency status not classified as in process of foreclosure. Troubled debt restructurings are restructurings in which we, for economic or legal reasons related to the debtor's financial difficulties, grant a concession to the debtor that we would not otherwise consider.


²	~~Includes loans where the decision of foreclosure or similar alternative such as pursuit of deed-in-lieu has been reported.~~


³	Conventional loans that are 90 days or more past due or in the process of foreclosure expressed as a percentage of the total conventional loan portfolio principal balance. Only fixed rate prime conventional mortgage loans are held in the MPF portfolio.

Two indications of credit quality are ~~Fair Isaac Corporation (FICO~~^®)FICO scores and LTV ratios. FICO is a widely used credit industry indicator to assess borrower credit quality with scores typically ranging from 300 to 850 with the low end of the scale indicating greater credit risk. In February 2010, the MPF Program instituted a minimum FICO score of 620 for all conventional loans. Table 3226 provides the percentage distribution of FICO scores at origination for conventional mortgage loans outstanding in our traditional MPF products:

Table 26


FICO Score1	12/31/2023		12/31/2022
< 620	0.5	%	0.5	%
620 to < 660	4.2		4.5
660 to < 700	11.8		12.3
700 to < 740	19.4		19.4
>= 740	64.1		63.3
	100.0	%	100.0	%

Weighted average	750		749

~~Table 32~~1 Represents the original FICO score of the lowest-scoring borrower for the related loan.

FICO Score¹
12/31/2017 12/31/2016
< 620 0.5 % 0.6 %
620 to < 660 4.1
4.0
660 to < 700 12.2
12.1
700 to < 740 19.6
19.4
>= 740 63.6
63.9
100.0 % 100.0 %

Weighted average 750
750


¹	~~Represents the original FICO score of the lowest-scoring borrower for the related loan.~~

LTV is a primary variable in credit performance. Generally, a higher LTV ratio means greater risk of loss in the event of a default and ~~also means~~ higher loss severity. As noted previously, the maximum LTV for conventional MPF loans is 95 percent, though AHP MPF mortgage loans may have LTVs up to 100 percent. Table 3327 provides LTV ratios at origination for conventional mortgage loans outstanding in our traditional MPF products:

Table 3327


LTV	12/31/2023		12/31/2022
<= 60%	15.7	%	16.5	%
> 60% to 70%	14.0		14.6
> 70% to 80%	49.6		49.8
> 80% to 90%	11.4		10.4
> 90% to < 100%	9.3		8.7
	100.0	%	100.0	%

Weighted average	74.5	%	73.9	%

LTV 12/31/2017 12/31/2016
<= 60% 14.7 % 15.3 %
> 60% to 70% 14.2
14.4
> 70% to 80% 54.5
54.8
> 80% to 90% 8.6
8.1
> 90% to < 100% 8.0
7.4
100.0 % 100.0 %

Weighted average 74.2 % 73.8 %

Our mortgage loans held in portfolio were dispersed across all 50 states and the District of Columbia as of December 31, ~~2017~~2023 and ~~2016.~~2022. Table 3428 is a summary of the geographic concentration percentage of our conventional mortgage loan portfolio by state, highlighting the top five states with the highest concentration. If athe state was not one of the top five states with the highest concentration for one of the periods presented, the applicable column is left blank.

Table 3428


	12/31/2023		12/31/2022
Kansas	36.3	%	38.0	%
Nebraska	24.1		24.6
Oklahoma	11.5		12.1
Colorado	10.9		11.2
Missouri	2.2		2.1

All other	15.0		12.0
TOTAL	100.0	%	100.0	%

12/31/2017 12/31/2016
Kansas 36.9 % 37.1 %
Nebraska 21.3
21.9
Colorado 16.3
15.6
Oklahoma 15.2
15.8
California 1.8

Missouri
1.5
All other 8.5
8.1
TOTAL 100.0 % 100.0 %

The credit risk of conventional mortgage loans sold under the traditional MPF products is managed by structuring potential credit losses into certain layers. As is customary for conventional mortgage loans, PMI is required for MPF loans with LTVs greater than 80 percent. Losses beyond the PMI layer are absorbed by an FLA established for each pool of mortgage loans sold by a PFI up to the maximum amount of the remaining FLA net of credit losses.

Allowance for Credit Losses on Mortgage Loans Held for Portfolio – The ~~decrease in the~~ allowance for credit losses ~~as of~~on mortgage loans decreased $0.8 million from December 31, ~~2017 was primarily attributable~~2022 to ~~a decrease in delinquent~~December 31, 2023. Delinquencies of conventional loans ~~during 2017 compared~~remained at low levels relative to ~~2016.~~the portfolio, at 0.9 percent of the amortized cost of total conventional loans at December 31, 2023 and 1.0 percent at December 31, 2022. We believe that policies and procedures are in place to effectively manage the credit risk on mortgage loans held infor portfolio. See Note 75 of the Notes to Financial Statements under Item 8 for a summary of the allowance for credit losses on mortgage loans as well as payment status and other delinquency ~~aging and key credit quality indicators~~statistics for our mortgage loan portfolio.

Investments: Investments are used to manage interest rate and duration risk, enhance income, and provide liquidity and primary and secondary market support for the U.S. housing securities market. Total investments increased $1.2 billion from December 31, ~~2016~~2022 to December 31, ~~2017 due to~~2023 driven by increases in MBS and certificates of deposit, partially offset by a decrease in money market investments and GSE debentures. The increase in long-term MBS coincided with the increase in advances and mortgage loans, as growth in core mission assets and the corresponding increase in capital allow for growth in non-mission assets while maintaining our desired CMA ratio. Consistent with FHFA guidance, we define investment quality as a security with adequate financial backings so that full and timely payment of principal and interest on such security is expected and there is minimal risk that the timely payment of principal and interest would not occur because of adverse changes in economic and financial conditions during the projected life of the security.securities.

Short-term Investments – Short-term investments, which are used to provide funds ~~to meet the credit needs of~~for our members, maintain liquidity, meet other financial obligations such as debt servicing, and enhance income, consist primarily of reverse repurchase agreements, interest-bearing deposits, ~~overnight~~ Federal funds sold, ~~term Federal funds sold,~~and certificates of deposit and commercial paper. The Bank Act and FHFA regulations and guidelines set liquidity requirements for us, and our Board of Directors has adopted additional liquidity policies. In addition, we maintain a contingency liquidity plan in the event of financial market disruptions. See “Risk Management – Liquidity Risk Management” under this Item 7 for a discussion of our liquidity management.deposit.

Within our portfolio of short-term investments, ~~we face~~counterparty credit risk arises from unsecured exposures. Our short-term unsecured credit investments have maturities generally ranging between overnight and three months and may include the following types:

•Interest-bearing deposits. Unsecured deposits that earn interest.

•Federal funds sold. Unsecured loans of reserve balances at the Federal Reserve Banks between financial institutions that are made on either an overnight or term basis, but typically made on an overnight basis.

~~Commercial paper.~~ ~~Unsecured debt issued by corporations, typically for the financing of accounts receivable, inventories, and meeting short-term liabilities.~~

•Certificates of deposit. Unsecured negotiable promissory notes issued by banks and payable to the bearer at maturity.

Table 3529 presents the carrying value of our unsecured credit exposure with private counterparties by investment type (in thousands). The unsecured investment credit exposure presented may not reflect the average or maximum exposure during the period as the balances presented reflect the balances at period end.

Table 3529


	12/31/2023				12/31/2023	12/31/2022
Interest-bearing deposits
Federal funds sold

TOTAL UNSECURED INVESTMENT CREDIT EXPOSURE1
	12/31/2017		12/31/2016
Interest-bearing deposits	$	441,009	$	385,148
Federal funds sold	1,175,000		2,725,000
Certificates of deposit	584,984		—
TOTAL UNSECURED INVESTMENT CREDIT EXPOSURE¹	$	2,200,993	$	3,110,148

TOTAL UNSECURED INVESTMENT CREDIT EXPOSURE1


¹ 1 Excludes unsecured investment credit exposure to U.S. government, U.S. government agencies, instrumentalities, GSEs and supranational entities and does not include related accrued interest.	~~Excludes unsecured investment credit exposure to U.S. government, U.S. government agencies, instrumentalities, GSEs and supranational entities and does not include related accrued interest.~~

We actively monitor our credit exposures and the credit quality of our counterparties, including an assessment of each counterparty’s financial performance, capital adequacy, sovereign support and the current market perceptions of the counterparties. General macro-economic, political and market conditions may also be considered when deciding on unsecured exposure. As a result, we may further limit existing exposures.

FHFA regulations include limits on the amount of unsecured credit an individual FHLBank may extend to a counterparty or to a group of affiliated counterparties. This limit is based on a percentage of eligible regulatory capital and the counterparty’s overall credit rating. Under these regulations, the level of eligible regulatory capital is determined as the lesser of an individual FHLBank’s total regulatory capital or the eligible amount of regulatory capital of the counterparty. The eligible amount of regulatory capital is then multiplied by a stated percentage. The percentage that an FHLBank may offer for term extensions of unsecured credit ranges from 1 percent to 15 percent based on the counterparty’s ~~long-term~~internal credit rating. The calculation of term extensions of unsecured credit includes on-balance sheet transactions, off-balance sheet commitments and derivative ~~transactions.~~transactions (derivative transactions cleared through a clearinghouse are excluded from the calculation and unsecured credit is limited with bilateral derivative counterparties due to the receipt of collateral based on zero collateral thresholds although there can be a lag between receipt and the calculation of exposure). See “Risk Management – Credit Risk Management” under this Item 7 for additional information related to derivative exposure.

FHFA regulation also permits us to extend additional unsecured credit for overnight extensions of credit. Our total overnight unsecured exposure to a counterparty may not exceed twice the regulatory limit for term exposures, or a total of 2 percent to 30 percent of the eligible amount of regulatory capital, based on the counterparty’s credit rating. We ~~however,~~ generally limit our unsecured exposure to any private counterparty to no more than the balance of our retained earnings, even if the counterparty limit under the previously discussed calculation would be higher. As of December 31, ~~2017,~~2023, we were in compliance with the regulatory limits established for unsecured credit, and our unsecured credit exposure to any individual non-member private counterparty (excluding GSEs) did not exceed the balance of our retained earnings on that date.

We are prohibited by FHFA regulation from investing in financial instruments issued by non-U.S. entities other than those issued by U.S. branches and agency offices of foreign commercial banks. Our unsecured credit exposures to U.S. branches and agency offices of foreign commercial banks include the risk that, as a result of political or economic conditions in a country, the counterparty may be unable to meet its contractual repayment obligations. Our unsecured credit exposures to domestic counterparties and U.S. subsidiaries of foreign commercial banks include the risk that these counterparties have extended credit to foreign counterparties. Throughout ~~the 2017 fiscal year,~~2023, we were in compliance with the regulation and did not own any financial instruments issued by foreign sovereign governments, including those countries that are members of the European Union.

We manage our credit risk by conducting pre-purchase credit due diligence and ~~on-going~~ongoing surveillance described previously and generally investing in unsecured investments of highly-rated counterparties. From time to time, we extend unsecured credit to qualified members by investing in overnight Federal funds issued by them. As of December 31, ~~2017,~~2023, all unsecured investments were rated as investment grade based on NRSROs (see Table ~~39)~~32).

Table 3630 presents the amount of our unsecured investment credit exposure by remaining contractual maturity and by the domicile of the counterparty or the domicile of the counterparty’s parent for U.S. branches and agency offices of foreign commercial banks as of December 31, ~~2017~~2023 (in thousands). We also mitigate the credit risk on investments by ~~generally investing in investments~~purchasing instruments that have short-term maturities.

Table 3630

Domicile of Counterparty Overnight
Due 2 – 30
days
Due 31 – 90
days
Total
Domestic $ 441,009
$ —
$ —
$ 441,009
U.S. Branches and agency offices of foreign commercial banks:

Canada 400,000
99,990
300,026
800,016
Netherlands 425,000
—
—
425,000
Norway 250,000
—
—
250,000
Sweden —
34,996
149,972
184,968
Austria 100,000
—
—
100,000
Total U.S. Branches and agency offices of foreign commercial banks 1,175,000
134,986
449,998
1,759,984
TOTAL UNSECURED INVESTMENT CREDIT EXPOSURE¹
$ 1,616,009
$ 134,986
$ 449,998
$ 2,200,993


Domicile of Counterparty	Overnight
Domestic	$	1,684,423


U.S. Branches and agency offices of foreign commercial banks:
Australia	1,100,000
Canada	500,000

United Kingdom	400,000





Total U.S. Branches and agency offices of foreign commercial banks	2,000,000
TOTAL UNSECURED INVESTMENT CREDIT EXPOSURE1	$	3,684,423


¹	~~Excludes unsecured investment credit exposure to U.S. government, U.S. government agencies, instrumentalities, GSEs and supranational entities, and does not include related accrued interest.~~

1 Excludes unsecured investment credit exposure to U.S. government, U.S. government agencies, instrumentalities, GSEs and supranational entities, and does not include related accrued interest.

Unsecured credit exposure continues to be ~~cautiously placed, with exposure concentrated domestically and in the countries listed in Table 36.~~conservatively placed. In addition, we anticipate continued future investment in reverse repurchase agreements, which are secured ~~investments, and limiting unsecured exposure, especially to foreign financial institutions, as long as the interest rates are comparable.~~investments. To enhance our liquidity position, we classify our unsecured short-term investment securities in our trading portfolio, which allows us to sell these securities if necessary.

Long-term investments – Our long-term investment portfolio consists primarily of GSE MBS and ~~GSE debentures.~~U.S. Treasury obligations. Our RMP restricts the acquisition of investments to highly rated long-term securities. The majority of these long-term securities are GSE MBS, which provide an alternative means to promote liquidity in the mortgage finance markets while providing acceptable returns. We hold fixed and variable rate GSE debentures in our long-term investment portfolio and we swap theGenerally, fixed rate ~~GSE debentures from fixed to variable rates. They provide attractive returns, can serve as excellent collateral (e.g., repurchase agreements and net derivatives exposure), and~~U.S. Treasury obligations are ~~generally~~either classified as trading securities and ~~carried at~~economically swapped to variable rates or classified as available-for-sale securities and swapped to variable rates in qualifying fair value hedging relationships. In addition to serving as excellent collateral, U.S. Treasury obligations also help satisfy regulatory liquidity requirements. We also purchase fixed rate securities for duration and interest rate risk management. A significant portion of our variable rate investment securities were indexed to LIBOR for the first half of 2023; however, LIBOR ceased publication on June 30, 2023. As such, all LIBOR-indexed investments converted to reference SOFR, either to ~~enhance our liquidity position, for asset/liability management purposes,~~start or ~~to provide a fair value offset to~~fall back, beginning July 3, 2023 or at the ~~gains or losses on~~beginning of the interest rate swaps tied to these securities. The interest rate swaps do not qualify for hedge accounting, which results in the net interest payments or receipts on these economic hedges flowing through net gains (losses) on derivatives and hedging activities instead of net interest income.next reset period.

According to FHFA regulation, no additional MBS purchases ~~can~~may be made if the ~~amortized cost~~aggregate value of our ~~mortgage securities~~MBS exceeds 300 percent of our regulatory capital. Further, quarterly increases in holdings of ~~mortgage securities~~MBS are restricted to no more than 50 percent of regulatory capital. As of December 31, ~~2017,~~2023, the ~~amortized cost~~aggregate value of our MBS portfolio represented ~~288~~248 percent of our regulatory capital.

~~As of December 31, 2017, we held $4.8 billion of par value~~ We are below our regulatory threshold primarily due to an increase in regulatory capital despite increased MBS purchases in 2023. We expect to be below our ~~held-to-maturity portfolio, $1.5 billion of par value in MBS in our available-for-sale portfolio, and $0.9 billion of par value in MBS in our trading portfolio. The majority of the MBS~~regulatory limit in the ~~held-to-maturity portfolio are variable rate GSE securities. The majority of the~~near-term but continue to remain opportunistic about future MBS ~~in the trading and available-for-sale portfolios are fixed rate GSE securities, which are swapped from fixed to variable rates.~~purchases.

We provide ~~SBPAs~~standby bond purchase agreements (SBPAs) to two state HFAs within the ~~Tenth District. During 2016, we also provided SBPAs to an out-of-district HFA.~~our district. For a predetermined fee, we accept an obligation to purchase the authorities’ bonds if the remarketing agent is unable to resell the bonds to suitable investors, and to hold the bonds until: (1) the designated remarketing agent can find a suitable investor; (2) we successfully exercise our right to sell the bonds; or (3) the HFA repurchases the bonds according to a schedule established by the SBPA. The standby bond purchase commitments executed and outstanding as of December 31, ~~2017~~2023 expire no later than ~~2020~~2028 though they are renewable upon request of the HFA and at our option. Total principal commitments for bond purchases under the SBPAs were ~~$0.9~~$1.0 billion and ~~$1.2~~$0.9 billion as of December 31, ~~2017~~2023 and ~~2016,~~2022, respectively. We were not required to purchase any bonds under these agreements during ~~2017~~2022 or ~~2016.~~2023. We plan to continue ~~to support~~supporting the state HFAs in our district by ~~continuing to execute~~executing SBPAs where appropriate and when allowed by our RMP. In the future, we may acquire participation interests in SBPAs with other FHLBanks and/or directly enter into SBPAs with out-of-district HFAs with the permission of the in-district FHLBank.

Major Security Types – Securities for which we have the ability and intent to hold to maturity are classified as held-to-maturity securities and recorded at carrying value, which is the net total of par, premiums, ~~discounts~~ and ~~credit and non-credit OTTI~~ discounts. We classify certain investments as trading or available-for-sale securities and carry them at fair value, generally for liquidity purposes, to provide a fair value offset to the gains (losses) on the interest rate swaps ~~tied to~~associated with swapped securities, and for asset/liability management purposes. Liquidity or other asset/liability management strategies may require periodic sale of these securities but they are not actively traded; most often, they are held until maturity or call date. Securities acquired as asset/liability management tools to manage duration risk, which ~~are likely to~~may be sold when the duration exposure is within risk ~~is no longer present,~~tolerances, are classified as trading or available-for-sale securities. Changes in the fair values of investments classified as trading are recorded through other income and the original premiums/discounts on these investments are not amortized. ~~We do not actively trade any of these securities with the intent of realizing gains; most often, they are held until maturity or call date.~~

Traditionally, if fixed rate securities were hedged with interest rate swaps, we would classify the securities as trading investments so that the changes in fair values of both the derivatives hedging the securities and the hedged securities are recorded in other income. However, during 2015, we began classifying our newly acquired swapped fixed rate multi-family GSE MBS as available-for-sale and designating the corresponding interest rate swaps as fair value benchmark hedges. See Note 43 of the Notes to Financial Statements under Item 8 of this annual report for additional information on our different investment classifications including the types of securities held under each classification. The carrying ~~value of our investments is summarized~~values by ~~security type in Table 37 (in thousands).~~

~~Table 37~~

12/31/2017 12/31/2016 12/31/2015
Trading securities:
Certificates of deposit $ 584,984
$ —
$ —
GSE debentures 1,353,083
1,563,351
1,338,639
Mortgage-backed securities:
U.S. obligation MBS 580
690
801
GSE MBS 930,768
938,747
955,166
Total trading securities 2,869,415
2,502,788
2,294,606
Available-for-sale securities:
GSE MBS 1,493,231
1,091,721
495,063
Total available-for-sale securities 1,493,231
1,091,721
495,063
Held-to-maturity securities:
State or local housing agency obligations 89,830
105,780
111,655
Mortgage-backed securities:
U.S. obligation MBS 127,588
36,331
47,234
GSE MBS 4,561,839
4,250,547
4,452,533
Private-label residential MBS 77,568
109,566
159,395
Total held-to-maturity securities 4,856,825
4,502,224
4,770,817
Total securities 9,219,471
8,096,733
7,560,486

Interest-bearing deposits 442,682
387,920
100,594

Federal funds sold 1,175,000
2,725,000
2,000,000

Securities purchased under agreements to resell 3,161,446
2,400,000
3,945,000
TOTAL INVESTMENTS $ 13,998,599
$ 13,609,653
$ 13,606,080

~~The~~ contractual maturities of our investments as of December 31, 2023 are summarized by security type in Table 3831 (dollar amounts in thousands). with certain weighted average yield metrics along with carrying values as of December 31, 2022. Expected maturities of certain securities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or ~~prepayment~~yield maintenance fees.

Table 3831


	12/31/2023														12/31/2022
	Due in one year or less			Due after one year through five years			Due after five years through 10 years			Due after 10 years			Carrying Value		Carrying Value
Trading securities:


U.S. Treasury obligations	$	—		$	—		$	—		$	—		$	—	$	396,233
GSE debentures	270,837			17,601			—			—			288,438		388,955

GSE MBS	81,108			528,031			6,537			4,494			620,170		636,265
Total trading securities	351,945			545,632			6,537			4,494			908,608		1,421,453

Available-for-sale securities:
U.S. Treasury obligations	—			2,937,868			—			—			2,937,868		3,315,356
U.S. obligation MBS	—			—			—			107,535			107,535		40,039
GSE MBS	98,436			1,684,626			3,977,023			2,947,965			8,708,050		5,999,021
Total available-for-sale securities	98,436			4,622,494			3,977,023			3,055,500			11,753,453		9,354,416

Held-to-maturity securities:
State or local housing agency obligations	—			—			35,855			—			35,855		70,505

GSE MBS	—			44,242			1,900			182,799			228,941		274,925
Total held-to-maturity securities	—			44,242			37,755			182,799			264,796		345,430


Total securities	450,381			5,212,368			4,021,315			3,242,793			12,926,857		11,121,299


Interest-bearing deposits	1,604,989			—			—			—			1,604,989		2,039,852

Federal funds sold	2,080,000			—			—			—			2,080,000		3,750,000

Securities purchased under agreements to resell	3,875,000			—			—			—			3,875,000		2,350,000
TOTAL INVESTMENTS	$	8,010,370		$	5,212,368		$	4,021,315		$	3,242,793		$	20,486,846	$	19,261,151

Weighted average yields1:
Available-for-sale securities	2.38		%	2.76		%	3.69		%	4.75		%
Held-to-maturity securities	—		%	2.83		%	2.58		%	1.71		%

1 The weighted average yields are calculated as the sum of each debt security using the period end balances multiplied by the coupon rate adjusted by the impact of amortization and accretion of premiums and discounts, divided by the total debt securities in the applicable portfolio. The result is then multiplied by 100 to express it as a percentage.

12/31/2017

Due in
one year
or less
Due after
one year
through five years
Due after
five years
through 10 years
Due after
10 years
Carrying
Value
Trading securities:

Certificates of deposit $ 584,984
$ —
$ —
$ —
$ 584,984
GSE debentures 343,800
601,928
407,355
—
1,353,083
Mortgage-backed securities:
U.S. obligation MBS —
—
580
—
580
GSE MBS —
—
862,314
68,454
930,768
Total trading securities 928,784
601,928
1,270,249
68,454
2,869,415
Yield on trading securities 1.36 % 1.37 % 2.88 % 2.47 %
Available-for-sale securities:
GSE MBS —
131,302
1,339,397
22,532
1,493,231
Total available-for-sale securities —
131,302
1,339,397
22,532
1,493,231
Yield on available-for-sale securities — % 2.05 % 2.64 % 2.71 %
Held-to-maturity securities:

State or local housing agency obligations —
—
—
89,830
89,830
Mortgage-backed securities:

U.S. obligation MBS —
—
—
127,588
127,588
GSE MBS 36
303,916
1,572,402
2,685,485
4,561,839
Private-label residential MBS 1,313
2,558
2,442
71,255
77,568
Total held-to-maturity securities 1,349
306,474
1,574,844
2,974,158
4,856,825
Yield on held-to-maturity securities 2.33 % 1.66 % 2.01 % 1.92 %

Total securities 930,133
1,039,704
4,184,490
3,065,144
9,219,471
Yield on total securities 1.36 % 1.54 % 2.47 % 1.94 %

Interest-bearing deposits 442,682
—
—
—
442,682

Federal funds sold 1,175,000
—
—
—
1,175,000

Securities purchased under agreements to resell 3,161,446
—
—
—
3,161,446
TOTAL INVESTMENTS $ 5,709,261
$ 1,039,704
$ 4,184,490
$ 3,065,144
$ 13,998,599

Securities Ratings – Tables 3932 and 4033 present the carrying value of our investments by rating as of December 31, ~~2017~~2023 and ~~2016~~2022 (in thousands). The ratings presented are the lowest ratings available for the security, issuer, or ~~the issuer~~counterparty based on NRSROs, where available. Some counterparties for collateralized overnight borrowing are not rated by an NRSRO because they are not issuers of debt or are otherwise not required to be rated by an NRSRO. We also utilize other credit quality factors when analyzing potential investments including, but not limited to, collateral performance, marketability, asset class or sector considerations, local and regional economic conditions, and/or the financial health of the underlying issuer.

Table 3932


	12/31/2017
			12/31/2023
			12/31/2023
			12/31/2023
	Carrying Value¹																Carrying Value1
	Investment Grade									Below Triple-B		Unrated		Total			Investment Grade	Unrated	Total
	Triple-A			Double-A		Single-A		Triple-B
Interest-bearing deposits²	$	26		$	1,673	$	440,983	$	—	$	—	$	—	$	442,682
Interest-bearing deposits2
Interest-bearing deposits2

Federal funds sold2
Federal funds sold2
Federal funds sold²	—			—		1,175,000		—		—		—		1,175,000

Securities purchased under agreements to resell³	—			—		—		—		—		3,161,446		3,161,446
Securities purchased under agreements to resell3
Securities purchased under agreements to resell3

Investment securities:
Investment securities:
Investment securities:
Non-mortgage-backed securities:																Non-mortgage-backed securities:
Certificates of deposit²	—			384,990		199,994		—		—		—		584,984

U.S. Treasury obligations

U.S. Treasury obligations

U.S. Treasury obligations
GSE debentures	—			1,353,083		—		—		—		—		1,353,083
State or local housing agency obligations	59,830			30,000		—		—		—		—		89,830
Total non-mortgage-backed securities	59,830			1,768,073		199,994		—		—		—		2,027,897
Mortgage-backed securities:																Mortgage-backed securities:
U.S. obligation MBS	—			128,168		—		—		—		—		128,168
GSE MBS	—			6,985,838		—		—		—		—		6,985,838
Private label residential MBS	—			6,977		4,081		24,743		41,335		432		77,568
Total mortgage-backed securities	—			7,120,983		4,081		24,743		41,335		432		7,191,574

TOTAL INVESTMENTS	$	59,856		$	8,890,729	$	1,820,058	$	24,743	$	41,335	$	3,161,878	$	13,998,599
TOTAL INVESTMENTS
TOTAL INVESTMENTS

As of the date of this annual report on Form 10-K, we have 18 directors, 10 of whom are serving directorships as “member directors” (as such term is defined under the Bank Act) and 8 of whom are serving directorships as “independent directors” (as such term is also defined under the Bank Act).

On November 7, ~~2017, we elected Andrew C. Hove, Jr. and Richard S. Masinton as independent directors, as reported in our Current Report on Form 8-K filed with~~2023, Steven G. Bradshaw from the ~~SEC on November 7, 2017. Additionally, on September 26, 2017, we filed a Current Report on Form 8-K announcing that Mark J. O'Connor,~~State of Oklahoma, Craig A. Meader from the state of ~~Colorado,~~Kansas, and Gregg L. Vandaveer from the state of Oklahoma were ~~deemed~~each declared elected as member directors, and Holly M. Johnson was declared elected as an independent director of FHLBank’s ~~Board~~board of ~~Directors.~~directors. Each of the directors elected in ~~2017~~2023 will serve four-year terms expiring December 31, ~~2021.~~2027.

Table 6846 sets forth certain information regarding each of our directors as of the filing date of this annual report on Form 10-K.

Table 68

Director

Age

~~Director~~

~~Age~~

Type of

Directorship

Director Since

Current Term

Expiration

Board Committee

Membership¹

~~Donald R. Abernathy, Jr.~~

~~Member~~

~~January 2017~~

~~December 2018~~

~~(e), (f)~~

Milroy A. Alexander

6874

Independent

January 2015

December ~~2020~~2024

(a), (b), (c), (e) Chair

~~Robert E. Caldwell, II~~Steven G. Bradshaw

4764

~~Independent~~Member

January ~~2004~~2024

December ~~2018~~2027

(d), (f)

Thomas E. Henning

Independent

January 2023

December 2026

(a), (b), ~~(c) Vice Chair~~(d)

~~G. Bridger Cox~~Michael B. Jacobson

6570

Member

January 2022

December 2025

(d), (f)

Holly Johnson

Independent

January ~~2011~~2016

December 2027

(a) Chair, (c), (d)

Lynn Jenkins Katzfey

Independent

July 2019

December 2024

(e), (f)

Barry Lockard

Member

January 2019

December 2026

(b), (c) Chair

~~Holly Easterling~~Craig A. Meader

5466

~~Independent~~Member

January ~~2016~~2020

December ~~2019~~2027

~~(a), (f)~~

~~Andrew C. Hove, Jr.~~

~~Independent~~

~~April 2007~~

~~December 2021~~

~~(d), (e)~~

~~Michael B. Jacobson~~

~~Member~~

~~January 2012~~

~~December 2019~~

~~(a), (c), (f) Chair~~

~~Jane C. Knight~~

~~Independent~~

~~January 2004~~

~~December 2018~~

~~(d), (e)~~

~~Richard S. Masinton~~

~~Independent~~

~~April 2007~~

~~December 2021~~

~~(b) Chair, (c), (d)~~

~~Neil F. M. McKay~~

~~Independent~~

~~April 2007~~

~~December 2020~~

~~(a), (f)~~

~~L. Kent Needham~~

~~Member~~

~~January 2013~~

~~December 2020~~

~~(d), (e)~~

~~Mark J. O’Connor~~

~~Member~~

~~May 2011~~

~~December 2021~~

~~(d), (f)~~

~~Thomas H. Olson, Jr.~~

~~Member~~

~~January 2013~~

~~December 2020~~

~~(a),~~ (e), (f)

~~Donde~~ L. ~~Plowman~~Kent Needham

6570

~~Independent~~Member

January ~~2017~~2013

December ~~2020~~

~~(b), (d)~~

~~Mark W. Schifferdecker~~

~~Member~~

~~January 2011~~

~~December 2018~~2024

(a) ~~Chair, (b), (c), (d)~~

~~Bruce A. Schriefer~~

~~Member~~

~~January 2007~~

~~December 2019~~

~~(a), (b)~~, (c), (d) Chair

Jeffrey R. Noordhoek

Independent

July 2020

December 2025

(b), (f)

Mark J. O’Connor

Member

May 2011

December 2025

(c), (e), (f) Chair

Thomas H. Olson, Jr.

Member

January 2013

December 2024

(a), (b) Chair, (c), (e)

Carla D. Pratt

Independent

January 2023

December 2026

(b), (e)

Douglas E. Tippens

6369

Member

January 2015

December 2026

(a), (b), (d)

Gregg Vandaveer

Member

January ~~2015~~2024

December ~~2018~~2027

~~(b),~~ (e), (f)

~~Gregg~~Paul E. Washington

Independent

July 2021

December 2025

(a), (e)

Lance L. ~~Vandaveer~~White

6550

Member

January ~~2018~~2023

December ~~2021~~2026

~~(e)~~(d), (f)


1 Board of Director committees are as follows: (a) Audit; (b) Compensation, Human Resources and Inclusion; (c) Executive; (d) Risk Oversight; (e) Housing and Governance; and (f) Operations. ¹	~~Board of Director committees are as follows: (a) Audit; (b) Compensation, Human Resources and Inclusion; (c) Executive; (d) Risk Oversight; (e) Housing and Governance; and (f) Operations.~~

The following describes the principal occupation, business experience, qualifications and skills, among other matters, of the 1817 directors who currently serve on the ~~Board~~board of ~~Directors.~~directors. Except as otherwise indicated, each director has been engaged in the principal occupation described below for at least five years:

Donald R. Abernathy, Jr. has served as the President and CEO of The Bankers Bank, Oklahoma City, Oklahoma, since June 1993, and has served on the board of directors of Bankers Banc Investment Services, Inc., since December 2006. Although the Board of Directors did not participate in Mr. Abernathy's nomination since he is a member director, Mr. Abernathy possesses a Bachelors of Business Administration, has more than 38 years of banking experience, including 23 as President and CEO, and served on the board of directors of the Independent Community Bankers of America, that assists in his service as a director.

Milroy A. Alexander has been a housing, financial and business consultant since 2010, serving ~~nonprofit~~non-profit housing organizations ~~local housing authorities~~ and ~~the City of Denver Housing~~a residential and ~~Neighborhood Redevelopment department. He also served his second and third terms as a director~~commercial redevelopment authority. A former board member of the Municipal Securities Rulemaking Board, ~~from October 2010 through September 2012 and May 2013 through September 2013. He completed his second and final five-year term on~~he was also a member of the board of trustees of Rose Community Foundation for 10 years ending in December 2017, and is currently board ~~chair~~Chair of the Lowry Redevelopment ~~Authority.~~Authority and Northeast Denver Housing Center. Mr. Alexander previously served as Executive Director and CEO of the Colorado Housing and Finance Authority in Denver, Colorado. The ~~Board~~board of ~~Directors~~directors considered Mr. Alexander’s qualifications, skills and attributes, including his more than 21 years of service at a state HFA, including nine years as Executive Director and CEO and 12 years as ~~CFO,~~CFO; his certification as a ~~CPA,~~certified public accountant (CPA); his more than 1011 years as an auditor with Touche Ross & Co. (now Deloitte),; his past service on the audit committees of many organizations, his experience in and knowledge of auditing and accounting, financial management, organizational management, project development, and risk management practices; and his ability to ~~provide~~enhance the ~~Board~~diversity of ~~Directors~~viewpoints among the directors serving on the board of directors by providing the board of directors with racial diversity, when making his nomination.

~~Robert E. Caldwell, II is the Vice Chair~~Steven G. Bradshaw has served as President Emeritus of ~~our Board of Directors. Mr. Caldwell is currently Director of Corporate Development for Nebco, Inc.~~BOKF, N.A., ~~a supplier of materials to the construction industry to construct buildings, streets~~ and ~~highways, which he began in August 2014. Prior to his service at Nebco, Inc., Mr. Caldwell was the President and COO of WRK Real Estate, LLC, which he began in January 2014.~~BOK Financial, Tulsa, Oklahoma, since July 2022. He ~~previously~~has also served as President and CEO of ~~Hampton Enterprises, Inc.~~both BOKF, N.A., ~~a commercial real estate development, general contracting, construction management~~ and ~~property management firm, since 2006,~~BOK Financial, both of Tulsa, Oklahoma, from January 2014 to December 2021. Before joining BOKF, N.A., and General Counsel for Linweld, Inc., a large independent manufacturer and distributor of industrial/medical gases and welding supplies. The Board of Directors considered Mr. Caldwell’s qualifications, skills and attributes, includingBOKF Financial in 1991, he operated his B.S. in business administration, his J.D. and MBA, his experience as General Counsel for Linweld, Inc., a subsidiary of a Japanese public company, his service as President and CEO of a commercial real estate and construction company, and his prior service as an FHLBank director, when making his nomination.

~~G. Bridger Cox is the Chair of our Board of Directors. Mr. Cox has been Chairman and President of Citizens Bank & Trust Company, Ardmore, Oklahoma, since 1996.~~wholly owned retail brokerage service. Although the ~~Board~~board of ~~Directors~~directors did not participate in Mr. ~~Cox’s~~Bradshaw’s nomination since he is a member director, Mr. ~~Cox is~~Bradshaw possesses a ~~graduate~~B.S. in Business Finance from the University of Central Oklahoma, graduated with distinction from the ~~Stonier~~Southwestern Graduate School of Banking, ~~at Rutgers University, possesses more than~~and has over 30 years of banking ~~management~~ experience that assists in his service as a director.

Thomas E. Henning has been Manager of Henning LLC Companies since January 2023. Prior to his current role, Mr. Henning was Chairman, President and CEO of the Assurity Group, Inc. (AGI), a mutual holding company of life insurance companies in Lincoln, Nebraska, from 2005 through 2022 and was employed by Security Financial Life Insurance Co., a predecessor to AGI, from 1990 to 2005. Mr. Henning has served on the board of Nelnet, Inc., a public company and provider of education finance and services, headquartered in Lincoln, Nebraska, since 2003. He has also served on the board of First Interstate Bank, a public company and provider of financial services headquartered in Billings, Montana, since 2022, and previously served on the board of Great Western Bank prior to its acquisition by First Interstate Bank from 2015 to 2022. The board of directors considered Mr. Henning’s qualifications, skills, and attributes, including his past experience as Chairman, President, and CEO of a life and health insurance company; his past experience as President and CEO of a community bank and President and Chief Operating Officer of a regional banking group; his prior and current service on the ~~Oklahoma Industrial Finance Authority and the Oklahoma Development Finance Authority, and has~~board of publicly traded companies; his more than 40 years of financial services experience; his prior ~~experience~~service as an FHLBank director; and his experience in and knowledge of auditing and accounting, financial management, organizational management, project development, risk management practices, and the law, when making his nomination. Prior to his current term, Mr. Henning served as an independent director of FHLBank from April 2007 through December 2015.

Michael B. Jacobson has served as Chairman, President and CEO of NebraskaLand Bank, North Platte, Nebraska, since 1998. He has also served as Chairman, President and CEO of NebraskaLand Financial Services, Inc. since 2000. Mr. Jacobson also serves on the Government Relations committee of the Nebraska Bankers Association, Chairman of North Platte Redevelopment Authority, Chair of the North Platte Airport Authority, on the Great Plans Health board of directors, as a University of Nebraska Foundation Trustee, and on Governor Pete Ricketts' Agricultural committee. Although the board of directors did not participate in Mr. Jacobson's nomination since he is a member director, Mr. Jacobson possesses a B.S. in agricultural economics, is a graduate of the Colorado Graduate School of Banking and possesses over 40 years of banking experience, including over 25 years as the CEO of a bank, that assists in his service as a director. Prior to his current term, Mr. ~~Cox~~Jacobson served as a member director of ~~the~~ FHLBank from January ~~1998~~2012 through December ~~2006.~~2019.

Holly ~~Easterling has served~~Johnson, a Chickasaw citizen and CPA, owns a tribal consulting company providing services to the Chickasaw Nation in ~~various roles since 1997~~the area of administrative support and ~~presently serves~~policy development. She served as Secretary of the Department of Treasury for the Chickasaw Nation ~~since~~from October ~~2012.~~2012 to December 2019, where she was responsible for all finance and accounting functions. From October 2010 to September 2012, she served as the Administrator of Planning and Organizational Development for the Chickasaw Nation. From August 2003 to October 2010, she served as an Elected Tribal Legislator for the Pontotoc District. Ms. ~~Easterling~~Johnson serves as a trustee of the Chickasaw Foundation and is a past trustee of the Ada City Schools Foundation and the Chickasaw Nation's 401(k) plans, a ~~current~~past board member of the Ada Chamber of Commerce, a member of the Oklahoma State University School of Accounting Executive Advisory Board, and a ~~current~~former appointed commissioner of the Oklahoma Ethics Commission. She represented Indian Tribal Governments on the Advisory Committee of the Internal Revenue Service. The ~~Board~~board of ~~Directors~~directors considered Ms. ~~Easterling's~~Johnson's qualifications, skills and attributes, including her role as Secretary for the Department of Treasury for the Chickasaw ~~Nation,~~Nation; her experience as a CPA and at public accounting ~~firms,~~firms; her experience in and knowledge of auditing and accounting, financial management, organizational management, project development and risk management ~~practices,~~practices; and her ability to ~~provide~~enhance the ~~Board~~diversity of ~~Directors~~viewpoints among the directors serving on the board of directors by providing the board of directors with gender and racial diversity, when making her nomination.

~~Andrew C. Hove, Jr., now retired, previously~~Lynn Jenkins Katzfey has been a partner at LJ Strategies since January 2019. Ms. Katzfey worked as a CPA for 16 years before launching a career in public service. Ms. Katzfey served as ~~Vice Chairman and Acting Chairman~~Treasurer of the ~~FDIC from 1991~~State of Kansas and was subsequently elected to ~~2001, and prior to that he served as~~serve five terms in the ~~Chairman and CEO~~U.S. House of ~~Minden Exchange Bank and Trust, Minden, Nebraska. Mr. Hove served~~Representatives. She currently serves on the boards of directors ~~of NeighborWorks Lincoln from 2002 to 2016, Great Western Bank, Sioux Falls, South Dakota, from 2001 until February 2017,~~for American Century Investments Mutual Funds and ~~Great Western Bancorp, Inc., a Delaware corporation and public company, from July 2014 until February 2017. Mr. Hove also~~ previously served on the board of directors of ~~Sovereign Bank, Wyomissing, Pennsylvania, a public company, until 2009.~~MGP Ingredients, Inc. The ~~Board~~board of ~~Directors~~directors considered ~~Mr. Hove’s~~Ms. Katzfey's qualifications, skills and attributes, including ~~his~~her role as a member of the U.S. House of Representatives, including service in leadership roles and on the House Financial Services Committee and the House Ways and Means Committee; her role as the Treasurer of the State of Kansas; her experience as ~~Chairman~~a CPA and ~~CEO~~at public accounting firms; her experience in and knowledge of ~~a community bank, his experience as Vice Chairman~~auditing and ~~Acting Chairman~~accounting, financial management, organizational management, project development, and the law; and her ability to enhance the diversity of viewpoints among the ~~FDIC, his activities and affiliation~~directors serving on the board of directors by providing the board of directors with ~~NeighborWorks Lincoln, and his prior service as an FHLBank director,~~gender diversity, when making ~~his~~her nomination.

~~Michael B. Jacobson~~Barry J. Lockard is Chair of our board of directors. Mr. Lockard has ~~been Chairman,~~served as President and CEO of ~~NebraskaLand~~Cornhusker Bank, Lincoln, Nebraska, since 2007. Mr. Lockard previously held senior leadership roles at Black and Decker, Cincinnati Bell, and First National Bank ~~North Platte,~~of Omaha. He also served eight years in the Nebraska ~~since 1998.~~Army National Guard. He has served on the boards of directors of the Nebraska Bankers Association, the American Bankers Association (ABA) Community Bankers Council, and is a trustee for the Graduate School of Banking at Colorado, where he has also served as a member of the faculty. Although the ~~Board~~board of ~~Directors~~directors did not participate in Mr. ~~Jacobson’s~~Lockard’s nomination since he is a member director, Mr. ~~Jacobson~~Lockard possesses a ~~B.S.~~bachelor’s degree in ~~agricultural economics,~~business administration, is a graduate of the Colorado Graduate School of Banking, and ~~possesses over 35 years of banking experience, including over 20~~has more than 15 years as ~~the CEO of~~ a bank CEO, that assists in his service as a director.

~~Jane C. Knight, now retired,~~Craig A. Meader has served as ~~Vice President~~Chairman and CEO of ~~Site-based Strategies for~~First National Bank of Kansas Big Brothers Big Sisters from 2002 through 2005. Prior to that, she directed the Wichita office for Kansas Governor Bill Graves and was in charge of addressing constituent concerns, including housing issues. The Board of Directors considered Ms. Knight’s qualifications, skills and attributes, including her prior management skills, her servicesince 1988. Mr. Meader has served as ~~Director~~Chairman of the Kansas ~~Governor’s regional office, her experience with housing issues through~~Bankers Association and the ~~Governor’s office~~Bankers Bank of Kansas. Mr. Meader is a former member of the ABA Community Bankers Council, Government Relations Council and ~~Habitat for Humanity, her experience with not-for-profit organizations, her ability to provide~~ the ~~Board~~ABA board of ~~Directors with gender diversity,~~directors. Although the board of directors did not participate in Mr. Meader’s nomination since he is a member director, Mr. Meader possesses a bachelor’s degree in business administration and ~~her prior service as an FHLBank director, when making her nomination.~~

~~Richard S. Masinton, now retired, was Executive Vice President~~finance, is a graduate of ~~Quinn Capital, LLC, a private equity company in Leawood, Kansas from January 2009 through 2014. Mr. Masinton previously served as CFO, then Executive Vice President~~the Madison Wisconsin Graduate School of ~~Russell Stover Candies in Kansas City, Missouri, from 1996 until 2008. Mr. Masinton has~~Banking, served on the board of directors of No More Homeless Pets Kansas City, an animal welfare charity. He also sat on the boards of directors of Eco-Choice Springwater, LLC and CRB Biosoft, LLC. Mr. Masinton retired from the boards of directors of OneNeck IT Services Corp in 2008 and Enterprise Financial Services Corporation, a publicly owned bank holding company, in 2007. He has also served on the board of advisors of the UniversityBankers’ Bank of Kansas, ~~School of Business~~N.A. for seven years, including one year as Chairman, and on an advisory board at the University of Oklahoma School of Business. The Board of Directors considered Mr. Masinton’s qualifications, skills and attributes, including his Master's Degree in Accounting, Finance and Economics, his certificationhas more than 40 years as a ~~CPA,~~bank CEO, that assists in his ~~experience on the board of a publicly owned bank holding company, including his 7 years of experience as Chairman of the audit committee of such bank holding company, his 40 years of experience~~service as a ~~corporate executive, and his prior service as an FHLBank director, when making his nomination.~~director.

Neil F. M. McKay was CFO and Treasurer of Capitol Federal Savings in Topeka, Kansas, from 1994 through March 2006. Mr. McKay, now retired, has held significant executive positions in various financial institutions including Heartland Federal Savings in Ponca City, Oklahoma, and First Nationwide Bank (now part of Citibank) in San Francisco, California. He was also a CPA in public practice for 12 years. The Board of Directors considered Mr. McKay’s qualifications, skills and attributes, including his certification as a CPA, his 12 years of service as an audit manager of large, publicly traded banks, his experience as Controller of a $30 billion publicly traded bank, his experience as CFO of an $8 billion publicly traded bank, and his prior service as an FHLBank director, when making his nomination.

L. Kent Needham has served as Chairman and CEO of The First Security Bank, Overbrook, Kansas, since July 2022. He served as Chairman, President and CEO of The First Security Bank, Overbrook, Kansas ~~since 2007. Although~~from 2007 to 2022. Prior to that he served as President/CEO and Director of First State Bank & Trust in Tonganoxie, Kansas from 1993 to 2007; Executive Vice President and Director of Farmers Bank & Trust, N.A. in Great Bend, Kansas, from 1981 to 1992; and Assistance Vice President of Western National Bank in Amarillo, Texas from 1977 to 1980. Mr. Needham began his banking career at Coffeyville State Bank in Coffeyville, Kansas, where he served as a loan officer from 1975 to 1976. Mr. Needham is a graduate of the Graduate School of Banking at Colorado. Mr. Needham previously served as a member of the Board of Trustees and as Chairman of the Graduate School of Banking at Colorado, served as a member of the Board of Directors and as Chairman of the Kansas Bankers’ Association, and previously served on a number of committees of the ABA. Although the board of directors did not participate in Mr. ~~Needham’s~~Needham's nomination since he is a member director, Mr. Needham possesses an MBA, is a graduate of the Colorado Graduate School of Banking, and has over 40 years of banking experience, including more than 20 years as CEO, that assists in his service as a director.

Jeffrey R. Noordhoek has served as CEO of Nelnet, Inc., a publicly traded company, since January 2014, and previously served as President of Nelnet, Inc., from January 2006 through December 2013. The board of directors considered Mr. Noordhoek's qualifications, skills and attributes, including his position as CEO of Nelnet, Inc., which is a publicly traded company listed on the New York Stock Exchange and is the largest education payment plan provider in the United States; his lending, financial services, capital markets and derivatives experience; his experience overseeing a large team of information technology and IT security professionals; and his experience in and knowledge of auditing and accounting, financial management, organizational management, project development, and risk management practices, when making his nomination.

Mark J. O’Connor ~~currently~~ serves as the president of the Board of The Impact Development Fund, a nonprofit CDFI headquartered in Loveland, Colorado. Mr. O’Connor recently retired as President of Investments of FirstBank Holding Company, Lakewood, Colorado, ~~and has served as Vice President of FirstBank~~where he held many leadership positions since ~~2002.~~1989. Although the ~~Board~~board of ~~Directors~~directors did not participate in Mr. O’Connor’s most recent nomination since he is a member director, Mr. O’Connor has more than 2930 years of banking experience. He is a graduate of the Pacific Coast Banking School ~~currently serves~~and has over 18 years of investment portfolio management experience, which includes serving as the President of Investments and ~~Chairs~~Chair of the ALCO Committee of a large bank holding ~~company and has over 15 years of investment portfolio management experience. Mr. O’Connor serves on the Foundation Board of a local university and sits on its Investment Committee. He has~~company. His experience on the board ~~including service as chairman,~~ of a state housing finance authority, including service as Chairman, and his prior experience as an FHLBank director ~~assists~~assist in his service as a director.

Thomas H. Olson, Jr. has been CEO of Points West Community Bank, Windsor, Colorado, ~~since 1998.~~from 1998 through 2019. Mr. Olson is currently ~~also~~ the ~~chairman~~Chairman of Points West Community Bank, Windsor, Colorado, ~~Chairman of Points West Community Bank, Sidney, Nebraska,~~ Chairman of First Nebraska Bancs, Inc., Chairman of Bank of Estes Park, Chairman of First National Financial, ~~Chairman~~Director of ~~Fullerton National~~Nebraska State Bank, ~~Chairman~~Director of ~~Woodstock Land and~~O&F Cattle Co., and Director of Rush Creek Land and Livestock. Although the ~~Board~~board of ~~Directors~~directors did not participate in Mr. Olson's nomination since he is a member director, Mr. Olson has a B.S. in Finance and Accounting, is a graduate of the Colorado Graduate School of Banking, and has over 2436 years of banking experience, including more than 1921 years as CEO, that assists in his service as a director.

~~Donde L. Plowman serves~~Carla D. Pratt has served as ~~Executive Vice Chancellor~~the Ada Lois Sipuel Fisher Chair in Civil Rights, Race, and ~~Chief Academic Officer~~Justice in Law at the University of ~~Nebraska - Lincoln~~Oklahoma College of Law since ~~January 2017. From July 2010 through December 2016,~~May 2022. Prior to her current position she served as ~~the~~ Dean and Professor of ~~the College~~Law at Washburn University School of ~~Business Administration~~Law in Topeka, Kansas, from July 2018 to May 2022. Prior to joining Washburn University School of Law, she served various faculty and administrative roles at ~~the University~~Penn State’s Dickinson School of ~~Nebraska - Lincoln. Ms. Plowman has also served on the~~Law beginning in July 2000. Prior to joining academia, she practiced insurance law and commercial litigation. The board of directors of Ballantyne Strong, a publicly traded company, from June 2011 through May 2015, served on the board of directors of Cornerstone Bank, York, Nebraska, from 2011 to December 2016, and has served on the Board of Trustees of Bryan Health Systems from January 2012 to present. The Board of Directors considered Ms. ~~Plowman's~~Pratt’s qualifications, skills and attributes, including her ~~role~~position as former Dean and Professor of Law at Washburn University School of Law; her service as an Associate Justice of the ~~College of Business Administration at the University of Nebraska - Lincoln,~~Standing Rock Sioux Supreme Court; her ~~M.Ed. in Higher Education, her Ph.D. in Strategic Management, her prior~~ service on the ~~board~~accrediting body that is authorized by the U.S. Department of ~~directors~~Education to accredit American law schools; her experience and deep understanding of ~~a publicly traded company,~~diversity and inclusion issues and initiatives; her experience in and knowledge of auditing and accounting, financial management, organizational management, project development, ~~and~~ risk management practices, and the law; and her ability to ~~provide~~enhance the ~~Board~~diversity of ~~Directors~~viewpoints among the directors serving on the board of directors by providing the board of directors with racial and gender diversity, when making her nomination.

Mark W. Schifferdecker has been President and CEO of The Girard National Bank, Girard, Kansas, since 2003. Although the Board of Directors did not participate in Mr. Schifferdecker’s nomination since he is a member director, Mr. Schifferdecker has experience as a CPA, possesses more than 11 years of experience as the CEO of a community bank, served more than 10 years as an auditor with KPMG, served six years on the board of directors of the Federal Reserve Bank of Kansas City, including two years as Chairman of the Audit Committee, and served on the board of directors of Bankers’ Bank of Kansas, N.A., including one year as Chairman, that assists in his service as a director.

Bruce A. Schriefer joined Bankers’ Bank of Kansas, Wichita, Kansas, in 1996 and served as President, CEO until his retirement in February 2015. He remains a director of Bankers' Bank of Kansas and is a director of its parent BBOK Bancshares, Inc. Although the Board of Directors did not participate in Mr. Schriefer’s nomination since he is a member director, Mr. Schriefer possesses more than 40 years of experience at various levels of commercial banking, experience as a former director of the Federal Reserve Bank of Kansas City, experience on the boards of directors of various national and state trade associations, experience as a member of the FDIC Advisory Committee on Community Banking, and prior experience as an FHLBank director, that assists in his service as a director.

Douglas E. Tippens has served as Executive Vice President of BancFirst, Oklahoma City, Oklahoma, since December 2017. He served as Market President of BancFirst from November 2015 to December 2017. Before his service at BancFirst, Mr. Tippens served as President and CEO of Bank of Commerce, Yukon, Oklahoma, since 2006, and served on the board of directors of Bank of Commerce, Chelsea, Oklahoma, since 2013. Although the ~~Board~~board of ~~Directors~~directors did not participate in Mr. Tippens’ nomination since he is a member director, Mr. Tippens possesses a B.S. in agriculture economics and an MBA, is a graduate of the Graduate School of Banking at the University of Wisconsin, has more than 3540 years of banking experience, including ~~nine~~10 years as president and CEO, and served on the board of directors of the Federal Reserve Bank of Kansas City, Oklahoma City Branch, that assists in his service as a director.

Gregg L. Vandaveer has served as Sooner State Bank's Chairman of the Board since 2022 where he previously served as President and CEO from 2001 to 2021. Prior to joining Sooner State Bank, he served as President and CEO of ~~Sooner~~Oklahoma State Bank ~~Tuttle, Oklahoma, since April 2001. Although~~from 1998 to 2001; Executive Vice President and Chief Lending Officer of First Enterprise Bank from 1995 to 1998; Executive Vice President and Member of the Board of Directors at American Bancorp of Oklahoma from 1987 to 1994; Vice President: Correspondent Banking for United Oklahoma Bank from 1983 to 1987; and Vice President of Johnco, Inc. Although the board of directors did not participate in Mr. ~~Vandaveer's~~Vandaveer’s nomination since he is a member director, Mr. Vandaveer possesses a B.S. in journalism, is a graduate of the ~~Southwest~~Southwestern Graduate School of Banking, ~~at SMU,~~the ABA Commercial Lending School, and the Oklahoma Bankers Association Intermediate School of Banking, and has more than 3630 years of banking experience, including more than 20 years as ~~President~~president and CEO, that assists in his service as a director.

Paul E. Washington has served as Executive Vice President for IMA Financial Group, Denver, Colorado, since May 2021, where he is responsible for mergers & acquisitions, commercial real estate strategy, communications, governance, administration, and investments. Mr. Washington served as market director (a regional president-equivalent position) for JLL, a Fortune 500, SEC registered commercial real estate services company from April 2017 to May 2021. He currently serves on the boards of directors for Independent Bank Group, Inc.; Colorado Concern; Downtown Denver Partnership; and Denver Museum of Nature & Science. Mr. Washington holds bar licenses in Colorado and California and previously served on the Colorado Housing and Finance Authority board of directors from 2013 to 2021 where he served as both board Chair and Chair of the Finance committee. The board of directors considered Mr. Washington's qualifications, skills, and attributes, including his degree in business and his J.D. and L.L.M. in taxation; his prior experience in leading a large real estate services company; his prior service on the board of directors of the Colorado Housing and Finance Authority; his experience in and knowledge of auditing and accounting, financial management, organizational management, project development, risk management practices, and the law; and his ability to enhance the diversity of viewpoints among the directors serving on the board of directors by providing the board of directors with racial diversity, when making his nomination.

Lance L. White has served as President and CEO of Bank of the Flint Hills, Wamego, Kansas, since 2007. Although the board of directors did not participate in Mr. White’s nomination since he is a member director, Mr. White has a B.S. in Accounting, is a graduate of the Colorado Graduate School of Banking, has served on the Community Depository Institutions Advisory Council of the Federal Reserve Bank of Kansas City, and has over 25 years of banking experience, including more than 15 as CEO, that assists in his service as a director.

Code of Ethics

We have adopted a Code of Ethics that applies to our directors, officers (including our principal executive officer, principal financial officer, principal accounting officer or controller and persons performing similar functions) and employees. Our Code of Ethics is filed as an exhibit to reports we file with the SEC and has been posted on our website at www.fhlbtopeka.com in the ~~"Board Governance"~~“Board Governance” page. We will also post on our website any amendments to, or waivers from, a provision of our Code of Ethics that applies to the principal executive officer, principal financial officer, principal accounting officer, or persons performing similar functions as required by applicable rules and regulations. Except for the documents specifically incorporated by reference into this ~~Annual Report~~annual report on Form 10-K, information contained on our website or that can be accessed through our website is not incorporated by reference into this ~~Annual Report~~annual report on Form 10-K. Reference to our website is made as an inactive textual reference. The Code of Ethics is available, in print, free of charge, upon request. Written requests may be made to the ~~CCEO and General Counsel~~CLEO of ~~the~~ FHLBank at 500 SW Wanamaker, Topeka, Kansas, 66606.

Audit Committee Financial Expert

We have a separately-designated, standing audit committee, which consists of ~~Mark W. Schifferdecker (chair)~~Holly Johnson (Chair), Milroy A. Alexander, ~~Robert~~Thomas E. ~~Caldwell, II, Holly Easterling, Michael B. Jacobson, Neil F. M. McKay,~~Henning, L. Kent Needham, Thomas H. Olson, Jr., Douglas E. Tippens, and ~~Bruce A. Schriefer.~~Paul E Washington.

The ~~Board~~board of ~~Directors~~directors has determined that ~~each of Neil F. M. McKay and Mark W. Schifferdecker~~Holly Johnson is an “audit committee financial expert” as that term is defined under SEC regulations. ~~Mr. McKay and Mr. Schifferdecker are~~Ms. Johnson is “independent” in accordance with the Nasdaq Independence Standards (defined under Item 13 below) for audit committee members, as those standards were applied by our ~~Board~~board of ~~Directors.~~directors.

The Compensation, Human Resources and Inclusion Committee Report is included following the Compensation Discussion and Analysis in Item 11 - “Executive Compensation.”

Item 11. Executive Compensation

Compensation Discussion and Analysis

Overview of Previous Year Performance and Compensation: Our overall executive compensation philosophy is to attract, retain, and motivate highly-qualified executive officers who will advance: (1) our business objectives to promote our long-term growth and profitability in accordance with achievement of our long-term strategic objectives; and (2) our mission of supporting our members’ ~~interests.~~efforts to build strong communities.

We met or exceeded all of our short-term objectives in 2017, as discussed below. We believe FHLBank experienced strong performance against our long-term objectives as well. These objectives were designed to drive performance in key areas that align our incentive compensation with our members’ view of our performance and with our ongoing long-term financial stability.

The named executive officers in ~~2017 were comprised of~~2023 were: (1) the ~~person who served as our~~ President and ~~CEO throughout 2017,~~CEO; (2) the Executive Vice President and ~~CCEO~~CFO; (3) the Executive Vice President and ~~General Counsel,~~CAO; (4) the Senior Vice President and ~~CFO,~~CRO; (5) the Senior Vice President and ~~CAO and the Senior Vice President and CIO~~CLEO (collectively, the Named Executive Officers).

In determining the appropriate total compensation package for our Named Executive Officers for ~~2017,~~2023, we considered the principal objectives of our compensation program as: (1) attracting and retaining highly-qualified and talented individuals; and (2) motivating these individuals to achieve short- and long-term FHLBank-wide performance goals through incentive compensation.

In ~~2017,~~2023, we provided competitive compensation opportunities for our Named Executive Officers based in part on adjustments to base salary in line with our Executive Pay Philosophy and on incentive compensation achievable through our Executive Incentive Compensation Plan (EICP). The EICP provides cash-based annual incentives and deferred incentive awards, which promote the achievement of short- and long-term objectives. The achievement of both short- and long-term goals translated to above target incentive awards earned by our Named Executive Officers in recognition of their contribution to our overall performance and success.

Framework for Compensation Decisions: The Compensation, Human Resources and Inclusion Committee of the ~~Board~~board of ~~Directors~~directors (Compensation Committee) oversees the compensation of the Named Executive Officers. The Compensation Committee’s responsibilities in ~~2017~~2023 included:


▪	~~Advising the Board of Directors on the establishment of appropriate compensation, incentive and benefits programs, including the recommendation of performance goals for the EICP;~~


▪	~~Approving the base salaries and salary adjustments of the CCEO and General Counsel, CFO, CAO, and CIO, as recommended by the CEO; and~~


▪	~~Recommending to the Board of Directors the base salary, including any salary adjustments, of the CEO.~~

▪Advising the board of directors on the establishment of appropriate compensation, incentive and benefits programs, including the recommendation of performance goals for the EICP;

▪Approving the base salaries for the CFO, CAO, CRO and CLEO, as recommended by the CEO;

▪Approving the annual and deferred cash incentive awards of the CEO, CFO, CAO, CRO and CLEO; and

▪Recommending to the board of directors the base salary, including any salary adjustments, of the CEO.

Elements of Executive Compensation in ~~2017:~~ 2023: To implement our compensation objectives, the elements of our ~~2017~~2023 compensation program for the Named Executive Officers included: (1) annual base salary; (2) annual and deferred cash incentive award opportunities under our EICP; (3) retirement and other benefits; (4) limited perquisites; and (5) potential payments upon termination or change in control.

Use of Benchmarks - We believe a key to attracting and retaining ~~highly-qualified~~highly qualified executive officers is the identification of the appropriate peer groups within which we compete for executive talent. We have historically recruited nationally, both within and outside of the FHLBank System, in our efforts to attract ~~highly-qualified~~highly qualified candidates for the Named Executive Officer positions. To ensure that we are offering and paying competitive compensation to retain our Named Executive Officers, the ~~Board~~board of ~~Directors~~directors (and/or Compensation Committee) periodically retains compensation consultants to assist with comparative analyses of the Named Executive Officers’ total compensation through a review of survey data reflecting potential comparator benchmarks for total compensation. Our Compensation Committee has used ~~such~~the survey data as guideposts in considering and determining competitive levels of base salary and total compensation for our Named Executive Officers among other factors as described above.

~~In 2017,~~For 2023 compensation, the Compensation Committee considered the competitiveness of the total compensation paid to our Named Executive Officers by reviewing comparative survey data obtained from the compensation consultant, McLagan Partners, Inc. (McLagan).

The Compensation Committee generally considers a market composite benchmark when making pay decisions regarding the Named Executive Officers. The market composite benchmark is created by McLagan ~~pulled from a proprietary survey database and~~ is calculated by considering ~~three peer groups: (1) commercial banks with $20 billion or more in assets, including Federal Reserve Banks (excluding former "bulge bracket" investment banks); (2) other FHLBanks; and (3)~~ publicly available proxy data for regional and community banks with assets between $10 billion and $20 ~~billion.~~billion and other FHLBanks. Additionally, in calculating the market composite benchmark, for the ~~first~~commercial banks' peer group, ~~the commercial banks,~~ Divisional Heads are used as the relevant comparison ~~(e.g., General Counsel)~~ at the median. For the other ~~FHLBanks~~FHLBanks' peer group, ~~Overall~~overall Functional Heads are used ~~(e.g., CFO)~~ at the median. ~~For the third peer group, Salary Rank is used except for the CEO and CFO where the actual position is used; in addition, the low quartile is used.~~

~~The following is a list of survey participants of Commercial Banks, FHLBanks, and Fannie Mae and Freddie Mac that were included by McLagan in the 2017 FHLBank Custom Compensation Survey:~~



~~ABN AMRO~~	~~FNB Omaha~~
~~Agricultural Bank Of China~~	~~Freddie Mac~~
~~AIB~~	~~GE Capital~~
~~Ally Financial Inc.~~	~~Hancock Bank~~
~~Australia & New Zealand Banking Group~~	~~HSBC~~
~~Banco Bilbao Vizcaya Argentaria~~	~~Huntington Bancshares, Inc.~~
~~Bank Hapoalim~~	~~Industrial and Commercial Bank of China~~
~~Bank of America Merrill Lynch~~	~~ING~~
~~Bank of New York Mellon~~	~~Intesa Sanpaolo~~
~~Bank of Nova Scotia~~	~~Investors Bancorp, Inc~~
~~Bank of the West~~	~~JP Morgan Chase~~
~~Bank of Tokyo - Mitsubishi UFJ~~	~~KBC Bank~~
~~Bayerische Landesbank~~	~~KeyCorp~~
~~BBVA Compass~~	~~Landesbank Baden-Wuerttemberg~~
~~BMO Financial Group~~	~~Lloyds Banking Group~~
~~BNP Paribas~~	~~M&T Bank Corporation~~
~~BOK Financial Corporation~~	~~Macquarie Bank~~
~~Branch Banking & Trust Co.~~	~~Mizuho Bank~~
~~Brown Brothers Harriman~~	~~Mizuho Capital Markets~~
~~Capital One~~	~~Mizuho Trust & Banking Co. (USA)~~
~~Charles Schwab & Co.~~	~~MUFG Securities~~
~~China Construction Bank~~	~~National Australia Bank~~
~~CIBC World Markets~~	~~Natixis~~
~~CIT Group~~	~~New York Community Bank~~
~~Citigroup~~	~~Nord/LB~~
~~Citizens Financial Group~~	~~Nordea Bank~~
~~City National Bank~~	~~Norinchukin Bank, New York Branch~~
~~Comerica~~	~~Northern Trust Corporation~~
~~Commerzbank~~	~~People's United Bank, National Association~~
~~Commonwealth Bank of Australia~~	~~PNC Bank~~
~~Crédit Agricole CIB~~	~~Rabobank~~
~~Credit Industriel et Commercial – N.Y.~~	~~Regions Financial Corporation~~
~~Cullen Frost Bankers, Inc.~~	~~Royal Bank of Canada~~
~~DBS Bank~~	~~Royal Bank of Scotland Group~~
~~DnB Bank~~	~~Santander Bank, NA~~
~~DZ Bank~~	~~Societe Generale~~
~~Fannie Mae~~	~~Standard Chartered Bank~~
~~Federal Home Loan Bank of Atlanta~~	~~State Street Corporation~~
~~Federal Home Loan Bank of Boston~~	~~Sumitomo Mitsui Banking Corporation~~
~~Federal Home Loan Bank of Chicago~~	~~Sumitomo Mitsui Trust Bank~~
~~Federal Home Loan Bank of Cincinnati~~	~~SunTrust Banks~~
~~Federal Home Loan Bank of Dallas~~	~~SVB Financial Group~~
~~Federal Home Loan Bank of Des Moines~~	~~Synchrony Financial~~
~~Federal Home Loan Bank of Indianapolis~~	~~Synovus~~



~~Federal Home Loan Bank of New York~~	~~TCF National Bank~~
~~Federal Home Loan Bank of Pittsburgh~~	~~TD Ameritrade~~
~~Federal Home Loan Bank of San Francisco~~	~~TD Securities~~
~~Federal Home Loan Bank of Topeka~~	~~Texas Capital Bank~~
~~Federal Reserve Bank of Atlanta~~	~~The PrivateBank~~
~~Federal Reserve Bank of Boston~~	~~U.S. Bancorp~~
~~Federal Reserve Bank of Chicago~~	~~UMB Financial Corporation~~
~~Federal Reserve Bank of Cleveland~~	~~Umpqua Holding Corporation~~
~~Federal Reserve Bank of New York~~	~~UniCredit Bank AG~~
~~Federal Reserve Bank of Richmond~~	~~Valley National Bank~~
~~Federal Reserve Bank of San Francisco~~	~~Webster Bank~~
~~Federal Reserve Bank of St Louis~~	~~Wells Fargo Bank~~
~~Fifth Third Bank~~	~~Westpac Banking Corporation~~
~~First Citizens Bank~~	~~Zions Bancorporation~~
~~First Republic Bank~~

The following is a list of regional and community banks with $10 billion to $20 billion in assets, which is the market peer group used for the ~~2017~~2023 compensation benchmarks:


Apple Financial Holdings	Independent Bank
Axos Financial, Inc.	Independent Bank Corp.
~~Banc of California Inc.~~BancFirst Corporation	International Bancshares Corporation
~~BancorpSouth~~Bank of North Dakota	Lakeland Bancorp, Inc.	~~MB Financial Inc.~~
Banner Bank	Mechanics Bank
Berkshire Bank	Merchants Bank of ~~Hawaii Corporation~~	~~Old National Bancorp~~Indiana
~~Bank~~Bremer Financial Corporation	Mutual of ~~the Ozarks Inc.~~	~~Pinnacle Financial Partners~~Omaha
~~Cathay General~~Central Bancompany, Inc	NBT Bancorp	~~Sterling Bancorp~~ Inc.
~~Chemical Financial Corporation~~Columbia Bank – NJ	~~Trustmark Corporation~~Northwest Bank – PA
~~First Midwest~~Community Bank System, Inc.	OceanFirst Bank
CVB Financial Corp.	PlainsCapital Bank
Dime Community Bancshares, Inc.	Provident Financial Services
Eagle Bancorp Inc.	~~United~~Renasant Corporation
Enterprise Financial Services Corp.	Sandy Spring Bank
FB Financial Corporation	Seacoast Banking Corporation of Florida
First BanCorp – PR	ServisFirst Bancshares, Inc.
First Bancorp NC	State Bank & Trust
First Busey Corporation	Stellar Bancorp, Inc.
First Financial Bancorp	TowneBank
First Financial Bankshares, Inc.	TriState Capital Bank
~~Flagstar Bancorp~~First Foundation Inc.	~~United Community Banks Inc.~~Trustmark Corporation
~~Fulton Financial Corporation~~First Merchants Bank	~~Washington Federal~~Veritex Holdings, Inc.
~~Great Western Bancorp~~First United Bank	~~Western Alliance Bancorp~~Washington Trust Bank
Hilltop Holdings Inc.	WesBanco, Inc.
Hope Bancorp, Inc.	WSFS Financial Corporation

The intent to remain competitive primarily with the other FHLBanks and to also consider the broader labor market of a limited group of financial services institutions reflects our belief that the knowledge and skills necessary to effectively perform our Named Executive Officers’ duties may be developed as a result of experience not only at other FHLBanks, but also at a variety of other financial services institutions. We recognize that Topeka’s geographic location may be a disadvantage in attracting executives, but generally is a positive factor in retaining executives.

~~Of the~~The FHLBank-based survey data is considered a primary peer group. For each of the FHLBank-based and ~~the broader~~market-based peer groups (the survey ~~data utilized,~~data), the Compensation Committee considered the 25^th percentile, 50^th percentile (median) and 75^th percentile compensation ranges for analyzing executive positions similar to those of our Named Executive Officers in ~~considering~~assessing the competitiveness of our total compensation for the Named Executive Officers. The Compensation Committee generally strives to establish annual base salary and incentive compensation opportunities for our Named Executive Officers in the median range of the survey data reviewed assuming target level performance would be achieved. The ultimate compensation determined appropriate in any given year, however, will depend on the scope of a Named Executive Officer’s responsibilities as compared to similar positions within our identified peer ~~groups,~~group(s), the experience and performance of the individual Named Executive Officer, and our overall performance. ~~Generally, the Compensation Committee and CEO recommend below median pay for poor performance and above median pay for superior performance.~~ While survey information is one factor in setting compensation for our Named Executive Officers, ~~we believe that~~ surveys are not the sole governing factor and independent decisions by the Compensation Committee are necessary to make compensation consistent with our financial condition and future prospects.

Annual Base Salary - A significant element of each Named Executive Officer’s total compensation is annual base salary, which is designed to reward our Named Executive Officers for past performance and their commitment to future performance and to serve as the foundation for competitive total compensation. Adjustments to annual base salaries for the Named Executive Officers are considered annually and ~~generally were~~ made effective ~~April~~January 1st, following an analysis of our total compensation practices, the survey data, and ~~the~~ FHLBank’s performance. ~~As of January 1, 2018, annual increases to the annual base salary of the Named Executive Officers will be effective each January 1st.~~

For ~~2017,~~2023, the Compensation Committee determined that appropriate annual base salaries for each Named Executive Officer should be competitive with the salaries of comparable executive positions within financial institutions that are regarded as peers for purposes of providing guideposts for a competitive compensation analysis, as discussed in more detail previously under “Use of Benchmarks.” Adjustments to annual base salaries of the Named Executive Officers for ~~2017~~2023 were based on: (1) each Named Executive Officer’s scope of responsibility and accountability; (2) analysis of our comparator peer groups; (3) performance of ~~the~~ FHLBank based on achievement levels of FHLBank-wide goals in the prior year; (4) the perceived performance of each Named Executive Officer, as a subjective matter; and (5) other factors such as experience, time in position, general economic conditions, and labor supply and demand conditions.

A final factor that the Compensation Committee generally considers in determining base salary increases in its effort to retain our Named Executive Officers is the relative difference in compensation between the executive officers as well as the pay relationship between executive officers and other employees at ~~the~~ FHLBank. The Compensation Committee believes that internal pay equity provides an additional perspective to that of ~~peer group~~the survey compensation information. While comparisons to compensation levels of executive positions within our peer groups are the primary basis used to assess the overall competitiveness of our compensation program, we also believe thatdata and helps ensure our executive compensation practices ~~should be~~are internally consistent and equitable.

The Compensation Committee also considered guidance and communications from ~~FHLBank's~~our regulator, the FHFA, in determining total compensation for the Named Executive Officers as more specifically addressed below under “FHFA Oversight.”

In ~~2017,~~2023, the Compensation Committee and the CEO determined that, with respect to competitive pay positioning for purposes of retaining our Named Executive Officers, it was appropriate to increase the base salaries of the Named Executive Officers to maintain competitive base and total compensation. Consideration was also given to each Named Executive Officer’s scope of responsibility, market comparators, individual and FHLBank performance, and other factors as described above. The CEO salary increase was recommended by the Compensation Committee and approved by the board of directors. Table 6947 presents the total base salary and the percentage of salary increase for the Named Executive Officers, effective January 1, ~~2017 for the CEO and effective April 1, 2017 for the other four Named Executive Officers:~~2023:

Table69

Named Executive Officer Percentage Increase Salary
Mark E. Yardley, President & CEO¹
49.9 % $ 550,000
Patrick C. Doran, EVP, CCEO & General Counsel²
15.6
370,000
William W. Osborn, SVP & CFO²
12.6
340,000
Sonia R. Betsworth, SVP & CAO²
5.5
290,000
Joe B. Edwards, SVP & CIO²
3.0
276,900


Named Executive Officer	Percentage Increase		Salary
Mark E. Yardley, President & CEO1	12.5	%	$	900,000
Jeffrey B. Kuzbel, EVP & CFO	6.3		470,000
Sonia R. Betsworth, EVP & CAO	7.2		370,000
Martin L. Schlossman, Jr., SVP & CRO	8.3		365,000
Carl M. Koupal, III, SVP & CLEO	7.5		360,000


¹	~~Salary increase recommended by the Compensation Committee and approved by the Board of Directors.~~


²	~~Salary increase recommended by the CEO and approved by the Compensation Committee.~~

1 Mark E. Yardley served as President & CEO through December 31, 2023 and as a non-executive Senior Advisor until February 1, 2024.

Annual and Deferred Cash Incentive Awards - ~~Effective January 1, 2012, we adopted the~~Our EICP asis a cash-based annual incentive plan with a long-term deferral component that establishes individual incentive compensation award opportunities related to achievement of performance objectives during the performance periods. The EICP establishes two performance periods: (1) a Base Performance Period aligned with the calendar year; and (2) a Deferral Performance Period (or the long-term performance period), which is a three-year period commencing the calendar year following the Base Performance Period. Named Executive Officers may earn an annual cash incentive during a Base Performance Period and a deferred cash incentive during a Deferral Performance Period. For each Base Performance Period, the ~~Board~~board of directors will establish a Total Base Opportunity for Named Executive Officers. The Total Base Opportunity is equal to a percentage of each Named Executive Officer’s annual base salary at the beginning of the Base Performance Period and is composed of the Cash Incentive and the Deferred Incentive.

We believe that well-designed incentive compensation plans provide important opportunities to motivate our Named Executive Officers to accomplish financial, risk, and operational goals that promote our mission. Thus, motivating our Named Executive Officers to accomplish business and financial short- and long-term goals that promote a high level of performance for our members is a key objective of our total compensation program. Consequently, our compensation and benefits programs are designed to motivate our Named Executive Officers to engage in the behaviors and performance necessary to deliver our desired results.

To effectively motivate the Named Executive Officers to accomplish both short- and long-term goals that promote our performance, we believe that incentive awards must represent pay at risk. In other words, the administration of our incentive compensation plans must be such that awards are distributed only in exchange for accomplishing pre-established goals, recommended by the Compensation Committee and approved by the ~~Board~~board of ~~Directors,~~directors, and are distributed only in accordance with such achievement. In ~~2017,~~2023, we achieved ~~this compensation objective through~~at or above target attainment for each of ~~objectives under our EICP.~~the pre-established goals.

~~Beginning in~~In the fourth quarter of ~~2016,~~2022, goal metrics, metric performance ranges and metric weights for cash incentive award opportunities under the ~~2017~~2023 EICP were developed. The proposed performance objectives reflected the drivers of our business and mission and were based upon the Compensation Committee’s and management’s discussions with respect to our primary mission and stockholder perceptions of success. The Compensation Committee and management took steps intended to align the performance objectives to the Strategic Business Plan. The Compensation Committee reviewed and analyzed the proposed ~~2017~~2023 performance objectives, as appropriate, before submitting the objectives to the ~~Board~~board of ~~Directors~~directors for ~~approval in January 2017.~~approval.

For the Base Performance Period of January 1, ~~2017~~2023 to December 31, ~~2017,~~2023, the ~~Board~~board of ~~Directors~~directors approved a Total Base Opportunity equal to a percentage of each Named Executive Officer’s annual base salary at the beginning of the Base Performance Period. Certain Named Executive Officers have a greater and more direct impact than others on the success of ~~the~~ FHLBank; therefore, these differences are recognized by varying the Total Base Opportunity for each Named Executive Officer. The Total Base Opportunity is the amount that may be earned for achieving performance levels under established Performance Measures and is comprised of the Cash Incentive and the Deferred Incentive. In the event ~~the~~ FHLBank’s performance during the Base Performance Period results in the achievement of a Total Base Opportunity that exceeds 100 percent of a Participant’s base salary at the start of the Base Performance Period, the Target Document provides that the Total Base Opportunity shall be capped at 100 percent of the Participant’s base salary in accordance with regulatory restrictions. The Deferred Incentive is 50 percent of the Total Base Opportunity, which shall be deferred for the Deferral Performance Period, which is the three-year period from January 1, ~~2018~~2024 to December 31, ~~2020,~~2026, over which ~~the FHLBank’s performance is measured based on specific parameters,~~FHLBank applies an interest rate credit compounding annually, as further described below, and becomes payable after the end of the Deferral Performance Period, subject to review by the Director of the FHFA. The Cash Incentive is the portion of the Total Base Opportunity that is not the Deferred Incentive and becomes payable after the end of the Base Performance Period upon achievement of established Performance Measures, subject to review by the Director of the FHFA.

Awards under the EICP may be granted for achievement of Performance Measures corresponding to achievement levels, from threshold, to target, to optimum performance for each goal metric. Threshold represents the minimum achievement level; target represents the expected achievement level; and optimum represents the achievement level that substantially exceeds the target level. Awards may be earned for performance attainment within these achievement levels as a percentage of base salary that corresponds to actual performance. For performance that falls between any two levels of achievement, linear interpolation is used to ensure that the award is consistent with the level of performance achieved. Named Executive Officers may earn annual awards expressed as a percent of their base salary at the beginning of the Performance Period. Total Base Opportunity is capped at 100 percent of the Participant’s Earned Base Salary. Table 7048 presents the Total Base Opportunity for each Named Executive Officer for each achievement level for the Base Performance Period:

Table 7048


Position	Total Base Opportunity
	Threshold		Target		Optimum
President & CEO	37.5	%	75.0	%	112.5	%
EVP	30.0		60.0		90.0
SVP	25.0		50.0		75.0

Position Total Base Opportunity
Threshold Target Optimum
CEO 35.0 % 70.0 % 105.0 %
CCEO & General Counsel and CFO 27.5
55.0
82.5
CAO and CIO 25.0
50.0
75.0

The Total Base Opportunity Goal Metrics for ~~2017~~2023 are described in Table ~~71:~~49:

Table 71



Total Base Opportunity Goal Metric	Definition
~~Adjusted~~ Return on Equity Spread ~~on Total Regulatory Capital~~^{to SOFR1}		The spread between (a) adjusted net income (before assessment of the Affordable Housing Program (AHP) commitment) divided by the daily average total regulatory capital and (b) the daily average ~~daily Overnight Federal funds effective rate (Fed Effective).~~of overnight SOFR.
~~Net Income after Capital Charge~~Advance Penetration Spread		~~The dollar amount of adjusted net income~~Advance penetration spread is defined as ~~defined in the above metric which exceeds the cost~~a four-quarter average of the ~~required return on capital.~~
~~Retained Earnings~~	~~The dollar amount~~total advances outstanding to members divided by the total assets of ~~GAAP Retained Earnings as~~members less the same measurement of ~~12/31/2017.~~total advances to total assets for members of other FHLBanks.
Diversity, Equity and Inclusion Education and Culture		FHLBank’s Diversity, Equity and Inclusion (DEI) initiative is defined as the ~~promotion,~~advancement of DEI, to the maximum extent possible in balance with financially safe and sound business practices, ~~the~~through inclusion and utilization of diverse-owned businesses as vendors and the inclusion of diverse individuals within its workforce, as defined in the ~~Diversity and Inclusion~~DEI Policy, in all business activities of FHLBank.
Diversity, Equity and Inclusion Business Practice Outcome Measures		Points are awarded by achievement of the following (one point awarded for each): (1) Workforce: Attain a workforce ratio of at least 12% business partners of color as of 12/31/2023. (2) Workforce: Participate in four outreach opportunities to support diversifying our workforce or members of the board of directors. (3) Marketplace: Participate in four outreach opportunities with diverse-owned vendors. (4) Marketplace: Participate in four outreach opportunities with diverse broker dealers. (5) Marketplace: Increase the number of viable and certified diverse suppliers in Supplier GATEWAY by 12. (6) Culture: Celebrate cultural diversity of business partners at four FHLBank-sponsored events.
Risk Management -– Market, Credit and Liquidity Risks		Management of FHLBank risks as determined by the weighted average rating by the board of directors in an annual evaluation of the Risk Appetite metrics in this area using a 1 (lowest) to 5 (highest) point scale. General risk categories are market, credit and liquidity risks.
Risk Management -– Compliance, Business and Operations ~~Risk~~Risks		Management of FHLBank risks as determined by the weighted average rating by the board of directors in an annual evaluation of the Risk Appetite metrics in this area using a 1 (lowest) to 5 (highest) point scale. General risk categories are compliance, business and operations risks.

As part of evaluating our financial performance and measuring EICP performance, we begin with the components of “adjusted income” and “adjusted ROE,” non-GAAP financial measures defined in Item 7 - “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Results of Operations.” We adjust net income reported in accordance with GAAP for the impact of: (1) AHP assessments (equivalent to an effective minimum income tax rate of 10 percent); (2) fair value changes on derivatives and hedging activities (excludes net interest settlements related to derivatives not qualifying for hedge accounting); and (3) prepayment fees on terminated advances; and (4) other items excluded because they are not considered a part of our routine operations, such as gains/losses on retirement of debt, gains/losses on mortgage loans held for sale, and gains/losses on securities. For measuring our EICP performance, we further adjust for other items excluded because they are not considered a part of our routine operations or ongoing business model, such as interest expense on mandatorily redeemable capital stock, amortization of derivative option costs and amortization/accretion of premium/discount on unswapped MBS classified as trading. This resulting EICP adjusted income, also a non-GAAP financial measure of income, is used to compute an EICP adjusted ROE that is then compared to the average overnight Federal funds effective rate with the difference referred to as EICP adjusted ROE spread.

1 As part of evaluating our financial performance and measuring EICP performance, we begin with the components of “adjusted income”, a non-GAAP financial measures defined in Item 7 - “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Results of Operations.” We adjust net income reported in accordance with GAAP for the impact of: (1) AHP assessments (equivalent to an effective minimum income tax rate of 10 percent); (2) fair value changes on trading securities and derivatives and hedging activities (excluding net interest settlements); (3) prepayment and yield maintenance fees; (4) non-routine and/or unpredictable items, such as gains/losses on securities; and (5) non-recurring items, such as gains/losses on retirement of debt and gains/losses on mortgage loans held for sale. For measuring our EICP performance, we further adjust for other items excluded because they are not considered a part of our routine operations or ongoing business model, such as interest expense on mandatorily redeemable capital stock, amortization of derivative option costs and amortization/accretion of premium/discount on unswapped MBS classified as trading.

The ~~profit-oriented~~profit- and mission-oriented objectives ~~of “Adjusted Return~~“Return on Equity Spread ~~on Total Regulatory Capital”~~to SOFR” and ~~“Net Income after Capital Charge” (non-GAAP financial measures)~~“Advance Penetration Spread” were based on the belief that profitability isand mission focus are critical to the long-term viability of the organization. The “Diversity, Equity and Inclusion Education and Culture” and “Diversity, Equity and Inclusion Business Practice Outcome Measures” reflect our commitment to diversity across all levels of our business, from recruiting and growing our business partners to selecting our suppliers. We recognize that by harnessing the power of our collective similarities and differences FHLBank is better able to deliver on our mission. We believe this makes FHLBank a better place to work and a better partner for our cooperative members. Finally, the “Risk ~~Management”~~Management – Market, Credit and Liquidity Risks” and the “Risk Management – Compliance, Business and Operations Risks” objectives were included in recognition of the impact that the Named Executive Officers have on management of business, compliance, credit, liquidity, market and operations risks, to incent strong risk management practices and ~~an effort~~ to reward positive risk management performance as determined by the ~~Board~~board of ~~Directors.~~directors. We divided the risk management objectives to provide balance and focus in the amount of risk exposure we are willing to accept/retain in pursuit of stakeholder value.

The ~~“Retained Earnings” objective reflects our desire~~Total Base Opportunity available to ~~ensure we operate from a position of capital strength~~Participants for the Financial Performance Goals shall be adjusted as reflected in Table 50 below if the daily average Total Regulatory Capital is below 4.75 percent for 2023. The Financial Performance Goals include the Return on Equity Spread to SOFR and ~~take appropriate steps to protect our members from the potential impairment~~Advance Penetration Spread, which represent 50 percent of the ~~par value of our capital stock. Finally, the performance objective for “Diversity and Inclusion” establishes our commitment to the advancement of Diversity and Inclusion awareness.~~Base Opportunity Metric Weights at Table 52.

Table 50


Daily Average Total Regulatory Capital			Financial Performance Goals Adjustment
≥4.75%			0%
≥4.70% and <4.75%			(25)%
≥4.65% and <4.70%			(50)%
≥4.60% and <4.65%			(75)%
<4.60%			(100)%

Award levels were set at ~~threshold, target~~Threshold, Target and ~~optimum~~Optimum percentages of annual base salary. Table 7251 sets forth the specific annual goal performance ranges, ~~and~~ the actual achievement levels, and the incentive payout for each of our Total Base Opportunity Goal Metrics in ~~2017:~~2023:

Table 7251

Total Base Opportunity Goal Metrics Annual Performance Range Actual Achievement
Threshold Target Optimum
Adjusted Return Spread on Total Regulatory Capital 5.02 % 6.12 % 7.22 % 6.05 %
Net Income after Capital Charge $ 92,690,000
$ 117,690,000
$ 142,690,000
$ 125,444,783
Retained Earnings $ 789,184,000
$ 818,184,000
$ 847,184,000
$ 840,405,563
Diversity and Inclusion - Participation¹
40.00 % 60.00 % 80.00 % 89.56 %
Diversity and Inclusion - Awareness Opportunities¹
6
9
12
15
Risk Management - Market, Credit and Liquidity Risks (5.0 point scoring scale) 3.00
4.00
5.00
4.90
Risk Management - Compliance, Business and Operations Risk (5.0 point scoring scale) 3.00
4.00
5.00
4.41


Total Base Opportunity Goal Metrics	Annual Performance Range						Actual Achievement		Incentive Payout1
	Threshold		Target		Optimum
Return on Equity Spread to SOFR	2.43	%	3.43	%	4.03	%	4.75	%	150.00	%
Advance Penetration Spread	1.20	%	1.70	%	2.20	%	2.09	%	139.00	%
Diversity, Equity and Inclusion Education and Culture	80.00	%	85.00	%	90.00	%	91.73	%	150.00	%
Diversity, Equity and Inclusion Business Practice Outcome Measures (6.0 point scoring scale)	2.00		4.00		6.00		6.00		150.00	%
Risk Management – Market, Credit and Liquidity Risks (5.0 point scoring scale)	3.00		4.00		5.00		4.30		115.00	%
Risk Management – Compliance, Business and Operations Risks (5.0 point scoring scale)	4.00		4.50		5.00		4.68		118.00	%
TOTAL WEIGHTED AVERAGE INCENTIVE PAYOUT									135.50	%


¹	As a minimum requirement to achieving this goal, FHLBank management prepared and the Board of Directors adopted a long-term Diversity and Inclusion strategic plan to incorporate cultural diversity into all of FHLBank's business activities by December 31, 2017.

1 If the actual achievement is Optimum or higher, the incentive payout is capped at 150.00 percent.

We believe the goals incorporated into the EICP are indicative of our balanced approach to profitability, mission and member-focus, and risk management. As reflected in Table ~~72, 2017 was a strong year regarding~~51, we achieved in excess of Optimum for the ~~achievement~~Return on Equity Spread to SOFR and above target for the Advance Penetration Spread. We achieved Optimum for Education and Culture and Optimum for the Business Practice Outcome Measures of ~~our EICP base opportunity performance objectives, which is indicative of FHLBank's balanced approach to profitability and risk management.~~the DEI goals. We exceeded Target performance for ~~each goal in 2017 with the exception~~Market, Credit and Liquidity and Compliance, Business and Operations of the ~~Adjusted Return Spread on Total Regulatory Capital.~~Risk Management goals.

Table 7352 provides the metric weight for each Total Base Opportunity Goal Metric as a percent of the Total Base Opportunity for each Named Executive Officer in ~~2017:~~2023:

~~Table 73~~

Performance Objective Metric Weight
CEO/CFO CCEO & General
Counsel/CAO/CIO
Adjusted Return Spread on Total Regulatory Capital 20 % 15 %
Net Income after Capital Charge 20
15
Retained Earnings 10
10
Diversity and Inclusion 10
10
Risk Management - Market, Credit and Liquidity Risks 20
25
Risk Management - Compliance, Business and Operations Risk 20
25

Table 7452


Performance Objective	Metric Weight
Return on Equity Spread to Secured Overnight Financing Rate	40	%
Advance Penetration Spread	10
Diversity, Equity and Inclusion Education and Culture	5
Diversity, Equity and Inclusion Business Practice Outcome Measures	5
Risk Management - Market, Credit, and Liquidity	20
Risk Management - Compliance, Business, and Operations	20



TOTAL	100	%

Table 53 presents the base salary, aggregate goal achievement, Total Base Opportunity, Cash Incentive and Deferred Incentive for each Named Executive Officer as calculated under the EICP for the Base Performance Period of January 1, ~~2017~~2023 to December 31, ~~2017~~2023 and the Deferral Performance Period, which is the three-year period from January 1, ~~2018~~2024 to December 31, ~~2020:~~2026:

Table 7453

Named Executive Officer Base Salary Aggregate Goal Achievement as a Percentage of Target Total Base Opportunity
Cash
Incentive¹
Deferred Incentive
Mark E. Yardley, President & CEO $ 550,000
124.40 % $ 478,929
$ 239,465
$ 239,464
Patrick C. Doran, EVP, CCEO & General Counsel 320,000
127.06
223,618
111,809
111,809
William W. Osborn, SVP & CFO 302,000
124.40
206,624
103,312
103,312
Sonia R. Betsworth, SVP & CAO 275,000
127.06
174,702
87,351
87,351
Joe B. Edwards, SVP & CIO 268,800
127.06
170,763
85,382
85,381


Named Executive Officer	Base Salary		Incentive Percent of Base Salary		Total Base Opportunity		Cash Incentive1		Deferred Incentive
Mark E. Yardley, President & CEO	$	900,000	100.00	%	$	900,000	$	450,000	$	450,000
Jeffrey B. Kuzbel, EVP & CFO	470,000		81.30		382,111		191,056		191,055
Sonia R. Betsworth, EVP & CAO	370,000		81.30		300,811		150,406		150,405
Martin L. Schlossman, Jr., SVP & CRO	365,000		67.75		247,288		123,644		123,644
Carl M. Koupal, III, SVP & CLEO	360,000		67.75		243,900		121,950		121,950


¹	~~Cash Incentive is included as non-equity incentive plan compensation in Table 80 for all Named Executive Officers.~~

1 Cash Incentive is included as non-equity incentive plan compensation in Table 57 for all Named Executive Officers.

The final value of the Deferred Incentive portion of the Total Base Opportunity ~~is measured by evaluating Performance Measures as presented in Table 75, which provides a template of how amounts will be calculated~~for the calendar year ~~2018~~2024 to calendar year ~~2020,~~2026 is measured by applying a six percent interest credit, compounded annually, to the Deferred Incentive presented in Table 53, as long as ~~the minimum requirement for receiving a Final Deferred Incentive Award of having~~FHLBank has an MVE of not less than 100 percent of ~~our~~ TRCS outstanding, as of the last day of the Deferral Performance ~~Period, is met:~~Period.

~~Table 75~~

Threshold Target Optimum
Total Return¹:
10/11 or 11/11 vs FHLBanks 5/11 vs FHLBanks 2/11 or 1/11 vs FHLBanks
Deferred Incentive

Performance Measure Percentage 75 % 100 % 125 %
Weighting 0.50
0.50
0.50
Dollar Value (Deferred Incentive x Performance Measure Percentage x Weight) $ $ $

MVE / Total Regulatory Capital (TRC)²:
10/11 or 11/11 vs FHLBanks 5/11 vs FHLBanks 2/11 or 1/11 vs FHLBanks
Deferred Incentive

Performance Measure Percentage 75 % 100 % 125 %
Weighting 0.50
0.50
0.50
Dollar Value (Deferred Incentive x Performance Measure Percentage x Weight) $ $ $

Final Deferred Incentive Award (Dollar Value for Total Return + Dollar Value for MVE/TRC) $ $ $

Total Return equals the Total Dividends, plus the Change in Retained Earnings, divided by the Average TRC over the three-year period. Total Dividends is defined as all dividends paid on all capital stock during the three-year period; Change in Retained Earnings is defined as the change in retained earnings from 12/31/2017 to 12/31/2020; and Average TRC is defined as the average daily ending balance of regulatory capital for dates starting with 01/01/2018 and ending 12/31/2020. TRC is defined as total capital stock plus retained earnings plus subordinated debt plus mandatorily redeemable capital stock. TRC will also include any additional capital from mergers that will be reported in the FHFA Call Report System (CRS) statement of condition. For performance comparison purposes, FHLBank Topeka will be ranked against the other FHLBanks, with the highest total return being the best performance, and ranking 1^st ~~out of the 11 FHLBanks.~~


²	Using amounts reported on the Trendbook Analysis from the CRS, MVE/TRC is calculated by dividing base case MVE by TRC (as defined above) calculated at the end of the Deferral Performance Period. For performance comparison purposes, FHLBank Topeka will be ranked against the other FHLBanks, with the highest MVE/TRC being the best performance, and ranking 1^st ~~out of the 11 FHLBanks.~~

We believe our long-term goals effectively motivate our Named Executive Officers to develop strategies and policies to achieve long-term growth and provide increased value to members while taking future risk into account.

For any Performance Period, an award will not be payable if we fail to achieve performance at or above the Performance Measure(s) set by the Compensation Committee. The Compensation Committee may, in its discretion, reduce or eliminate an award payable under the EICP under any of the following circumstances: (1) we receive a composite “4” or “5” rating in our FHFA examination in any single year in any single Base Performance Period or Deferral Performance Period; (2) the ~~Board~~board of ~~Directors~~directors finds a serious, material safety or soundness problem or a serious, material risk management deficiency exists, or if: (a) operational errors or omissions result in material revisions to the financial results, information submitted to the FHFA, or to data used to determine incentive payouts; (b) submission of material information to the SEC, Office of Finance, and/or FHFA is significantly past due; or (c) we fail to make sufficient progress, as determined by the ~~Board~~board of ~~Directors,~~directors, in the timely remediation of significant examination, monitoring or other supervisory findings; (3) during the most recent FHFA examination, the FHFA identified an unsafe or unsound practice or condition that is material to the financial operation of ~~the~~ FHLBank within a Named Executive Officer’s area(s) of responsibility and such unsafe or unsound practice or condition is not subsequently resolved in favor of ~~the~~ FHLBank by the last day of the Base Performance Period or Deferral Performance Period; or (4) a given participant does not achieve satisfactory individual achievement levels (as determined in the sole discretion of the Compensation Committee) during the Deferral Performance Period. Additionally, Deferred Incentive awards shall be reduced by one-third for each year during the Deferral Performance Period in which we have negative net income, as defined and in accordance with GAAP. ~~As noted above,~~The Compensation Committee did not reduce or eliminate an award.

The EICP for the 2021-2023 Deferral Performance ~~Periods beginning 2015 and later in order for Participants~~Period is subject to ~~be eligible to receive a Final Deferred Incentive Award,~~ the following performance goal: (1) FHLBank must have an MVE of not less than 100 percent of ~~FHLBank’s~~ TRCS outstanding as of the last day of the Deferral Performance ~~Period.~~

~~Under~~Period; and (2) the EICP Targets for the 2015-2017 Deferral Performance Period, the achievement of base award opportunities is measured over a three-year performance period. The metric weight for the 2015-2017 performance goals as a percentcalculation of the ~~total EICP award opportunity for all Named Executive Officers and~~Final Deferred Incentive Award shall be calculated by applying an interest rate credit of six percent, compounded annually, to the ~~2015-2017 goal achievement percentage is included in Table 76:~~Deferred Incentive.

~~Table 76~~

Objective Metric Weight 2015-2017
Goal
Achievement Percentage
Total Return 50.0 % 116.67 %
MVE/TRCS 50.0
116.67
Overall Payout Percentage 100.0 % 116.67 %

Based on the performance results, Table 7754 presents the Final Deferred Incentive Award for the ~~2015-2017~~2021-2023 Deferral Performance Period for each Named Executive Officer:

Table 7754

Named Executive Officer Deferred Incentive Goal Achievement Percentage
Final Deferred Incentive Award¹
Mark E. Yardley, President & CEO $ 99,644
116.67 % $ 116,255
Patrick C. Doran, EVP, CCEO & General Counsel 87,112
116.67
101,634
William W. Osborn, SVP & CFO 73,065
116.67
85,245
Sonia R. Betsworth, SVP & CAO 61,900
116.67
72,219
Joe B. Edwards, SVP & CIO 77,288
116.67
90,172


Named Executive Officer	Deferred Incentive		Final Deferred Incentive Award1
Mark E. Yardley, President & CEO	$	233,705	$	278,347
Jeffrey B. Kuzbel, EVP & CFO	—		—
Sonia R. Betsworth, EVP & CAO	79,191		94,318
Martin L. Schlossman, Jr., SVP & CRO	70,595		84,080
Carl M. Koupal, III, SVP & CLEO	—		—


¹	~~Final Deferred Incentive Award is included as non-equity incentive plan compensation in Table 80 for all Named Executive Officers.~~

1 The amount is included as non-equity incentive plan compensation in Table 57 for all Named Executive Officers.

2 The amount reflected is based on the Non-NEO EICP for which the goal achievement percentage is the same as the NEO EICP for the 2021-2023 Deferral Performance Period.

A Named Executive Officer, in the discretion of the Compensation Committee, ~~may~~shall be required to forfeit an award earned under the EICP if the Named Executive Officer is: (1) terminated from employment with ~~the~~ FHLBank for Cause as defined under the EICP; (2) engages in competition with ~~the~~ FHLBank or interferes with the business relationships of ~~the~~ FHLBank during ~~his or her~~their employment or for a period of one year following ~~his or her~~their termination; or (3) discloses confidential information of ~~the~~ FHLBank.

Bonuses - On occasion, the Compensation Committee may elect to award a Named Executive Officer additional compensation in the form of a bonus in recognition of that Named Executive Officer's performance. ~~On January 24, 2017, the Compensation Committee determined to award~~In April 2021, Mr. ~~Doran~~Kuzbel, joined FHLBank as SVP and CFO and received a hiring bonus in the amount of $150,000 with the first $100,000 paid on April 15, 2021 in accordance with his offer letter, and the remaining $50,000 ~~for~~bonus paid on the first payroll date following completion of his ~~work in overseeing and managing the FHLBank's significant legal and governance projects in 2016.~~first year of employment with FHLBank. In 2021, Mr. Kuzbel also received an upfront relocation stipend of $25,000.

Retirement and Other Benefits - ~~We maintain a comprehensive retirement program for our eligible employees comprised~~In 2023, certain of ~~two qualified retirement plans: (1)~~the Named Executive Officers were participants in the Pentegra Defined Benefit Plan for Financial Institutions, a tax-qualified multiple-employer defined-benefit plan (DB Plan)~~; and (2)~~, which was hard frozen December 31, 2019. All of the ~~Pentegra Financial Institutions Thrift~~Named Executive Officers participate in the Federal Home Loan Bank of Topeka 401(k) Plan, a defined contribution retirement savings plan qualified under the Internal Revenue Code (IRC) for employees of ~~the~~ FHLBank (DC Plan). In response to federal legislation, which imposed restrictions on the ~~pension~~retirement benefits payable to our executives, we subsequently established a third retirement plan, the Benefit Equalization Plan (BEP) ~~in order~~ to maintain the competitive level of our total compensation for executive officers, including the Named Executive Officers. Generally, the BEP is characterized as a non-qualified “excess benefit” plan, which restores those retirement benefits that exceed the IRC limits applicable to the qualified DB Plan and DC Plan. In this respect, the BEP is an extension of our retirement commitment to our Named Executive Officers and other eligible highly compensated employees that preserves and restores the full pension and thrift benefits that, due to IRC limitations, are not payable from the qualified pension plans.

DB Plan - The board of directors resolved, effective December 31, 2019, to: (1) freeze the DB Plan to discontinue the future accrual of new benefits under the DB Plan; and (2) revise the BEP to cease any further accrual of pension benefit under the BEP (as described further below).

Our DB Plan ~~covers~~covered all full-time employees of ~~the~~ FHLBank as of January 1, 2009 who ~~have~~ met the eligibility requirements of: (1) attainment of age 21; (2) completion of twelve months of employment; and (3) employed by ~~the~~ FHLBank as of December 31, 2008, including certain of the Named Executive Officers. Employees ~~are~~were not fully vested until they ~~have~~ completed five years of employment. The regular form of retirement benefits provides a single life annuity; a lump-sum payment or other additional payment options are also available to a limited degree for those Named Executive Officers who were employed prior to a plan change in 2003. The benefits are not subject to offset for social security or any other retirement benefits received. In ~~2017,~~2023, four of the Named Executive Officers (the CEO, ~~CCEO~~CAO, CRO, and ~~General Counsel, CFO, and CAO)~~CLEO) participated in the DB Plan, which required no contribution from those four Named Executive Officers.

The DB Plan ~~provides~~made available a normal retirement benefit, at or after age 65 where a Named Executive Officer participant has met the vesting requirement, ~~of completing five years of employment~~ equal to 2.0 percent of ~~his/her~~their highest three-year average salary multiplied by ~~his/her~~their years of benefit service, up to 30 years. ~~Two~~Three Named Executive Officer participants ~~(Mr.~~(Messrs. Yardley and Schlossman and Ms. Betsworth) are eligible to receive benefits in excess of 2.0 percent because of a plan change in 2003. The amount in excess of 2.0 percent is a calculated “frozen add-on” determined at the time of the plan change. The formula for this “frozen add-on” is the ~~old~~prior benefit formula as of August 31, 2003 minus the new benefit formula as of September 1, 2003. Earnings are defined as base salary plus overtime and bonuses, subject to an annual IRC Section 401(a)(17) limit of $270,000 on earnings for 2017. Annual benefits provided under the DB Plan also are subject to IRC limits, which vary by age and benefit option selected. The annual IRC Section 415(b)(1)(A) benefit limit is $215,000 for 2017. Benefits are payable in the event of retirement, death, disability, or termination of employment if vested. Only the portion of the benefit accrued before September 1, 2003 is payable as a lump sum to employees who have attained age 50; otherwise, benefits are paid in installments.

Early retirement benefits are payable at a reduced rate. Upon termination of employment prior to age 65, Named Executive Officer participants meeting the ~~5-year~~five-year vesting and age 45 early retirement eligibility criteria are entitled to an early retirement benefit. Each of the Named Executive Officers participating in the DB Plan is eligible for early retirement. The early retirement benefit amount is calculated by taking the normal retirement benefit amount and reducing it by 3.0 percent times the difference between the age of the early retiree and age 65. If the Named Executive Officer was employed prior to September 1, 2003 and ~~his/her~~their age and benefit service added together totaled 70 (Rule of 70), the normal retirement benefit amount would be reduced by 1.5 percent for each year between the age of the early retiree and age 65 for the portion of the normal retirement benefit accrued prior to September 1, 2003.

The measurement date used to determine the current year’s benefit obligation was December 31, 2017. The present value of the accrued benefit of the DB Plan, calculated through September 1, 2003, was valued at 50 percent of benefit value using the 2000 RP Mortality table (generational table for annuities) and 50 percent of benefit value using the 2000 RP Mortality table (statistical mortality table for lump sums), discounted to the current age of each Named Executive Officer at 3.60 percent interest. The present value of benefits accrued after September 1, 2003 is multiplied by a present value factor which uses the 2000 RP Mortality table (generational table for annuities) discounted to the current age of each Named Executive Officer at 3.60 percent. As of December 31, 2017, the actuary’s calculations utilized: (1) the projected unit credit valuation method; (2) the 2014 RP white collar worker annuitant tables (with Scale MP-2017); (3) an average salary increase adjustment; and (4) a 3.50 percent discount rate as the primary assumptions attributable to valuation of benefits under the DB portion of the BEP (see "BEP" below).

DC Plan - The DC Plan is a tax-qualified, defined contribution ~~pension~~ plan. Substantially all officers and employees of ~~the~~ FHLBank are covered by the plan. ~~The~~ FHLBank contributes a matching amount equal to a percentage of voluntary employee contributions, subject to certain limitations (see ~~"BEP"~~“BEP” below).

All employees who have met the eligibility requirements can choose to participate in the DC Plan. We match employee contributions based on the length of service and the amount of an employee’s contribution. These employer contributions are immediately 100 percent vested. ~~Matching~~During 2023, matching ratios for all employees, including the Named Executive Officers (with the exception of Mr. Kuzbel), under the DC Plan ~~are~~were as follows:



Year 1		No match


~~Year 1~~	~~No match~~
Years 2 through 3	100 percent match up to 34 percent of employee’s eligible compensation
Years 4 through 5		150 percent match up to 34 percent of employee’s eligible compensation
After 5 years		200 percent match up to 34 percent of employee’s eligible compensation

~~For an employee hired on or after January 1, 2009, we~~We also make a monthly basic contribution in an amount equal to two percent of ~~that employee's~~all employees’, including the Named Executive Officers’, monthly eligible ~~compensation.~~compensation after one year of service.

BEP - The BEP is an unfunded, nonqualified supplemental executive retirement plan that permits Named Executive Officers and certain other ~~participants in the BEP~~executives to defer compensation and to receive matching contributions ~~and pension accruals~~ that would otherwise have been made or accrued under ~~the~~ FHLBank’s DC ~~Plan or DB~~ Plan, as appropriate, but for the limitations imposed by the IRC. ~~Effective January 1, 2018, the Board of Directors approved participation~~Each of the ~~CIO~~Named Executive Officers are participants in the BEP. As part of Mr. Kuzbel's offer letter, he is eligible to receive an employer contribution of 10 percent as though he were a five-year, tenured employee of FHLBank.

The BEP allows the Named Executive Officers to receive a rate of return based on our return on equity calculated for EICP purposes for the previous year. For ~~2017,~~2023, the rate of return earned on the defined contribution portion of the BEP was ~~6.52~~6.83 percent, which was our 2022 return on ~~equity calculated for EICP purposes for 2016.~~equity.

Named Executive Officers are at all times 100 percent vested in their defined contribution account balances of the BEP. In the event of unforeseen emergencies, they may request withdrawals equal to the lesser of the amounts necessary to meet their financial hardships or the amount of their account balances. As of December 31, ~~2017,~~2023, each of the Named Executive Officers would be entitled to receive ~~his or her~~their respective balance of compensation deferred through participation under the BEP within ninety days of any such Named Executive Officer’s termination of employment due to death, disability or retirement and upon a change in control as defined in the BEP and in accordance with IRC Section 409A and applicable regulations. For each Named Executive Officer, these amounts are listed in Table 8461 under the column titled “Aggregate Balance at Last FYE.”

As indicated above, the pension accrual benefit of the BEP ceased further accruals as of December 31, 2019.

Other benefits - We are also committed to providing competitive benefits designed to promote health and welfare for all employees (including their families), including the Named Executive Officers. We offer all employees a variety of benefits including insurance (medical, dental, vision, prescription drug, life, long-term disability and travel accident), short-term disability salary continuation, flexible spending accounts, health savings account, an employee assistance program and education benefits. The Named Executive Officers participate in these benefit programs on the same basis as all other eligible employees.

Perquisites - The ~~Board~~board of ~~Directors~~directors views limited perquisites afforded to the Named Executive Officers as an element of the total compensation program. Any perquisites provided, however, are not intended to materially add to any Named Executive Officer’s compensation package and, as such, are provided to them primarily as a convenience associated with their respective duties and responsibilities. Examples of ongoing perquisites that were provided to the Named Executive Officers in ~~2017 are limited~~2023 include cell phone reimbursement, limited spousal travel and limited ~~spousal travel.~~

Categorical types of perquisites provided to the Named Executive Officers in 2017 are presented and detailed in the All Other Compensation Table (see Table 81 under this Item 11) and are more specifically described in the case that aggregateclub dues. Total perquisites to ~~any single~~each Named Executive Officer ~~exceeded $10,000.~~are presented in Table 58.

Potential payments upon termination or change in control

Severance Benefits - We provide severance benefits to the Named Executive Officers pursuant to our Executive Officer Severance Policy. The policy’s primary objective is to provide a level of protection to officers from loss of income during a period of unemployment. These officers are eligible to receive severance pay under the policy if we terminate the officer’s employment with or without cause, subject to certain limitations. These limitations include: (1) the officer voluntarily terminates employment, including as a result of disability or death; or (2) the officer’s employment is terminated by us for misconduct.

Provided the requirements of the policy are met and the Named Executive Officer provides us an enforceable release, Table 7855 presents the term and amounts that would have been payable to the Named Executive Officer under the ~~Named~~ Executive ~~Officers~~Officer Severance Policy as of December 31, ~~2017,~~2023, or other effective policy, absent a qualifying event that would result in payments under the Change in Control Plan (see ~~"Change~~“Change in Control ~~Plan"~~Plan” below):

Table 7855

Officer Months
Severance Amount¹
COBRA²
Severance Total
Mark E. Yardley 12 $ 550,000
$ 10,675
$ 560,675
Patrick C. Doran 9 277,500
12,122
289,622
William W. Osborn 6 170,000
7,980
177,980
Sonia R. Betsworth 6 145,000
5,338
150,338
Joe B. Edwards 6 138,450
8,084
146,534


Officer	Months	Severance Amount1		COBRA2		Severance Total
Mark E. Yardley3	12	$	900,000	$	23,506	$	923,506
Jeffrey B. Kuzbel4	9	352,500		25,768		378,268
Sonia R. Betsworth	9	277,500		17,629		295,129
Martin L. Schlossman, Jr.	6	182,500		13,408		195,908
Carl M. Koupal, III5	6	180,000		17,179		197,179


¹	~~Severance Amount equals the number of months of base salary as described under the Severance Policy.~~


²	~~COBRA equals the number of months of medical, dental and vision coverage cost as described under the Severance Policy.~~

1 Severance Amount equals the number of months of base salary as described under the Executive Officer Severance Policy.

2 COBRA equals the number of months of medical, dental and vision coverage cost as described under the Executive Officer Severance Policy.

3 In December 2023, Mr. Yardley ceased to serve as President and CEO effective December 31, 2023; consequently, the Severance Policy was no longer applicable to Mr. Yardley as of January 1, 2024.

4 Effective January 1, 2024, Mr. Kuzbel became President and CEO making him eligible for 12 months of severance benefits as of that date.

5 Effective January 1, 2024, Mr. Koupal became Executive Vice President making him eligible for 9 months of severance benefits as of that date.

The amounts above do not include accrued incentive plan payments as presented in the Summary Compensation Table; the aggregate balance of the DC Plan as presented in the Nonqualified Deferred Compensation Table; or the present value of accumulated benefits of the BEP as presented in the Pension Benefits Table.

Change in Control Plan - The Change in Control Plan provides that, upon both a change in control and the termination of a participant that qualifies as a Change in Control Termination, a participant will be entitled to a cash lump sum payment. A Change in Control means the occurrence of any of the following events, provided it shall not include any reorganization that is mandated by any Federal statute, rule, regulations or directive: (1) the merger, reorganization, or consolidation of FHLBank Topeka with or into another FHLBank or other entity; (2) the sale or transfer of all or substantially all of the business or assets of FHLBank Topeka to another FHLBank or other entity; (3) the purchase by FHLBank Topeka or transfer to FHLBank Topeka of substantially all of the business or assets of another FHLBank; (4) a change in the composition of the ~~Board~~board of ~~Directors,~~directors, as a result of one or a series of related transactions, that causes the combined number of member directors from the states of Colorado, Kansas, Nebraska and Oklahoma to cease to constitute a majority of the directors of FHLBank Topeka; or (5) the liquidation or dissolution of FHLBank Topeka. We provide for payments under a Change in Control to: (1) promote key employee loyalty and to assure continued dedication to FHLBank Topeka, notwithstanding the possibility, threat or occurrence of a Change in Control; and (2) to reduce the personal uncertainties to key employees who are vital to FHLBank Topeka's future success associated with a pending or possible Change in Control, and to encourage those key employees' continued dedication to FHLBank Topeka.

A Participant in the Change in Control Plan will receive in a cash lump sum, an amount that, when combined with any amount payable under an FHLBank severance policy, equals a compensation multiplier times the sum of: (1) the Participant’s then annualized base salary; and (2) an amount equal to the target Total Base Opportunity as reflected in FHLBank’s EICP Targets document for the year in which the change in control occurs. Participants at Tier 1 are subject to a compensation multiplier of 2.99, participants at Tier 2 are subject to a compensation multiplier of 2.0, and participants at Tier 3 are subject to a compensation multiplier of 1.0. A Participant is also eligible to receive the continuation of certain group health care benefits for a period of years equal to ~~his or her~~their compensation multiplier. ~~On June 19, 2015, FHLBank’s board approved the Change in Control Plan. Subsequently on June 22, 2017, the~~The Compensation Committee approved the following Participants in the Change in Control Plan and their effective Tiers: CEO at Tier 1; ~~CCEO and General Counsel, at Tier 2; and~~ CFO and CAO at Tier 2; and CRO and CLEO at Tier 3.

Table 7956 represents the elements of potential payments upon a Change in Control and the total amount that would be payable to the participating Named Executive Officers as of December 31, ~~2017~~2023 subject to FHLBank’s Change in Control Plan, as currently in effect:

Table 7956

Officer
Severance Amount¹
Incentive²
COBRA³
Change in Control Total
Mark E. Yardley $ 1,644,500
$ 1,151,150
$ 32,025
$ 2,827,675
Patrick C. Doran 740,000
407,000
32,325
1,179,325
William W. Osborn 340,000
187,000
15,960
542,960
Sonia R. Betsworth 290,000
145,000
10,675
445,675


Officer	Severance Amount1		Incentive2		COBRA3		Change in Control Total
Mark E. Yardley4	$	2,691,000	$	2,018,250	$	70,518	$	4,779,768
Jeffrey B. Kuzbel5	940,000		564,000		68,715		1,572,715
Sonia R. Betsworth	740,000		444,000		47,012		1,231,012
Martin L. Schlossman, Jr.	365,000		182,500		26,816		574,316
Carl M. Koupal, III	360,000		180,000		34,357		574,357


¹	~~Compensation multiplier times the annual base salary at year end as described under the Change in Control Plan.~~


²	~~Compensation multiplier times target Total Base Opportunity reflected in the 2017 EICP Targets as described in under the Change in Control Plan.~~


³	~~COBRA equals the number of months of medical, dental and vision coverage cost as described under the Change in Control Plan.~~

1 Compensation multiplier times the annual base salary at year end as described under the Change in Control Plan.

2 Compensation multiplier times target Total Base Opportunity reflected in the 2023 EICP Targets as described in under the Change in Control Plan.

3 COBRA equals the number of months of medical, dental and vision coverage cost as described under the Change in Control Plan.

4 In December 2023, Mr. Yardley ceased to serve as President and CEO effective December 31, 2023; consequently, the Change in Control Plan was no longer applicable to Mr. Yardley as of January 1, 2024.

5 Effective January 1, 2024, Mr. Kuzbel became President and CEO making him eligible for the Tier 1 compensation multiplier as of that date.

Why We Choose to Pay These Elements: We believe the Compensation Committee’s analyses described above provided an appropriate process to determine ~~2017~~2023 compensation levels for each Named Executive Officer that reasonably positions us to competitively manage our operations for success and to accomplish our mission.

The mix of compensation elements that comprised the total compensation of our Named Executive Officers in ~~2017~~2023 particularly allowed us to provide total compensation that we believe appropriately balanced reasonable guaranteed pay through carefully considered base salary determinations with additional at-risk cash compensation opportunities for the Named Executive Officers. This means that while we strived to match an appropriate level of compensation comparable to that reflected by our perceived peer groups and internal pay analysis through annual base salary and retirement benefits components, we also strived to provide a component of compensation that is at-risk in both the ~~shorter term~~shorter- and ~~the longer term.~~longer-term. These at-risk awards represent an opportunity to reward our Named Executive Officers based on the achievement of both our annual and long-term performance goals and the discretion vested in our Compensation Committee.

FHFA Oversight: Section 1113 of the Recovery Act requires that the Director of the FHFA prevent an FHLBank from paying compensation to its executive officers that is not reasonable and comparable to that paid for employment in similar businesses involving similar duties and responsibilities. In 2009, the FHFA issued an advisory bulletin establishing certain principles for executive compensation at the FHLBanks and the Office of Finance that include: (1) such compensation must be reasonable and comparable to that offered to executives in similar positions at comparable financial institutions; (2) such compensation should be consistent with sound risk management and preservation of the par value of FHLBank capital stock; (3) a significant percentage of an executive’s incentive based compensation should be tied to longer-term performance and outcome-indicators and be deferred and made contingent upon performance over several years; and (4) the ~~Board~~board of ~~Directors~~directors should promote accountability and transparency in the process of setting compensation. On January 28, 2014, the FHFA issued a final rule on executive compensation, which defines “reasonable” and “comparable” compensation and establishes the review and approval process for certain compensation payments and agreements. The FHLBank is subject to additional supervisory guidance and oversight from the FHFA, from time to time.

The FHLBanks have been directed to provide all compensation actions affecting their Named Executive Officers to the FHFA for review.

Compensation, Human Resources and Inclusion Committee Report: The Compensation, Human Resources and Inclusion Committee of our ~~Board~~board of ~~Directors~~directors has reviewed and discussed the Compensation Discussion and Analysis with management. Based on its review and discussions with management, the Compensation, Human Resources and Inclusion Committee has recommended to the ~~Board~~board of ~~Directors~~directors that the Compensation Discussion and Analysis be included in our annual report on Form 10-K.

The Compensation, Human Resources and Inclusion Committee

of the ~~Board~~board of ~~Directors~~directors

~~Richard S. Masinton,~~Thomas H. Olson, Jr., Chair

Milroy A. Alexander

~~Robert~~Thomas E. ~~Caldwell, II~~Henning, Chair Designate

~~G. Bridger Cox~~Barry J. Lockard

~~Donde L. Plowman~~Jeffrey R. Noordhoek

~~Mark W. Schifferdecker~~

~~Bruce A. Schriefer~~Carla D. Pratt

Douglas E. Tippens

Table 8057 presents the Summary Compensation Table for the Named Executive ~~Officers.~~Officers for the years for which they represented Named Executive Officers of FHLBank.

Table 57


Name and Principal Position	Year	Salary		Bonus		Non-Equity Incentive Plan Compensation1		Change in Pension Value and Nonqualified Deferred Compensation Earnings2		All Other Compensation3		Total
Mark E. Yardley4	2023	$	900,000	$	—	$	820,046	$	700,625	$	132,871	$	2,553,542
President & CEO	2022	800,000		—		721,642		69,058		114,339		1,705,039
	2021	725,000		—		481,944		407,337		105,952		1,720,233
Jeffrey B. Kuzbel5	2023	470,000		—		191,056		3,993		70,544		735,593
EVP & CFO	2022	442,000		50,000		175,101		3,533		60,614		731,248
	2021	322,500		125,000		132,942		619		161,543		742,604
Sonia R. Betsworth6	2023	370,000		—		279,660		236,248		51,895		937,803
EVP & CAO	2022	345,000		—		250,056		22,762		45,376		663,194
	2021	335,000		—		176,948		17,490		44,207		573,645
Martin L. Schlossman, Jr.7	2023	365,000		—		237,831		107,417		49,431		759,679
SVP & CRO	2022	337,000		—		211,707		8,606		43,477		600,790
	2021	328,500		—		162,659		4,211		42,668		538,038
Carl M. Koupal, III8	2023	360,000		—		121,950		24,868		48,014		554,832
SVP & CLEO	2022	335,000		—		110,594		448		43,672		489,714

1 All compensation reported under “non-equity incentive plan compensation” represents performance awards earned pursuant to achievement of performance objectives under FHLBank’s EICP, subject to the approval of the Compensation Committee and not disapproved by the FHFA. The deferred compensation earned and the accrued component of the EICP for 2020 was reduced when paid in 2021. In 2023, the amount of these reductions, which was $91,699, $34,936, and $30,107 for Mr. Yardley, Ms. Betsworth, and Mr. Schlossman, respectively, was paid at the discretion of the Board of Directors. The amounts in the table reflect the actual amounts paid in the respective years.

2 The change in pension value will fluctuate with changes in discount rates used to calculate the present value of accumulated benefits and can result in decreases. However, per SEC rules, any net actuarial decreases in pension plan values have been excluded from this column. Nonqualified deferred compensation earnings include above market earnings attributable to the BEP, which are calculated by multiplying the nonqualified deferred compensation average balance of the applicable year by the average rate of return in excess of the long-term applicable Federal rate (120 percent compounded quarterly) published by the IRS.

3 The 2023 components of All Other Compensation are provided in Table 8058.

4 Above market earnings attributable to the BEP were $49,625, $69,058, and $56,337 for 2023, 2022, and 2021, respectively. The aggregate change in the value of the accumulated benefit under FHLBank’s DB Plan was $221,000, $(444,000), and $111,000 for 2023, 2022, and 2021, respectively. The aggregate change in the value of the accumulated benefit under the defined benefit portion of the BEP was $430,000, $(1,077,000), and $240,000 for 2023, 2022, and 2021, respectively.

5 Above market earnings attributable to the BEP were $3,993, $3,533, and $619 for 2023, 2022 and 2021, respectively.

6 Above market earnings attributable to the BEP were $17,248, $22,762, and $17,490 for 2023, 2022, and 2021, respectively. The aggregate change in the value of the accumulated benefit under FHLBank’s DB Plan was $151,000, $(651,000) and $(62,000) for 2023, 2022, and 2021, respectively. The aggregate change in the value of the accumulated benefit under the defined benefit portion of the BEP was $68,000, $(321,000) and $(18,000) for 2023, 2022, and 2021, respectively.

7 Above market earnings attributable to the BEP were $8,417, $8,606, and $4,211 for 2023, 2022, and 2021, respectively. The aggregate change in the value of the accumulated benefit under FHLBank’s DB Plan was $69,000, $(406,000) and $(51,000) for 2023, 2022 and 2021, respectively. The aggregate change in the value of the accumulated benefit under the defined benefit portion of the BEP was $30,000, $(184,000), and $(16,000) for 2023, 2022, and 2021, respectively.

8 Above market earnings attributable to the BEP were $868 and $448 for 2023 and 2022, respectively. The aggregate change in the value of the accumulated benefit under FHLBank’s DB Plan was $24,000 and $(223,000) for 2023 and 2022, respectively.

Name and Principal Position
Year Salary Bonus
Non-Equity Incentive Plan Compensation¹
Change in Pension Value and Nonqualified Deferred Compensation Earnings²
All Other Compensation³
Total
Mark E. Yardley⁴
2017 $ 550,000
$ —
$ 355,720
$ 1,297,561
$ 58,773
$ 2,262,054
President & CEO 2016 364,250
—
246,612
204,745
41,627
857,234
2015 352,625
—
212,734
44,175
34,131
643,665
Patrick C. Doran⁵
2017 357,500
50,000
213,443
324,590
36,455
981,988
EVP, CCEO & General 2016 315,875
—
207,172
174,310
51,455
748,812
Counsel 2015 300,625
—
185,585
63,565
25,867
575,642
William W. Osborn⁶
2017 330,500
—
188,557
251,542
28,521
799,120
SVP & CFO 2016 297,500
—
182,027
139,000
48,525
667,052
2015 271,012
—
155,082
54,241
9,263
489,598
Sonia R. Betsworth⁷
SVP & CAO
2017 286,250
1,450
159,570
525,768
24,036
997,074
Joe B. Edwards⁸
SVP & CIO
2017 274,875
—
175,554
—
20,447
470,876


¹	~~All compensation reported under “non-equity incentive plan compensation” represents performance awards earned pursuant to achievement of performance objectives under the FHLBank’s EICP.~~

The change in pension value will fluctuate with changes in discount rates used to calculate the present value of accumulated benefits and can result in decreases. However, per SEC rules, any net actuarial decreases in pension plan values have been excluded from this column. Nonqualified deferred compensation earnings include above market earnings attributable to the BEP, which are calculated by multiplying the nonqualified deferred compensation balance as of January 1 of the applicable year by the average rate of return in excess of the long-term applicable Federal rate (120 percent compounded quarterly) published by the IRS.


³	~~The 2017 components of All Other Compensation are provided in Table 81.~~

⁴

Above market earnings attributable to the BEP for Mr. Yardley were $36,561, $28,745, and $30,175 for 2017, 2016, and 2015, respectively. The aggregate change in the value of Mr. Yardley’s accumulated benefit under the FHLBank’s DB Plan was $264,000, $155,000, and $30,000 for 2017, 2016, and 2015, respectively. The aggregate change in the value of his accumulated benefit under the defined benefit portion of the BEP was $997,000, $21,000, and $(16,000) for 2017, 2016, and 2015, respectively.

⁵

Above market earnings attributable to the BEP for Mr. Doran were $6,590, $4,310, and $4,565 for 2017, 2016, and 2015, respectively. The aggregate change in the value of Mr. Doran’s accumulated benefit under the FHLBank’s DB Plan was $157,000, $97,000, and $34,000 for 2017, 2016, and 2015, respectively. The aggregate change in the value of his accumulated benefit under the defined benefit portion of the BEP was $161,000, $73,000, and $25,000 in 2017, 2016, and 2015, respectively.

⁶

Above market earnings attributable to the BEP for Mr. Osborn were $542, $0, and $241 for 2017, 2016, and 2015, respectively. The aggregate change in the value of Mr. Osborn's accumulated benefit under the FHLBank’s DB Plan was $132,000, $78,000 and $26,000 for 2017, 2016, and 2015, respectively. The aggregate change in the value of his accumulated benefit under the defined benefit portion of the BEP was $119,000, $61,000 and $28,000 for 2017, 2016, and 2015, respectively.


⁷	Above market earnings attributable to the BEP for Ms. Betsworth were $7,768 for 2017. The aggregate change in the value of Ms. Betsworth's accumulated benefit under the FHLBank’s DB Plan was $280,000 for 2017. The aggregate change in the value of her accumulated benefit under the defined benefit portion of the BEP was $238,000 in 2017.


⁸	~~Mr. Edwards was not a participant in the BEP during 2017.~~

Table 8158 presents the components of “All Other Compensation” for ~~2017~~2023 as summarized in Table ~~80.~~57. There were no perquisites or personal benefits of more than $10,000 in aggregate for any Named Executive Officer for 2023.

~~Table 81~~

Named Executive Officer
Perquisites and Personal Benefits¹
Gross-ups for Taxes
Life Insurance Premiums
Long Term and Individual Disability Premiums
FHLBank Contribution to DC Plan
FHLBank Contribution to Defined Contribution Portion of BEP
Other Miscellaneous
Total All Other Compensation
Mark E. Yardley $ 11,180
$ 1,486
$ 711
$ 4,714
$ 14,540
$ 26,125
$ 17
$ 58,773
Patrick C. Doran —
1,919
513
2,970
16,200
14,836
17
36,455
William W. Osborn —
1,226
470
768
16,200
9,840
17
28,521
Sonia R. Betsworth —
1,346
391
713
7,744
13,825
17
24,036
Joe B. Edwards —
8
401
730
19,291
—
17
20,447


¹	Perquisites and personal benefits are only included if more than $10,000 in aggregate for an individual. Mr. Yardley's perquisites and personal benefits consist of professional and tax fee reimbursement, cellular phone reimbursement and expenses for spousal travel.

Table 8258


Named Executive Officer	Life Insurance Premiums		Long Term and Individual Disability Premiums		FHLBank Contribution to DC Plan		FHLBank Contribution to Defined Contribution Portion of BEP		Other Miscellaneous		Total All Other Compensation
Mark E. Yardley	$	855	$	4,132	$	33,000	$	94,885	$	—	$	132,871
Jeffrey B. Kuzbel	804		5,411		19,027		45,302		—		70,544
Sonia R. Betsworth	634		770		21,210		28,746		536		51,895
Martin L. Schlossman, Jr.	625		759		19,689		28,358		—		49,431
Carl M. Koupal, III	616		749		26,152		20,215		282		48,014

Table 59 presents the Grants of Plan Based Awards Table for the Named Executive Officers.

Table 8259

Name Plan
Estimated Future Payouts Under Non‑Equity Incentive Plan Awards¹
Threshold Target Optimum
Mark E. Yardley EICP-Cash Incentive $ 96,250
$ 192,500
$ 288,750
President & CEO
EICP-Deferred Incentive Opportunity²
96,250
192,500
288,750
Patrick C. Doran EICP-Cash Incentive 44,000
88,000
132,000
EVP, CCEO & General Counsel
EICP-Deferred Incentive Opportunity²
44,000
88,000
132,000
William W. Osborn EICP-Cash Incentive 41,525
83,050
124,575
SVP & CFO
EICP-Deferred Incentive Opportunity²
41,525
83,050
124,575
Sonia R. Betsworth EICP-Cash Incentive 34,375
68,750
103,125
SVP & CAO
EICP-Deferred Incentive Opportunity²
34,375
68,750
103,125
Joe B. Edwards EICP-Cash Incentive 33,600
67,200
100,800
SVP & CIO
EICP-Deferred Incentive Opportunity²
33,600
67,200
100,800


Name	Plan	Estimated Future Payouts Under Non‑Equity Incentive Plan Awards1
		Threshold		Target		Optimum
Mark E. Yardley	EICP-Cash Incentive	$	168,750	$	337,500	$	506,250
President & CEO	EICP-Deferred Incentive Opportunity	168,750		337,500		506,250
Jeffrey B. Kuzbel	EICP-Cash Incentive	70,500		141,000		211,500
EVP & CFO	EICP-Deferred Incentive Opportunity	70,500		141,000		211,500
Sonia R. Betsworth	EICP-Cash Incentive	55,500		111,000		166,500
EVP & CAO	EICP-Deferred Incentive Opportunity	55,500		111,000		166,500
Martin L. Schlossman, Jr.	EICP-Cash Incentive	45,625		91,250		136,875
SVP & CRO	EICP-Deferred Incentive Opportunity	45,625		91,250		136,875
Carl M. Koupal, III	EICP-Cash Incentive	45,000		90,000		135,000
SVP & CLEO	EICP-Deferred Incentive Opportunity	45,000		90,000		135,000

Amounts reflected for the EICP represent the applicable range of estimated future payouts and do not represent amounts actually earned or awarded for the fiscal year ended December 31, 2017. Award amounts are calculated using the base salaries in effect on January 1 at the beginning of the performance period. The EICP-Cash Incentive, if any, are earned and vested at year end. Awards, if any, under the EICP-Deferred Incentive Opportunity are payable in the year following the end of the three-year performance period. See discussion under Annual and Deferred Cash Incentive Awards under this Item 11 for a description of the terms of the EICP and future payouts.


²	~~The final value of the EICP-Deferred Incentive Opportunity may be $0 if threshold metrics are not met, 75 percent of initial deferral at threshold, 100 percent at target and 125 percent at optimum.~~

1 Amounts reflected for the EICP represent the applicable range of estimated future payouts and do not represent amounts actually earned or awarded for the fiscal year ended December 31, 2023. Award amounts are calculated using the base salaries in effect on January 1 at the beginning of the performance period. The EICP-Cash Incentive, if any, are earned and vested at year end. Awards, if any, under the EICP-Deferred Incentive Opportunity are payable in the year following the end of the three-year performance period. See discussion under Annual and Deferred Cash Incentive Awards under this Item 11 for a description of the terms of the EICP and potential future payouts.

Pension Benefits: Table 8360 presents the ~~2017~~2023 Pension Benefits Table for the participating Named Executive Officers.

Table 8360


Name	Plan Name	Number of Years of Credited Services	Present Value of Accumulated Benefit		Payments During Last Fiscal Year
Mark E. Yardley	Pentegra Defined Benefit Plan for Financial Institutions	30.000	$	3,078,000	$	—
President & CEO	FHLBank Benefit Equalization Plan	30.000	5,996,000		—


Sonia R. Betsworth	Pentegra Defined Benefit Plan for Financial Institutions	30.000	2,137,000		—
EVP & CAO	FHLBank Benefit Equalization Plan	30.000	881,000		—
Martin L. Schlossman, Jr.	Pentegra Defined Benefit Plan for Financial Institutions	18.083	856,000		—
SVP & CRO	FHLBank Benefit Equalization Plan	18.100	324,000		—
Carl M. Koupal, III	Pentegra Defined Benefit Plan for Financial Institutions	10.500	226,000		—
SVP & CLEO	FHLBank Benefit Equalization Plan	N/A	—		—

Name Plan Name
Number of Years of Credited Services
Present Value of Accumulated Benefit
Payments During Last Fiscal Year
Mark E. Yardley Pentegra Defined Benefit Plan for Financial Institutions 30.000 $ 2,445,000
$ —
President & CEO FHLBank Benefit Equalization Plan 30.000 2,675,000
—
Patrick C. Doran Pentegra Defined Benefit Plan for Financial Institutions 12.667 774,000
—
EVP, CCEO & General Counsel FHLBank Benefit Equalization Plan 12.667 509,000
—
William W. Osborn Pentegra Defined Benefit Plan for Financial Institutions 10.583 563,000
—
SVP & CFO FHLBank Benefit Equalization Plan 10.583 290,000
—
Sonia R. Betsworth Pentegra Defined Benefit Plan for Financial Institutions 30.000 1,987,000
—
SVP & CAO FHLBank Benefit Equalization Plan 30.000 402,000
—

Deferred Compensation: Table 8461 presents the ~~2017~~2023 Nonqualified Deferred Compensation Table for the participating Named Executive Officers. Our fiscal year (FY) is ~~2017,~~2023, with a fiscal year end (FYE) of December 31, ~~2017.~~2023.

Table 61


Name	Executive Contributions in Last FY1		Registrant Contributions in Last FY		Aggregate Earnings in Last FY		Aggregate Withdrawals / Distributions		Aggregate Balance at Last FYE2
Mark E. Yardley, President & CEO	$	97,885	$	94,885	$	152,675	$	—	$	2,527,807
Jeffrey B. Kuzbel, EVP & CFO	33,606		45,302		12,284		—		241,727
Sonia R. Betsworth, EVP & CAO	45,794		28,746		53,065		—		879,268
Martin L. Schlossman, Jr., SVP & CRO	97,223		28,358		25,896		—		470,386
Carl M. Koupal, III, SVP & CLEO	11,077		20,215		2,670		—		65,111

1 All amounts are also included in the salary column of Table 8457.

2 The total amount reported as preferential (above market) earnings in the aggregate balance at last FYE reported as compensation to each Named Executive Officer in the Executive Group in our Summary Compensation Tables for previous years (2006-2022) was $455,039 for Mr. Yardley, $4,152 for Mr. Kuzbel, $89,904 for Ms. Betsworth, $12,817 for Mr. Schlossman, Jr. , and $448 for Mr. Koupal. The amounts reported as preferential (above market) earnings for the current year are presented in Table 57.

Name
Executive Contributions in Last FY¹
Registrant Contributions in Last FY
Aggregate Earnings in Last FY
Aggregate Withdrawals / Distributions
Aggregate Balance at Last FYE²
Mark E. Yardley,
President & CEO $ 43,775
$ 26,125
$ 69,917
$ —
$ 1,154,815
Patrick C. Doran,
EVP, CCEO & General Counsel 17,308
14,836
13,407
—
235,300
William W. Osborn,
SVP & CFO 13,120
9,840
2,028
—
50,403
Sonia R. Betsworth,
SVP & CAO 47,894
13,825
16,481
—
299,975


¹	~~All amounts are also included in the salary column of Table 80.~~

~~The total amount reported as preferential (above market) earnings in the aggregate balance at last FYE reported as compensation to each Named Executive Officer~~in the Executive Group in our Summary Compensation Tables for previous years (2006-2016) was $164,565 for Mr. Yardley, $23,622 for Mr. Doran, $783 for Mr. Osborn, and $9,065 for Ms. Betsworth. The amounts reported as preferential (above market) earnings for the current year are presented in Table 80.

CEO Pay Ratio: As required by Section 953(b) of the Dodd-Frank Act and Item 402(u) of Regulation S-K, we are providing the following information about the relationship of the median of the annual Total Compensation of all our employees except our CEO ~~who is our principal executive officer~~ (the "Median Employee"), and the annual total compensation of Mr. Yardley, our ~~CEO.~~ CEO, who is our principal executive officer. We identified the Median Employee in 2023 (see methodology below).

Methodology used to determine the Median Employee

We identified the Median Employee by comparing the ~~2017~~2023 compensation (i.e., ~~2017 annual~~base salary ~~and~~on December 31, 2023 combined with actual incentive compensation earned ~~for 2016~~in 2023 but paid in ~~2017)~~2024) for each of the employees who were employed by ~~the~~ FHLBank on ~~October 1, 2017,~~December 31, 2023, and ranking all ~~235~~252 employees by that consistently applied compensation measure from lowest to highest, excluding the CEO. ~~We next~~Because there was an even amount of employees in the total count, we identified the two middle employees and selected the one with lower compensation to represent the initial median ~~employee based on that calculation, and~~employee. Next, we identified the five employees with ~~2017~~2023 compensation higher than that initial median employee and the five employees with ~~2017~~2023 compensation lower than that initial median employee, constituting a total pool of 11 employees (the ~~"Identified Pool"~~“Identified Pool”). We then calculated the ~~2017~~2023 Total Compensation for each employee in the Identified Pool for ~~2017~~2023 in the same manner as “Total Compensation” ~~for 2017 is~~as shown for our CEO in the Summary Compensation Table, ~~(see~~ Table ~~80),~~57, which includes among other things, amounts attributable to the change in pension value, which will vary among employees based upon their tenure at ~~the~~ FHLBank. We ranked the ~~2017~~2023 Total Compensation for each employee in the Identified Pool from lowest to highest, and the ~~median~~ employee from the Identified Pool ~~based on 2017 Total Compensation was identified as~~in the middle is our Median Employee. The employees in the calculation included ~~all~~only full-time ~~and~~employees as all part-time employees and ~~we annualized all such employees who~~interns were ~~not employed by us~~excluded.

100

Methodology used to determine the CEO Pay Ratio for ~~all of 2017.~~

2023

For the year ended December 31, ~~2017,~~2023, the ratio of our CEO’s Total Compensation to the Total Compensation of our Median Employee was approximately ~~21:~~20:1. For the year ended December 31, ~~2017,~~2023, the Total Compensation of the CEO, as reported in the Summary Compensation Table, Table 57, was ~~$2,262,054,~~$2,553,542, and the Total Compensation of the Median Employee for the same year ended December 31, 2023 was ~~$106,947.~~$125,286. As a result of our methodology for determining the pay ratio, the estimated pay ratio reported above may not be comparable to the pay ratio of other companies in our industry or in other industries because other companies may rely on different methodologies or assumptions to determine an estimate of their pay ratio, or may make adjustments that we do not make. In addition, no two companies have identical employee populations or compensation programs. As such, our pay ratio should not be used as a basis for comparison between companies.

Director Compensation: Table 8562 presents the Director Compensation Table for the persons who served on our ~~2017 Board~~board of ~~Directors.~~directors during 2023.

Table 62


Name	Fees Earned or Paid in Cash		Nonqualified Deferred Compensation Earnings1		Total
Donald R. Abernathy, Jr.	$	120,000	$	532	$	120,532
Milroy A. Alexander	130,000		2,952		132,952
G. Bridger Cox	155,000		9,295		164,295
Thomas E. Henning	120,000				120,000
Michael B. Jacobson	120,000				120,000
Holly Johnson	130,000				130,000
Lynn Katzfey	120,000				120,000
Barry J. Lockard	134,500				134,500
Craig A. Meader	120,000				120,000
L. Kent Needham	130,000		2,182		132,182
Jeffrey R. Noordhoek	120,000				120,000
Mark J. O’Connor	130,000				130,000
Thomas H. Olson, Jr.	130,000				130,000
Carla D. Pratt	120,000				120,000
Douglas E. Tippens	120,000		14,580		134,580
Paul E. Washington	120,000				120,000
Lance L. White	120,000		545		120,545

~~Table 85~~1 Nonqualified deferred compensation earnings represents above market earnings attributable to the BEP, which are calculated by multiplying the nonqualified deferred compensation average balance of the applicable year by the average rate of return in excess of the long-term applicable Federal rate (120 percent compounded quarterly) published by the IRS.

Name
Fees Earned or Paid in Cash
Donald R. Abernathy, Jr. $ 100,000
Milroy A. Alexander 100,000
Robert E. Caldwell, II 115,000
G. Bridger Cox 130,000
Holly Easterling 100,000
James R. Hamby 110,000
Andrew C. Hove, Jr. 100,000
Michael B. Jacobson 100,000
Jane C. Knight 100,000
Richard S. Masinton 110,000
Neil F. M. McKay 100,000
L. Kent Needham 100,000
Mark J. O’Connor 100,000
Thomas H. Olson, Jr. 100,000
Donde L. Plowman 100,000
Mark W. Schifferdecker 110,000
Bruce A. Schriefer 110,000
Douglas E. Tippens 100,000

Director Fees - The ~~Board~~board of ~~Directors~~directors establishes on an annual basis a Board of Directors Compensation Policy governing compensation for ~~Board~~board of director meeting attendance. Our ~~2017~~2023 Board of Directors Compensation Policy ~~(2017~~(2023 Policy) was adopted ~~October 28, 2016~~January 26, 2023 and became effective January 1, ~~2017.~~2023. This policy was established in accordance with the Bank Act and FHFA regulations that were amended in 2008 to remove the statutory cap on director compensation. The applicable statutes and regulations allow each FHLBank to pay its directors reasonable compensation and expenses, subject to the authority of the Director of the FHFA to object to, and to prohibit prospectively, compensation and/or expenses that the Director of the FHFA determines are not reasonable. ~~In order to~~To compensate them for their time while serving as directors, our ~~2017~~2023 Policy provided that each director shall be paid one-fourth of ~~his or her~~their maximum annual compensation provided for in the policy following the end of each calendar quarter. The quarterly payment can be reduced for reasons specified in the policy.

~~In determining reasonable compensation for our directors, we participated in~~

101

The Maximum Annual Compensation amounts are based on an evaluation of McLagan market research data, including the appropriate peer group and peer positioning, a fee comparison among the FHLBanks and the board’s assessment of appropriate and comparable pay that will allow the FHLBank ~~System review of director compensation, which included a study prepared by McLagan. FHLBank director compensation that was established by the Board under the 2017 Policy reflected this analysis.~~to recruit and retain highly qualified directors. The ~~2017~~2023 Policy established annual compensation limits of ~~$130,000~~$155,000 for the ~~Chairman, $110,000~~Chair, $134,500 for the ~~Vice-Chairman and~~Vice Chair, $130,000 for Committee Chairs and ~~$100,000~~$120,000 for all other directors. Additionally, an individual serving as a Vice Chair of the Board was also entitled to an increase of $5,000 in ~~his or her Maximum Annual Compensation~~their maximum annual compensation in the event the individual served as both Vice Chair of the Board and a Committee Chair.

The ~~Board~~board of ~~Directors~~directors adopted a ~~2018~~2024 Board of Directors Compensation Policy ~~(2018~~(2024 Policy) governing compensation for board of director meeting attendance on ~~October 27, 2017.~~December 15, 2023. The ~~2018~~2024 Policy is similar to the ~~2017~~2023 Policy, except that the ~~2018 Policy~~2024 policy reflects increases in the established annual compensation limits to ~~$133,750~~$160,000 for the ~~Chairman, $113,750~~Chair, $140,000 for the ~~Vice-Chairman and~~Vice Chair, $130,000 for Committee Chairs, and ~~$103,750~~$123,000 for all other directors. Additionally, an individual serving as a Vice Chair of the Board shall be entitled to an increase of $5,000 in his or her Maximum Annual Compensation in the event the individual serves as both Vice Chair of the Board and a Committee Chair. In addition to the Maximum Annual Compensation reflected in the policy, a director may also realize the benefit of reasonable spousal or guest travel expenses that qualify as perquisites as set forth in the Directors and Executive Officers Travel Policy, for one meeting per calendar year, as designated by the Chair of the ~~Board~~board of ~~Directors. The Board of~~directors. Directors are also ~~adopted revisions~~entitled to ~~the~~participate in FHLBank’s BEP, ~~effective January 1, 2018,~~ discussed above, ~~and as disclosed in the Form 8-K filed on February 5, 2018,~~ which allows Directors the opportunity to defer Director compensation, up to 100 percent.

Director Expenses - Directors are also reimbursed for all necessary and reasonable travel, subsistence and other related expenses incurred in connection with the performance of their duties. For expense reimbursement purposes, directors’ official duties can include:


▪	~~Meetings of the Board and Board Committees;~~


▪	~~Meetings requested by the FHFA;~~


▪	~~Meetings of FHLBank System committees;~~


▪	~~FHLBank System director meetings;~~


▪	~~Meetings of the Council of Federal Home Loan Banks and Council committees; and~~


▪	~~Attendance at other events on behalf of the FHLBank.~~

▪Meetings of the Board and Board Committees;

▪Meetings requested by the FHFA;

▪Meetings of FHLBank System committees;

▪FHLBank System director meetings;

▪Meetings of the Council of Federal Home Loan Banks and Council committees; and

▪Attendance at other events on behalf of FHLBank.

Item 12: Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

We are a cooperative. Our members or former members own all of our outstanding capital stock. A majority of our directors are elected from our membership. One of the voting rights of members is for the election of member and independent directors. Each member is eligible to vote for those open member director seats in the state in which its principal place of business is located and for all open independent director seats, which are elected by members of the entire FHLBank district. Membership is voluntary; however, members must give notice of their intent to withdraw from membership. A member that withdraws from membership may not be readmitted to membership for five years after the date upon which its required membership stock (Class A Common Stock) is redeemed by us.

Management cannot legally and, therefore, does not, own our capital stock. We do not offer any compensation plan to our employees under which equity securities of ~~the~~ FHLBank are authorized for issuance.

Table 8663 presents information on ~~member institutions~~members holding five percent or more of the total outstanding capital stock, which includes mandatorily redeemable capital stock, of ~~the~~ FHLBank as of ~~March 13, 2018. Of these stockholders, no~~February 29, 2024. No affiliated officer or director of these stockholders currently serves on our ~~Board~~board of ~~Directors.~~directors.

Table 8663

Member Institutions Holding 5 Percent or More Capital Stock

Borrower Name

Address

City

State

Number of Shares

Percent of Total

MidFirst Bank

501 NW Grand Blvd

Oklahoma City

4,789,901

20.0

BOKF, N.A.

1 Williams Center-BOK Tower 16 SW

Tulsa

2,707,397

11.3

TOTAL

7,497,298

31.3

102

Member Institutions Holding 5 Percent or More Capital Stock
Borrower Name Address City State Number of Shares Percent of Total
BOKF, NA 1 Williams Center-BOK Tower 16 SW Tulsa OK 3,150,000
18.2 %
MidFirst Bank 501 NW Grand Blvd Oklahoma City OK 2,727,500
15.7
Capitol Federal Savings Bank 700 S Kansas Ave Topeka KS 1,924,250
11.1
TOTAL 7,801,750
45.0 %

Additionally, because of the fact that a majority of our ~~Board~~board of ~~Directors~~directors is nominated and elected from our membership (“member directors”), these member directors are officers or directors of ~~member institutions~~members that own our capital stock. Table 8764 presents total outstanding capital stock, which includes mandatorily redeemable capital stock, held as of ~~March 13, 2018,~~February 29, 2024, for ~~member institutions~~members whose affiliated officers or directors ~~served as~~currently serve on our ~~directors as~~board of ~~March 13, 2018:~~directors:

Table 8764

Total Capital Stock Outstanding to Member Institutions whose Officers or Directors Serve as a Director

Borrower Name

Address

City

State

Number of Shares

Percent of Total

BOKF, N.A.

1 Williams Center-BOK Tower 16 SW

Tulsa

2,707,397

11.3

NebraskaLand Bank

1400 S Dewey Street

North Platte

52,053

0.2

Cornhusker Bank

8310 O Street

Lincoln

46,664

0.2

Bank of the Flint Hills

806 5th Street

Wamego

35,957

0.2

Points West Community Bank

1291 Main Street

Windsor

8,629

—

BancFirst

100 N Broadway Ave

Oklahoma City

6,500

—

First National Bank of Kansas

600 N 4th Street

Burlington

5,852

—

Sooner State Bank

2 SE 4th Street

Tuttle

3,474

—

First Security Bank

312 Maple Street

Overbrook

2,927

—

Bank of Estes Park

255 Park Lane

Estes Park

1,805

—

Nebraska State Bank

218 Main Street

Oshkosh

1,207

—

Impact Development Fund

200 E. 7th Street, Suite 412

Loveland

1,200

—

TOTAL

2,873,665

11.9

Total Capital Stock Outstanding to Member Institutions whose Officers or Directors Serve as a Director
Borrower Name Address City State Number of Shares Percent of Total
Girard National Bank 100 E Forest Girard KS 55,968
0.3 %
NebraskaLand National Bank 1400 S Dewey North Platte NE 15,013
0.1
Citizens Bank & Trust Co. 1100 N Commerce Ardmore OK 10,072
0.1
Points West Community Bank 809 Illinois Street Sidney NE 8,264
0.1
FirstBank 10403 W Colfax Ave Lakewood CO 7,233
0.1
Bank of the Prairie 18675 West 151st Street Olathe KS 6,660
—
BancFirst 101 N. Broadway Oklahoma City OK 5,500
—
Points West Community Bank 100 E 3rd Street Windsor CO 5,471
—
The Bankers Bank 9020 N May Ave Ste 200 Oklahoma City OK 2,801
—
Bankers’ Bank of Kansas, NA 555 N Woodlawn Wichita KS 2,345
—
Sooner State Bank 2 SE 4th Street Tuttle OK 1,905
—
Bank of Estes Park Park Lane at MacGregor Estes Park CO 1,243
—
First Security Bank 312 Maple Street Overbrook KS 1,175
—
TOTAL 123,650
0.7 %

Item 13: Certain Relationships and Related Transactions, and Director Independence

Certain Relationships and Related Transactions

Since we are a cooperative, ownership of our capital stock is a prerequisite for our members to transact business with us. In recognition of this organizational structure, the SEC granted us an accommodation pursuant to a “no action letter,” dated May 23, 2006, which relieves us from the requirement to make disclosures under Item 404(a) of Regulation S-K for transactions with related persons, such as our members and directors, which occur in the ordinary course of business. Further, the Recovery Act codified this accommodation.

Members with beneficial ownership of more than five percent of our total outstanding capital stock and all of our directors are classified as related persons under SEC regulations. Transactions with members deemed related persons of ~~the~~ FHLBank occur in the ordinary course of our business since we conduct our advance and mortgage loan business almost exclusively with our members. Our member directors are officers or directors of members that own our capital stock and conduct business with us.

Information with respect to the directors who are officers or directors of our members is set forth under Item 10 ‑ “Directors, Executive Officers and Corporate Governance ‑ Directors.” Additional information regarding members that are beneficial owners of more than five percent of our total outstanding capital stock is provided in Item 12 ‑ “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.”

See Item 11 - ~~"Executive Compensation"~~“Executive Compensation” for a discussion of the compensation of our Named Executive Officers and directors.

We have a written “Related Person Transactions Policy” (Policy) that provides for the review and approval or ratification by our Audit Committee of any transaction with a related person that is outside the ordinary course of business. Under the Policy, transactions with related persons that are in the ordinary course of business are deemed pre-approved.

103

A “Related Person” under the Policy is:


▪	~~Any person who is, or at any time since the beginning of our last fiscal year was, a director or an executive officer of the FHLBank;~~


▪	~~Any immediate family member of any of the foregoing persons and any person (other than a tenant or employee) sharing the household of such director or executive officer;~~


▪	~~Any firm, corporation, or other entity in which any of the foregoing persons is an executive officer, a general partner or principal or in a similar position; or~~


▪	~~Any member institution (or successor) of the FHLBank that is known to be the beneficial owner of more than five percent of our voting securities.~~

▪Any person who is, or at any time since the beginning of our last fiscal year was, a director or an executive officer of FHLBank;

▪Any immediate family member of any of the foregoing persons and any person (other than a tenant or employee) sharing the household of such director or executive officer;

▪Any firm, corporation, or other entity in which any of the foregoing persons is an executive officer, a general partner or principal or in a similar position; or

▪Any member institution (or successor) of FHLBank that is known to be the beneficial owner of more than five percent of our voting securities.

“Ordinary course of business” is defined in the Policy as activities conducted with members, including but not limited to providing our products and services to the extent such product and service transactions are conducted on terms no more favorable than the terms of comparable transactions with similarly situated members or housing associates, as applicable, or transactions between ~~the~~ FHLBank and a Related Person where the rates and charges involved in the transactions are subject to competitive bidding. Our products and services include: (1) credit products (i.e., line of credit, advances, forward settling advance commitments, letters of credit, standby credit facility and derivative transactions); (2) MPF Program mortgage loan products; (3) housing and CDP products; and (4) other services (i.e., deposit accounts, wire transfer services, safekeeping services ~~consolidated obligation direct placement~~ and unsecured credit transactions permissible under the RMP).

Transactions outside the ordinary course of business, with Related Persons that have a direct or indirect material interest, and exceed $120,000 are subject to Audit Committee review and approval under the Policy and include situations in which: (1) we obtain products or services from a Related Person of a nature, quantity or quality, or on terms that are not readily available from alternative sources; (2) we provide products or services to a Related Person on terms not comparable to those provided to unrelated parties; or (3) the rates or charges involved in the transactions are not subject to competitive bidding.

Director Independence

Board Operating Guidelines and Nasdaq Standards: The Board Operating Guidelines of ~~the~~ FHLBank (Guidelines), available at www.fhlbtopeka.com, require that the ~~Board~~board of ~~Directors~~directors make an annual affirmative determination as to the independence of each director, as that term is defined by Rule 5605(a)(2) of the Nasdaq Marketplace Rules (the “Nasdaq Independence Standards”).

The ~~Board~~board of ~~Directors~~directors has affirmatively determined that each one of its directors, both independent and member directors (each of whom is listed in Item 10 of this Form 10-K), is independent in accordance with the Nasdaq Independence Standards.

~~In order to~~To assist the ~~Board~~board of ~~Directors~~directors in making an affirmative determination of each director’s independence under the Nasdaq Independence Standards, the ~~Board~~board of ~~Directors:~~directors: (1) applied categorical standards for independence contained in the Guidelines and under the Nasdaq Independence Standards; (2) determined subjectively the independence of each director; and (3) considered the recommendation of the Audit Committee following its assessment of the independence of each director. The ~~Board~~board of ~~Directors’~~directors’ determination of independence under the Nasdaq Independence Standards rested upon a finding that each director has no relationship which, in the opinion of the ~~Board~~board of ~~Directors,~~directors, would interfere with that director’s exercise of independent judgment in carrying out the responsibilities of the director. Since under FHFA regulations, each independent director must be a bona fide resident of our district, and each member director must be an officer or director of one of our members, the ~~Board~~board of ~~Directors~~directors included in its consideration whether any of these relationships would interfere with the exercise of independent judgment of a particular director.

Committee Independence

Audit Committee: In addition to the Nasdaq Independence Standards for committee members, our Audit Committee members are subject to the independence standards of the FHFA. FHFA regulations state that a director will be considered sufficiently independent to serve as an Audit Committee member if that director does not have a disqualifying relationship with ~~the~~ FHLBank or its management that would interfere with the exercise of that director’s independent judgment. Disqualifying relationships include but are not limited to:


▪	~~Being employed by the FHLBank in the current year or any of the past five years;~~


▪	~~Accepting compensation from the FHLBank other than compensation for service as a director;~~


▪	~~Serving or having served in any of the past five years as a consultant, advisor, promoter, underwriter, or legal counsel of the FHLBank; or~~


▪	~~Being an immediate family member of an individual who is, or has been in any of the past five years, employed by the FHLBank as an executive officer.~~

▪Being employed by FHLBank in the current year or any of the past five years;

▪Accepting compensation from FHLBank other than compensation for service as a director;

▪Serving or having served in any of the past five years as a consultant, advisor, promoter, underwriter, or legal counsel of FHLBank; or

▪Being an immediate family member of an individual who is, or has been in any of the past five years, employed by FHLBank as an executive officer.

104

In addition to the independence standards for Audit Committee members required under the FHFA regulations, Section 10A(m) of the Exchange Act sets forth the independence requirements of directors serving on the Audit Committee of a listed company under the Exchange Act. Under Section 10A(m), ~~in order~~ to be considered independent, a member of the Audit Committee may not, other than in ~~his or her~~their capacity as a member of the ~~Board~~board of ~~Directors~~directors or any other ~~Board Committee:~~board committee: (1) accept any consulting, advisory, or other compensation from ~~the~~ FHLBank; or (2) be an affiliated person of ~~the~~ FHLBank.

All members of our Audit Committee were independent under the FHFA’s audit committee independence criteria and under the independence criteria of Section 10A(m) of the Exchange Act throughout the period covered by this annual report.

The FHFA’s criteria for audit committee independence are posted on the corporate governance page of our website at www.fhlbtopeka.com. Except for the documents specifically incorporated by reference into this Annual Report on Form 10-K, information contained on our website or that can be accessed through our website is not incorporated by reference into this Annual Report on Form 10-K. Reference to our website is made as an inactive textual reference.

Compensation, Human Resources and Inclusion Committee: FHLBank’s ~~Board~~board of ~~Directors~~directors has established a Compensation ~~Human Resources and Inclusion committee.~~Committee. Under ~~NASDAQ~~Nasdaq rules, ~~in order~~ to be considered an independent ~~Compensation~~compensation committee member, the ~~Board~~board of ~~Directors~~directors must affirmatively determine the independence of each director on the Compensation ~~committee~~Committee and must consider all factors specifically relevant to determine whether a director has a relationship to FHLBank which is material to that director’s ability to be independent from management in connection with the duties of a Compensation ~~committee~~Committee member, including the source of the compensation of the director and whether the director is affiliated with FHLBank. The ~~Board~~board of ~~Directors~~directors has affirmatively determined that each member of the Compensation ~~Human Resources and Inclusion committee~~Committee is independent in accordance with the ~~NASDAQ~~Nasdaq Independence Standards for ~~Compensation~~compensation committee members.

Item 14: Principal ~~Accounting~~Accountant Fees and Services

Prior to approving PricewaterhouseCoopers LLP as our independent accountants for ~~2017,~~2023, the Audit Committee considered whether PricewaterhouseCoopers LLP’s provision of services other than audit services is compatible with maintaining the accountants’ independence. The Audit Committee’s policy is to pre-approve all audit, audit-related, and permissible non-audit services provided by our independent accountants. The Audit Committee pre-approved all such services provided by the independent accountants during ~~2017~~2023 and ~~2016.~~2022. Pre-approval is generally provided for up to one year and any pre-approval is detailed as to the particular service or category of services and is generally subject to a specific budget. The independent accountants and management are required to periodically report to the Audit Committee regarding the extent of services provided by the independent accountants in accordance with its pre-approval and the fees for the services performed to date. The Audit Committee may also pre-approve particular services on a case-by-case basis.

Table 8865 sets forth the aggregate fees we were billed for the years ended December 31, ~~2017~~2023 and ~~2016~~2022 by our external accounting firm, PricewaterhouseCoopers LLP (in thousands):

Table 8865


	2023		2022
Audit fees	$	1,044	$	892
Audit-related fees	70		65
Tax fees	—		—
All other fees	81		1
TOTAL	$	1,195	$	958

2017 2016
Audit fees $ 807
$ 696
Audit-related fees 46
51
Tax fees —
—
All other fees —
6
TOTAL $ 853
$ 753

Audit fees during the years ended December 31, ~~2017~~2023 and ~~2016~~2022 were for professional services rendered for the audits of our annual financial statements and review of financial statements included in our annual reports on Form 10-K and quarterly reports on Form 10‑Q.

Audit-related and all other fees during the years ended December 31, ~~2017~~2023 and ~~2016~~2022 were for discussions regarding miscellaneous accounting-related ~~matters.~~matters and a license fee for an electronic disclosure checklist application. For the year ended December 31, 2023, all other fees also included $80 thousand for a pre-implementation software review.

105

We are assessed our proportionate share of the costs of operating the Office of Finance, which includes the expenses associated with the annual audits of the combined financial statements of the 11 FHLBanks. The audit fees for the combined financial statements are billed directly by PricewaterhouseCoopers LLP to the Office of Finance and we are assessed our proportionate share of these expenses. In ~~2017~~2023 and ~~2016,~~2022, we were assessed ~~$30,000 and $31,000, respectively,~~$42,000 each year for the costs associated with PricewaterhouseCoopers LLP’s audits of the combined financial statements for those years. These assessments are not included in the table above.

WeSection 1433 of the Bank Act provides that we and the other FHLBanks are exempt from all federal, state and local taxation, with the exception of real property tax. Therefore, no tax consultation fees were paid to our external accounting firm during the years ended December 31, ~~2017~~2023 and ~~2016.~~2022.

~~All other fees during the year ended December 31, 2016 were for consulting fees related to a private health care exchange feasibility study on behalf of all FHLBanks.~~

106

PART IV

Item 15: ~~Exhibits,~~Exhibit and Financial Statement Schedules


a)	The financial statements included as part of this Form 10-K are identified in the index to Audited Financial Statements appearing in Item 8 of this Form 10-K and which index is incorporated in this Item 15 by reference.


b)	~~Exhibits.~~

a) The financial statements included as part of this Form 10-K are identified in the index to Audited Financial Statements appearing in Item 8 of this Form 10-K and which index is incorporated in this Item 15 by reference.

b) Exhibits.

We have incorporated by reference certain exhibits as specified below pursuant to Rule 12b-32 under the Exchange Act.



Exhibit No.	Description
3.1		Exhibit 3.1 to the FHLBank’s registration statement on Form 10, filed May 15, 2006, and made effective on July 14, 2006 (File No. 000-52004) (the “Form 10 Registration Statement”), Federal Home Loan Bank of Topeka Articles and Organization Certificate, is incorporated herein by reference as Exhibit 3.1.
3.2		Exhibit ~~3.2~~3.1 to the ~~2015 Annual~~Current Report on Form ~~10-K,~~8-K, filed ~~March 10, 2016,~~October 26, 2022, Federal Home Loan Bank of Topeka Amended and Restated Bylaws, is incorporated herein by reference as Exhibit 3.2.
4.1		Exhibit ~~99.2~~4.1 to the ~~Current~~2019 Annual Report on Form ~~8-K,~~10-K, filed ~~August 5, 2011,~~March 20, 2020, Federal Home Loan Bank of Topeka Capital Plan, is incorporated herein by reference as Exhibit 4.1.
4.2		Exhibit 4.2 to the 2019 Annual Report on Form 10-K, filed March 20, 2020, Description of Securities - Supplement to the Federal Home Loan Bank of Topeka Capital Plan, is incorporated herein by reference as Exhibit 4.2.
10.1*		Exhibit 10.1 to the Current Report on Form 8-K, filed ~~February 5, 2018,~~December 18, 2020, Federal Home Loan Bank of Topeka Benefit Equalization Plan, is incorporated herein by reference as Exhibit 10.1.
10.2		~~Exhibit 10.4 to the Form 10 Registration Statement, Federal Home Loan Bank of Topeka Office Complex Lease Agreement, is incorporated herein by reference as Exhibit 10.2.~~
~~10.2.1~~	~~Exhibit 10.4.1 to the Form 10 Registration Statement, Federal Home Loan Bank of Topeka Office Complex Lease Amendment, is incorporated herein by reference as Exhibit 10.2.1.~~
~~10.2.2~~	~~Exhibit 10.4.2 to the Form 10 Registration Statement, Federal Home Loan Bank of Topeka Office Complex Second Lease Amendment, is incorporated herein by reference as Exhibit 10.2.2.~~
~~10.2.3~~	Exhibit 10.2.3 to the 2013 Annual Report on Form 10-K, filed March 14, 2014, Federal Home Loan Bank of Topeka Office Complex Third Lease Amendment, is incorporated herein by reference as Exhibit 10.2.3
~~10.2.4~~	~~Federal Home Loan Bank of Topeka Office Complex Fourth Lease Amendment.~~
~~10.2.5~~	~~Exhibit 10.1 to the Current Report on Form 8-K, filed January 31, 2018, Federal Home Loan Bank of Topeka Office Complex Fifth Lease Amendment, is incorporated herein by reference as Exhibit 10.2.5.~~
~~10.3~~	Exhibit 10.3 to the 2016 Annual Report on Form 10-K, filed March 9, 2017, Federal Home Loan Bank of Topeka Form of Advance, Pledge and Security Agreement (Specific Pledge), is incorporated herein by reference as Exhibit ~~10.3.~~10.2.
~~10.4~~10.3		Exhibit 10.4 to the 2016 Annual Report on Form 10-K, filed March 9, 2017, Federal Home Loan Bank of Topeka Form of Advance, Pledge and Security Agreement (Blanket Pledge), is incorporated herein by reference as Exhibit ~~10.4.~~10.3.
~~10.5~~10.4		Exhibit 10.6 to the 2013 Annual Report on Form 10-K, filed March 14, 2014, Federal Home Loan Bank of Topeka Form of Confirmation of Advance, is incorporated herein by reference as Exhibit ~~10.5.~~10.4.
~~10.6~~10.5		Exhibit 10.1 to the Current Report on Form 8-K, filed June 23, 2017, Bond Trust Indenture dated as of June 1, 2017, between Shawnee County, Kansas and BOKF, N.A., is incorporated herein by reference as Exhibit ~~10.6.~~10.5.
~~10.7~~10.6		Exhibit 10.2 to the Current Report on Form 8-K, filed June 23, 2017, Lease Agreement dated as of June 1, 2017, between Shawnee County, Kansas and Federal Home Loan Bank of Topeka, is incorporated herein by reference as Exhibit ~~10.7.~~10.6.
~~10.8~~10.7		Exhibit 10.3 to the Current Report on Form 8-K, filed June 23, 2017, Base Lease Agreement dated as of June 1, 2017, between Shawnee County, Kansas and Federal Home Loan Bank of Topeka, is incorporated herein by reference as Exhibit ~~10.8.~~10.7.
~~10.9~~10.8		Exhibit 10.26 to the 2016 Annual Report on Form 10-K, filed March 9, 2017, Amended and Restated Federal Home Loan Banks P&I Funding and Contingency Plan Agreement, is incorporated herein by reference as Exhibit ~~10.9.~~10.8.
~~10.10~~10.9*		Exhibit ~~10.6~~10.1 to the ~~2015 Annual~~Current Report on Form ~~10-K,~~8-K, filed ~~March 10, 2016,~~February 16, 2022, Executive Incentive Compensation Plan, is incorporated herein by reference as Exhibit ~~10.10.~~10.9.
~~10.11~~10.10*		Exhibit ~~10.1~~10.2 to the Current Report on Form 8-K, filed January ~~21, 2016,~~8, 2019, Federal Home Loan Bank of Topeka ~~2014~~2019 Executive Incentive Compensation Plan Targets, is incorporated herein by reference as Exhibit ~~10.11.~~10.10.
~~10.12~~10.11*		Exhibit ~~10.2~~10.1 to the Current Report on Form 8-K, filed ~~January 21, 2016,~~February 6, 2020, Federal Home Loan Bank of Topeka ~~2015~~2020 Executive Incentive Compensation Plan Targets, is incorporated herein by reference as Exhibit 10.11
10.1 2*		Exhibit 10.1 to the Current Report on Form 8-K, filed February 2, 2021, Federal Home Loan Bank of Topeka 2021 Executive Incentive Compensation Plan Targets, is incorporated herein by reference as Exhibit 10.12.
10.13*		Exhibit ~~10.16~~10.2 to the ~~Annual~~Current Report on Form ~~10-K,~~8-K, filed February 16, 2022, Federal Home Loan Bank of Topeka ~~2016~~2022 Executive Incentive Compensation Plan Targets, is incorporated herein by reference as Exhibit 10.13.



10.14*		Exhibit 10.1 to the Current Report on Form 8-K, filed ~~February 15, 2017,~~March 7, 2023, Federal Home Loan Bank of Topeka ~~2017~~2023 Executive Incentive Compensation Plan Targets, is incorporated herein by reference as Exhibit 10.14.
10.15*		Exhibit 10.1 to the Current Report on Form 8-K, filed January 22, 2018, Federal Home Loan Bank of Topeka 2018 Executive Incentive Compensation Plan Targets, is incorporated herein by reference as Exhibit 10.15.
~~10.16~~^*	Exhibit 10.1 to the Current Report on Form 8-K, filed July 20, 2015, Federal Home Loan Bank of Topeka Change in Control Plan, is incorporated herein by reference as Exhibit ~~10.16.~~10.15.
~~10.17~~10.16*		Exhibit 10.1 to the Current Report on Form 8-K, filed ~~July 31, 2017,~~August 1, 2018, Federal Home Loan Bank of Topeka Executive Officer Severance Policy, is incorporated herein by reference as Exhibit ~~10.17.~~10.16.
~~10.18~~10.17*		Exhibit 10.1 to the Current Report on Form ~~8-K/A,~~8-K, filed ~~November 15, 2016,~~February 16, 2023, Federal Home Loan Bank of Topeka ~~2017~~2023 Board of Directors Compensation Policy, is incorporated herein by reference as Exhibit 10.17.
1 0.1 8		Exhibit 10.1 to the Current Report on Form 8-K, filed January 5, 2024, Federal Home Loan Bank of Topeka 2024 Board of Directors Compensation Policy, is incorporated herein by reference as Exhibit 10.18.

107


Exhibit No.		Description
10.19*		Exhibit 10.1 to the Current Report on Form 8-K/A, filed November 29, 2017, Federal Home Loan Bank of Topeka 2018 Board of Directors Compensation Policy, is incorporated herein by reference as Exhibit 10.19.
~~10.20~~^*	Exhibit 10.1 to the Current Report on Form 8-K, filed June 30, 2016, Form of Director Indemnification Agreement, is incorporated herein by reference as Exhibit ~~10.20.~~10.19.
~~10.21~~10.20*		Exhibit 10.2 to the Current Report on Form 8-K, filed June 30, 2016, Form of Officer Indemnification Agreement, is incorporated herein by reference as Exhibit ~~10.21.~~10.20.
~~10.22~~14.1^*		~~Exhibit 10.2 to the Current Report on Form 8-K, filed January 22, 2018, Federal Home Loan Bank of Topeka Non-NEO Executive Incentive Compensation Plan, is incorporated by reference as Exhibit 10.22.~~
~~10.23~~^***	~~Federal Home Loan Bank of Topeka 2014 Non-NEO Executive Incentive Compensation Plan Targets.~~
~~10.24~~^***	~~Federal Home Loan Bank of Topeka 2015 Non-NEO Executive Incentive Compensation Plan Targets.~~
~~10.25~~^***	~~Federal Home Loan Bank of Topeka 2016 Non-NEO Executive Incentive Compensation Plan Targets.~~
~~12.1~~	~~Federal Home Loan Bank of Topeka Statements of Computation of Ratios.~~
~~14.1~~	Federal Home Loan Bank of Topeka Code of ~~Ethics.~~Ethics
24.1		Power of Attorney.
31.1		Certification of President and Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certification of ~~Senior~~First Vice President and ~~Chief~~Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32		Certification of President and Principal Executive Officer and ~~Senior~~First Vice President and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.1		Federal Home Loan Bank of Topeka Audit Committee Charter.
99.2		Federal Home Loan Bank of Topeka Audit Committee Report.
101.INS^**		Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)
101.SCH^**		XBRL Taxonomy Extension Schema Document
101.CAL^**		XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB^**		XBRL Taxonomy Extension Label Linkbase Document
101.PRE^**		XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF^**		XBRL Taxonomy Extension Definition Linkbase Document
104		Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)


^*	~~Represents a management contract or a compensatory plan or arrangement.~~


^**	~~The financial information contained in these XBRL documents is unaudited.~~


^***	~~FHLBank has requested confidential treatment of the redacted portions of this exhibit pursuant to Rule 246-2 under the Exchange Act.~~

* Represents a management contract or a compensatory plan or arrangement.

** The financial information contained in these XBRL documents is unaudited.

Item 16: Form 10-K Summary

None.

108

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



	Federal Home Loan Bank of Topeka


March ~~15, 2018~~11, 2024		By: /s/ ~~Mark E. Yardley~~Jeffrey B. Kuzbel
Date		~~Mark E. Yardley~~Jeffrey B. Kuzbel
		President and Chief Executive Officer

March 11, 2024		By: /s/ Amy J. Crouch
Date		Amy J. Crouch
		First Vice President and Chief Accounting Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on the dates indicated.


Signature			Title		Date

~~Signature~~	~~Title~~	~~Date~~

/s/~~Mark E. Yardley~~ Jeffrey B. Kuzbel			President and Chief Executive Officer		March ~~15, 2018~~11, 2024
~~Mark E. Yardley~~Jeffrey B. Kuzbel			(principal executive officer)

/s/~~William W. Osborn~~ Amy J. Crouch			~~Senior Vice President and Chief Financial Officer~~		~~March 15, 2018~~
~~William W. Osborn~~	~~(principal financial officer)~~

~~/s/Denise L. Cauthon~~	~~Senior~~First Vice President and Chief Accounting Officer	March ~~15, 2018~~11, 2024
~~Denise L. Cauthon~~Amy J. Crouch			(interim principal ~~accounting~~financial officer)




/s/~~G. Bridger Cox~~^{Barry Lockard1}			~~Chairman~~Chair of the Board of Directors		March ~~15, 2018~~11, 2024
~~G. Bridger Cox~~Barry Lockard

/s/~~Robert E. Caldwell, II~~^{Milroy A. Alexander1}			Vice ~~Chairman~~Chair of the Board of Directors		March ~~15, 2018~~11, 2024
~~Robert E. Caldwell, II~~

~~/s/Donald R. Abernathy~~¹	~~Director~~	~~March 15, 2018~~
~~Donald R. Abernathy~~

~~/s/~~Milroy A. Alexander

/s/ Steven G. Bradshaw1			Director		March ~~15, 2018~~11, 2024
~~Milroy A. Alexander~~Steven G. Bradshaw

/s/ Thomas E. Henning1			Director		March 11, 2024
Thomas E. Henning

/s/~~Holly Easterling~~¹			~~Director~~	~~March 15, 2018~~
~~Holly Easterling~~

~~/s/Andrew C. Hove, Jr.~~¹	~~Director~~	~~March 15, 2018~~
~~Andrew C. Hove, Jr.~~

~~/s/~~Michael B. Jacobson¹	Director			March ~~15, 2018~~11, 2024
Michael B. Jacobson

/s/ Holly Johnson1			Director		March 11, 2024
Holly Johnson

/s/ Lynn Jenkins Katzfey1			Director		March 11, 2024
Lynn Jenkins Katzfey

/s/~~Jane C. Knight~~^{Craig A. Meader1}			Director		March ~~15, 2018~~11, 2024
~~Jane C. Knight~~Craig A. Meader

~~/s/Richard S. Masinton~~¹	~~Director~~	~~March 15, 2018~~
~~Richard S. Masinton~~

~~/s/Neil F. M. McKay~~¹	~~Director~~	~~March 15, 2018~~
~~Neil F. M. McKay~~

109




/s/L. Kent Needham¹			Director		March ~~15, 2018~~11, 2024
L. Kent Needham

/s/ Jeffrey R. Noordhoek1			Director		March 11, 2024
Jeffrey R. Noordhoek

/s/Mark J. O’Connor¹			Director		March ~~15, 2018~~11, 2024
Mark J. O’Connor

/s/Thomas H. Olson, Jr.¹			Director		March ~~15, 2018~~11, 2024
Thomas H. Olson, Jr.

/s/ Carla D. Pratt1			Director		March 11, 2024
Carla D. Pratt

/s/~~Donde L. Plowman~~¹			~~Director~~	~~March 15, 2018~~
~~Donde L. Plowman~~

~~/s/Mark W. Schifferdecker~~¹	~~Director~~	~~March 15, 2018~~
~~Mark W. Schifferdecker~~

~~/s/Bruce A. Schriefer~~¹	~~Director~~	~~March 15, 2018~~
~~Bruce A. Schriefer~~

~~/s/~~Douglas E. Tippens¹	Director			March ~~15, 2018~~11, 2024
Douglas E. Tippens

/s/ Gregg Vandaveer1			Director		March 11, 2024
Gregg Vandaveer

/s/ Paul E. Washington1			Director		March 11, 2024
Paul E. Washington

/s/~~Gregg~~ Lance L. ~~Vandaveer~~^White1			Director		March ~~15, 2018~~11, 2024
~~Gregg~~Lance L. ~~Vandaveer~~White


¹ 1 Pursuant to Power of Attorney 110	~~Pursuant to Power of Attorney~~

Management’s Report on Internal Control over Financial Reporting

Management of the Federal Home Loan Bank of Topeka (FHLBank) is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. The FHLBank’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the financial statements in accordance with generally accepted accounting principles. Internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the FHLBank’s assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the FHLBank are being made only in accordance with authorizations of the FHLBank’s management and board of directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the FHLBank’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements and even when determined to be effective, can only provide reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management of the FHLBank assessed the effectiveness of the FHLBank’s internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control - Integrated Framework (2013). Based on this evaluation under the COSO framework, management has concluded that the FHLBank’s internal control over financial reporting was effective as of December 31, ~~2017.~~2023.

The effectiveness of the FHLBank’s internal control over financial reporting as of December 31, ~~2017~~2023 has been audited by PricewaterhouseCoopers LLP, the FHLBank’s independent registered public accounting firm, as stated in their accompanying report.

~~/s/Mark E. Yardley~~


/s/ Jeffrey B. Kuzbel
Jeffrey B. Kuzbel
President and Chief Executive Officer

/s/ Amy J. Crouch
Amy J. Crouch
First Vice President and Chief Accounting Officer

~~Mark E. Yardley~~

~~President and Chief Executive Officer~~

F-1

~~/s/William W. Osborn~~

~~William W. Osborn~~

~~Senior Vice President and Chief Financial Officer~~

Report of Independent Registered Public Accounting Firm

To theBoard of Directors and ~~Shareholders~~Stockholders of the

Federal Home Loan Bank of Topeka

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying statements of condition of the Federal Home Loan Bank of Topeka (the “FHLBank”) as of December 31, ~~2017~~2023 and ~~2016,~~2022, and the related statements of income, of comprehensive income, of capital and of cash flows for each of the three years in the period ended December 31, ~~2017,~~2023, including the related notes (collectively referred to as the “financial statements”). We also have audited the FHLBank's internal control over financial reporting as of December 31, ~~2017,~~2023, based on criteria established in Internal Control - Integrated Framework(2013)issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the FHLBank as of December 31, ~~2017~~2023 and ~~2016~~, 2022, and the results of itsoperations and itscash flows for each of the three years in the period ended December 31, ~~2017~~2023 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the FHLBank maintained, in all material respects, effective internal control over financial reporting as of December 31, ~~2o17,~~2023, based on criteria established in Internal Control - Integrated Framework(2013)issued by the COSO.

Basis for Opinions

The FHLBank's management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying ~~Management's~~Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express opinions on the FHLBank’s financial statements and on the FHLBank's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ~~("PCAOB")~~(PCAOB) and are required to be independent with respect to the FHLBank in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

F-2

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Valuation of Interest-Rate Related Derivatives and Hedged Items

As described in Notes 6 and 14 to the financial statements, the FHLBank uses derivatives to manage its exposure to interest-rate risks and reduce funding costs, among other objectives. The total notional amount of derivatives as of December 31, 2023 was $51.5 billion, of which 87% were designated as hedging instruments, and the fair value of derivative assets and liabilities as of December 31, 2023 was $350.4 million and $0.9 million, respectively. The fair values of interest-rate related derivatives and hedged items are generally estimated using standard valuation techniques such as discounted cash flow analysis and comparisons to similar instruments. The discounted cash flow model uses market observable inputs such as discount rate, forward interest rate, and volatility assumptions.

The principal considerations for our determination that performing procedures relating to the valuation of interest-rate related derivatives and hedged items is a critical audit matter are the significant audit effort in evaluating the discount rate, forward interest rate, and volatility assumptions used to fair value these derivatives and hedged items, and the audit effort involved the use of professionals with specialized skill and knowledge.

F-3

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the financial statements. These procedures included testing the effectiveness of controls relating to the valuation of interest-rate related derivatives and hedged items, including controls over the model, data and assumptions. These procedures also included, among others, the involvement of professionals with specialized skill and knowledge to assist in developing an independent range of prices for a sample of interest-rate derivatives and hedged items and comparison of management’s estimate to the independently developed ranges. Developing the independent range of prices involved testing the completeness and accuracy of data provided by management and independently developing the discount rate, forward interest rate, and volatility assumptions.

/s/PricewaterhouseCoopers LLP

Kansas City, Missouri

March ~~15, 2018~~11, 2024

We have served as the FHLBank’s auditor since 1990.

F-4

FEDERAL HOME LOAN BANK OF TOPEKA
STATEMENTS OF CONDITION
(In thousands, except par value)
12/31/2017 12/31/2016
ASSETS
Cash and due from banks (Note 3) $ 268,050
$ 207,254
Interest-bearing deposits 442,682
387,920
Securities purchased under agreements to resell (Note 12) 3,161,446
2,400,000
Federal funds sold 1,175,000
2,725,000

Investment securities:
Trading securities (Note 4) 2,869,415
2,502,788
Available-for-sale securities (Note 4) 1,493,231
1,091,721
Held-to-maturity securities¹ (Note 4)
4,856,825
4,502,224
Total investment securities 9,219,471
8,096,733

Advances (Notes 5, 7, 18) 26,295,849
23,985,835

Mortgage loans held for portfolio, net:
Mortgage loans held for portfolio (Notes 6, 7, 18) 7,287,605
6,642,399
Less allowance for credit losses on mortgage loans (Note 7) (1,208 ) (1,674 )
Mortgage loans held for portfolio, net 7,286,397
6,640,725

Overnight loans to other FHLBanks (Note 19) —
600,000
Accrued interest receivable 85,547
68,400
Premises, software and equipment, net 47,670
16,205
Derivative assets, net (Notes 8, 12) 37,030
60,900
Other assets (Note 17) 57,463
27,777

TOTAL ASSETS $ 48,076,605
$ 45,216,749

LIABILITIES
Deposits (Notes 9, 18) $ 461,769
$ 598,931

Consolidated obligations, net:
Discount notes (Notes 10, 17) 20,420,651
21,775,341
Bonds (Notes 10, 17) 24,514,468
20,722,335
Total consolidated obligations, net 44,935,119
42,497,676

Mandatorily redeemable capital stock (Note 13) 5,312
2,670
Accrued interest payable 56,116
49,808
Affordable Housing Program payable (Note 11) 43,005
33,242
Derivative liabilities, net (Notes 8, 12) 2,417
7,171
Other liabilities (Notes 15, 17) 66,764
64,803

TOTAL LIABILITIES 45,570,502
43,254,301

Commitments and contingencies (Note 17)

Table of Contents


FEDERAL HOME LOAN BANK OF TOPEKA
STATEMENTS OF CONDITION
(In thousands, except par value)
	12/31/2023		12/31/2022
ASSETS
Cash and due from banks (Note 1)	$	26,062	$	25,964
Interest-bearing deposits (Note 3)	1,604,989		2,039,852
Securities purchased under agreements to resell (Notes 3, 10)	3,875,000		2,350,000
Federal funds sold (Note 3)	2,080,000		3,750,000

Investment securities:
Trading securities (Note 3)	908,608		1,421,453
Available-for-sale securities, amortized cost of $11,872,397 and $9,438,859 (Note 3)	11,753,453		9,354,416
Held-to-maturity securities, fair value of $260,653 and $340,259 (Note 3)	264,796		345,430
Total investment securities	12,926,857		11,121,299

Advances (Notes 4, 16)	45,444,769		44,262,750




Mortgage loans held for portfolio, net of allowance for credit losses of $5,531 and $6,378 (Notes 5, 16)	8,352,713		7,905,135


Accrued interest receivable	204,243		186,594

Derivative assets, net (Notes 6, 10)	350,367		272,076
Other assets (Note 15)	81,985		79,172

TOTAL ASSETS	$	74,946,985	$	71,992,842

LIABILITIES
Deposits (Notes 7, 16)	$	752,200	$	711,061

Consolidated obligations, net:
Discount notes (Notes 8, 15)	20,743,249		24,775,405
Bonds (Notes 8, 15)	49,047,489		42,505,839
Total consolidated obligations, net	69,790,738		67,281,244


Mandatorily redeemable capital stock (Note 11)	247		280
Accrued interest payable	361,840		197,175
Affordable Housing Program payable (Note 9)	77,794		53,635
Derivative liabilities, net (Notes 6, 10)	860		2,359
Other liabilities (Notes 13, 15)	72,654		70,544

TOTAL LIABILITIES	71,056,333		68,316,298

Commitments and contingencies (Note 15)

¹~~Fair value:~~ ~~$4,856,996~~ ~~and~~ ~~$4,487,252~~ ~~as of~~ ~~December 31, 2017~~ ~~and~~ ~~2016, respectively.~~

The accompanying notes are an integral part of these financial statements.

~~F-4~~F-5

~~F-4~~

Table of Contents


FEDERAL HOME LOAN BANK OF TOPEKA
STATEMENTS OF CONDITION
(In thousands, except par value)
	12/31/2023		12/31/2022

CAPITAL
Capital stock outstanding - putable:
Class A ($100 par value; 2,789 and 2,388 shares issued and outstanding) (Notes 11, 16)	$	278,887	$	238,777
Class B ($100 par value; 23,288 and 22,689 shares issued and outstanding) (Notes 11, 16)	2,328,796		2,268,932
Total capital stock	2,607,683		2,507,709

Retained earnings:
Unrestricted	989,457		914,716
Restricted (Note 11)	412,483		338,389
Total retained earnings	1,401,940		1,253,105

Accumulated other comprehensive income (loss) (Note 12)	(118,971)		(84,270)

TOTAL CAPITAL	3,890,652		3,676,544

TOTAL LIABILITIES AND CAPITAL	$	74,946,985	$	71,992,842

The accompanying notes are an integral part of these financial statements.

F-6

FEDERAL HOME LOAN BANK OF TOPEKA
STATEMENTS OF CONDITION
(In thousands, except par value)
12/31/2017 12/31/2016

CAPITAL
Capital stock outstanding - putable:
Class A ($100 par value; 2,351 and 1,621 shares issued and outstanding) (Notes 13, 18) $ 235,134
$ 162,143
Class B ($100 par value; 14,049 and 10,645 shares issued and outstanding) (Notes 13, 18) 1,404,905
1,064,532
Total capital stock 1,640,039
1,226,675

Retained earnings:
Unrestricted 676,993
611,226
Restricted (Note 13) 163,413
123,970
Total retained earnings 840,406
735,196

Accumulated other comprehensive income (loss) (Note 14) 25,658
577

TOTAL CAPITAL 2,506,103
1,962,448

TOTAL LIABILITIES AND CAPITAL $ 48,076,605
$ 45,216,749

Table of Contents


FEDERAL HOME LOAN BANK OF TOPEKA
STATEMENTS OF INCOME
(In thousands)


	Year Ended
		12/31/2023		12/31/2022		12/31/2021
INTEREST INCOME:
Interest-bearing deposits		$	143,330	$	33,548	$	943
Securities purchased under agreements to resell		121,367		42,895		1,672
Federal funds sold		221,114		68,392		2,146
Trading securities		34,196		57,899		64,657
Available-for-sale securities		594,548		197,809		44,239
Held-to-maturity securities		15,982		8,570		7,777
Advances		2,409,840		742,694		129,586

Mortgage loans held for portfolio		261,352		228,583		211,770
Other		1,430		885		938
Total interest income		3,803,159		1,381,275		463,728

INTEREST EXPENSE:
Deposits		32,921		10,342		400
Consolidated obligations:
Discount notes		1,102,702		368,075		5,481
Bonds		2,206,160		638,751		160,173
Mandatorily redeemable capital stock		14		7		19
Other		1,311		1,109		1,007
Total interest expense		3,343,108		1,018,284		167,080

NET INTEREST INCOME		460,051		362,991		296,648
Provision (reversal) for credit losses on mortgage loans		(641)		710		(750)
NET INTEREST INCOME AFTER LOAN LOSS PROVISION (REVERSAL)		460,692		362,281		297,398

OTHER INCOME (LOSS):
Net gains (losses) on trading securities		19,554		(112,548)		(84,089)

Net gains (losses) on sale of held-to-maturity securities		—		(89)		—
Net gains (losses) on derivatives		14,923		86,492		30,402

Standby bond purchase agreement commitment fees		2,815		2,642		2,505
Letters of credit fees		8,218		6,558		6,136
Other		2,437		3,003		3,612
Total other income (loss)		47,947		(13,942)		(41,434)

The accompanying notes are an integral part of these financial statements.

F-7

Table of Contents

FEDERAL HOME LOAN BANK OF TOPEKA
STATEMENTS OF INCOME
(In thousands)
Year Ended December 31,
2017 2016 2015
INTEREST INCOME:
Interest-bearing deposits $ 4,204
$ 1,873
$ 241
Securities purchased under agreements to resell 23,937
11,975
4,371
Federal funds sold 27,994
5,743
2,131
Trading securities (Note 4) 60,048
65,743
66,017
Available-for-sale securities (Note 4) 24,364
12,101
956
Held-to-maturity securities (Note 4) 73,692
47,923
39,862
Advances (Note 5) 400,610
227,609
143,279
Prepayment fees on terminated advances, net (Note 5) 1,461
2,295
2,410
Mortgage loans held for portfolio (Note 6) 214,388
203,916
204,778
Other 1,280
1,259
1,385
Total interest income 831,978
580,437
465,430

INTEREST EXPENSE:
Deposits (Note 9) 3,371
1,009
590
Consolidated obligations:
Discount notes (Note 10) 237,019
93,052
21,585
Bonds (Note 10) 320,895
228,842
203,283
Mandatorily redeemable capital stock (Note 13) 195
79
39
Other 490
271
253
Total interest expense 561,970
323,253
225,750

NET INTEREST INCOME 270,008
257,184
239,680
(Reversal) provision for credit losses on mortgage loans (Note 7) (186 ) (109 ) (1,909 )
NET INTEREST INCOME AFTER LOAN LOSS (REVERSAL) PROVISION 270,194
257,293
241,589

OTHER INCOME (LOSS):
Total other-than-temporary impairment losses on held-to-maturity securities (Note 4) (127 ) (65 ) (281 )
Net amount of impairment losses on held-to-maturity securities reclassified to/(from) accumulated other comprehensive income (loss) (341 ) (103 ) (545 )
Net other-than-temporary impairment losses on held-to-maturity securities (Note 4) (468 ) (168 ) (826 )
Net gains (losses) on trading securities (Note 4) 6,914
(13,709 ) (47,991 )
Net gains (losses) on sale of held-to-maturity securities (Note 4) —
—
390
Net gains (losses) on derivatives and hedging activities (Note 8) (1,245 ) (11,627 ) (42,843 )
Standby bond purchase agreement commitment fees 4,492
5,373
5,654
Letters of credit fees 3,820
3,520
3,233
Other 2,474
2,781
2,294
Total other income (loss) 15,987
(13,830 ) (80,089 )


FEDERAL HOME LOAN BANK OF TOPEKA
STATEMENTS OF INCOME
(In thousands)


	Year Ended
		12/31/2023		12/31/2022		12/31/2021
OTHER EXPENSES:
Compensation and benefits		$	49,870	$	42,479	$	41,125
Other operating		25,422		21,011		19,557
Federal Housing Finance Agency		5,963		5,599		4,743
Office of Finance		4,441		4,455		4,503

Mortgage loans transaction service fees		6,413		6,079		6,401
Other		4,899		1,231		1,200
Total other expenses		97,008		80,854		77,529

INCOME BEFORE ASSESSMENTS		411,631		267,485		178,435

Affordable Housing Program		41,164		26,749		17,845

NET INCOME		$	370,467	$	240,736	$	160,590

The accompanying notes are an integral part of these financial statements.

F-8

FEDERAL HOME LOAN BANK OF TOPEKA
STATEMENTS OF INCOME
(In thousands)
Year Ended December 31,
2017 2016 2015
OTHER EXPENSES:
Compensation and benefits (Note 15) $ 39,105
$ 38,089
$ 33,175
Other operating (Note 17) 17,019
15,739
15,275
Federal Housing Finance Agency 2,909
2,956
2,410
Office of Finance 3,052
2,662
2,672
Other 4,951
4,260
4,230
Total other expenses 67,036
63,706
57,762

INCOME BEFORE ASSESSMENTS 219,145
179,757
103,738

Affordable Housing Program (Note 11) 21,934
17,984
10,378

NET INCOME $ 197,211
$ 161,773
$ 93,360

Table of Contents


FEDERAL HOME LOAN BANK OF TOPEKA
FEDERAL HOME LOAN BANK OF TOPEKA
FEDERAL HOME LOAN BANK OF TOPEKA
STATEMENTS OF COMPREHENSIVE INCOME
STATEMENTS OF COMPREHENSIVE INCOME
STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(In thousands)
(In thousands)
	Year Ended December 31,
	2017		2016			2015
					Year Ended

					Year Ended

					Year Ended
						12/31/2023			12/31/2023	12/31/2022	12/31/2021
Net income	$	197,211	$	161,773		$	93,360

Other comprehensive income (loss):
Other comprehensive income (loss):
Other comprehensive income (loss):
Net unrealized gains (losses) on available-for-sale securities	21,861		17,922			(8,577		)
Net non-credit portion of other-than-temporary impairment losses on held-to-maturity securities	1,678		2,109			3,824
Net unrealized gains (losses) on available-for-sale securities
Net unrealized gains (losses) on available-for-sale securities

Defined benefit pension plan
Defined benefit pension plan
Defined benefit pension plan	1,542		(477		)	1,683
Total other comprehensive income (loss)	25,081		19,554			(3,070		)

TOTAL COMPREHENSIVE INCOME	$	222,292	$	181,327		$	90,290
TOTAL COMPREHENSIVE INCOME (LOSS)
TOTAL COMPREHENSIVE INCOME (LOSS)
TOTAL COMPREHENSIVE INCOME (LOSS)

The accompanying notes are an integral part of these financial statements.

F-9

FEDERAL HOME LOAN BANK OF TOPEKA
STATEMENTS OF CAPITAL
(In thousands)

Capital Stock¹
Retained Earnings Accumulated Total Capital
Other
Class A Class B Total Comprehensive
Shares Par Value Shares Par Value Shares Par Value Unrestricted Restricted Total Income (Loss)
Balance at December 31, 2014 2,083
$ 208,273
7,657
$ 765,768
9,740
$ 974,041
$ 554,189
$ 72,944
$ 627,133
$ (15,907 ) $ 1,585,267
Comprehensive income 74,688
18,672
93,360
(3,070 ) 90,290
Proceeds from issuance of capital stock 19
1,857
12,237
1,223,719
12,256
1,225,576
1,225,576
Repurchase/redemption of capital stock (4,613 ) (461,319 ) (115 ) (11,574 ) (4,728 ) (472,893 ) (472,893 )
Net reclassification of shares to mandatorily redeemable capital stock (220 ) (21,952 ) (5,642 ) (564,240 ) (5,862 ) (586,192 ) (586,192 )
Net transfer of shares between Class A and Class B 4,528
452,824
(4,528 ) (452,824 ) —
—
—
Dividends on capital stock (Class A - 1.0%, Class B - 6.0%):
Cash payment (296 ) (296 ) (296 )
Stock issued 684
68,415
684
68,415
(68,415 ) (68,415 ) —
Balance at December 31, 2015 1,797
$ 179,683
10,293
$ 1,029,264
12,090
$ 1,208,947
$ 560,166
$ 91,616
$ 651,782
$ (18,977 ) $ 1,841,752
Comprehensive income 129,419
32,354
161,773
19,554
181,327
Proceeds from issuance of capital stock 27
2,698
12,890
1,289,065
12,917
1,291,763
1,291,763
Repurchase/redemption of capital stock (5,820 ) (581,966 ) (80 ) (8,012 ) (5,900 ) (589,978 ) (589,978 )
Net reclassification of shares to mandatorily redeemable capital stock (630 ) (63,021 ) (6,991 ) (699,104 ) (7,621 ) (762,125 ) (762,125 )
Net transfer of shares between Class A and Class B 6,247
624,749
(6,247 ) (624,749 ) —
—
—
Dividends on capital stock (Class A - 1.0%, Class B - 6.0%):
Cash payment (291 ) (291 ) (291 )
Stock issued 780
78,068
780
78,068
(78,068 ) (78,068 ) —
Balance at December 31, 2016 1,621
$ 162,143
10,645
$ 1,064,532
12,266
$ 1,226,675
$ 611,226
$ 123,970
$ 735,196
$ 577
$ 1,962,448
Comprehensive income 157,768
39,443
197,211
25,081
222,292
Proceeds from issuance of capital stock 19
1,882
18,154
1,815,441
18,173
1,817,323
1,817,323
Repurchase/redemption of capital stock (7,137 ) (713,680 ) (20 ) (2,034 ) (7,157 ) (715,714 ) (715,714 )
Net reclassification of shares to mandatorily redeemable capital stock (1,396 ) (139,632 ) (6,403 ) (640,347 ) (7,799 ) (779,979 ) (779,979 )
Net transfer of shares between Class A and Class B 9,244
924,421
(9,244 ) (924,421 ) —
—
—
Dividends on capital stock (Class A - 1.1%, Class B - 6.5%):

Cash payment

(267 ) (267 ) (267 )
Stock issued 917
91,734
917
91,734
(91,734 ) (91,734 ) —
Balance at December 31, 2017 2,351 $ 235,134
14,049 $ 1,404,905
16,400 $ 1,640,039
$ 676,993
$ 163,413
$ 840,406
$ 25,658
$ 2,506,103

Table of Contents


FEDERAL HOME LOAN BANK OF TOPEKA
STATEMENTS OF CAPITAL
(In thousands)
	Capital Stock1									Retained Earnings						Accumulated		Total Capital
																Other
	Class A			Class B			Total									Comprehensive
	Shares	Par Value		Shares	Par Value		Shares	Par Value		Unrestricted		Restricted		Total		Income (Loss)
Balance at December 31, 2020	4,122	$	412,225	11,618	$	1,161,779	15,740	$	1,574,004	$	793,331	$	258,124	$	1,051,455	$	42,308	$	2,667,767

Comprehensive income										128,472		32,118		160,590		30,007		190,597
Proceeds from issuance of capital stock	36	3,616		16,807	1,680,705		16,843	1,684,321										1,684,321
Repurchase/redemption of capital stock	(10,335)	(1,033,507)		(1,247)	(124,673)		(11,582)	(1,158,180)										(1,158,180)
Net reclassification of shares to mandatorily redeemable capital stock	(5,423)	(542,379)		(1,276)	(127,605)		(6,699)	(669,984)										(669,984)
Net transfer of shares between Class A and Class B	13,942	1,394,235		(13,942)	(1,394,235)		—	—										—

Dividends on capital stock (Class A - 0.3%, Class B - 5.6%):
Cash payment										(255)				(255)				(255)
Stock issued				691	69,140		691	69,140		(69,140)				(69,140)				—
Balance at December 31, 2021	2,342	$	234,190	12,651	$	1,265,111	14,993	$	1,499,301	$	852,408	$	290,242	$	1,142,650	$	72,315	$	2,714,266

Comprehensive income										192,589		48,147		240,736		(156,585)		84,151
Proceeds from issuance of capital stock	24	2,380		38,060	3,806,000		38,084	3,808,380										3,808,380
Repurchase/redemption of capital stock	(18,495)	(1,849,477)		(2,678)	(267,833)		(21,173)	(2,117,310)										(2,117,310)
Net reclassification of shares to mandatorily redeemable capital stock	(3,960)	(396,024)		(4,167)	(416,668)		(8,127)	(812,692)										(812,692)
Net transfer of shares between Class A and Class B	22,477	2,247,708		(22,477)	(2,247,708)		—	—										—

Dividends on capital stock (Class A - 1.7%, Class B - 7.3%):
Cash payment										(251)				(251)				(251)
Stock issued				1,300	130,030		1,300	130,030		(130,030)				(130,030)				—
Balance at December 31, 2022	2,388	$	238,777	22,689	$	2,268,932	25,077	$	2,507,709	$	914,716	$	338,389	$	1,253,105	$	(84,270)	$	3,676,544







Comprehensive income										296,373		74,094		370,467		(34,701)		335,766
Proceeds from issuance of capital stock	41	4,069		31,186	3,118,587		31,227	3,122,656										3,122,656
Repurchase/redemption of capital stock	(23,058)	(2,305,768)		(2,117)	(211,704)		(25,175)	(2,517,472)										(2,517,472)
Net reclassification of shares to mandatorily redeemable capital stock	(4,341)	(434,167)		(2,925)	(292,406)		(7,266)	(726,573)										(726,573)
Net transfer of shares between Class A and Class B	27,759	2,775,976		(27,759)	(2,775,976)		—	—										—

Dividends on capital stock (Class A - 4.3%, Class B - 9.1%):
Cash payment										(269)				(269)				(269)
Stock issued				2,214	221,363		2,214	221,363		(221,363)				(221,363)				—
Balance at December 31, 2023	2,789	$	278,887	23,288	$	2,328,796	26,077	$	2,607,683	$	989,457	$	412,483	$	1,401,940	$	(118,971)	$	3,890,652

¹Putable

The accompanying notes are an integral part of these financial statements.

F-10

FEDERAL HOME LOAN BANK OF TOPEKA
STATEMENTS OF CASH FLOWS
(In thousands)
Year Ended December 31,
2017 2016 2015
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 197,211
$ 161,773
$ 93,360
Adjustments to reconcile income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization:
Premiums and discounts on consolidated obligations, net 9,475
(5,771 ) (13,982 )
Concessions on consolidated obligations 5,406
13,066
6,277
Premiums and discounts on investments, net 3,869
2,175
704
Premiums, discounts and commitment fees on advances, net (6,002 ) (7,330 ) (9,880 )
Premiums, discounts and deferred loan costs on mortgage loans, net 21,626
21,177
19,237
Fair value adjustments on hedged assets or liabilities 4,464
6,195
10,300
Premises, software and equipment 2,282
2,031
2,193
Other 657
221
415
(Reversal) provision for credit losses on mortgage loans (186 ) (109 ) (1,909 )
Non-cash interest on mandatorily redeemable capital stock 193
74
34
Net realized (gains) losses on sale of held-to-maturity securities —
—
(390 )
Net other-than-temporary impairment losses on held-to-maturity securities 468
168
826
Net realized (gains) losses on sale of premises and equipment 82
(47 ) (17 )
Other adjustments (212 ) (490 ) (143 )
Net (gains) losses on trading securities (6,914 ) 13,709
47,991
(Gains) losses due to change in net fair value adjustment on derivative and hedging activities 16,670
26,021
54,710
(Increase) decrease in accrued interest receivable (17,175 ) 10,863
(8,344 )
Change in net accrued interest included in derivative assets (131 ) (8,207 ) 10,982
(Increase) decrease in other assets (3,200 ) (2,956 ) 1,048
Increase (decrease) in accrued interest payable 6,341
(2,469 ) (5,962 )
Change in net accrued interest included in derivative liabilities (1,944 ) (4,641 ) (4,306 )
Increase (decrease) in Affordable Housing Program liability 9,763
5,231
(2,852 )
Increase (decrease) in other liabilities (284 ) 1,032
426
Total adjustments 45,248
69,943
107,358
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 242,459
231,716
200,718

Table of Contents


FEDERAL HOME LOAN BANK OF TOPEKA
STATEMENTS OF CASH FLOWS
(In thousands)


	Year Ended
	12/31/2023		12/31/2022		12/31/2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	370,467	$	240,736	$	160,590
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization:
Premiums and discounts on consolidated obligations, net	86,304		145,675		(15,563)
Concessions on consolidated obligations	5,956		5,112		5,694
Premiums and discounts on investments, net	(28,549)		(1,522)		14,116
Premiums, discounts and commitment fees on advances, net	(2,865)		(3,713)		(5,179)
Premiums, discounts and deferred loan costs on mortgage loans, net	12,930		20,119		50,188
Fair value adjustments on hedged assets or liabilities	(3,404)		1,421		3,767
Premises, software and equipment	3,121		3,172		3,285
Other	—		249		531
Provision (reversal) for credit losses on mortgage loans	(641)		710		(750)






Other adjustments, net	(9)		(19)		(305)
Net (gains) losses on trading securities	(19,554)		112,548		84,089
Net change in derivatives and hedging activities	(198,493)		693,354		239,455
(Increase) decrease in accrued interest receivable	(18,096)		(111,073)		19,699
Change in net accrued interest included in derivative assets	(23,379)		(41,566)		(6,628)
(Increase) decrease in other assets	(640)		(1,213)		173
Increase (decrease) in accrued interest payable	164,670		154,524		(2,822)
Change in net accrued interest included in derivative liabilities	(19,945)		9,643		(8,149)
Increase (decrease) in Affordable Housing Program liability	24,159		11,411		1,095
Increase (decrease) in other liabilities	1,935		2,147		(342)
Total adjustments	(16,500)		1,000,979		382,354
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES	353,967		1,241,715		542,944

The accompanying notes are an integral part of these financial statements.

F-11

Table of Contents


FEDERAL HOME LOAN BANK OF TOPEKA
STATEMENTS OF CASH FLOWS
STATEMENTS OF CASH FLOWS
STATEMENTS OF CASH FLOWS
(In thousands)
(In thousands)
(In thousands)
	Year Ended December 31,
	2017			2016			2015
			Year Ended

			Year Ended

			Year Ended
	12/31/2023									12/31/2023	12/31/2022	12/31/2021
CASH FLOWS FROM INVESTING ACTIVITIES:
Net (increase) decrease in interest-bearing deposits
Net (increase) decrease in interest-bearing deposits
Net (increase) decrease in interest-bearing deposits	$	(8,879	)	$	(202,323	)	$	(80,744	)
Net (increase) decrease in securities purchased under resale agreements	(761,446		)	1,545,000			(2,720,000		)
Net (increase) decrease in Federal funds sold	1,550,000			(725,000		)	75,000
Net (increase) decrease in short-term trading securities	(585,000		)	—			(10		)
Proceeds from maturities of and principal repayments on long-term trading securities	225,288			671,532			321,621
Purchases of long-term trading securities	—			(893,423		)	(1,202,159		)
Proceeds from maturities of and principal repayments on long-term available-for-sale securities	6,027			3,355			162
Purchases of long-term available-for-sale securities	(399,437		)	(618,072		)	(505,049		)
Proceeds from sale of trading securities
Proceeds from maturities of and principal repayments on trading securities
Purchases of trading securities

Proceeds from maturities of and principal repayments on available-for-sale securities
Proceeds from maturities of and principal repayments on available-for-sale securities
Proceeds from maturities of and principal repayments on available-for-sale securities
Purchases of available-for-sale securities
Proceeds from sale of held-to-maturity securities	—			—			4,106
Proceeds from maturities of and principal repayments on long-term held-to-maturity securities	1,099,083			895,729			1,234,879
Purchases of long-term held-to-maturity securities	(1,483,101		)	(595,553		)	(1,222,058		)
Proceeds from maturities of and principal repayments on held-to-maturity securities
Purchases of held-to-maturity securities
Advances repaid	522,851,282			157,420,556			93,175,453
Advances originated	(525,215,855		)	(157,903,955		)	(98,504,544		)
Principal collected on mortgage loans	947,143			1,122,764			1,004,008
Purchases of mortgage loans	(1,616,044		)	(1,398,936		)	(1,187,231		)
Proceeds from sale of foreclosed assets	2,455			4,510			5,577
Purchases of other long-term assets	(29,000		)	—			—
Net proceeds from sale of foreclosed assets

Other investing activities	2,538			2,373			2,232
Net (increase) decrease in loans to other FHLBanks	600,000			(600,000		)	—
Proceeds from sale of premises, software and equipment	48			1			—
Other investing activities
Other investing activities

Purchases of premises, software and equipment

Purchases of premises, software and equipment

Purchases of premises, software and equipment	(30,119		)	(9,418		)	(1,058		)
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES	(2,845,017		)	(1,280,860		)	(9,599,815		)

CASH FLOWS FROM FINANCING ACTIVITIES:
CASH FLOWS FROM FINANCING ACTIVITIES:
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits
Net increase (decrease) in deposits
Net increase (decrease) in deposits
Net proceeds from issuance of consolidated obligations:
Discount notes
Discount notes
Discount notes
Bonds
Payments for maturing, retired and transferred consolidated obligations:
Discount notes
Discount notes
Discount notes
Bonds
Bonds transferred to other FHLBanks

Net interest payments received (paid) for financing derivatives

Net interest payments received (paid) for financing derivatives

Net interest payments received (paid) for financing derivatives
Proceeds from issuance of capital stock
Payments for repurchase/redemption of capital stock
Payments for repurchase of mandatorily redeemable capital stock
Cash dividends paid

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
CASH AND CASH EQUIVALENTS AT END OF PERIOD

The accompanying notes are an integral part of these financial statements.

F-12

Table of Contents

FEDERAL HOME LOAN BANK OF TOPEKA
STATEMENTS OF CASH FLOWS
(In thousands)
Year Ended December 31,
2017 2016 2015
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits $ (107,106 ) $ (160,953 ) $ 156,178
Net proceeds from issuance of consolidated obligations:
Discount notes 937,784,053
533,157,539
309,022,332
Bonds 18,002,624
17,337,645
14,135,837
Payments for maturing and retired consolidated obligations:
Discount notes (939,161,380 ) (533,202,600 ) (301,432,848 )
Bonds (14,191,615 ) (16,457,890 ) (14,467,800 )
Net increase (decrease) in other borrowings 29,000
—
—
Proceeds from financing derivatives 3,227
16,784
14,119
Net interest payments received (paid) for financing derivatives (19,261 ) (56,023 ) (56,075 )
Proceeds from issuance of capital stock 1,817,323
1,291,763
1,225,576
Payments for repurchase/redemption of capital stock (715,714 ) (589,978 ) (472,893 )
Payments for repurchase of mandatorily redeemable capital stock (777,530 ) (762,268 ) (587,674 )
Cash dividends paid (267 ) (291 ) (296 )
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 2,663,354
573,728
7,536,456
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 60,796
(475,416 ) (1,862,641 )
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 207,254
682,670
2,545,311
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 268,050
$ 207,254
$ 682,670

Supplemental disclosures:
Interest paid $ 535,268
$ 311,851
$ 223,684
Affordable Housing Program payments $ 12,752
$ 13,189
$ 13,413
Net transfers of mortgage loans to other assets $ 2,218
$ 1,955
$ 4,267
Change in capital expenditures incurred but unpaid $ 3,758
$ —
$ —


FEDERAL HOME LOAN BANK OF TOPEKA
STATEMENTS OF CASH FLOWS
(In thousands)


	Year Ended
	12/31/2023		12/31/2022		12/31/2021

Supplemental disclosures:
Interest paid	$	1,166,760	$	308,581	$	184,420
Affordable Housing Program payments	$	17,286	$	15,653	$	17,124

Transfer of held-to-maturity securities to available-for-sale securities with the adoption of the reference rate reform guidance	$	—	$	—	$	2,019,635

The accompanying notes are an integral part of these financial statements.

F-13

Table of Contents

FEDERAL HOME LOAN BANK OF TOPEKA

Notes to Financial Statements

For the years ended December 31, ~~2017~~, ~~2016~~2023, 2022 and ~~2015~~2021

BACKGROUND ~~INFORMATION~~

~~The~~ Federal Home Loan Bank of Topeka (FHLBank or FHLBank Topeka), a federally chartered corporation, is one of 11 district Federal Home Loan Banks (FHLBanks). The FHLBanks are government-sponsored enterprises (GSE) that were organized under the Federal Home Loan Bank Act of 1932, as amended (Bank Act), to serve the public by enhancing the availability of credit for residential mortgages and targeted community development and provide a readily available, competitively-priced source of funds to their members. ~~The~~ FHLBank is a cooperative whose member institutions own substantially all of the outstanding capital stock of ~~the~~ FHLBank and generally receive dividends on their stock investments. Regulated financial depositories, insurance companies, and community development financial institutions engaged in residential housing finance whose principal place of business is located in Colorado, Kansas, Nebraska, or Oklahoma are eligible to apply for membership. State and local housing authorities that meet certain statutory requirements may become housing associates of ~~the~~ FHLBank and also be eligible to borrow from ~~the~~ FHLBank. While eligible to borrow, housing associates are not members of ~~the~~ FHLBank and therefore are not permitted or required to hold capital stock.

All members are required to purchase stock in the FHLBank located in their district in accordance with the capital plan of that particular FHLBank. Under FHLBank Topeka’s capital plan, members must own capital stock in ~~the~~ FHLBank based on the amount of their total assets. Each member is also required to purchase activity-based capital stock as it engages in certain business activities with ~~the~~ FHLBank, including ~~advances.~~advances, Acquired Member Assets (AMA), and letters of credit. Former members that still have outstanding business transactions with ~~the~~ FHLBank are also required to maintain their investments in FHLBank capital stock until the transactions mature or are paid off. As a result of these requirements, ~~the~~ FHLBank conducts business with members in the ordinary course of its business. For financial reporting purposes, ~~the~~ FHLBank defines related parties as those members: (1) with investments in excess of 10 percent of ~~the~~ FHLBank’s total regulatory capital stock outstanding, which includes mandatorily redeemable capital stock; or (2) with an officer or director serving on ~~the~~ FHLBank’s board of directors. See Note 1816 for more information on related party transactions.

The FHLBanks are supervised and regulated by the Federal Housing Finance Agency (FHFA), an independent agency in the executive branch of the U.S. government. The FHFA’s stated mission is to ensure ~~that~~ the housing GSEs ~~operate~~fulfill their mission by operating in a safe and sound manner ~~so that they~~to serve as a reliable source of liquidity and funding for housing finance and community investment. Each FHLBank is operated as a separate entity and has its own management, employees, and board of directors. The FHLBanks do not ~~have~~sponsor any special purpose entities or any other type of off-balance sheet conduits.

The FHLBanks have established a joint office called the Office of Finance to facilitate the issuance and servicing of the debt instruments of the FHLBanks, known as consolidated obligation bonds and consolidated obligation discount notes (collectively referred to as consolidated obligations) and to prepare the combined quarterly and annual financial reports of the FHLBanks. As provided by the Bank Act and applicable regulations, consolidated obligations are backed only by the financial resources of the FHLBanks. Consolidated obligations are the primary source of funds for the FHLBanks in addition to deposits, other borrowings, and capital stock issued to members. ~~The~~ FHLBank primarily uses these funds to provide advances to members and to acquire mortgage loans from members through the Mortgage Partnership Finance^® (MPF^®) Program. ~~"Mortgage~~“Mortgage Partnership ~~Finance"~~Finance” and ~~"MPF"~~“MPF” are registered trademarks of ~~the~~ FHLBank of Chicago. In addition, ~~the~~ FHLBank also offers correspondent services to members and other financial institutions such as wire transfer, security safekeeping, and ~~settlement services.~~cash management.

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation: The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP).

Use of Estimates: The preparation of financial statements under GAAP requires management to make estimates and assumptions as of the date of the financial statements in determining the reported amounts of assets, liabilities, and estimated fair values and in determining the disclosure of any contingent assets or liabilities. Estimates and assumptions by management also affect the reported amounts of income and expense during the reporting period. The most significant of these estimates include the fair value of ~~trading and available-for-sale securities, the fair value of derivatives and the allowance for credit losses.~~derivatives. Many of the estimates and assumptions, including those used in financial models, are based on financial market conditions as of the date of the financial statements. Because of the volatility of the financial markets, as well as other factors that affect management estimates, actual results may vary from these estimates.

F-14

Table of Contents

Fair Values: The fair value amounts, recorded on the Statements of Condition and presented in the note disclosures for the periods presented, have been determined by ~~the~~ FHLBank using available market and other pertinent information and reflect ~~the~~ FHLBank’s best judgment of appropriate valuation methods. Although ~~the~~ FHLBank uses its best judgment in estimating the fair value of these financial instruments, there are inherent limitations in any valuation technique. Therefore, these fair values may not be indicative of the amounts that would have been realized in market transactions at the reporting dates. See Note 1614 for more information.

Financial Instruments Meeting Netting Requirements: ~~The~~ FHLBank presents certain financial instruments, including derivatives, repurchase agreements and securities purchased under agreements to resell, on a net basis when it has a legal right of offset and all other requirements for netting are met (collectively referred to as the netting requirements). For these financial instruments, ~~the~~ FHLBank has elected to offset its asset and liability positions, as well as cash collateral received or pledged, when it has met the netting requirements. The net exposure for these financial instruments can change on a daily basis; therefore, there may be a delay between the time this exposure change is identified and additional collateral is requested and the time when this collateral is received or pledged. Likewise, there may be a delay for excess collateral to be returned. ~~See Note 12 for additional information regarding these financial instruments.~~

For derivative instruments that meet the netting requirements, any excess cash collateral received or pledged is recognized as a derivative liability or derivative asset. See ~~Note 8~~Notes 6 and 10 for additional ~~information regarding these agreements.~~information.

Cash ~~Flows:~~and Due from Banks: For purposes of the Statements of Condition and Statements of Cash Flows, ~~the~~ FHLBank considers cash on hand and non-interest-bearing deposits in banks as cash and cash equivalents.

Interest-bearing Deposits, Securities Purchased Under Agreements to Resell and Federal Funds Sold: FHLBank invests in interest-bearing deposits, securities purchased under agreements to resell and Federal funds sold. FHLBank treats securities purchased under agreements to resell as short-term collateralized loans. Federal funds sold consist of short-term unsecured loans generally transacted with counterparties that are considered by FHLBank to be of investment quality. Interest-bearing deposits, securities purchased under agreements to resell and Federal funds sold provide short-term liquidity and are carried at cost. ~~The~~ Accrued interest receivable is recorded separately on the Statements of Condition. Interest-bearing deposits and Federal funds sold are evaluated quarterly for credit losses. If applicable, an allowance for credit losses is recorded with a corresponding adjustment to the provision (reversal) for credit losses.

FHLBank ~~treats~~uses the collateral maintenance provision practical expedient, which allows expected credit losses to be measured based on the difference between the fair value of the collateral and the investment's amortized cost, for securities purchased under agreements to ~~resell as short-term collateralized loans, which are classified as assets on~~resell. Consequently, a credit loss would be recognized if there is a collateral shortfall that FHLBank does not believe the ~~Statements of Condition. Securities purchased under agreements~~counterparty will replenish in accordance with its contractual terms. The credit loss would be limited to ~~resell are held in safekeeping in~~ the ~~FHLBank’s name by third-party custodians approved by the FHLBank. If~~difference between the fair value of the ~~underlying securities decreases below~~collateral and the fair value required as collateral, the counterparty has the option to: (1) place an equivalent amount of additional securities in safekeeping in the FHLBank’s name; or (2) remit an equivalent amount of cash; otherwise, the dollar value of the resale agreement will be decreased accordingly. Federal funds sold consist of short-term unsecured loans generally transacted with counterparties that are considered by the FHLBank to be of investment quality.investment’s amortized cost.

Investment Securities: ~~The~~ FHLBank classifies investments as trading, available-for-sale, and held-to-maturity at the date of acquisition. Purchases and sales of securities are recorded on a trade date basis.

Trading: Securities classified as trading are either: (1) held for liquidity purposes; (2) economically swapped and classified as trading to provide a fair value offset to the gains (losses) on the interest rate swaps tied to the securities; or (3) acquired as asset/liability management tools and carried at fair value. ~~The~~ FHLBank records changes in the fair value of thesesecurities through other income (loss) as net gains (losses) on trading securities. ~~FHFA regulation and the~~

FHLBank’s Risk Management Policy (RMP) ~~prohibit~~prohibits active trading ~~in or the speculative use~~ of these ~~instruments and~~securities with the intent of realizing gains. FHFA regulation limits credit risk arising from these ~~instruments.~~instruments by prohibiting certain instruments identified as not investment quality. While ~~the~~ FHLBank classifies certain securities as trading for financial reporting purposes, it does not actively trade any of these securities, ~~with~~reflecting management’s intent that the ~~intent~~securities be available as a source of ~~realizing gains and holds these investments indefinitely as management periodically evaluates its asset/liability and~~ liquidity ~~needs.~~if needed but are otherwise held until maturity. Short-term money market investments with maturities of three months or less are acquired and classified as trading securities primarily for liquidity purposes. These short-term money market investments are periodically sold to meet ~~the~~ FHLBank’s cash flow needs.

Available-for-Sale: Securities that are not classified as trading or held-to-maturity are classified as available-for-sale and are carried at fair value. The change in fair value of available-for-sale securities is recorded in other comprehensive income (loss) (OCI) ~~as net unrealized gains (losses)~~. Accrued interest receivable is recorded separately on ~~available-for-sale securities.~~ the Statements of Condition.

For available-for-sale securities in hedging relationships that ~~have been hedged and the hedge relationships~~ qualify as ~~benchmark~~ fair value hedges, ~~the~~ FHLBank records both the ~~portion~~changes in the fair value of the ~~change~~designated derivative as well as the changes in the fair value of the investment ~~related~~attributable to the risk being hedged in ~~non-interest~~interest income ~~as net gains (losses)~~ on ~~derivatives and hedging activities together with the related change in the fair value of the derivative,~~available-for-sale securities, and records the remainder of the change in the fair value of the investment in OCI as net unrealized gains (losses) on available-for-sale securities.

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For securities classified as available-for-sale, FHLBank evaluates an individual security for impairment on a quarterly basis by comparing the security’s fair value to its amortized cost. Impairment exists when the fair value of the investment is less than its amortized cost (i.e., in an unrealized loss position). In assessing whether a credit loss exists on an impaired security, FHLBank considers whether there would be a shortfall in receiving all cash flows contractually due. When a shortfall is considered possible, FHLBank compares the present value of cash flows to be collected from the security with the amortized cost basis of the security. If the present value of cash flows is less than amortized cost, an allowance for credit losses is recorded with a corresponding adjustment to the provision (reversal) for credit losses. The allowance is limited by the amount of the unrealized loss. The allowance for credit losses excludes uncollectible accrued interest receivable, which is measured separately.

If management intends to sell an impaired security classified as available-for-sale, or more likely than not will be required to sell the security before expected recovery of its amortized cost basis, any allowance for credit losses is written off and the amortized cost basis is written down to the security’s fair value at the reporting date with any incremental impairment reported in earnings as net gains (losses) on investment securities. For those securities that management does not intend to sell or it is more likely than not that management will not be required to sell prior to recovery of the amortized cost basis, the credit portion of the impairment is recognized as an allowance for credit losses while the non-credit portion is recognized as net unrealized gains (losses) on available-for-sale securities in OCI.

Held-to-Maturity: Securities that ~~the~~ FHLBank has both the ability and intent to hold to maturity are classified as held-to-maturity and are carried at amortized cost, which is original cost adjusted for periodic principal repayments, amortization of premiums, and accretion of ~~discounts and other-than-temporary impairment (OTTI) recognized in net income and OCI.~~discounts. Accrued interest receivable is recorded separately on the Statements of Condition.

Certain changes in circumstances may cause ~~the~~ FHLBank to change its intent to hold a security to maturity without calling into question its intent to hold other debt securities to maturity in the future, including: (1) evidence of a significant deterioration in the issuer’s creditworthiness; (2) a change in statutory or regulatory requirements significantly modifying either what constitutes a permissible investment or the maximum level of investments in certain kinds of investments, thereby causing ~~the~~ FHLBank to dispose of a held-to-maturity investment; (3) a significant increase by a regulator in ~~the~~ FHLBank’s capital requirements that causes ~~the~~ FHLBank to downsize by selling held-to-maturity investments; or (4) a significant increase in the risk weights of debt securities used for regulatory risk-based capital purposes. ~~The~~ FHLBank considers the following situations to be ~~maturities~~a maturity for purposes of assessing ability and intent to hold to maturity:


▪	The sale of the security is near enough to maturity (or call date if exercise of the call is probable) that interest rate risk is substantially eliminated as a pricing factor and the changes in market interest rates would not have a significant effect on the security’s fair value; or


▪	The sale of a security occurs after the FHLBank has already collected a substantial portion (at least 85 percent) of the principal outstanding at acquisition either due to prepayments on the debt security or to scheduled payments on a debt security payable in equal installments (both principal and interest) over its term.

▪The sale of the security is near enough to maturity (for example, within three months of maturity), or call date if exercise of the call is probable that interest rate risk is substantially eliminated as a pricing factor and the changes in market interest rates would not have a significant effect on the security’s fair value; or

▪The sale of a security occurs after FHLBank has already collected a substantial portion (at least 85 percent) of the principal outstanding at acquisition either due to prepayments on the debt security or to scheduled payments on a debt security payable in equal installments (both principal and interest) over its term.

Held-to-maturity securities are evaluated quarterly for expected credit losses on a pool basis unless an individual assessment is deemed necessary because the securities do not possess similar risk characteristics. An allowance for credit losses is recorded with a corresponding adjustment to the provision (reversal) for credit losses. The allowance for credit losses excludes uncollectible accrued interest receivable, which is measured separately.

Premiums and Discounts: ~~The~~ FHLBank computes the amortization of purchased premiums and accretion of purchased discounts on mortgage-backed securities (MBS) using the level-yield method over the estimated cash flows of the securities. This method requires a retrospective adjustment of the effective yield each time ~~the~~ FHLBank receives a principal repayment or changes the estimated remaining cash flows as if the actual principal repayments and new estimated cash flows had been known since the original acquisition dates of the securities. ~~The FHLBank uses nationally recognized, market-based third-party prepayment models to estimate future cash flows. The~~ FHLBank computes the amortization of premiums and accretion of discounts on other investments using the level-yield method to the contractual maturities of the securities.

Gains and Losses on Sales: Gains and losses on the sales of investment securities are computed using the specific identification method and are included in other income (loss).

~~Investment Securities - Other-than-temporary Impairment:~~ ~~The~~ Advances: FHLBank ~~evaluates its individual available-for-sale and held-to-maturity investment securities in an unrealized loss position for OTTI~~records advances at least quarterly, or more frequently if events or changes in circumstances indicate that these investments may be other-than-temporarily impaired. An investment is considered impaired when its fair value is less than its amortized cost, ~~basis. The FHLBank considers an OTTI to have occurred under any of the following circumstances:~~


▪	~~The FHLBank has the intent to sell the impaired debt security;~~


▪	~~The FHLBank believes, based on available evidence, it~~which is ~~more likely than not that it will be required to sell the debt security before the recovery of its amortized cost basis; or~~


▪	~~The FHLBank does not expect to recover the entire amortized cost basis of the impaired debt security.~~

~~Recognition of OTTI:~~ If either of the first two conditions above is met, the FHLBank recognizes an OTTI charge in earnings equal to the entire difference between the security’s amortized cost basis and its fair value as of the Statement of Condition date. For securities in an unrealized loss position that meet neither of the first two conditions, the entire loss position, or total OTTI, is evaluated to determine the extent and amount of credit loss.

To determine whether a credit loss exists, the FHLBank performs an analysis, which includes a cash flow analysis for private-label MBS, to determine if it will recover the entire amortized cost basis of each of these securities. The present value of the cash flows expected to be collected is compared to the amortized cost basis of the security to determine if a credit loss exists. If there is a credit loss, the carrying value of the security is adjusted to its fair value. However, rather than recognizing the entire difference between the amortized cost basis and the fair value in earnings, only the amount of the impairment representing the credit loss (i.e., the credit component) is recognized in earnings, while the amount related to all other factors (i.e., the non-credit component) is recognized in OCI. The credit loss on a debt security is limited to the amount of that security’s unrealized losses.

The total OTTI is presented in the Statements of Income with an offset for the amount of the non-credit portion of OTTI that is recognized in OCI. The remaining amount in the Statements of Income represents the credit loss for the period.

~~Accounting for OTTI Recognized in OCI:~~ For subsequent accounting of other-than-temporarily impaired securities, the FHLBank records an additional OTTI if the present value of cash flows expected to be collected is less than the amortized cost basis. The total amount of this additional OTTI is determined as the difference between its carrying amount prior to the determination of this additional OTTI and its fair value. Additional credit losses related to previously other-than-temporarily impaired securities are reclassified out of OCI into the Statements of Income, but only to the extent of a security’s unrealized losses (i.e., difference between the security’s amortized cost and its fair value). The OTTI recognized in OCI is accreted to the carrying value of each held-to-maturity security on a prospective basis, based on the amount and timing of future estimated cash flows (with no effect on earnings unless the security is subsequently sold or there are additional decreases in cash flows expected to be collected).

~~Interest Income Recognition:~~ The FHLBank recognizes subsequent interest income in accordance with the method described in accounting guidance for beneficial interests in securitized financial assets. As of the impairment measurement date, a new accretable yield is calculated for the impaired investment security. This adjusted yield is used to calculate the amount to be recognized into income over the remaining life of the security so as to match the amount and timing of future cash flows expected to be collected. Subsequent changes in estimated cash flows change the accretable yield on a prospective basis. The estimated cash flows and accretable yield are re-evaluated on a quarterly basis.

~~Advances:~~ ~~The FHLBank presents advances (secured loans to members, former members or housing associates)~~ net of ~~unearned commitment fees,~~ premiums, discounts, and fair value basis adjustments. ~~The~~ FHLBank amortizes the premiums and accretes the discounts on advances to interest income using the level-yield method. ~~The~~ FHLBank records interest on advances to interest income as earned. Accrued interest receivable is recorded separately on the Statements of Condition. Advances are evaluated quarterly for expected credit losses. If deemed necessary, an allowance for credit losses is recorded with a corresponding adjustment to the provision (reversal) for credit losses.

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Advance Modifications:In cases in which ~~the~~ FHLBank funds a new advance concurrently with or within a short period of time before or after the prepayment of an existing advance, ~~the~~ FHLBank evaluates whether the new advance meets the accounting criteria to qualify as a modification of an existing advance or whether it constitutes a new advance. ~~The~~ FHLBank compares the present value of cash flows on the new advance to the present value of cash flows remaining on the existing advance. If there is at least a 10 percent difference in the cash flows or if ~~the~~ FHLBank concludes the differences between the advances are more than minor based on qualitative factors, the advance is accounted for as a new advance. ~~In all other instances,~~Otherwise, the new advance is accounted for as a modification.

Prepayment Fees: ~~The~~ FHLBank charges a borrower a prepayment ~~fees to its borrowers~~fee when the borrower prepays certain advances ~~are repaid~~ before ~~their~~the original ~~maturities. The~~maturity. FHLBank records prepayment fees net of ~~hedging fair value~~ basis adjustments related to hedging activities included in the carrying value of the advance as ~~prepayment fees on terminated advances~~advance interest income in the ~~interest income section of its~~ Statements of Income.

If a new advance does not qualify as a modification of an existing advance, itthe existing advance is treated as an advance termination and any prepayment fee, net of hedging adjustments, is recorded to ~~prepayment fees on terminated advances in the~~advance interest income ~~section of~~in the Statements of Income.

If ~~the~~a new advance qualifies as a modification ~~the net~~of an existing advance, any prepayment fee, ~~received on the prepaid advance~~net of hedging adjustments, is deferred, ~~as a discount and included~~recorded in the basis of the modified ~~advance. The basis adjustment is~~advance as a discount, and amortized using a level-yield methodology over the life of the modified advance to advance interest income. If the modified advance is hedged ~~the fair value gain or loss on the advance~~ and ~~the prepayment fee are included in the carrying amount of~~meets hedge accounting requirements, the modified advance ~~and any prior gains or losses and prepayment fees are amortized to interest income over the life of the modified advance using the level-yield method. Modified hedged advances are~~is marked to a benchmark fair value ~~after the modification,~~ and subsequent fair value changes that are attributable to the hedged risk are recorded in ~~net gains (losses) on derivatives and hedging activities in other income (loss).~~advance interest income.

Mortgage Loans Held for Portfolio: ~~The~~ FHLBank ~~carries~~classifies mortgage loans classified as held for investment at their principal amount outstanding, net of unamortized premiums, unaccreted discounts, deferred loan fees associated with table funded loans, hedging adjustments, unrealized gains and losses from mortgage purchase commitments, charge-offs, and other fees. The FHLBankthat it has the intent and ability to hold ~~these~~for the foreseeable future, or until maturity or payoff, as held for portfolio. These mortgage loans are recorded at amortized cost, which is the principal amount outstanding, net of premiums, discounts, deferred loan fees, hedging adjustments, charge-offs, and other fees. Accrued interest receivable is recorded separately on the Statements of Condition. An allowance for expected credit losses is recorded with a corresponding adjustment to ~~maturity.~~the provision (reversal) for credit losses. FHLBank does not purchase mortgage loans with credit deterioration at the time of purchase.

Quarterly, FHLBank measures expected credit losses on mortgage loans on a collective basis, pooling loans with similar risk characteristics. If a mortgage loan no longer shares risk characteristics with other loans, it is removed from the pool and evaluated for expected credit losses on an individual basis. When developing the allowance for credit losses, FHLBank measures the expected loss over the estimated remaining life of a mortgage loan, which also considers how FHLBank’s credit enhancements mitigate credit losses. If a loan is purchased at a discount, the discount does not offset the allowance for credit losses. FHLBank includes estimates of expected recoveries within the allowance for credit losses.

The allowance excludes uncollectible accrued interest receivable, as FHLBank writes off accrued interest receivable by reversing interest income if a mortgage loan is placed on nonaccrual status.

Premiums and Discounts: ~~The~~ FHLBank defers and amortizes/accretes mortgage loan origination fees (agent fees) and premiums and discounts paid to and received from participating financial institutions (PFI) as interest income using the level-yield method over the contractual lives of the loans. This method uses the cash flows required by the loan contracts, as adjusted for actual prepayments, to apply the interest method. The contractual method does not utilize estimates of future prepayments of principal.

Credit Enhancement Fees: The credit enhancement obligation (CE obligation) is an obligation on the part of the PFI that ensures the retention of credit risk on loans it originates on behalf of or sells to ~~the~~ FHLBank. The amount of the CE obligation is determined at the time of purchase so that any losses in excess of the CE obligation for each pool of mortgage loans purchased approximate those experienced by an investor in ~~either a double-A or triple-B rated~~an investment-grade MBS. As a part of ~~our~~the methodology used to determine the amount of credit enhancement necessary, ~~we analyze~~FHLBank analyzes the risk characteristics of each mortgage loan using a model licensed from a Nationally Recognized Statistical Rating Organization (NRSRO). ~~We use~~FHLBank uses the model to evaluate loan data provided by the PFI as well as other relevant information.

~~The~~ FHLBank pays the PFI a credit enhancement fee (CE fee) for managing this portion of the credit risk in the pool of loans. CE fees are paid monthly based on the remaining unpaid principal balance ~~(UPB)~~ of the loans in a master commitment, or a one-time upfront CE fee is paid at purchase. The upfront CE fee is based upon the present value of the monthly CE fee payments, with consideration for expected prepayments, and amortized as interest income using the level-yield method over the contractual lives of the loans.commitment. The required CE obligation amount may vary depending on the various product alternatives selected by the PFI. CE fees paid to PFIs are recorded as an offset to mortgage loan interest income. To the extent ~~the~~ FHLBank experiences a loss in a master commitment, ~~the~~ FHLBank may be able to recapture future performance-based CE fees paid to the PFIs to offset these losses.

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Other Fees: ~~The~~ FHLBank may receive other non-origination fees, such as delivery commitment extension fees and pair-off fees as part of the mark-to-market on derivatives to which they are related or as part of the loan basis, as applicable. Delivery commitment extension fees are received when a PFI requires an extension of the delivery commitment period beyond the original stated expiration. These fees compensate ~~the~~ FHLBank for lost interest as a result of late funding and represent the member purchasing a derivative from ~~the~~ FHLBank. Pair-off fees are received from the PFI when the amount funded is more than or less than a specific percentage range of the delivery commitment amount. These fees compensate ~~the~~ FHLBank for hedge costs associated with the under-delivery or over-delivery. To the extent that ~~pair off~~pair-off fees relate to under-deliveries of loans, they are included in the mark-to-market of the related delivery commitment derivative. If they relate to over-deliveries, they represent purchase price adjustments to the related loans acquired and are recorded as a part of the carrying value of the loan.

~~Allowance for Credit Losses:~~ ~~An allowance for credit losses~~Nonaccrual Loans: A past due loan is one where the borrower has failed to make a ~~valuation allowance separately established for each identified portfolio segment, if necessary, to provide for probable losses inherent in the FHLBank’s portfolios as~~full payment of ~~the Statement~~principal and interest within 30 days of ~~Condition~~its due date. ~~To the extent necessary, an allowance for credit losses for off-balance sheet credit exposures is recorded as a liability. See Note 7 for details on each allowance methodology.~~

~~Portfolio Segments:~~A portfolio segment is defined as the level at which an entity develops and documents a systematic methodology for determining its allowance for credit losses. The FHLBank has developed and documented a systematic methodology for determining an allowance for credit losses, where applicable, for: (1) credit products (advances, letters of credit and other extensions of credit to members); (2) government-guaranteed or -insured mortgage loans held for portfolio; (3) conventional mortgage loans held for portfolio; (4) the direct financing lease receivable; (5) term Federal funds sold; and (6) term securities purchased under agreements to resell.

~~Classes of Financing Receivables:~~Classes of financing receivables generally are a disaggregation of a portfolio segment to the extent that it is needed to understand the exposure to credit risk arising from these financing receivables. The FHLBank has determined that no further disaggregation of portfolio segments identified previously is needed as the credit risk arising from these financing receivables is assessed and measured at the portfolio segment level.

~~Non-accrual Loans:~~ ~~The~~ FHLBank places a conventional mortgage loan on ~~non-accrual~~nonaccrual status if it is determined that either: (1) the collection of interest or principal is doubtful; or (2) interest or principal is past its due date for 90 days or more, except when the loan is well-secured (e.g., through credit enhancements) and in the process of collection. ~~The~~ FHLBank does not place government-guaranteed or -insured mortgage loans on ~~non-accrual~~nonaccrual status due to the U.S. government guarantee or insurance on these loans and the contractual obligation of the loan servicer to repurchase the loans when certain criteria are met. For those mortgage loans placed on ~~non-accrual~~nonaccrual status, accrued but uncollected interest is reversed against interest income. ~~The~~ FHLBank records cash payments received on ~~non-accrual~~nonaccrual loans first as interest income and then as a reduction of principal as specified in the contractual agreement unless the collection of the remaining principal amount due is considered doubtful. If the collection of the remaining principal amount due is considered doubtful, then cash payments received would be applied first solely to principal until the remaining principal amount due is expected to be collected and then as a recovery of any charge-off, if applicable, followed by recording interest income. A loan on ~~non-accrual~~nonaccrual status may be restored to accrual status when: (1) none of its contractual principal and interest is due and unpaid, and ~~the~~ FHLBank expects repayment of the remaining contractual principal and interest; or (2) it otherwise becomes ~~well secured~~well-secured and in the process of collection.

~~Troubled Debt Restructuring:~~ The FHLBank considers a troubled debt restructuring to have occurred when a concession is granted to a borrower for economic or legal reasons related to the borrower’s financial difficulties and that concession would not have been considered otherwise. Loans that are discharged in Chapter 7 bankruptcy and have not been reaffirmed by the borrowers are also considered to be troubled debt restructurings, except in certain cases where supplemental mortgage insurance (SMI) policies are held or where all contractual amounts due are still expected to be collected as a result of certain credit enhancements or government guarantees.

~~Impairment Methodology:~~Collateral-dependent Loans: A loan is considered ~~impaired~~collateral dependent when ~~based on current information~~the borrower is experiencing financial difficulty and ~~events, it~~repayment is ~~probable that~~expected to be substantially provided through the ~~FHLBank will be unable to collect all amounts due according to the contractual terms~~sale of the underlying collateral. A loan ~~agreement.~~

~~Loans~~ that ~~are on non-accrual status and that are~~is considered collateral-dependent ~~are~~is measured for ~~impairment~~credit loss based on the fair value of the underlying property less estimated selling costs. Loans are considered collateral-dependent if repayment is expected to be provided solely by the sale of the underlying property; that is, there is no other available and reliable source of repayment. Collateral-dependent loans are impaired if the fair value of the underlying collateral is insufficient to recover the recorded investment on the loan. Interest income on impaired loans iscosts, with any shortfall recognized ~~in the same manner~~ as ~~non-accrual loans.~~an allowance for loan loss or charged off.

Charge-off Policy: A charge-off is recorded if it is estimated that the ~~recorded investment~~amortized cost and any applicable accrued interest in a loan will not be recovered. ~~The~~ FHLBank evaluates whether to record a charge-off on a conventional mortgage loan upon the occurrence of a confirming event. Confirming events include, but are not limited to, the occurrence of foreclosure or notification of a claim against any of the credit enhancements. ~~The~~ FHLBank charges off the portion of outstanding conventional mortgage loan balances in excess of fair value of the underlying property, less estimated cost to sell, for loans that are 180 days or more delinquent and for certain loans ~~that~~for which the borrower has filed for bankruptcy.

Real Estate Owned: Real estate owned (REO) includes assets that have been received in satisfaction of debt through foreclosures. REO is initially recorded at fair value less estimated selling costs and is subsequently carried at the lower of that amount or current fair value less estimated selling costs. ~~The~~ FHLBank recognizes a charge-off to the allowance for credit losses if the fair value of the REO less estimated selling costs is less than the ~~recorded investment~~amortized cost in the loan at the date of transfer from loans to REO. Any subsequent gains, losses and carrying costs are included in other expense in the Statements of Income. REO is recorded in other assets on the Statements of Condition.

Derivatives: All derivatives are recognized on the Statements of Condition at their fair values and are reported as either derivative assets or derivative liabilities, net of cash collateral, ~~including initial and certain variation margin,~~ and accrued interest receivable from or pledged by clearing agents and/or counterparties. The fair values of derivatives are netted by clearing agent or counterparty when the netting requirements have been met. If these netted amounts are positive, they are classified as an asset and, if negative, they are classified as a liability. Cash flows associated with ~~derivatives~~a derivative are reflected as cash flows from operating activities in the Statements of Cash Flows unless the derivative meets the criteria to be a financing derivative.

~~The~~ FHLBank utilizes two Derivative Clearing Organizations (Clearinghouses) for all cleared derivative transactions, ~~LCH.Clearnet LLC~~LCH Ltd and CME Clearing. ~~Effective January 3, 2017, CME Clearing made certain amendments to its rulebook changing the legal characterization of~~At both Clearinghouses, variation margin ~~payments to be~~is characterized as daily settlement payments rather than collateral. Variation margin related to LCH.Clearnet LLC contracts was characterized as cash collateral as of December 31, 2017 as amendments to its rulebook were not effective until January 16, 2018. At both Clearinghouses,and initial margin is considered cash collateral.

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Derivative Designations: Each derivative is designated as one of the following:


▪	~~a qualifying fair value hedge of the change in fair value of: (1) a recognized asset or liability; or (2) an unrecognized firm commitment;~~


▪	~~a qualifying cash flow hedge of: (1) a forecasted transaction; or (2) the variability of cash flows that are to be received or paid in connection with a recognized asset or liability;~~


▪	~~a non-qualifying hedge of an asset or liability (an economic hedge) for asset/liability management purposes; or~~


▪	~~a non-qualifying hedge of another derivative (an intermediary hedge) that is offered as a product to members.~~

▪a qualifying fair value hedge of the change in fair value of: (1) a recognized asset or liability, or (2) an unrecognized firm commitment; or

▪a non-qualifying hedge of an asset or liability (an economic hedge) for asset/liability management purposes.

Accounting for Qualifying Hedges: If hedging relationships meet certain criteria, including, but not limited to, formal documentation of the hedging relationship and an expectation to be highly effective, they qualify for hedge accounting. Two approaches to hedge accounting include:

▪Long haul hedge accounting - The application of long haul hedge accounting requires FHLBank to assess (both at the hedge's inception and at least quarterly) whether the derivatives that are used in hedging transactions have been highly effective in offsetting changes in the fair value of ~~the~~ hedged items attributable to the hedged risk and whether those derivatives may be ~~recorded~~expected to remain highly effective in ~~earnings (fair value hedges) or OCI (cash flow hedges). Two approaches to~~future periods; and

▪Shortcut hedge accounting ~~include:~~

▪

Long haul hedge accounting - The application of long haul hedge accounting requires the FHLBank to formally assess (both at the hedge's inception and at least quarterly) whether the derivatives that are used in hedging transactions have been highly effective in offsetting changes in the fair value or cash flows of hedged items or forecasted transactions attributable to the hedged risk and whether those derivatives may be expected to remain highly effective in future periods; and

▪

Shortcut hedge accounting - Transactions that meet more stringent criteria qualify for the shortcut method of hedge accounting in which an assumption can be made that the change in fair value of a hedged item, due to changes in the benchmark rate, exactly offsets the change in fair value of the related derivative. Under the shortcut method, the entire change in fair value of the interest rate swap is considered to be highly effective at achieving offsetting changes in fair values or cash flows of the hedged asset or liability.

- Under the shortcut method of hedge accounting, the entire change in fair value of the interest rate swap is considered to be perfectly effective at achieving offsetting changes in the fair value of the hedged asset or liability if the interest rate swap transaction meets more stringent qualifying criteria. Thus, an assumption can be made that the change in fair value of a hedged item, due to changes in the hedged risk, exactly offsets the change in fair value of the related derivative. FHLBank has elected to document at hedge inception a quantitative method to assess hedge effectiveness for its shortcut hedging relationships for use in the event that the use of the shortcut method is no longer appropriate.

Derivatives are typically executed at the same time as the hedged item, and ~~the~~ FHLBank designates the hedged item in a qualifying ~~hedge~~hedging relationship at the trade date. In many hedging relationships, ~~the~~ FHLBank may designate the hedging relationship upon its commitment to disburse an advance or trade a consolidated obligation in which settlement occurs within the shortest period of time possible for the type of instrument based on market settlement conventions. ~~The~~ FHLBank defines market settlement conventions for advances and consolidated obligation discount notes to be five business days or less and for consolidated ~~obligations~~obligation bonds to be thirty calendar days or less, using a next business day convention. ~~The~~ FHLBank then records the changes in fair value of the derivative and the hedged item beginning on the trade date.

Changes in the fair value of a derivative that is designated and qualifies as a fair value hedge, along with changes in the fair value of the hedged asset or liability that are attributable to the hedged risk, ~~(including changes that reflect losses or gains on firm commitments),~~ are recorded in ~~other~~net interest income ~~(loss)~~in the same line as ~~net~~the earnings effect of the hedged item. Net gains (losses) on derivatives and hedging ~~activities. Changes in the fair value of a derivative that is designated and qualifies as a cash flow hedge, to the extent that the hedge is highly effective, are~~activities for qualifying hedges recorded in ~~accumulated OCI (AOCI), a component of capital, until earnings are affected by the variability of the cash flows of the hedged transaction (i.e., until the recognition of~~net interest ~~on a variable rate asset or liability is recorded in earnings). For both fair value~~income include unrealized and cash flow hedges, any hedge ineffectiveness (which represents the amount by which the change in the fair value of the derivative differs from the change in fair value of the hedged item or the variability in the cash flows of the forecasted transaction attributable to the hedged risk) is recorded in other income (loss) as netrealized gains (losses) ~~on derivatives and hedging activities.~~, which include net interest settlements.

Accounting for Non-Qualifying Hedges: An FHLBank defines an economic hedge ~~is defined~~ as a derivative hedging ~~specific or non-specific~~ underlying assets, liabilities or firm commitments that does not qualify for hedge accounting or where management did not elect hedge accounting treatment at inception but is an acceptable hedging strategy under ~~the~~ FHLBank’s RMP. These economic hedging strategies also comply with FHFA regulatory requirements prohibiting speculative derivative transactions. An economic hedge ~~by definition~~ introduces the potential for earnings variability caused by changes in fair value on the derivatives that are recorded in the FHLBank’s income but not offset by corresponding changes in the fair value of the economically hedged assets, liabilities or firm commitments being recorded simultaneously in income. As a result, thevolatility because FHLBank recognizes ~~only~~ the net interest settlement and the change in fair value of these derivatives in other income (loss) as net gains (losses) on derivatives, ~~and hedging activities~~ with no offsetting fair value adjustments for the assets, liabilities or firm commitments.

The derivatives used in intermediary activities do not qualify for hedge accounting treatment and are separately marked-to-market through earnings. The net result of the accounting for these derivatives does not significantly affect the operating results of the FHLBank. These amounts are recorded in other income (loss) as net gains (losses) on derivatives and hedging activities.

Accrued Interest Receivables and Payables: The net settlements of interest receivables and payables onrelated to derivatives designated asin fair value ~~or cash flow hedges~~hedging relationships are recognized as adjustments to the interest income or expense of the designated underlying investment securities, advances, consolidated obligations or other financial instruments, thereby affecting the reported amount of net interest income on the Statements of Income. The net settlements of interest receivables and payables on ~~intermediated derivatives for members and other~~ economic hedges are recognized in other income (loss) as net gains (losses) on ~~derivatives and hedging activities.~~derivatives.

Discontinuance of Hedge Accounting: ~~The~~ FHLBank discontinues hedge accounting prospectively when: (1) it determines that the derivative is no longer highly effective in offsetting changes in the fair value ~~or cash flows~~ of a hedged item attributable to the hedged risk (including hedged items such as firm ~~commitments or forecasted transactions)~~commitments); (2) the derivative and/or the hedged item expires or is sold, terminated or exercised; (3) ~~it is no longer probable that the forecasted transaction will occur in the originally expected period; (4)~~ a hedged firm commitment no longer meets the definition of a firm commitment; or ~~(5)~~(4) management determines that designating the derivative as a hedging instrument is no longer appropriate.

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When hedge accounting is discontinued because ~~the~~ FHLBank determines that the derivative no longer qualifies as an effective fair value hedge of an existing hedged item, ~~the~~ FHLBank continues to carry the derivative on its Statements of Condition at fair value, ceases to adjust the hedged asset or liability for changes in fair value, and begins amortizing the cumulative basis adjustment on the hedged item into earnings over the remaining life of the hedged item using the level-yield method. When hedge accounting is discontinued because the FHLBank determines that the derivative no longer qualifies as an effective cash flow hedge of an existing hedged item, the FHLBank continues to carry the derivative on its Statements of Condition at fair value and amortizes the cumulative OCI adjustment to earnings when earnings are affected by the original forecasted transaction. In all situations in which hedge accounting is discontinued and the derivative remains outstanding, ~~the~~ FHLBank carries the derivative at fair value on its Statements of Condition, recognizing changes in the fair value of the derivative in current period earnings. When the FHLBank discontinues hedge accounting because it is probable that a forecasted transaction will not occur by the end of the originally specified time period or within an additional two-month period of time thereafter, theother income (loss) as net gains ~~and losses in AOCI will be recognized immediately in earnings.~~(losses) on derivatives. When hedge accounting is discontinued because the hedged item no longer meets the definition of a firm commitment, ~~the~~ FHLBank continues to carry the derivative on its Statements of Condition at fair value, removing any asset or liability that was recorded to recognize the firm commitment and recording it as a gain or loss in current period earnings.

Embedded Derivatives: ~~The~~ FHLBank may issue debt, make advances, or purchase financial instruments in which a derivative instrument is embedded. Upon execution of these transactions, ~~the~~ FHLBank assesses whether the economic characteristics of the embedded derivative are clearly and closely related to the economic characteristics of the remaining component of the advance, debt or purchased financial instrument (the host contract) and whether a separate, non-embedded instrument with the same terms as the embedded instrument would meet the definition of a derivative instrument. When ~~the~~ FHLBank determines that: (1) the embedded derivative has economic characteristics that are not clearly and closely related to the economic characteristics of the host contract; and (2) a separate, stand-alone instrument with the same terms would qualify as a derivative instrument, the embedded derivative is separated from the host contract, carried at fair value, and designated as a stand-alone derivative instrument pursuant to an economic hedge. However, if the entire contract (the host contract and the embedded derivative) is to be measured at fair value, with changes in fair value reported in current period earnings (such as an investment security classified as trading), or if ~~the~~ FHLBank cannot reliably identify and measure the embedded derivative for purposes of separating that derivative from its host contract, the entire contract is carried on the Statements of Condition at fair value and no portion of the contract is designated as a hedging instrument.

Premises, Software and Equipment: ~~The~~Premises, software, and equipment are included in other assets on the Statements of Condition. FHLBank records premises, software, and equipment at cost less accumulated depreciation and amortization. Depreciation is computed on the straight-line method over the estimated useful lives of the assets ranging from 3 to 40 years. Leasehold improvements are amortized on the straight-line basis over the shorter of the estimated useful life of the improvement or the remaining term of the lease. Improvements and major renewals are capitalized, and ordinary maintenance and repairs are expensed as incurred. As of December 31, 2017 and 2016, the accumulated depreciation and amortization related to premises, software and equipment was $31,482,000 and $30,175,000, respectively. Depreciation and amortization expense was $2,282,000, $2,031,000 and $2,193,000 for the years ended December 31, 2017, 2016, and 2015, respectively. Gains and losses on disposals are included in other income (loss).

The cost of purchased software and certain costs incurred in developing computer software for internal use isare capitalized and amortized over future periods. ~~Amortization is computed~~Gains and losses on disposals are included in other income (loss) on the ~~straight-line method over the estimated useful lives ranging from five to seven years for purchased and developed software.~~ Statements of Income.

As of December 31, ~~2017~~2023 and ~~2016, the FHLBank had $7,295,000 and $4,433,000, respectively, in unamortized computer software costs included in~~2022, premises, software, and equipment ~~on its Statements~~were $38,588,000 and $36,968,000, which was net of ~~Condition. Amortization~~the accumulated depreciation and amortization of ~~computer software costs charged to expense was $936,000, $834,000~~$35,381,000 and ~~$1,064,000 for~~$32,356,000, respectively. For the years ended December 31, ~~2017, 2016,~~2023, 2022, and ~~2015,~~2021, the depreciation and amortization expense for premises, software and equipment was $3,121,000, $3,172,000 and $3,285,000, respectively.

Consolidated Obligations: Consolidated obligations are recorded at amortized ~~cost.~~cost, which represents the funded amount, adjusted for premiums, discounts, concessions, and fair value hedging adjustments.

Discounts and Premiums:Consolidated obligation discounts are accreted and premiums are amortized to interest expense using the level-yield method over the contractual maturities of the corresponding debt.

Concessions: Amounts paid to dealers in connection with sales of consolidated obligations are deferred and amortized using the level-yield method over the contractual terms of the consolidated obligations. Concession amounts are prorated to ~~the~~ FHLBank by the Office of Finance based on the percentage of each consolidated obligation issued by the Office of Finance on behalf of ~~the~~ FHLBank. ~~The~~ FHLBank records concessions paid on consolidated obligations as a direct deduction from their carrying amounts, consistent with the presentation of discounts on consolidated obligations. The amortization of those concessions is included in consolidated obligation interest expense.

Off-Balance Sheet Credit Exposures: FHLBank evaluates off-balance sheet credit exposures on a quarterly basis for expected credit losses. If deemed necessary, an allowance for expected credit losses on these off-balance sheet exposures is recorded in other liabilities with a corresponding adjustment to the provision (reversal) for credit losses.

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Mandatorily Redeemable Capital Stock: ~~The~~ FHLBank reclassifies all stock subject to redemption from capital to liability once a member submits a written redemption request, gives notice of intent to withdraw from membership, or attains non-member status by merger or acquisition, charter termination or involuntary termination from membership, since the member shares will then meet the definition of a mandatorily redeemable financial instrument. There is no distinction as to treatment for reclassification from capital to liability between in-district redemption requests and those redemption requests triggered by out-of-district acquisitions. ~~The~~ FHLBank does not take into consideration its members’ right to cancel a redemption request in determining when shares of capital stock should be classified as a liability because the cancellation would be subject to a substantial cancellation fee. Member and non-member shares of capital stock meeting the definition of mandatorily redeemable capital stock are reclassified to a liability at fair value, which has been determined to be par value ~~($100)~~ plus any estimated accrued but unpaid dividends. ~~The~~ FHLBank’s dividends are declared and paid at each quarter-end; therefore, the fair value reclassified equals par value. Dividends declared on a member's shares of capital stock for the time after classification as a liability are accrued at the expected dividend rate and reflected as interest expense in the Statements of Income. The repurchase of these mandatorily redeemable financial instruments by ~~the~~ FHLBank are reflected as financing cash outflows in the Statements of Cash Flows once settled.

If a member submits a written request to cancel a previously submitted written redemption request, the capital stock covered by the written cancellation request is reclassified from a liability to capital at fair value. After the reclassification, dividends on the capital stock are no longer classified as interest expense.

Restricted Retained Earnings: The Joint Capital Enhancement Agreement, as amended, provides that FHLBank, ~~allocates~~on a quarterly basis, allocate 20 percent of its ~~quarterly~~ net income to a separate restricted retained earnings account until the balance of that account, ~~balance~~calculated as of the last day of each calendar quarter, equals at least 1 percent of ~~its~~FHLBank's average balance of outstanding consolidated obligations for the ~~previous~~calendar quarter. These restricted retained earnings are not available to pay dividends and are presented separately on the Statements of Condition.

FHFA Expenses: A portion of the FHFA’s expenses and working capital fund are allocated among the FHLBanks based on the pro rata share of the annual assessments, which are based on the ratio between each FHLBank’s minimum required regulatory capital and the aggregate minimum required regulatory capital of every FHLBank.

Office of Finance Expenses: Each FHLBank’s proportionate share of Office of Finance operating and capital expenditures is calculated using a formula that is based upon the following components: (1) two-thirds based upon each FHLBank’s share of total consolidated obligations outstanding; and (2) one-third based upon an equal pro rata allocation.

Affordable Housing Program (AHP) Assessments: ~~The~~ FHLBank is required to establish, fund and administer an AHP. The AHP funds provide subsidies to members to assist in the purchase, construction or rehabilitation of housing for very low-, low- and moderate-income households. The required annual AHP funding is charged to earnings, and an offsetting liability is established.

NOTE 2 – RECENTLY ISSUED ACCOUNTING STANDARDS AND INTERPRETATIONS AND CHANGES IN AND ADOPTIONS OF ACCOUNTING PRINCIPLES

~~Targeted Improvements to Accounting for Hedging Activities~~Segment Reporting (Accounting Standards Update (ASU) ~~2017-12)~~2023-07). In ~~August 2017,~~July 2023, the Financial Accounting Standards Board (FASB) issued ~~an amendment to simplify the application of hedge accounting guidance in current GAAP and~~amendments to improve ~~the financial reporting~~disclosures about a public entity’s reportable segments and addresses requests from investors and other allocations of ~~hedging relationships to better portray the economic results of an entity's risk management activities in its financial statements. This~~capital for additional, more detailed information about a reportable segment’s expenses. The guidance requires that, for fair value hedges, the entire change in the fair value of the hedging instrument included in the assessment of hedge effectiveness be presented in the same income statement line that is used to present the earnings effect of the hedged item. For cash flow hedges, the entire change in the fair value of the hedging instrument included in the assessment of hedge effectiveness must be recorded in OCI. In addition, the amendments include certain targeted improvements to the assessment of hedge effectiveness and permit, among other things, the following:

~~Measurement of the change in fair value of the hedged item on the basis of the benchmark rate component of the contractual coupon cash flows determined at hedge inception;~~

~~Measurement of the hedged item in a partial-term fair value hedge of interest rate risk by assuming the hedged item has a term that reflects only the designated cash flows being hedged;~~

Consideration only of how changes in the benchmark interest rate affect a decision to settle a prepayable instrument before its scheduled maturity in calculating the change in the fair value of the hedged item attributable to interest rate risk; and

For a cash flow hedge of interest rate risk of a variable rate financial instrument, an entity could designate the variability in cash flows attributable to the contractually specified interest rate as the hedged risk.

~~The amendment will be~~ effective for ~~annual periods,~~fiscal years beginning after December 15, 2023 and interim periods within ~~those annual periods, beginning~~fiscal years after December 15, 2018, which is January 1, 2019 for the FHLBank, and early adoption is permitted in any interim period or fiscal year prior to the effective date. The FHLBank does not plan on early adoption. This guidance should be applied through a cumulative-effect adjustment directly to retained earnings as of the beginning of the fiscal year of adoption. The FHLBank is in the process of evaluating this guidance and its effect on the FHLBank's financial condition, results of operations and cash flows.

~~Premium Amortization on Purchased Callable Debt Securities (ASU 2017-08).~~ In March 2017, FASB issued an amendment to shorten the amortization period of any premium on callable debt securities to the first call date instead of over the contractual life of the instrument. The amendment does not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity. The guidance is intended to reduce diversity in practice in the amortization of premiums and the consideration of how the potential of a security being called is factored into current impairment assessments. The amendment also intends to more closely align the amortization of premiums and discounts to the expectations incorporated into the market pricing of the instrument. The amendment will be effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2018, which is January 1, 2019 for the FHLBank, and early adoption is permitted. The FHLBank does not plan on early adoption. This guidance should be applied using a modified retrospective method through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption.2024. The adoption of this guidance is not expected to have a material effect on ~~the FHLBank's financial condition, results of operations or cash flows.~~FHLBank’s current disclosures.

~~Improving the Presentation of Net Periodic Pension Cost~~Troubled Debt Restructurings and ~~Net Periodic Postretirement Benefit Cost~~Vintage Disclosures (ASU ~~2017-07)~~2022-02). In March ~~2017,~~2022, the FASB issued amendments to eliminate the accounting guidance for troubled debt restructurings by creditors in Accounting Standards Codification (ASC) 310 for entities that have adopted ASU 2016-13, while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty. The amended guidance requires that an ~~amendment~~entity apply the loan refinancing and restructuring guidance in ASC 310-20-35-9 through ASC 310-20-35-11 to ~~improve~~determine whether a modification results in a new loan or a continuation of an existing loan. Additionally, the ~~presentation~~amendments require that an entity disclose current-period gross writeoffs by year of ~~net periodic pension cost~~origination for financing receivables and net ~~periodic postretirement benefit cost. The amendment requires that~~investments in leases within the ~~employer disaggregate the service cost component and the other components~~scope of ~~net benefit cost and allow only the service cost component~~ASC 326. FHLBank adopted this guidance as of ~~net benefit cost to be eligible for capitalization. The amendment~~January 1, 2023. While this guidance is intended to provide transparency, consistency, and usefulness to users of financial statements. The amendment became effective for annual periods, and interim periods within those annual periods, beginning on January 1, 2018 forenhance disclosures, the FHLBank. This guidance was applied retrospectively for the presentation of the service cost component and the other components of net periodic pension cost and net periodic postretirement benefit cost in the income statement and prospectively, on and after the effective date, for the capitalization of the service cost component of net periodic pension cost and net periodic postretirement benefit in assets. The adoption of this guidance did not have a material effect on ~~the FHLBank's~~FHLBank’s financial condition, results of operations, cash flows, or ~~cash flows.~~disclosures.

~~Classification of Certain Cash Receipts and Cash Payments~~Fair Value Hedging – Portfolio Layer Method (ASU ~~2016-15)~~2022-01).In ~~August 2016,~~March 2022, the FASB issued ~~amendments~~an amendment to clarify the application of the guidance in ASC 815 related to fair value hedging of interest rate risk for portfolios of financial assets. The ASU

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expands the scope and application of the portfolio layer method and provides guidance on the ~~classification~~accounting for and disclosure of ~~certain cash receipts and payments in the statement~~hedge basis adjustments. FHLBank adopted this guidance as of cash flows. This guidance is intended to reduce existing diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. This guidance became effective for the FHLBank for interim and annual periods and applied retrospectively, beginning on January 1, ~~2018. The~~2023. FHLBank does not currently hedge interest rate risk for portfolios of financial assets so adoption of this guidance ~~did not have an impact~~had no effect on ~~the FHLBank's~~FHLBank’s financial condition, results of operations, cash flows, or ~~cash flows.~~disclosures given current strategies.

~~Measurement~~Facilitation of ~~Credit Losses~~the Effects of Reference Rate Reform on Financial ~~Instruments~~Reporting (ASU ~~2016-13)~~2020-04). In ~~June 2016,~~March 2020, the FASB issued temporary optional guidance to ease the potential burden in accounting for reference rate reform. The new guidance provides optional expedients and exceptions for applying GAAP to transactions affected by reference rate reform if certain criteria are met. The transactions primarily include: (1) contract modifications; (2) hedging relationships; and (3) sale or transfer of debt securities classified as held-to-maturity. This guidance was effective upon issuance and through December 31, 2024, as amended, ~~guidance~~except for certain optional expedients elected for hedging relationships, which should be retained for the accounting of credit losses on financial instruments. The amendments require entities to measure expected credit losses based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectabilityduration of the ~~reported amount. An entity must use judgment in determining~~hedge term. As of June 30, 2023, FHLBank transitioned all outstanding London Interbank Offered Rate (LIBOR) settings to convert to reference the ~~relevant information and estimation methods that are appropriate in its circumstances. Additionally, under the new guidance, a financial asset,~~Secured Overnight Financing Rate (SOFR), either to start or ~~a group of financial assets, measured~~to fall back, beginning July 3, 2023 or at ~~amortized cost basis is required to be presented at the net amount expected to be collected.~~

~~The guidance also requires:~~

The statement of income to reflect the measurement of credit losses for newly recognized financial assets, as well as the expected increases or decreases of expected credit losses that have taken place during the period;

The entities to determine the allowance for credit losses for purchased financial assets with a more-than-insignificant amount of credit deterioration since origination that are measured at amortized cost basis in a similar manner to other financial assets measured at amortized cost basis. The initial allowance for credit losses is required to be added to the purchase price;

Credit losses relating to available-for-sale debt securities to be recorded through an allowance for credit losses. The amendments limit the allowance for credit losses to the amount by which fair value is below amortized cost; and

~~Public entities to further disaggregate the current disclosure of credit quality indicators in relation to the amortized cost of financing receivables by the year of origination (i.e., vintage).~~

The guidance is effective for the FHLBank for interim and annual periods beginning on January 1, 2020. Early application is permitted as of the interim and annual reporting periods beginning after December 15, 2018. The FHLBank does not plan on early adoption. The guidance should be applied using a modified-retrospective approach, through a cumulative-effect adjustment to retained earnings as of the beginning of the ~~first reporting period~~next reset period. As a result of finalizing transition, FHLBank adopted certain practical expedients in ~~which the guidance is effective. In addition, entities are required to use a prospective transition approach~~ASC 848 for debt securities for which an OTTI charge had been recognized before the effective date. The FHLBank has formed an internal working group that has begun its implementation efforts by identifying key interpretive issues and potential impacts to processes and systems that will eventually determine the magnitude of the impact on the FHLBank's financial condition, results of operations and cash flows.

~~Leases (ASU 2016-02).~~ In February 2016, FASB issued amendments to lease accounting guidance. Under the new guidance, lessees will be required to recognize a lease liability and a right-of-use asset for all leases in the statement of financial condition, which effectively removes a source of off-balance sheet financing for operating leases. A distinction remains between finance leases and operating leases, but the assets and liabilities arising from operating leases are now also required to be recognized in the statement of financial condition. Lessor accounting is largely unchanged. The amendments are effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2018, which is January 1, 2019 for the FHLBank. The FHLBank does not plan on early adoption. The FHLBank has a limited number of lease agreements and has concluded that the impact of the guidance is not expected to have a material effect on the FHLBank's financial condition, results of operations or cash flows.

~~Recognition and Measurement of Financial Assets and Financial Liabilities (ASU 2016-01).~~ In January 2016, FASB issued amendments to improve the recognition, measurement, presentation and disclosure of financial instruments through changes to existing GAAP. The provisions impacting the FHLBank include the elimination of the requirement to disclose the method and significant assumptions used to estimate the fair value of financial instruments carried at amortized cost, the requirement to use the notion of exit price when measuring the fair value of financial instruments for disclosure purposes, and the separate presentation of financial assets and financial liabilities by measurement category and form of asset (i.e., securities or loans and receivables) on the statement of financial condition or in the notes to financial statements. The amendments became effective for annual periods, and interim periods within those annual periods, beginning on January 1, 2018 for the FHLBank. This guidance will impact disclosuresqualifying contract modifications related to ~~the fair value of financial instruments. However, this guidance did not have an impact on the FHLBank's financial condition, results of operations or cash flows.~~

~~Revenue Recognition (ASU 2014-09).~~ ~~In May 2014, FASB issued guidance~~reference rate reform, including with respect to introduce a new revenue recognition model in which an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This guidance also requires disclosures sufficient to enable users to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers, including qualitative and quantitative disclosures about contracts with customers, significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill a contract. In July 2015, FASB voted to defer the effective date of the new standard by one year. Inaddition, in March 2016, FASB issued amendments to clarify the implementation guidance on principal versus agent considerations, in particular, relating to how an entity should determine whether the entity is a principal or an agent for each specified good or service promised to the customer and the nature of each specified good or service. The amendments do not change the core principle in the new revenue standard. The standard became effective for fiscal years, including interim periods within those fiscal years, beginning on January 1, 2018 for the FHLBank. Because the guidance does not apply to revenue associated with financial instruments, including loans and securities that are accounted for under other GAAP, the adoptionqualifying hedge relationships. Application of this guidance did not have a material impact on ~~its~~FHLBank’s financial condition, results of operations, cash flows, or ~~cash flows.~~disclosures. For qualifying hedge relationships, FHLBank does not expect that the practical expedients elected for the duration of the hedge term will have a material impact on the financial statements. As all of FHLBank’s qualifying contracts transitioned at June 30, 2023, FHLBank does not expect to further elect provisions or expedients of this guidance through its ending date of December 31, 2024 because FHLBank has no outstanding LIBOR exposure.

NOTE 3 - ~~CASH AND DUE FROM BANKS~~ – INVESTMENTS

~~Cash~~FHLBank's investment portfolio consists of interest-bearing deposits, securities purchased under agreements to resell, Federal funds sold, and ~~due~~debt securities.

Interest-Bearing Deposits, Securities Purchased under Agreements to Resell, and Federal Funds Sold: FHLBank invests in interest-bearing deposits, securities purchased under agreements to resell, and Federal funds sold to provide short-term liquidity. These investments are generally transacted with counterparties that have received a credit rating of triple-B or greater (investment grade) by an NRSRO. These may differ from ~~banks represents non-interest-bearing~~internal ratings of the investments, if applicable. As of December 31, 2023, approximately 31 percent of these overnight investments were with counterparties not rated by an NRSRO. All transactions with unrated counterparties are secured transactions.

Federal funds sold are unsecured loans that are generally transacted on an overnight term. FHFA regulations include a limit on the amount of unsecured credit FHLBank may extend to a counterparty. As of December 31, 2023 and 2022, all investments in interest-bearing deposits ~~in banks.~~

~~Pass-through Deposit Reserves: The FHLBank acts as a pass-through correspondent~~and Federal funds sold were repaid or expected to be repaid according to the contractual terms. No allowance for members required to deposit reserves with the Federal Reserve Banks (FRB). The amount shown as cash and due from banks includes pass-through reserves deposited with the FRB of $9,513,000 and $1,726,000credit losses was recorded for these assets as of December 31, ~~2017~~2023 and ~~2016,~~2022. Carrying values of interest-bearing deposits and Federal funds sold exclude accrued interest receivable of $3,271,000 and $927,000, respectively, as of December 31, 2023, and $2,278,000 and $903,000, respectively, as of December 31, 2022.

Securities purchased under agreements to resell are short-term and are structured such that they are evaluated regularly to determine if the market value of the underlying securities decreases below the market value required as collateral (i.e., subject to collateral maintenance provisions). Based upon the collateral held as security and collateral maintenance provisions with its counterparties, FHLBank determined that no allowance for credit losses was needed for its securities purchased under agreements to resell as of December 31, 2023 and 2022. The carrying value of securities purchased under agreements to resell excludes accrued interest receivable of $1,749,000 and $565,000 as of December 31, 2023 and 2022, respectively.

Debt Securities: FHLBank invests in debt securities, which are classified as either trading, available-for-sale, or held-to-maturity. FHLBank is prohibited by FHFA regulations from purchasing certain higher-risk securities, such as equity securities and debt instruments that are not investment quality, other than certain investments targeted at low-income persons or communities, but FHLBank is not required to divest instruments that experience credit deterioration after their purchase.

~~NOTE 4 – INVESTMENT SECURITIES~~

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FHLBank's debt securities include the following major security types, which are based on the issuer and the risk characteristics of the security:

▪U.S. Treasury obligations - sovereign debt of the United States;

▪GSE debentures - debentures issued by other FHLBanks, Federal National Mortgage Association (Fannie Mae), Federal Farm Credit Bank and Federal Agricultural Mortgage Corporation. GSE securities are not guaranteed by the U.S. government;

▪State or local housing agency obligations - municipal bonds issued by housing finance agencies;

▪U.S. obligation MBS - single-family MBS issued by Government National Mortgage Association (Ginnie Mae), which are guaranteed by the U.S. government; and

▪GSE MBS - single-family and multifamily MBS issued by Fannie Mae and Federal Home Loan Mortgage Corporation (Freddie Mac).

Trading Securities: Trading securities by major security type as of December 31, ~~2017~~2023 and ~~2016~~2022 are summarized in Table ~~4.1~~3.1 (in thousands):

Table ~~4.1~~3.1


	Fair Value
	12/31/2023		12/31/2022
Non-mortgage-backed securities:


U.S. Treasury obligations	$	—	$	396,233
GSE debentures	288,438		388,955
Non-mortgage-backed securities	288,438		785,188
Mortgage-backed securities:

GSE MBS	620,170		636,265
Mortgage-backed securities	620,170		636,265
TOTAL	$	908,608	$	1,421,453

Fair Value
12/31/2017 12/31/2016
Non-mortgage-backed securities:
Certificates of deposit $ 584,984
$ —
GSEobligations¹
1,353,083
1,563,351
Non-mortgage-backed securities 1,938,067
1,563,351
Mortgage-backed securities:
U.S. obligation MBS²
580
690
GSE MBS³
930,768
938,747
Mortgage-backed securities 931,348
939,437
TOTAL $ 2,869,415
$ 2,502,788


¹	Represents debentures issued by other FHLBanks, Federal National Mortgage Association (Fannie Mae), Federal Home Loan Mortgage Corporation (Freddie Mac), Federal Farm Credit Bank (Farm Credit) and Federal Agricultural Mortgage Corporation (Farmer Mac). GSE securities are not guaranteed by the U.S. government.


²	~~Represents single-family MBS issued by Government National Mortgage Association (Ginnie Mae), which are guaranteed by the U.S. government.~~


³	~~Represents single-family and multi-family MBS issued by Fannie Mae and Freddie Mac.~~

Net gains (losses) on trading securities during the years ended December 31, ~~2017, 2016,~~2023, 2022, and ~~2015~~2021 are shown in Table ~~4.2~~3.2 (in thousands):

Table ~~4.2~~3.2




	2023		2022		2021
Net gains (losses) on trading securities held as of December 31, 2023	$	14,309	$	(79,901)	$	(41,107)
Net gains (losses) on trading securities sold or matured prior to December 31, 2023	5,245		(32,647)		(42,982)
NET GAINS (LOSSES) ON TRADING SECURITIES	$	19,554	$	(112,548)	$	(84,089)

F-23

Table of Contents

2017 2016 2015
Net gains (losses) on trading securities held as of December 31, 2017 $ 11,958
$ 5,869
$ (8,396 )
Net gains (losses) on trading securities sold or matured prior to December 31, 2017 (5,044 ) (19,578 ) (39,595 )
NET GAINS (LOSSES) ON TRADING SECURITIES $ 6,914
$ (13,709 ) $ (47,991 )

Available-for-sale Securities: Available-for-sale securities by major security type as of December 31, ~~2017~~2023 are summarized in Table ~~4.3~~3.3 (in thousands):. Amortized cost includes adjustments made to the cost basis of an investment for accretion, amortization, and fair value hedge accounting adjustments, and excludes accrued interest receivable of $29,768,000 as of December 31, 2023.

Table ~~4.3~~3.3


	12/31/2023
	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Fair Value
Non-mortgage-backed securities:
U.S. Treasury obligations	$	2,983,880	$	—	$	(46,012)	$	2,937,868
Non-mortgage-backed securities	2,983,880		—		(46,012)		2,937,868
Mortgage-backed securities:
U.S. obligation MBS	109,083		—		(1,548)		107,535
GSE MBS	8,779,434		32,178		(103,562)		8,708,050
Mortgage-backed securities	8,888,517		32,178		(105,110)		8,815,585
TOTAL	$	11,872,397	$	32,178	$	(151,122)	$	11,753,453

12/31/2017

Amortized
Cost
Gross
Unrecognized
Gains
Gross
Unrecognized
Losses
Fair
Value
Mortgage-backed securities:
GSE MBS¹
$ 1,462,025
$ 31,638
$ (432 ) $ 1,493,231
TOTAL $ 1,462,025
$ 31,638
$ (432 ) $ 1,493,231


¹	~~Represents fixed rate multi-family~~ ~~MBS~~ ~~issued by Fannie Mae.~~

Available-for-sale securities by major security type as of December 31, ~~2016~~2022 are summarized in Table ~~4.4~~3.4 (in thousands):. Amortized cost includes adjustments made to the cost basis of an investment for accretion, amortization, and fair value hedge accounting adjustments, and excludes accrued interest receivable of $28,784,000 as of December 31, 2022.

~~Table 4.4~~

12/31/2016
Amortized
Cost Gross
Unrecognized
Gains Gross
Unrecognized
Losses
Fair
Value
Mortgage-backed securities:
GSE MBS¹
$ 1,082,376
$ 9,396
$ (51 ) $ 1,091,721
TOTAL $ 1,082,376
$ 9,396
$ (51 ) $ 1,091,721


¹	~~Represents fixed rate multi-family~~ ~~MBS~~ ~~issued by Fannie Mae.~~

Table ~~4.5~~3.4


	12/31/2022
	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Fair Value
Non-mortgage-backed securities:
U.S. Treasury obligations	$	3,332,244	$	1,493	$	(18,381)	$	3,315,356
Non-mortgage-backed securities	3,332,244		1,493		(18,381)		3,315,356
Mortgage-backed securities:
U.S. obligation MBS	40,881		—		(842)		40,039
GSE MBS	6,065,734		26,457		(93,170)		5,999,021
Mortgage-backed securities	6,106,615		26,457		(94,012)		6,039,060
TOTAL	$	9,438,859	$	27,950	$	(112,393)	$	9,354,416

F-24

Table of Contents

Table 3.5 summarizes the available-for-sale securities with gross unrealized losses as of December 31, ~~2017~~2023 (in thousands). The gross unrealized losses are aggregated by major security type and length of time that individual securities have been in a continuous unrealized loss position.

~~Table 4.5~~

12/31/2017
Less Than 12 Months 12 Months or More Total

Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
Mortgage-backed securities:
GSE MBS¹
$ 84,937
$ (432 ) $ —
$ —
$ 84,937
$ (432 )
TOTAL TEMPORARILY IMPAIRED SECURITIES $ 84,937
$ (432 ) $ —
$ —
$ 84,937
$ (432 )


¹	~~Represents fixed rate multi-family~~ ~~MBS~~ ~~issued by Fannie Mae.~~

Table ~~4.6~~3.5


	12/31/2023
	Less Than 12 Months				12 Months or More				Total
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
Non-mortgage-backed securities:
U.S. Treasury obligations	$	1,280,546	$	(10,036)	$	1,657,322	$	(35,976)	$	2,937,868	$	(46,012)
Non-mortgage-backed securities	1,280,546		(10,036)		1,657,322		(35,976)		2,937,868		(46,012)
Mortgage-backed securities:
U.S. obligation MBS	71,883		(366)		35,652		(1,182)		107,535		(1,548)
GSE MBS	2,863,223		(23,525)		3,164,674		(80,037)		6,027,897		(103,562)
Mortgage-backed securities	2,935,106		(23,891)		3,200,326		(81,219)		6,135,432		(105,110)
TOTAL	$	4,215,652	$	(33,927)	$	4,857,648	$	(117,195)	$	9,073,300	$	(151,122)

Table 3.6 summarizes the available-for-sale securities with gross unrealized losses as of December 31, ~~2016~~2022 (in thousands). The gross unrealized losses are aggregated by major security type and length of time that individual securities have been in a continuous unrealized loss position.

Table ~~4.6~~3.6


	12/31/2022
	Less Than 12 Months				12 Months or More				Total
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
Non-mortgage-backed securities:
U.S. Treasury obligations	$	1,540,880	$	(6,384)	$	532,968	$	(11,997)	$	2,073,848	$	(18,381)
Non-mortgage-backed securities	1,540,880		(6,384)		532,968		(11,997)		2,073,848		(18,381)
Mortgage-backed securities:
U.S. obligation MBS	35,008		(766)		5,032		(76)		40,040		(842)
GSE MBS	3,743,089		(56,545)		881,963		(36,625)		4,625,052		(93,170)
Mortgage-backed securities	3,778,097		(57,311)		886,995		(36,701)		4,665,092		(94,012)
TOTAL	$	5,318,977	$	(63,695)	$	1,419,963	$	(48,698)	$	6,738,940	$	(112,393)

F-25

Table of Contents

12/31/2016
Less Than 12 Months 12 Months or More Total

Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
Mortgage-backed securities:
GSE MBS¹
$ —
$ —
$ 33,509
$ (51 ) $ 33,509
$ (51 )
TOTAL TEMPORARILY IMPAIRED SECURITIES $ —
$ —
$ 33,509
$ (51 ) $ 33,509
$ (51 )


¹	~~Represents fixed rate multi-family~~ ~~MBS~~ ~~issued by Fannie Mae.~~

~~All~~The amortized cost and fair values of available-for-sale securities by contractual maturity as of December 31, 2023 and 2022 are ~~GSE MBS and as such do not have a single maturity date. The expected~~shown in Table 3.7 (in thousands). Expected maturities of ~~these securities~~MBS will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment fees.

Table 3.7


	12/31/2023				12/31/2022
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Non-mortgage-backed securities:
Due in one year or less	$	—	$	—	$	1,240,015	$	1,241,508
Due after one year through five years	2,983,880		2,937,868		1,876,301		1,858,697
Due after five years through ten years	—		—		215,928		215,151
Due after ten years	—		—		—		—
Non-mortgage-backed securities	2,983,880		2,937,868		3,332,244		3,315,356
Mortgage-backed securities	8,888,517		8,815,585		6,106,615		6,039,060
TOTAL	$	11,872,397	$	11,753,453	$	9,438,859	$	9,354,416

Held-to-maturity Securities: Held-to-maturity securities by major security type as of December 31, ~~2017~~2023 are summarized in Table ~~4.7~~3.8 (in thousands):. Carrying value equals amortized cost, which includes adjustments made to the cost basis of an investment for accretion and amortization, and excludes accrued interest receivable of $612,000 as of December 31, 2023.

Table ~~4.7~~3.8


	12/31/2023
	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Fair Value
Non-mortgage-backed securities:
State or local housing agency obligations	$	35,855	$	—	$	(646)	$	35,209
Non-mortgage-backed securities	35,855		—		(646)		35,209
Mortgage-backed securities:

GSE MBS	228,941		188		(3,685)		225,444
Mortgage-backed securities	228,941		188		(3,685)		225,444
TOTAL	$	264,796	$	188	$	(4,331)	$	260,653

F-26

Table of Contents

12/31/2017

Amortized
Cost
OTTI
Recognized
in AOCI
Carrying Value
Gross
Unrecognized
Gains
Gross
Unrecognized
Losses
Fair
Value
Non-mortgage-backed securities:
State or local housing agency obligations $ 89,830
$ —
$ 89,830
$ 74
$ (4,896 ) $ 85,008
Non-mortgage-backed securities 89,830
—
89,830
74
(4,896 ) 85,008
Mortgage-backed securities:
U.S. obligation MBS¹
127,588
—
127,588
435
(88 ) 127,935
GSE MBS²
4,561,839
—
4,561,839
15,548
(14,740 ) 4,562,647
Private-label residential MBS 81,731
(4,163 ) 77,568
5,456
(1,618 ) 81,406
Mortgage-backed securities 4,771,158
(4,163 ) 4,766,995
21,439
(16,446 ) 4,771,988
TOTAL $ 4,860,988
$ (4,163 ) $ 4,856,825
$ 21,513
$ (21,342 ) $ 4,856,996


¹	~~Represents single-family MBS issued by Ginnie Mae.~~


²	~~Represents single-family and multi-family MBS issued by Fannie Mae and Freddie Mac.~~

Held-to-maturity securities by major security type as of December 31, ~~2016~~2022 are summarized in Table ~~4.8~~3.9 (in thousands):

~~Table 4.8~~

12/31/2016

Amortized
Cost
OTTI
Recognized
in AOCI
Carrying Value
Gross
Unrecognized
Gains
Gross
Unrecognized
Losses
Fair
Value
Non-mortgage-backed securities:
State or local housing agency obligations $ 105,780
$ —
$ 105,780
$ 98
$ (5,707 ) $ 100,171
Non-mortgage-backed securities 105,780
—
105,780
98
(5,707 ) 100,171
Mortgage-backed securities:
U.S obligation MBS¹
36,331
—
36,331
—
(201 ) 36,130
GSE MBS²
4,250,547
—
4,250,547
12,044
(22,071 ) 4,240,520
Private-label residential MBS 115,407
(5,841 ) 109,566
4,869
(4,004 ) 110,431
Mortgage-backed securities 4,402,285
(5,841 ) 4,396,444
16,913
(26,276 ) 4,387,081
TOTAL $ 4,508,065
$ (5,841 ) $ 4,502,224
$ 17,011
$ (31,983 ) $ 4,487,252


¹	~~Represents single-family MBS issued by Ginnie Mae.~~


²	~~Represents single-family and multi-family MBS issued by Fannie Mae and Freddie Mac.~~

~~Table 4.9 summarizes~~. Carrying value equals amortized cost, which includes adjustments made to the ~~held-to-maturity securities with unrealized losses~~cost basis of an investment for accretion and amortization, and excludes accrued interest receivable of $896,000 as of December 31, ~~2017 (in thousands). The unrealized losses are aggregated by major security type and length of time that individual securities have been in a continuous unrealized loss position.~~2022.

Table ~~4.9~~3.9


	12/31/2022
	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Fair Value
Non-mortgage-backed securities:
State or local housing agency obligations	$	70,505	$	—	$	(1,737)	$	68,768
Non-mortgage-backed securities	70,505		—		(1,737)		68,768
Mortgage-backed securities:

GSE MBS	274,925		695		(4,129)		271,491
Mortgage-backed securities	274,925		695		(4,129)		271,491
TOTAL	$	345,430	$	695	$	(5,866)	$	340,259

12/31/2017
Less Than 12 Months 12 Months or More Total

Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses¹
Non-mortgage-backed securities:
State or local housing agency obligations $ —
$ —
$ 25,104
$ (4,896 ) $ 25,104
$ (4,896 )
Non-mortgage-backed securities —
—
25,104
(4,896 ) 25,104
(4,896 )
Mortgage-backed securities:
U.S. obligation MBS²
37,944
(88 ) —
—
37,944
(88 )
GSE MBS³
796,378
(1,363 ) 1,478,510
(13,377 ) 2,274,888
(14,740 )
Private-label residential MBS 150
(1 ) 64,477
(2,314 ) 64,627
(2,315 )
Mortgage-backed securities 834,472
(1,452 ) 1,542,987
(15,691 ) 2,377,459
(17,143 )
TOTAL TEMPORARILY IMPAIRED SECURITIES $ 834,472
$ (1,452 ) $ 1,568,091
$ (20,587 ) $ 2,402,563
$ (22,039 )


¹	Total unrealized losses in Table 4.9 will not agree to total gross unrecognized losses in Table 4.7. Total unrealized losses in Table 4.9 include non-credit-related OTTI recognized in AOCI and gross unrecognized gains on previously other-than-temporarily impaired securities.


²	~~Represents single-family MBS issued by Ginnie Mae.~~


³	~~Represents single-family and multi-family MBS issued by Fannie Mae and Freddie Mac.~~

Table 4.10 summarizes the held-to-maturity securities with unrealized losses as of December 31, 2016 (in thousands). The unrealized losses are aggregated by major security type and length of time that individual securities have been in a continuous unrealized loss position.

~~Table 4.10~~

12/31/2016
Less Than 12 Months 12 Months or More Total

Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses¹
Non-mortgage-backed securities:
State or local housing agency obligations $ —
$ —
$ 34,348
$ (5,707 ) $ 34,348
$ (5,707 )
Non-mortgage-backed securities —
—
34,348
(5,707 ) 34,348
(5,707 )
Mortgage-backed securities:
U.S obligation MBS²
—
—
35,998
(201 ) 35,998
(201 )
GSE MBS³
1,097,379
(2,612 ) 2,025,394
(19,459 ) 3,122,773
(22,071 )
Private-label residential MBS 1,903
(3 ) 85,984
(6,263 ) 87,887
(6,266 )
Mortgage-backed securities 1,099,282
(2,615 ) 2,147,376
(25,923 ) 3,246,658
(28,538 )
TOTAL TEMPORARILY IMPAIRED SECURITIES $ 1,099,282
$ (2,615 ) $ 2,181,724
$ (31,630 ) $ 3,281,006
$ (34,245 )


¹	Total unrealized losses in Table 4.10 will not agree to total gross unrecognized losses in Table 4.8. Total unrealized losses in Table 4.10 include non-credit-related OTTI recognized in AOCI and gross unrecognized gains on previously other-than-temporarily impaired securities.


²	~~Represents single-family MBS issued by Ginnie Mae.~~


³	~~Represents single-family and multi-family MBS issued by Fannie Mae and Freddie Mac.~~

The amortized cost ~~carrying value~~ and fair values of held-to-maturity securities by contractual maturity as of December 31, ~~2017~~2023 and ~~2016~~2022 are shown in Table ~~4.11~~3.10 (in thousands). Expected maturities of certain securities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment fees.

Table ~~4.11~~3.10


	12/31/2023		12/31/2022
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Non-mortgage-backed securities:
Due in one year or less	$	—	$	—	$	—	$	—
Due after one year through five years	—		—		—		—
Due after five years through ten years	35,855		35,209		40,505		40,036
Due after ten years	—		—		30,000		28,732
Non-mortgage-backed securities	35,855		35,209		70,505		68,768
Mortgage-backed securities	228,941		225,444		274,925		271,491
TOTAL	$	264,796	$	260,653	$	345,430	$	340,259

During 2021, FHLBank adopted a provision of ASU 2020-04 which allows a one-time election to sell, transfer, or both sell and transfer debt securities classified as held-to-maturity that reference a rate affected by reference rate reform and that were classified as held-to-maturity before January 1, 2020. Upon adopting the provision, FHLBank transferred held-to-maturity securities with an amortized cost of $2,019,635,000 to available-for-sale and recorded unrealized gains in accumulated other comprehensive income (AOCI) of $4,059,000.

12/31/2017 12/31/2016

Amortized
Cost
Carrying
Value
Fair
Value
Amortized
Cost
Carrying
Value
Fair
Value
Non-mortgage-backed securities:
Due in one year or less $ —
$ —
$ —
$ —
$ —
$ —
Due after one year through five years —
—
—
2,710
2,710
2,710
Due after five years through 10 years —
—
—
10,055
10,055
10,048
Due after 10 years 89,830
89,830
85,008
93,015
93,015
87,413
Non-mortgage-backed securities 89,830
89,830
85,008
105,780
105,780
100,171
Mortgage-backed securities 4,771,158
4,766,995
4,771,988
4,402,285
4,396,444
4,387,081
TOTAL $ 4,860,988
$ 4,856,825
$ 4,856,996
$ 4,508,065
$ 4,502,224
$ 4,487,252

Net gains (losses) were realized on the sale of ~~long-term~~ held-to-maturity securities ~~during the year ended December 31, 2015~~as presented below and are recorded as net gains (losses) on sale of held-to-maturity securities in other income (loss) on the Statements of Income. All securities sold had paid down below 15 percent of the principal outstanding at ~~acquisition.~~acquisition and were therefore considered maturities under GAAP. Table ~~4.12~~3.11 presents details of the sales (in thousands). NoThere were no sales of held-to-maturity securities ~~were sold~~ during the years ended December 31, ~~2017~~2023 and ~~2016.~~2021.

Table ~~4.12~~3.11


	2022



Proceeds from sale of held-to-maturity securities	$	19,930
Carrying value of held-to-maturity securities sold	(20,019)
NET REALIZED GAINS (LOSSES)	$	(89)

F-27

2015
Proceeds from sale of held-to-maturity securities $ 4,106
Carrying value of held-to-maturity securities sold (3,716 )
NET REALIZED GAINS (LOSSES) $ 390

~~Other-than-temporary Impairment:~~ ~~For the 21 outstanding private-label residential MBS with OTTI during the lives~~Table of ~~the securities, the FHLBank’s reported balances as of December 31, 2017 are presented in Table 4.13 (in thousands):~~

~~Table 4.13~~

Contents

12/31/2017

Unpaid
Principal
Balance
Amortized
Cost
Carrying
Value
Fair
Value
Private-label residential MBS:
Prime $ 7,744
$ 6,843
$ 6,313
$ 7,226
Alt-A 24,311
21,554
17,921
22,359
TOTAL $ 32,055
$ 28,397
$ 24,234
$ 29,585

~~Table 4.14 presents a roll-forward of OTTI activity~~Allowance for ~~the years ended December 31, 2017, 2016,~~Credit Losses on Available-for-Sale and ~~2015 related to~~Held-to-Maturity Securities: FHLBank evaluates available-for-sale and held-to-maturity investment securities for credit losses ~~recognized in earnings (in thousands):~~

~~Table 4.14~~

2017 2016 2015
Balance, beginning of period $ 7,502
$ 7,785
$ 9,406
Additional charge on securities for which OTTI was not previously recognized 65
1
1
Additional charge on securities for which OTTI was previously recognized¹
403
167
825
Realized principal losses on securities matured or sold during the period —
—
(1,684 )
Amortization of credit component of OTTI²
(307 ) (451 ) (763 )
Balance, end of period $ 7,663
$ 7,502
$ 7,785


¹	~~For the years ended December 31, 2017, 2016 and 2015, securities previously impaired represent all securities that were impaired prior to January 1, 2017, 2016 and 2015, respectively.~~

The FHLBank amortizes the credit component based on estimated cash flows prospectively up to the amount of expected principal to be recovered. The discounted cash flows will move from the discounted loss value to the ultimate principal to be written off at the projected date of loss. If the expected cash flows improve, the amount of expected loss decreases which causes a corresponding decrease in the calculated amortization. Based on the level of improvement in the cash flows, the amortization could become a positive adjustment to income.

on a quarterly basis. As of December 31, ~~2017, the fair value of~~2023 and 2022, FHLBank did not recognize a ~~portion of the FHLBank's~~provision for credit losses associated with available-for-sale ~~and~~investments or held-to-maturity ~~MBS~~investments.

Although certain available-for-sale securities were ~~below the amortized cost of the securities due to interest rate volatility and/or illiquidity. However, the decline~~ in ~~fair value of~~an unrealized loss position, these ~~securities is~~losses are considered temporary as ~~the~~ FHLBank expects to recover the entire amortized cost basis on ~~the remaining securities in unrecognized loss positions and~~these available-for-sale investment securities. FHLBank neither intends to sell these securities nor isconsiders it more likely than not that ~~the FHLBank~~it will be required to sell these securities before its anticipated recovery of ~~the~~each security's remaining amortized cost basis. ~~For state~~

FHLBank's held-to-maturity and ~~local housing agency~~available-for-sale securities: (1) were all highly rated and/or had short remaining terms to maturity; (2) had not experienced, nor did FHLBank expect, any payment default on the instruments; (3) in the case of U.S. obligations, carry an explicit government guarantee such that FHLBank considers the ~~FHLBank determined~~risk of nonpayment to be zero; and (4) in the case of GSE debentures or MBS, the securities are purchased under an assumption that ~~all of~~ the ~~gross unrealized losses~~issuers’ obligation to pay principal and interest on ~~these bonds were temporary because the strength of the underlying collateral and credit enhancements was sufficient to protect the FHLBank from losses based on current expectations.~~those securities will be honored, taking into account their status as GSEs.

NOTE 54 – ADVANCES

General Terms: ~~The~~ FHLBank offers ~~a wide range of~~ fixed and variable rate advance products with different maturities, interest rates, payment characteristics and optionality. As of both December 31, ~~2017~~2023 and ~~2016, the~~2022, FHLBank had advances outstanding at interest rates ranging from ~~0.66~~0.42 percent to ~~7.41~~7.20 percent and ~~0.46~~0.29 percent to ~~7.41~~7.20 percent, respectively. Table ~~5.1~~4.1 presents advances summarized by ~~year of contractual maturity~~redemption term as of December 31, ~~2017~~2023 and ~~2016~~2022 (dollar amounts in thousands): . The redemption term represents the period in which principal amounts are contractually due. Carrying amounts exclude accrued interest receivable of $118,604,000 and $108,891,000 as of December 31, 2023 and 2022, respectively.

Table ~~5.1~~4.1


	12/31/2023				12/31/2022
Redemption Term	Amount		Weighted Average Interest Rate		Amount		Weighted Average Interest Rate
Due in one year or less	$	29,786,238	5.32	%	$	31,796,396	4.31	%
Due after one year through two years	4,213,704		4.01		3,147,406		3.24
Due after two years through three years	3,882,479		4.22		2,784,200		3.30
Due after three years through four years	3,086,881		4.04		2,625,365		3.64
Due after four years through five years	2,837,481		4.03		1,894,308		3.52
Thereafter	1,863,519		3.04		2,407,040		3.07
Total par value	45,670,302		4.85	%	44,654,715		4.03	%
Discounts	(10,276)				(13,141)
Hedging adjustments	(215,257)				(378,824)
TOTAL	$	45,444,769			$	44,262,750

12/31/2017 12/31/2016
Year of Contractual Maturity Amount Weighted Average Interest Rate Amount Weighted Average Interest Rate
Due in one year or less $ 14,374,744
1.55 % $ 12,601,183
1.03 %
Due after one year through two years 1,219,842
1.73
2,019,260
1.96
Due after two years through three years 1,075,287
2.01
1,073,881
1.47
Due after three years through four years 971,634
2.16
781,339
1.96
Due after four years through five years 918,277
1.96
848,112
2.15
Thereafter 7,765,440
1.74
6,636,740
1.19
Total par value 26,325,224
1.67 % 23,960,515
1.24 %
Discounts (8,111 ) (13,977 )
Hedging adjustments (21,264 ) 39,297

TOTAL $ 26,295,849
$ 23,985,835

~~The FHLBank’s~~FHLBank offers advances ~~outstanding include advances that contain call options~~ that may be ~~exercised with or~~prepaid without prepayment or termination fees ~~at the borrower’s discretion~~ on ~~specific~~predetermined exercise dates (call dates) ~~before~~prior to the stated advance ~~maturities~~maturity (callable advances). In exchange for receiving the right to call the advance on a predetermined call schedule, the borrower may pay a higher ~~fixed~~ rate for the advance relative to an equivalent maturity, non-callable ~~fixed rate~~ advance. The borrower ~~normally~~generally exercises its call options on these advances when interest rates decline (fixed rate advances) or spreads change (adjustable rate advances). FHLBank also offers fixed rate advances that include a put option held by FHLBank. On the date FHLBank exercises its put option, the borrower has the option to prepay the advance in full without a fee or roll into another advance product. FHLBank would generally exercise its put option when interest rates increase. Other advances are prepayable with a prepayment fee that makes FHLBank economically indifferent to the prepayment.

Convertible advances allow ~~the~~ FHLBank to convert an advance from one interest payment term structure to another. When issuing convertible advances, ~~the~~ FHLBank purchases put options from a member that allow ~~the~~ FHLBank 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. Convertible advances are no longer a current product offering; however, $113,400,000 remain outstanding at December 31, 2023.

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Table ~~5.2~~4.2 presents advances summarized by ~~contractual maturity~~redemption term or next call date ~~(for callable advances)~~ and by ~~contractual maturity~~redemption term or next put or conversion date ~~(for convertible advances)~~ as of December 31, ~~2017~~2023 and ~~2016~~2022 (in thousands):

Table ~~5.2~~4.2


	Redemption Term or Next Call Date				Redemption Term or Next Put or Conversion Date
Redemption Term	12/31/2023		12/31/2022		12/31/2023		12/31/2022
Due in one year or less	$	31,038,961	$	33,289,458	$	31,299,438	$	31,992,646
Due after one year through two years	3,920,260		2,709,465		4,552,204		3,240,306
Due after two years through three years	3,562,900		2,552,756		3,954,979		2,801,700
Due after three years through four years	2,678,103		2,403,502		2,750,881		2,625,365
Due after four years through five years	2,715,262		1,568,168		1,600,481		1,884,308
Thereafter	1,754,816		2,131,366		1,512,319		2,110,390
TOTAL PAR VALUE	$	45,670,302	$	44,654,715	$	45,670,302	$	44,654,715

Year of Contractual Maturity
or Next Call Date
Year of Contractual Maturity
or Next Conversion Date
Redemption Term 12/31/2017 12/31/2016 12/31/2017 12/31/2016
Due in one year or less $ 21,375,728
$ 18,411,727
$ 14,450,744
$ 12,897,983
Due after one year through two years 881,835
1,752,403
1,342,342
1,800,460
Due after two years through three years 897,151
750,126
1,186,087
1,168,381
Due after three years through four years 790,641
666,059
1,083,984
808,139
Due after four years through five years 522,768
755,753
1,174,277
945,462
Thereafter 1,857,101
1,624,447
7,087,790
6,340,090
TOTAL PAR VALUE $ 26,325,224
$ 23,960,515
$ 26,325,224
$ 23,960,515

Interest Rate Payment Terms: Table ~~5.3~~4.3 details additional interest rate payment and redemption terms for advances as of December 31, ~~2017~~2023 and ~~2016~~2022 (in thousands):

Table ~~5.3~~4.3


Redemption Term	12/31/2023		12/31/2022
Fixed rate:
Due in one year or less	$	26,714,638	$	31,307,096
Due after one year through three years	6,034,768		3,984,356
Due after three years through five years	5,072,017		3,050,314
Due after five years through fifteen years	1,762,808		2,050,428
Due after fifteen years	28,659		35,010
Total fixed rate	39,612,890		40,427,204
Variable rate:
Due in one year or less	3,071,600		489,300
Due after one year through three years	2,061,415		1,947,250
Due after three years through five years	852,345		1,469,360
Due after five years through fifteen years	69,552		319,101
Due after fifteen years	2,500		2,500
Total variable rate	6,057,412		4,227,511
TOTAL PAR VALUE	$	45,670,302	$	44,654,715

12/31/2017 12/31/2016
Fixed rate:
Due in one year or less $ 2,079,061
$ 2,400,382
Due after one year 4,957,303
5,589,805
Total fixed rate 7,036,364
7,990,187
Variable rate:

Due in one year or less 12,295,683
10,200,801
Due after one year 6,993,177
5,769,527
Total variable rate 19,288,860
15,970,328
TOTAL PAR VALUE $ 26,325,224
$ 23,960,515

Credit Risk Exposure and Security Terms: ~~The FHLBank’s potential credit risk from~~FHLBank's advances ~~is concentrated in~~are primarily made to member financial institutions, including commercial banks and savings institutions. As of December 31, 2017 and 2016, the FHLBank had outstanding advances of $10,200,000,000 and $9,140,000,000, respectively, to two members that individually held 10 percent or more of the FHLBank’s advances, which represents 38.8 percent and 38.1 percent, respectively, of total outstanding advances. The members were the same each year.

~~See Note~~ 7 ~~for information related to the FHLBank’s credit risk on advances and allowance for credit losses.~~

~~See Note~~ 18 ~~for detailed information on transactions with related parties.~~

~~See Note~~ 16 ~~for information about the fair value of advances.~~

~~NOTE 6 – MORTGAGE LOANS~~

The MPF Program involves the FHLBank investing in mortgage loans, which have been funded by the FHLBank through or purchased from PFIs. These mortgage loans are government-guaranteed or -insured loans (by the Federal Housing Administration (FHA), the Department of Veterans Affairs (VA), the Rural Housing Service of the Department of Agriculture (RHS) and/or the Department of Housing and Urban Development (HUD)) and conventional residential loans credit-enhanced by PFIs. Depending upon a member’s product selection, the servicing rights can be retained or sold by the participating member. The FHLBank does not buy or own any mortgage servicing rights.

~~Mortgage Loans Held for Portfolio:~~ ~~Table 6.1 presents information as of December 31, 2017 and 2016 on mortgage loans held for portfolio (in thousands):~~

~~Table 6.1~~

12/31/2017 12/31/2016
Real estate:
Fixed rate, medium-term¹, single-family mortgages
$ 1,273,893
$ 1,353,938
Fixed rate, long-term, single-family mortgages 5,900,863
5,182,103
Total unpaid principal balance 7,174,756
6,536,041
Premiums 109,898
103,665
Discounts (2,380 ) (2,276 )
Deferred loan costs, net 280
387
Other deferred fees (60 ) (85 )
Hedging adjustments 5,111
4,667
Total before Allowance for Credit Losses on Mortgage Loans 7,287,605
6,642,399
Allowance for Credit Losses on Mortgage Loans (1,208 ) (1,674 )
MORTGAGE LOANS HELD FOR PORTFOLIO, NET $ 7,286,397
$ 6,640,725


¹	~~Medium-term defined as a term of 15 years or less at origination.~~

~~Table 6.2 presents information as of December 31, 2017 and 2016 on the outstanding UPB of mortgage loans held for portfolio (in thousands):~~

~~Table 6.2~~

12/31/2017 12/31/2016
Conventional loans $ 6,477,696
$ 5,899,924
Government-guaranteed or -insured loans 697,060
636,117
TOTAL UNPAID PRINCIPAL BALANCE $ 7,174,756
$ 6,536,041

~~See Note~~ 7 ~~for information related to the FHLBank’s credit risk on mortgage loans and allowance for credit losses.~~

~~See Note~~ 18 ~~for detailed information on transactions with related parties.~~

~~See Note~~ 16 ~~for information about the fair value of mortgage loans held for portfolio.~~

~~NOTE 7 – ALLOWANCE FOR CREDIT LOSSES~~

The FHLBank has established an allowance methodology for each of its portfolio segments: credit products (advances, letters of credit and other extensions of credit to borrowers); government mortgage loans held for portfolio; conventional mortgage loans held for portfolio; the direct financing lease receivable; term Federal funds sold; and term securities purchased under agreements to resell. Based on management's analyses of each portfolio segment, the FHLBank has only established an allowance for credit losses on its conventional mortgage loans held for portfolio.

~~Credit Products:~~ ~~The~~insurance companies. FHLBank manages its credit exposure ~~to credit products through an integrated approach that generally includes establishing a credit limit for each member. This approach includes an ongoing review of each member’s financial condition,~~ in ~~conjunction~~accordance with ~~conservative collateral/~~FHLBank's collateral and lending policies to limit risk of ~~loss, while balancing members’ needs for~~loss. These policies use a ~~reliable source~~risk-based approach to establish credit limits, specify eligible collateral types and required collateral levels, and include ongoing monitoring of ~~funding.~~ each borrower’s financial condition.

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In addition, ~~the~~ FHLBank lends to ~~its members~~eligible borrowers in accordance with federal law and FHFA regulations. Specifically, ~~the~~ FHLBank is required to obtain sufficient collateral to fully secure credit ~~products.~~products up to the borrower’s total credit limit. Collateral eligible to secure new or renewed advances includes:

▪One-to-four family and multifamily mortgage loans (delinquent for no more than 90 days) and securities representing such mortgages;

▪Loans and securities issued, insured, or guaranteed by the U.S. government or any U.S. government agency (for example, MBS issued or guaranteed by Fannie Mae, Freddie Mac, or Ginnie Mae);

▪Cash or deposits in FHLBank;

▪Certain other collateral that is real estate-related, provided that the collateral has a readily ascertainable value, meets certain requirements, and that FHLBank can perfect a security interest in it; and

▪Certain qualifying securities representing undivided equity interests in eligible advance collateral.

Residential mortgage loans are the principal form of collateral for advances. The estimated value of the collateral required to secure each ~~member’s~~member's credit products is calculated by applying collateral discounts, or haircuts, to the market value or ~~UPB~~unpaid principal balance of the collateral, as applicable. ~~The FHLBank accepts certain investment securities, residential mortgage loans, deposits, and other real estate related assets as collateral.~~ In addition, community financial institutions are eligible to ~~utilize~~use expanded statutory collateral provisions for small business, ~~loans, small farm loans, small agri-business~~agriculture loans, and community development loans. ~~The FHLBank’s~~FHLBank capital stock owned by ~~borrowing members~~each borrower is ~~held by the FHLBank~~also pledged as ~~further collateral security for all indebtedness of the member to the FHLBank.~~collateral. Collateral arrangements may vary depending upon ~~member~~borrower credit quality, financial condition, and performance; borrowing capacity; and overall credit exposure to the ~~member. The~~borrower. FHLBank can also require additional or substitute collateral to protect its security interest. FHLBank has policies and procedures for validating the reasonableness of the collateral valuations. In addition, collateral verifications and on-site reviews are performed by FHLBank based on the risk profile of the borrower. FHLBank management believes that these policies ~~are~~ effectively ~~applied to~~ manage ~~the FHLBank’s~~ credit risk from ~~credit products.~~advances.

~~The~~ FHLBank either allows a ~~member~~borrower to retain physical possession of the collateral assigned to ~~an advance,~~it, or requires the ~~member~~borrower to specifically assign or place physical possession of the collateral with ~~the~~ FHLBank or its safekeeping agent. ~~The~~ FHLBank perfects its security interest in all pledged collateral. The Bank Act ~~affords~~states that any security interest granted to ~~the~~an FHLBank by a ~~member~~borrower will have priority over the claims or rights of any other party, except for claims or rights of a third party that would be entitled to priority under otherwise applicable law and are held by a bona fide purchaser for value or by a secured party holding a prior perfected security interest.

Using a risk-based approach and taking into consideration each ~~member’s~~borrower's financial strength, ~~the~~ FHLBank considers the ~~type~~types and level of collateral to be the primary indicator of credit quality on ~~its credit products.~~advances. As of December 31, ~~2017~~2023 and ~~2016, the~~2022, FHLBank had rights to collateral on a ~~member-by-member~~borrower-by-borrower basis with an estimated value ~~in excess of~~greater than its outstanding ~~extensions of credit. The~~ advances.

FHLBank continues to evaluate and make changes to its collateral guidelines, as necessary, based on current market conditions. As of December 31, 2023 and 2022, no advances were past due, on nonaccrual status, or considered impaired. In addition, there were no troubled debt restructurings related to advances during the years ended December 31, 2023 and 2022.

Based ~~upon~~on the collateral held as security, ~~management’s~~FHLBank's credit extension and collateral policies, ~~management’s credit analysis~~ and ~~the~~ repayment history on advances, no allowance for credit ~~products,~~losses on advances was recorded as of December 31, 2023 and 2022.

FHLBank’s potential credit risk from advances is concentrated in commercial banks, insurance companies, and savings institutions. As of December 31, 2023, FHLBank had outstanding advances of $17,260,000,000 to two members that individually held 10 percent or more of FHLBank’s advances, which represents 37.8 percent of total outstanding advances. As of December 31, 2022, FHLBank had outstanding advances of $15,440,000,000 to two members that individually held 10 percent or more of FHLBank’s advances, which represented 34.6 percent of total outstanding advances. The members were the same in both years.

See Note 14 for information about the fair value of advances.

See Note 16 for detailed information on transactions with related parties.

NOTE 5 – MORTGAGE LOANS

Mortgage loans held for portfolio consist of loans obtained through the MPF Program and are either conventional mortgage loans or government-guaranteed or -insured mortgage loans. Under the MPF Program, FHLBank ~~currently does~~purchases single-family mortgage loans that are originated or acquired by PFIs. These mortgage loans are credit-enhanced by PFIs or are guaranteed or insured by Federal agencies.

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Mortgage Loans Held for Portfolio: Table 5.1 presents information as of December 31, 2023 and 2022 on mortgage loans held for portfolio (in thousands). Carrying amounts exclude accrued interest receivable of $45,669,000 and $38,358,000 as of December 31, 2023 and 2022, respectively.

Table 5.1


	12/31/2023		12/31/2022
Real estate:
Fixed rate, medium-term1, single-family mortgages	$	1,055,326	$	1,189,428
Fixed rate, long-term, single-family mortgages	7,227,825		6,640,750
Total unpaid principal balance	8,283,151		7,830,178
Premiums	94,485		97,210
Discounts	(5,591)		(2,230)
Deferred loan costs, net	39		46

Hedging adjustments	(13,840)		(13,691)
Total before allowance for credit losses on mortgage loans	8,358,244		7,911,513
Allowance for credit losses on mortgage loans	(5,531)		(6,378)
MORTGAGE LOANS HELD FOR PORTFOLIO, NET	$	8,352,713	$	7,905,135

1 Medium-term defined as a term of 15 years or less at origination.

Table 5.2 presents information as of December 31, 2023 and 2022 on the outstanding unpaid principal balance of mortgage loans held for portfolio (in thousands):

Table 5.2


	12/31/2023		12/31/2022
Conventional loans	$	7,953,624	$	7,486,591
Government-guaranteed or -insured loans	329,527		343,587
TOTAL UNPAID PRINCIPAL BALANCE	$	8,283,151	$	7,830,178

Credit Enhancements: FHLBank's allowance for credit losses considers the credit enhancements associated with conventional mortgage loans under the MPF Program. Credit enhancements may include primary mortgage insurance (PMI), supplemental mortgage insurance (SMI), and the CE obligation plus any recoverable performance-based CE fees (for certain MPF loans). Potential recoveries from credit enhancements for conventional loans are evaluated at the individual master commitment level to determine the credit enhancements available to recover losses on loans under each individual master commitment.

Conventional MPF loans held for portfolio are required to be credit enhanced as determined through the use of a validated model so that the risk of loss is limited to the losses within FHLBank's risk tolerance. FHLBank and its PFIs share the risk of credit losses on conventional loans by structuring potential losses into layers with respect to each master commitment. After considering the borrower’s equity and any PMI, credit losses on mortgage loans in a master commitment are then absorbed by FHLBank’s First Loss Account (FLA). If applicable to the MPF product master commitment, FHLBank will withhold a PFI’s scheduled performance-based CE fee to reimburse FHLBank for any losses allocated to the FLA. If the FLA is exhausted, the credit losses are then absorbed by the PFI up to an agreed upon CE obligation, which may consist of a direct liability of a PFI to pay credit losses up to a specified amount, a contractual obligation of a PFI to provide SMI, or a combination of both. Thereafter, any remaining credit losses are absorbed by FHLBank.

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FHLBank records CE fees paid to PFIs as a reduction to mortgage interest income. Table 5.3 presents net CE fees paid to PFIs for the years ended December 31, 2023, 2022, and 2021 (in thousands):

Table 5.3


	2023		2022		2021
CE fees paid to PFIs	$	6,580	$	6,414	$	6,432
Performance-based CE fees recovered from PFIs	(42)		(42)		(54)
NET CE FEES PAID	$	6,538	$	6,372	$	6,378

Payment Status of Mortgage Loans: Payment status is the key credit quality indicator for conventional mortgage loans and allows FHLBank to monitor borrower performance. A past due loan is one where the borrower has failed to make a full payment of principal and interest within 30 days of its due date. Other delinquency statistics include nonaccrual loans and loans in process of foreclosure.

Table 5.4 presents the payment status based on amortized cost as well as other delinquency statistics for FHLBank’s mortgage loans as of December 31, 2023 (dollar amounts in thousands):

Table 5.4


	12/31/2023
	Conventional Loans															Government Loans			Total
	Origination Year												Subtotal
	Prior to 2019		2019		2020		2021		2022		2023
Amortized Cost:1
Past due 30-59 days delinquent	$	19,739	$	7,135	$	5,601	$	5,955	$	6,745	$	2,746	$	47,921		$	10,327		$	58,248
Past due 60-89 days delinquent	5,013		1,319		479		931		2,047		—		9,789			2,972			12,761
Past due 90 days or more delinquent	8,063		5,185		1,354		1,170		447		—		16,219			2,659			18,878
Total past due	32,815		13,639		7,434		8,056		9,239		2,746		73,929			15,958			89,887
Total current loans	1,770,552		971,328		1,506,877		1,720,492		852,858		1,128,557		7,950,664			317,693			8,268,357
Total mortgage loans	$	1,803,367	$	984,967	$	1,514,311	$	1,728,548	$	862,097	$	1,131,303	$	8,024,593		$	333,651		$	8,358,244

Other delinquency statistics:
In process of foreclosure2													$	6,008		$	763		$	6,771
Serious delinquency rate3													0.2		%	0.8		%	0.2		%
Past due 90 days or more and still accruing interest													$	—		$	2,657		$	2,657
Loans on nonaccrual status4													$	19,383		$	—		$	19,383

1 Excludes accrued interest receivable.

2 Includes loans where the decision of foreclosure or similar alternative such as pursuit of deed-in-lieu has been reported. Loans in process of foreclosure are included in past due or current loans dependent on their delinquency status.

3 Loans that are 90 days or more past due or in the process of foreclosure expressed as a percentage of the total amortized cost for the portfolio class.

4 Includes $12,502,000 of conventional mortgage loans on nonaccrual status that did not ~~anticipate~~have an associated allowance for credit losses because either these loans were previously charged off to the expected recoverable value or the fair value of the underlying collateral was greater than the amortized cost of the loans.

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Table 5.5 presents the payment status based on amortized cost as well as other delinquency statistics for FHLBank’s mortgage loans as of December 31, 2022 (dollar amounts in thousands):

Table 5.5


	12/31/2022
	Conventional Loans															Government Loans			Total
	Origination Year												Subtotal
	Prior to 2018		2018		2019		2020		2021		2022
Amortized Cost:1
Past due 30-59 days delinquent	$	18,393	$	3,969	$	7,382	$	4,264	$	8,120	$	4,437	$	46,565		$	10,381		$	56,946
Past due 60-89 days delinquent	3,586		1,125		1,023		674		920		698		8,026			1,460			9,486
Past due 90 days or more delinquent	6,546		3,930		6,810		1,509		928		—		19,723			4,169			23,892
Total past due	28,525		9,024		15,215		6,447		9,968		5,135		74,314			16,010			90,324
Total current loans	1,744,631		280,448		1,074,312		1,646,404		1,857,020		886,268		7,489,083			332,106			7,821,189
Total mortgage loans	$	1,773,156	$	289,472	$	1,089,527	$	1,652,851	$	1,866,988	$	891,403	$	7,563,397		$	348,116		$	7,911,513

Other delinquency statistics:
In process of foreclosure2													$	8,431		$	920		$	9,351
Serious delinquency rate3													0.3		%	1.2		%	0.3		%
Past due 90 days or more and still accruing interest													$	—		$	4,169		$	4,169
Loans on nonaccrual status4													$	22,542		$	—		$	22,542

1 Excludes accrued interest receivable.

3 Loans that are 90 days or more past due or in the process of foreclosure expressed as a percentage of the total amortized cost for the portfolio class.

4 Includes $13,288,000 of conventional mortgage loans on nonaccrual status that did not have an associated allowance for credit losses because either these loans were previously charged off to the expected recoverable value or the fair value of the underlying collateral was greater than the amortized cost of the loans.

Allowance for Credit Losses:

Conventional Mortgage Loans: Conventional loans are evaluated collectively when similar risk characteristics exist. Conventional loans that do not share risk characteristics with other pools are evaluated for expected credit losses on an individual basis. FHLBank determines its allowance for credit losses on conventional loans through analyses that include consideration of various loan portfolio and collateral-related characteristics, such as past performance, current economic conditions, and reasonable and supportable forecasts of expected economic conditions. FHLBank uses a third-party projected cash flow model to estimate expected credit losses over the life of the loans. This model relies on a number of inputs, such as both current and forecasted property values and interest rates as well as historical borrower behavior. The forecasts used in the calculation of expected credit losses cover the contractual terms of the loans rather than a reversion to historical trends after a forecasted period. FHLBank also incorporates associated credit enhancements, as available, to determine its estimate of expected credit losses.

Certain conventional loans may be evaluated for credit losses using the practical expedient for collateral dependent assets. A mortgage loan is considered collateral dependent when the borrower is experiencing financial difficulty and repayment is expected to be substantially through the sale of the underlying collateral. FHLBank may estimate the fair value of this collateral by applying an appropriate loss severity rate or by using third party estimates or property valuation model(s). The expected credit loss of a collateral dependent mortgage loan is equal to the difference between the amortized cost of the loan and the estimated fair value of the collateral, less estimated selling costs. FHLBank records a direct charge-off of the loan balance if certain triggering criteria are met. Expected recoveries of prior charge-offs, if any, are included in the allowance for credit losses.

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FHLBank established an allowance for credit losses on its conventional mortgage loans held for portfolio. Table 5.6 presents a roll-forward of the allowance for credit ~~products.~~losses on mortgage loans for the years ended December 31, 2023, 2022, and 2021.

~~Government~~Table 5.6


	Year Ended
Conventional Loans		2023		2022		2021

Balance, beginning of the period		$	6,378	$	5,317	$	5,177

Net (charge-offs) recoveries		(206)		351		890
Provision (reversal) for credit losses		(641)		710		(750)
Balance, end of the period		$	5,531	$	6,378	$	5,317

Government-Guaranteed or -Insured Mortgage ~~Loans Held for Portfolio:~~ ~~The~~Loans: FHLBank invests in ~~government-guaranteed or -insured (by FHA, VA, RHA and/or HUD)~~ fixed rate mortgage loans ~~secured~~that are insured or guaranteed by ~~one-to-four family residential properties.~~the Federal Housing Administration, the Department of Veterans Affairs, the Rural Housing Service of the Department of Agriculture, and/or the Department of Housing and Urban Development. The servicer provides and maintains insurance or a guarantee from the applicable government agency. The servicer is responsible for compliance with all government agency requirements and for obtaining the benefit of the applicable ~~insurance~~guarantee or ~~guarantee~~insurance with respect to defaulted ~~government~~government-guaranteed or -insured mortgage loans. Any losses on these loans that are not recovered from the issuer or guarantor are absorbed by the servicers. Therefore, the FHLBank only has credit risk for these loans if the servicer fails to pay for losses not covered by the insurance or guarantee. Based on ~~the FHLBank’s~~FHLBank's assessment of its servicers and the ~~FHLBank has not established an allowance for credit losses on government mortgage loans.~~

~~Conventional Mortgage Loans Held for Portfolio: The allowance for conventional~~collateral backing the loans, is determined by a formula analysis based upon loss factors predominantly calculated using a historical analysis of loan performance. Delinquent loan migration analysis is performed to determine default probability rates, and historical loss analysis is performed to determine loss severity rates, both of which are then utilized as loss factors within the formula analysis. These analyses include consideration of various data observations, such as past performance, current performance, loan portfolio characteristics, collateral-related characteristics, industry data, and prevailing economic conditions. The measurement of the allowance for conventional mortgage loan losses may consist of: (1) reviewing all residential mortgage loans at the individual master commitment level; (2) reviewing specifically identified collateral-dependent loans for impairment; (3) reviewing homogeneous pools of residential mortgage loans; and/or (4) estimating credit losses in the remaining portfolio. The formula analysis is consistently applied, but loss factors may be adjusted in response to changing conditions, as a result of management’s assessment of the adequacy of the allowance to absorb losses inherent in the portfolio.

~~The FHLBank’s management of credit~~ risk ~~in the MPF Program involves several layers~~ of loss protection that are defined in agreements among the FHLBank and its PFIs. The availability of loss protection may differ slightly among MPF products. The FHLBank’s loss protection consists of the following loss layers, in order of priority:


▪	~~Homeowner Equity.~~


▪	~~Private Mortgage Insurance (PMI). PMI is required on all conventional loans with homeowner equity of less than 20 percent of the original purchase price or appraised value.~~

▪

First Loss Account (FLA). The FLA functions as a tracking mechanism for determining the FHLBank’s potential loss exposure under each master commitment prior to the PFI’s CE obligation. If the FHLBank experiences losses in a master commitment, these losses will be: (1) absorbed by the FHLBank's FLA; and (2) recovered through the withholding of future performance-based CE fees from the PFI, if applicable.

▪

CE Obligation. PFIs have a CE obligation to absorb losses in excess of the FLA in order to limit the FHLBank’s loss exposure to that of an investor in an MBS that is rated the equivalent of triple-B by an NRSRO (effective December 2016). For master commitments with loans funded prior to December 2016, the CE obligation makes the risk equivalent to a double-A rated asset, unless the PFI has requested a realignment of the CE obligation. PFIs must either fully collateralize their CE obligation with assets considered acceptable by the FHLBank’s Member Products Policy (MPP) or purchase SMI from mortgage insurers, as applicable. Any incurred losses that would be absorbed by the CE obligation are not reserved as part of the FHLBank’s allowance for loan losses.

The FHLBank pays the PFI a fee, a portion of which may be based on the credit performance of the mortgage loans, in exchange for absorbing the CE obligation loss layer up to an agreed-upon amount. For some products, losses incurred under the FLA may be recovered by withholding future performance-based CE fees otherwise paid to our PFIs. The FHLBank records CE fees paid to the participating members as a reduction to mortgage interest income. Table 7.1 presents net CE fees paid to PFIs for the years ended December 31, 2017, 2016, and 2015 (in thousands):

~~Table 7.1~~

2017 2016 2015
CE fees paid to PFIs¹
$ 5,767
$ 5,421
$ 5,251
Performance-based CE fees recovered from PFIs (103 ) (168 ) (128 )
NET CE FEES PAID $ 5,664
$ 5,253
$ 5,123


¹	~~CE fees paid to PFIs excludes the amortization of CE fees paid upfront, which is included with premium amortization as a reduction to mortgage interest income.~~

~~Mortgage Loans Evaluated at the Individual Master Commitment Level:~~The credit risk analysis of all conventional loans is performed at the individual master commitment level to properly determine the credit enhancements available to recover losses on mortgage loans under each individual master commitment.

~~Collectively Evaluated Mortgage Loans:~~ The credit risk analysis of conventional loans evaluated collectively for impairment considers loan pool specific attribute data, including historical delinquency migration, applies estimated loss severities, and incorporates the associated credit enhancements in order to determine the FHLBank’s best estimate of probable incurred losses. Migration analysis is a methodology for determining, through the FHLBank’s experience over a historical period, the rate of default on pools of similar loans. The FHLBank applies migration analysis to loans based on the following categories: (1) loans in foreclosure; (2) nonaccrual loans; (3) delinquent loans; and (4) all other remaining loans. The FHLBank then estimates how many loans in these categories may migrate to a realized loss position and applies a loss severity factor to estimate losses incurred as of the Statement of Condition date.

~~Individually Evaluated Mortgage Loans:~~Certain conventional mortgage loans, primarily impaired mortgage loans that are considered collateral-dependent, may be specifically identified for purposes of calculating the allowance for credit losses. A mortgage loan is considered collateral-dependent if repayment is expected to be provided by the sale of the underlying property, that is, if it is considered likely that the borrower will default and there is not sufficient CE obligation from a PFI to offset all losses under the master commitment. The estimated credit losses on impaired collateral-dependent loans may be separately determined because sufficient information exists to make a reasonable estimate of the inherent loss for these loans on an individual loan basis. The FHLBank estimates the fair value of this collateral by applying an appropriate loss severity rate or using third party estimates or property valuation models. The incurred loss of an individually evaluated mortgage loan is equal to the difference between the carrying value of the loan and the estimated fair value of the collateral, less estimated selling costs, and may include expected proceeds from PMI and other applicable credit enhancements.

~~Direct Financing Lease Receivable:~~ The FHLBank has a recorded investment in a direct financing lease receivable with a member for a building complex and property. Under the office complex agreement, the FHLBank has all rights and remedies under the lease agreement as well as all rights and remedies available under the member’s Advance, Pledge and Security Agreement. Consequently, the FHLBank can apply any excess collateral securing credit products to any shortfall in the leasing arrangement.

~~Term Federal Funds Sold:~~ Term Federal funds sold are short-term unsecured loans conducted with investment-grade counterparties. We only evaluate these investments for purposes of an allowance for credit losses if the investment is not paid when due. There werewas immaterial; consequently, no ~~investments in term Federal funds sold outstanding at any time during the years ended December 31, 2017 and 2016.~~

~~Term Securities Purchased Under Agreements to Resell:~~ Term securities purchased under agreements to resell are considered collateralized financing arrangements and effectively represent short-term loans to investment-grade counterparties. The terms of these loans are structured such that if the market value of the underlying securities decreases below the market value required as collateral, the counterparty must provide additional securities as collateral in an amount equal to the decrease or remit cash in such amount, or the FHLBank will decrease the dollar value of the agreement to resell accordingly. If the FHLBank determines that an agreement to resell is impaired, the difference between the fair value of the collateral and the amortized cost of the agreement is charged to earnings. There were no investments in term securities purchased under agreements to resell outstanding at any time during the years ended December 31, 2017 and 2016.

~~Roll-forward of Allowance for Credit Losses: Table 7.2 presents a roll-forward of the~~ allowance for credit losses for ~~the years ended December 31, 2017, 2016, and 2015 (in thousands).~~

~~Table 7.2~~

Conventional Loans

2017 2016 2015
Balance, beginning of the period $ 1,674
$ 1,972
$ 4,550
Net (charge-offs) recoveries (280 ) (189 ) (669 )
(Reversal) provision for credit losses (186 ) (109 ) (1,909 )
Balance, end of the period $ 1,208
$ 1,674
$ 1,972

~~Table 7.3 presents the allowance for credit losses and the recorded investment as well as the method used to evaluate impairment relating to all portfolio segments regardless of whether~~government-guaranteed or ~~not an estimated credit loss has been~~-insured mortgage loans was recorded as of December 31, ~~2017 (in thousands). The recorded investment in a financing receivable is~~2023 and 2022. Furthermore, none of these mortgage loans have been placed on nonaccrual status because of the ~~UPB, adjusted~~U.S. government guarantee or insurance on these loans and the contractual obligation of the loan servicer to repurchase the loans when certain criteria are met.

See Note 14 for ~~accrued interest, net deferred loan fees or costs, unamortized premiums or discounts,~~information about the fair value ~~hedging adjustments and direct write-downs. The recorded investment is not net~~ of ~~any valuation allowance.~~

~~Table 7.3~~

12/31/2017

Conventional
Loans
Government
Loans
Credit
Products¹
Direct
Financing
Lease
Receivable
Total
Allowance for credit losses:

Individually evaluated for impairment $ 39
$ —
$ —
$ —
$ 39
Collectively evaluated for impairment 1,169
—
—
—
1,169
TOTAL ALLOWANCE FOR CREDIT LOSSES $ 1,208
$ —
$ —
$ —
$ 1,208
Recorded investment:

Individually evaluated for impairment $ 11,059
$ —
$ 26,330,455
$ 14,833
$ 26,356,347
Collectively evaluated for impairment 6,600,210
711,382
—
—
7,311,592
TOTAL RECORDED INVESTMENT $ 6,611,269
$ 711,382
$ 26,330,455
$ 14,833
$ 33,667,939


¹	~~The recorded investment for credit products includes only advances. The recorded investment for all other credit products is insignificant.~~

Table 7.4 presents the allowance for credit losses and the recorded investment as well as the method used to evaluate impairment relating to all portfolio segments regardless of whether or not an estimated credit loss has been recorded as of December 31, 2016 (in thousands):

~~Table 7.4~~

12/31/2016
Conventional
Loans Government
Loans
Credit
Products¹
Direct
Financing
Lease
Receivable Total
Allowance for credit losses:

Individually evaluated for impairment $ —
$ —
$ —
$ —
$ —
Collectively evaluated for impairment 1,674
—
—
—
1,674
TOTAL ALLOWANCE FOR CREDIT LOSSES $ 1,674
$ —
$ —
$ —
$ 1,674
Recorded investment:

Individually evaluated for impairment $ 11,834
$ —
$ 24,009,010
$ 17,385
$ 24,038,229
Collectively evaluated for impairment 6,010,941
651,344
—
—
6,662,285
TOTAL RECORDED INVESTMENT $ 6,022,775
$ 651,344
$ 24,009,010
$ 17,385
$ 30,700,514


¹	~~The recorded investment for credit products includes only advances. The recorded investment for all other credit products is insignificant.~~

~~Credit Quality Indicators:~~ The FHLBank’s key credit quality indicators include the migration of: (1) past due loans; (2) non-accrual loans; (3) loans in process of foreclosure; and (4) impaired loans, all of which are used either on an individual or pool basis to determine the allowance for credit losses.

~~Table 7.5 summarizes the delinquency aging and key credit quality indicators for all of the FHLBank’s portfolio segments as of December 31, 2017 (dollar amounts in thousands):~~

~~Table 7.5~~

12/31/2017

Conventional
Loans
Government
Loans
Credit
Products¹
Direct
Financing
Lease
Receivable
Total
Recorded investment:
Past due 30-59 days delinquent $ 37,606
$ 17,775
$ —
$ —
$ 55,381
Past due 60-89 days delinquent 7,898
4,501
—
—
12,399
Past due 90 days or more delinquent 12,794
6,273
—
—
19,067
Total past due 58,298
28,549
—
—
86,847
Total current loans 6,552,971
682,833
26,330,455
14,833
33,581,092
Total recorded investment $ 6,611,269
$ 711,382
$ 26,330,455
$ 14,833
$ 33,667,939

Other delinquency statistics:

In process of foreclosure, included above²
$ 4,167
$ 1,595
$ —
$ —
$ 5,762
Serious delinquency rate³
0.2 % 0.9 % — % — % 0.1 %
Past due 90 days or more and still accruing interest $ —
$ 6,273
$ —
$ —
$ 6,273
Loans on non-accrual status⁴
$ 16,570
$ —
$ —
$ —
$ 16,570


¹	~~The recorded investment for credit products includes only advances. The recorded investment for all other credit products is insignificant.~~


²	Includes loans where the decision of foreclosure or similar alternative such as pursuit of deed-in-lieu has been reported. Loans in process of foreclosure are included in past due or current loans dependent on their delinquency status.


³	~~Loans that are 90 days or more past due or in the process of foreclosure expressed as a percentage of the total recorded investment for the portfolio class.~~


⁴	Loans on non-accrual status include $1,398,000 of troubled debt restructurings. Troubled debt restructurings are restructurings in which the FHLBank, for economic or legal reasons related to the debtor’s financial difficulties, grants a concession to the debtor that it would not otherwise consider.

~~Table 7.6 summarizes the key credit quality indicators for all of the FHLBank’s portfolio segments as of December 31, 2016 (dollar amounts in thousands):~~

~~Table 7.6~~

12/31/2016

Conventional
Loans
Government
Loans
Credit
Products¹
Direct
Financing
Lease
Receivable
Total
Recorded investment:
Past due 30-59 days delinquent $ 40,290
$ 16,920
$ —
$ —
$ 57,210
Past due 60-89 days delinquent 7,982
6,383
—
—
14,365
Past due 90 days or more delinquent 11,970
5,185
—
—
17,155
Total past due 60,242
28,488
—
—
88,730
Total current loans 5,962,533
622,856
24,009,010
17,385
30,611,784
Total recorded investment $ 6,022,775
$ 651,344
$ 24,009,010
$ 17,385
$ 30,700,514

Other delinquency statistics:

In process of foreclosure, included above²
$ 4,408
$ 1,748
$ —
$ —
$ 6,156
Serious delinquency rate³
0.2 % 0.8 % — % — % 0.1 %
Past due 90 days or more and still accruing interest $ —
$ 5,185
$ —
$ —
$ 5,185
Loans on non-accrual status⁴
$ 15,002
$ —
$ —
$ —
$ 15,002


¹	~~The recorded investment for credit products includes only advances. The recorded investment for all other credit products is insignificant.~~


²	Includes loans where the decision of foreclosure or similar alternative such as pursuit of deed-in-lieu has been reported. Loans in process of foreclosure are included in past due or current loans dependent on their delinquency status.


³	~~Loans that are 90 days or more past due or in the process of foreclosure expressed as a percentage of the total recorded investment for the portfolio class.~~


⁴	Loans on non-accrual status include $1,327,000 of troubled debt restructurings. Troubled debt restructurings are restructurings in which the FHLBank, for economic or legal reasons related to the debtor’s financial difficulties, grants a concession to the debtor that it would not otherwise consider.

~~Individually Evaluated Impaired Loans:~~ ~~Table 7.7 presents the recorded investment, UPB, and related allowance of impaired conventional~~ mortgage loans ~~individually assessed~~held for ~~impairment as of December 31, 2017 and 2016 (in thousands):~~portfolio.

~~Table 7.7~~See Note 16 for detailed information on transactions with related parties.

12/31/2017 12/31/2016
Recorded Investment Unpaid Principal Balance Related Allowance Recorded Investment Unpaid Principal Balance Related Allowance
With no related allowance $ 10,925
$ 10,875
$ —
$ 11,834
$ 11,776
$ —
With an allowance 134
136
39
—
—
—
TOTAL $ 11,059
$ 11,011
$ 39
$ 11,834
$ 11,776
$ —

Table 7.8 presents the average recorded investment and related interest income recognized on these individually evaluated impaired loans during the years ended December 31, 2017, 2016, and 2015 (in thousands):

~~Table 7.8~~

2017 2016 2015
Average Recorded Investment Interest Income Recognized Average Recorded Investment Interest Income Recognized Average Recorded Investment Interest Income Recognized
With no related allowance $ 10,712
$ 211
$ 11,746
$ 287
$ 13,399
$ 356
With an allowance 80
(6 ) —
—
91
—
TOTAL $ 10,792
$ 205
$ 11,746
$ 287
$ 13,490
$ 356

~~The FHLBank had $2,539,000 and $2,608,000 classified as REO recorded in other assets as of December 31, 2017 and 2016, respectively.~~

NOTE 86 – DERIVATIVES AND HEDGING ACTIVITIES

Nature of Business Activity: ~~The~~ FHLBank is exposed to interest rate risk primarily from the effect of interest rate changes on its interest-earning assets and its interest-bearing liabilities that finance these assets. The goal of ~~the~~ FHLBank’s interest-rate risk management strategy is not to eliminate interest rate risk, but to manage it within appropriate limits. To mitigate the risk of loss, ~~the~~ FHLBank has established policies and procedures, which include guidelines on the amount of exposure to interest rate changes it is willing to accept. In addition, ~~the~~ FHLBank monitors the risk to its interest income, net interest margin, and average maturity of interest-earning assets and interest-bearing liabilities.

Consistent with FHFA regulation, ~~the~~ FHLBank enters into derivatives to: (1) reduce the interest rate risk exposures inherent in otherwise unhedged assets and funding positions; and (2) achieve risk management ~~objectives; and (3) act as an intermediary between its members and counterparties.~~objectives. FHFA regulation and ~~the~~ FHLBank’s RMP prohibit trading in or the speculative use of these derivative instruments and limit credit risk arising from these instruments. The use of derivatives is an integral part of ~~the~~ FHLBank’s financial and risk management strategy.

~~The~~ FHLBank reevaluates its hedging strategies ~~from time to time~~periodically and may change the hedging techniques it uses or may adopt new strategies. The most common ways in which ~~the~~ FHLBank uses derivatives are to:


▪	Reduce funding costs by combining an interest rate swap with a consolidated obligation because the cost of a combined funding structure can be lower than the cost of a comparable consolidated obligation;


▪	~~Reduce the interest rate sensitivity and repricing gaps of assets and liabilities;~~

▪

Preserve a favorable interest rate spread between the yield of an asset (e.g., an advance) and the cost of the related liability (e.g., the consolidated obligation used to fund the advance). Without the use of derivatives, this interest rate spread could be reduced or eliminated when a change in the interest rate on the advance does not match a change in the interest rate on the consolidated obligation;


▪	~~Mitigate the adverse earnings effects of the shortening or extension of certain assets (e.g., advances or mortgage assets) and liabilities;~~


▪	~~Manage embedded options in assets and liabilities; and~~


▪	~~Manage its overall asset/liability portfolio.~~

▪Reduce funding costs by combining an interest rate swap with a consolidated obligation because the cost of a combined funding structure can be lower than the cost of a comparable consolidated obligation;

▪Reduce the interest rate sensitivity and repricing gaps of assets and liabilities;

▪Preserve a favorable interest rate spread between the yield of an asset (e.g., an advance) and the cost of the related liability (e.g., the consolidated obligation used to fund the advance). Without the use of derivatives, this interest rate spread could be reduced or eliminated when a change in the interest rate on the advance does not match a change in the interest rate on the consolidated obligation;

▪Mitigate the adverse earnings effects of the shortening or extension of certain assets (e.g., advances or mortgage assets) and liabilities;

▪Manage embedded options in assets and liabilities; and

▪Manage its overall asset/liability portfolio.

Application of Derivatives: At the inception of every hedge transaction, ~~the~~ FHLBank documents all hedging relationships between derivatives designated as hedging instruments and the hedged items, its risk management objectives and strategies for undertaking various hedge transactions, and its method of assessing hedge effectiveness. This process includes linking all derivatives that are designated as fair value ~~or cash flow~~ hedges ~~to: (1)~~to assets and/or liabilities on the Statements of ~~Condition; (2)~~Condition or firm ~~commitments; or (3) forecasted transactions.~~commitments.

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Table of Contents

Derivative instruments are designated by ~~the~~ FHLBank as:


▪	~~A qualifying fair value or cash flow hedge of an associated financial instrument, a firm commitment or an anticipated transaction;~~

▪

A non-qualifying economic hedge to manage certain defined risks in the statement of condition. These hedges are primarily used to: (1) manage mismatches between the coupon features of assets and liabilities; (2) offset prepayment risks in certain assets; (3) mitigate the income statement volatility that occurs when financial instruments are recorded at fair value and hedge accounting is not permitted; or (4) reduce exposure to reset risk; or

▪

A non-qualifying intermediary hedge to meet the asset/liability management needs of its members. The FHLBank acts as an intermediary by entering into derivatives with its members and offsetting derivatives with other counterparties. This intermediation grants smaller members indirect access to the derivatives market. The derivatives used in intermediary activities do not receive hedge accounting treatment and are separately marked-to-market through earnings. The net result of the accounting for these derivatives does not significantly affect the operating results of the FHLBank. As of December 31, 2017 and 2016, the FHLBank did not have any intermediary hedges outstanding, and the FHLBank does not currently offer this service to its members.

▪A qualifying fair value hedge of an associated financial instrument or a firm commitment; or

~~The~~ ▪A non-qualifying economic hedge to manage certain defined risks in the Statements of Condition. These hedges are primarily used to: (1) manage mismatches between the coupon features of assets and liabilities; (2) offset prepayment risks in certain assets; (3) mitigate the income statement volatility that occurs when financial instruments are recorded at fair value and hedge accounting is not permitted; or (4) reduce exposure to reset risk.

FHLBank transacts most of its derivatives with counterparties that are large banks and major broker/dealers. Some of these banks and broker/dealers or their affiliates buy, sell and distribute consolidated obligations. Over-the-counter derivative transactions may be either executed through a bilateral agreement with a counterparty (uncleared derivatives) or cleared through a Futures Commission Merchant (i.e., clearing agent) with a Clearinghouse (cleared derivatives). ~~Once a derivative transaction has been accepted for clearing by a Clearinghouse the executing counterparty is replaced with that Clearinghouse. The~~ FHLBank is not a derivatives dealer and ~~thus,~~ does not trade derivatives for short-term profit.

Types of Derivatives: ~~The~~ FHLBank primarily uses the following derivative instruments:

Interest Rate Swaps - An interest rate swap is an agreement between two entities to exchange cash flows in the future. The agreement sets the dates on which the cash flows will be exchanged and the manner in which the cash flows will be calculated. One of the simplest forms of an interest rate swap involves ~~the promise by~~ one party committing to pay cash flows equivalent to the interest on a notional principal amount at a predetermined fixed rate for a given period of time. In return for this ~~promise,~~commitment, this party receives cash flows equivalent to the interest on the same notional principal amount at a variable interest rate index for the same period of time. ~~The variable~~Interest rate swaps and their associated hedged item must qualify for hedge accounting under GAAP; interest rate ~~received or paid by the FHLBank in most derivative transactions is the London Interbank Offered Rate (LIBOR).~~swaps that do not qualify for hedge accounting are considered economic derivatives and are marked-to-market through other income.

~~Swaptions~~ - A swaption is an option that gives the buyer the right to enter into a specified interest rate swap at a certain time in the future. When used as a hedge, a swaption can protect the FHLBank against future interest rate changes. The FHLBank may enter into both payer swaptions and receiver swaptions to decrease its interest rate risk exposure related to the prepayment of certain assets. A payer swaption is the option to make fixed interest payments at a later date and a receiver swaption is the option to receive fixed interest payments at a later date.

Interest Rate Caps and Floors - In an interest rate cap agreement, a cash flow is generated if the price or interest rate of an underlying variable rises above a certain threshold (or cap) price or interest rate. In an interest rate floor agreement, a cash flow is generated if the price or interest rate of an underlying variable falls below a certain threshold (or floor) price or interest rate. Interest rate caps and floors are designed as protection against the interest rate on a variable rate asset or liability rising or falling below a certain level. ~~The~~ FHLBank purchases interest rate caps and floors to hedge embedded interest caps, prepayment risk, and option risk on variable rate MBS held in ~~the~~ FHLBank’s trading and held-to-maturity portfolios and to hedge embedded caps or floors in ~~the~~ FHLBank’s advances.

~~Types of Hedged Items:~~ ~~The FHLBank may have the following types of hedged items:~~

~~Investments~~ - The FHLBank invests in U.S. Treasury securities, U.S. Agency securities, GSE securities, MBS and state or local housing finance agency securities. The interest rate and prepayment risk associated with these investment securities is managed through a combination of debt issuance and derivatives. The FHLBank may manage the prepayment and interest rate risk by funding investment securities with consolidated obligations that have call features or by economically hedging the prepayment risk with interest rate caps or floors, callable swaps or swaptions. The FHLBank may manage against prepayment and duration risks by funding investment securities with consolidated obligations that have call features. The FHLBank may also manage the risk arising from changing market prices and volatility of investment securities by entering into economic derivatives that generally offset the changes in fair value or cash flows of the securities. The FHLBank’s derivatives associated with trading and held-to-maturity securities are designated as economic hedges, and the FHLBank's derivatives associated with available-for-sale securities are designated and qualify as fair value hedges.

Interest rate caps and floors, swaptions and callable swaps may also be used to hedge prepayment and option risk on the MBS held in the FHLBank’s trading, available-for-sale and held-to-maturity portfolios. Many of these derivatives are purchased interest rate caps that hedge interest rate caps embedded in the FHLBank’s trading and held-to-maturity variable rate Agency MBS. Although these derivatives are valid economic hedges against the prepayment and option risk of the portfolio of MBS, they are not specifically linked to individual investment securities and, therefore, do not receive ~~either fair value or cash flow~~ hedge ~~accounting. The~~accounting treatment. These derivatives are marked-to-market through ~~earnings.~~other income.

~~Advances~~ - ~~With~~Types of Hedged Items: FHLBank may have the ~~issuance~~following types of hedged items:

Investments - FHLBank invests in U.S. Treasury securities, U.S. Agency MBS, GSE debt securities or MBS, and state or local housing finance agency securities. The interest rate and prepayment risk associated with these investment securities is managed through a ~~convertible advance,~~combination of funding and derivatives. FHLBank may manage the prepayment, duration, and interest rate risk by funding investment securities with callable consolidated obligations, or by hedging the prepayment risk with interest rate caps or floors, or callable swaps. FHLBank ~~purchases~~may also manage the risk arising from changing market prices and volatility of investment securities by entering into derivatives that generally offset the changes in fair value of the securities.

Advances - For fixed rate advances, FHLBank can either fund the advances with fixed rate consolidated obligations with the same tenor or simultaneously enter into an interest rate swap in which the clearing agent or derivative counterparty receives fixed cash flows from FHLBank designed to mirror in timing and amount the cash inflows FHLBank receives on the advance. In this type of transaction, FHLBank typically receives from the ~~member~~clearing agent or derivative counterparty a variable cash flow that closely matches the interest payments on short-term discount notes or swapped consolidated obligation bonds.

Convertible advances contain an option that ~~enables the~~allows FHLBank to convert ~~an advance from~~a fixed rate advance to a callable variable rate ~~if interest rates increase.~~advance that re-prices monthly based upon our one-month short-term, fixed rate advance product. Once ~~the~~ FHLBank exercises ~~its~~the option to convert anthe advance, ~~to an at-the-market variable rate, the member then owns the option to terminate the converted advance~~it can be prepaid without a fee in whole or ~~penalty~~in part on the initial conversion date ~~and each~~or on any interest rate reset date thereafter. ~~The~~ FHLBank hedges a convertible advance by entering into ~~a cancelable derivative with a non-member counterparty~~an interest rate swap where ~~the~~ FHLBank pays a fixed rate and receives a variable rate. The derivative counterparty may cancel the derivative on a put date. This type of hedge is designated as a fair value hedge. ~~The counterparty’s decision to cancel the derivative would normally occur in a rising rate environment.~~ If the ~~option~~swap is ~~in-the-money, the derivative is~~ cancelled, ~~by the derivative counterparty at par (i.e., without any premium or other payment to the FHLBank). When the derivative is cancelled, the~~ FHLBank exercises its option to convert the advance to a variable rate. If a convertible advance is not prepaid by the member upon conversion, ~~to an at-the-market variable rate advance (i.e., callable variable rate advance),~~ any hedge-related unamortized basis adjustment is amortized as a yield adjustment.

When fixed rate advances are issued to one or more borrowers, the FHLBank can either fund the advances with fixed rate consolidated obligations with the same tenor or simultaneously enter into a matching derivative in which the clearing agent or derivative counterparty receives fixed cash flows from the FHLBank designed to mirror in timing and amount the cash inflows the FHLBank receives on the advance. These transactions are designated as fair value hedges. In this type

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Table of transaction, the FHLBank typically receives from the clearing agent or derivative counterparty a variable cash flow that closely matches the interest payments on short-term discount notes or swapped consolidated obligation bonds.Contents

The repricing characteristics and optionality embedded in certain financial instruments held by ~~the~~ FHLBank can create interest rate risk. For example, when a member prepays an advance, ~~the FHLBank~~future income could ~~suffer lower future income~~decline if the principal portion of the prepaid advance ~~were~~is invested in lower-yielding assets that continue to be funded by higher-cost debt. To protect against this risk, ~~the~~ FHLBank generally charges a prepayment fee on an advance that makes it financially indifferent to a member’s decision to prepay the advance. When ~~the~~ FHLBank offers advances (other than short-term advances) that a member may prepay without a prepayment fee, it usually finances these advances with callable debt or otherwise hedges the option being sold to the member.

Mortgage Loans - ~~The~~ FHLBank invests in fixed rate mortgage loans through the MPF Program. The prepayment options embedded in mortgage loans can result in extensions or contractions in the expected lives of these investments, ~~depending on changes in estimated future cash flows,~~ which usually occur as a result of changes in interest ~~rate changes. The~~rates. FHLBank may manage the interest rate and prepayment risk associated with mortgage loans ~~through a combination of debt issuance and derivatives. The FHLBank issues~~by issuing both callable and non-callable debt and using derivatives to achieve cash flow patterns and liability durations similar to those expected on the mortgage loans. ~~The FHLBank may use derivatives in conjunction with debt issuance to better match the expected prepayment characteristics of its mortgage loan portfolio.~~

Interest rate caps and floors, swaptions and callable swaps may also be used to hedge prepayment risk on the mortgage loans. Although these derivatives are valid economic hedges against the prepayment risk of the portfolio of mortgage loans, they are not specifically linked to individual loans and, therefore, do not receive either fair value or cash flow hedge accounting. The derivatives are marked-to-market through earnings.

Consolidated Obligations - ~~The~~ FHLBank may enter into derivatives to hedge the interest rate risk associated with ~~its~~ debt ~~issuances. The~~issuance. FHLBank manages the risk arising from changing market prices and volatility of a consolidated obligation by matching the cash inflow on the derivative with the cash outflow on the consolidated obligation.

For instance, ~~the~~ FHLBank may issue a fixed rate consolidated obligation and simultaneously enter into a matching derivative in which ~~the~~ FHLBank ~~received~~receives a fixed cash flow designed to mirror in timing and amount the cash outflows ~~the~~ FHLBank pays on the consolidated obligation. In this type of transaction, ~~the~~ FHLBank typically pays a variable cash flow that closely matches the interest payments it receives on short-term or variable rate ~~advances (typically one- or three-month LIBOR).~~advances. These transactions are designated as fair value hedges. ~~The~~ FHLBank may issue variable rate consolidated obligations indexed to ~~the~~SOFR, Federal funds effective rate, ~~LIBOR~~ or other ~~rate~~rates and generally simultaneously execute interest rate swaps to hedge the basis risk of the variable rate debt. This type of hedge is treated as an economic hedge and the derivative is ~~market-to-market~~marked-to-market through earnings.

This strategy of issuing consolidated obligations while simultaneously entering into derivatives is intended to enable the FHLBank to offer a wider range of attractively priced advances to its members and may allow the FHLBank to reduce its funding costs. The continued attractiveness of this debt depends on yield relationships between the consolidated obligations and the derivative markets. If conditions change, the FHLBank may alter consolidated obligations that it issues.

Firm Commitments - Commitments that obligate ~~the~~ FHLBank to purchase closed fixed rate mortgage loans from its members are considered derivatives. Accordingly, each mortgage loan purchase commitment is recorded as a derivative asset or derivative liability at fair value, with changes in fair value recognized in current period earnings. When a mortgage loan purchase commitment derivative settles, the current market value of the commitment is included with the basis of the mortgage loan and amortized accordingly.

~~The~~ Commitments that obligate FHLBank to issue consolidated obligations that settle outside of normal market settlement conventions are considered derivatives. Accordingly, each consolidated obligation commitment is recorded as a derivative asset or derivative liability at fair value, with changes in fair value recognized in current period earnings. When the consolidated obligation commitment derivative settles, the current market value of the commitment is included with the basis of the consolidated obligation and amortized accordingly.

FHLBank may also hedge a firm commitment for a ~~forward starting~~forward-starting advance or consolidated obligation bond through the use of an interest rate swap. In this case, the swap functions as the hedging instrument for both the hedging relationship involving the firm commitment and the subsequent hedging relationship involving the advance or bond. ~~The basis movement~~If the hedge relationship is de-designated when the commitment is terminated and the advance or bond is issued, the fair value change associated with the firm commitment is recorded as a basis adjustment of the advance or bond at the time ~~the commitment is terminated and the advance or bond is issued.~~of de-designation. The basis adjustment is then amortized into interest income or expense over the life of the advance or bond. In addition, if a hedged firm commitment no longer qualifies as a fair value hedge, the hedge would be terminated and net gains and losses would be recognized in current period earnings. There were no gains or losses recognized due to disqualification of firm commitment hedges during the years ended December 31, ~~2017, 2016,~~2023, 2022, and ~~2015.~~2021.

~~Anticipated Debt Issuance~~ - The FHLBank enters into interest rate swaps for the anticipated issuance of fixed rate consolidated obligation bonds to hedge the variability in forecasted interest payments associated with fixed rate debt that has not yet been issued. The interest rate swap is terminated upon issuance of the fixed rate bond, with the realized gain or loss on the interest rate swap recorded in OCI. Realized gains and losses reported in AOCI are recognized as earnings in the periods in which earnings are affected by the cash flows of the fixed rate bonds.

Financial Statement Impact and Additional Financial Information: Derivative instruments are recorded at fair value and reported in derivative assets or derivative liabilities on the Statements of Condition. Premiums paid at acquisition are accounted for as the basis of the derivative at inception of the hedge. The notional amount in derivative contracts serves as a factor in determining periodic interest payments or cash flows received and paid. However, the notional amount of derivatives reflects ~~the~~ FHLBank’s involvement in the various classes of financial instruments and represents neither the actual amounts exchanged nor the overall exposure of ~~the~~ FHLBank to credit and market risk; the overall risk is much smaller. The risks of derivatives can be measured meaningfully on a portfolio basis that takes into account the clearing agents, counterparties, the types of derivatives, the items being hedged, and any offsets between the derivatives and the items being hedged.

~~The~~

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FHLBank considers accrued interest receivables and payables and the legal right to offset derivative assets and liabilities by clearing agent or derivative counterparty. Consequently, derivative assets and liabilities reported on the Statements of Condition generally include the net cash collateral, including initial ~~or certain variation~~ margin, and accrued interest received or pledged by clearing agents and/or derivative counterparties. Therefore, an individual derivative may be in an asset position (clearing agent or derivative counterparty would owe ~~the~~ FHLBank the current fair value, which includes net accrued interest receivable or payable on the derivative, if the derivative was settled as of the Statement of Condition date) but when the derivative fair value and cash collateral fair value (includes accrued interest on the collateral) are netted by clearing agent by Clearinghouse, or by derivative counterparty, the derivative may be recorded on the Statements of Condition as a derivative liability. Conversely, a derivative may be in a liability position (FHLBank would owe the clearing agent or derivative counterparty the fair value if settled as of the Statement of Condition date) but may be recorded on the Statements of Condition as a derivative asset after netting.

Table ~~8.1~~6.1 presents outstanding notional amounts and fair values of the derivatives outstanding by type of derivative and by hedge designation as of December 31, ~~2017~~2023 and ~~2016~~2022 (in thousands). Total derivative assets and liabilities include the effect of netting adjustments and cash collateral.

Table ~~8.1~~6.1


	12/31/2017								12/31/2016									12/31/2023			12/31/2022
	Notional Amount		Derivative Assets			Derivative Liabilities			Notional Amount		Derivative Assets			Derivative Liabilities				Notional Amount	Derivative Assets	Derivative Liabilities	Notional Amount	Derivative Assets	Derivative Liabilities
Derivatives designated as hedging instruments:																	Derivatives designated as hedging instruments:
Interest rate swaps	$	7,219,084	$	56,159		$	19,971		$	7,896,110	$	70,683		$	65,471
Total derivatives designated as hedging relationships	7,219,084		56,159			19,971			7,896,110		70,683			65,471
Derivatives not designated as hedging instruments:																	Derivatives not designated as hedging instruments:
Interest rate swaps	3,529,299		3,243			21,672			2,022,630		649			40,824
Interest rate caps/floors	2,344,200		1,011			—			2,765,200		4,859			—
Mortgage delivery commitments	77,585		73			43			90,013		214			372

Total derivatives not designated as hedging instruments
Total derivatives not designated as hedging instruments
Total derivatives not designated as hedging instruments	5,951,084		4,327			21,715			4,877,843		5,722			41,196
TOTAL	$	13,170,168	60,486			41,686			$	12,773,953	76,405			106,667
Netting adjustments and cash collateral¹			(23,456		)	(39,269		)			(15,505		)	(99,496		)
DERIVATIVE ASSETS AND LIABILITIES			$	37,030		$	2,417				$	60,900		$	7,171

Amounts represent the application of the netting requirements that allow the FHLBank to settle positive and negative positions cash collateral, including initial or certain variation margin, and related accrued interest held or placed with the same clearing agent and/or derivative counterparty. Cash collateral posted was $56,508,000 and $105,481,000 as of December 31, 2017 and 2016, respectively. Cash collateral received was $40,695,000 and $21,490,000 as of December 31, 2017 and 2016, respectively.

1 Amounts represent the application of the netting requirements that allow FHLBank to settle positive and negative positions and cash collateral, including accrued interest, held or placed with the same clearing agent and/or derivative counterparty. Cash collateral posted was $649,456,000 and $761,704,000 as of December 31, 2023 and 2022, respectively. Cash collateral received was $28,452,000 and $51,239,000 as of December 31, 2023 and 2022, respectively.

~~The following tables provide information regarding gains and losses on derivatives and hedging activities by type~~

F-37

Table of ~~hedge and type of derivative and gains and losses by hedged item for fair value hedges.~~Contents

For the years ended December 31, ~~2017, 2016,~~2023, 2022, and ~~2015, the FHLBank recorded net gains (losses) on derivatives and hedging activities as presented in Table 8.2 (in thousands):~~

~~Table 8.2~~

2017 2016 2015
Derivatives designated as hedging instruments:
Interest rate swaps $ (3,852 ) $ 5,727
$ (2,878 )
Total net gains (losses) related to fair value hedge ineffectiveness (3,852 ) 5,727
(2,878 )
Derivatives not designated as hedging instruments:
Economic hedges:
Interest rate swaps 19,413
23,631
10,797
Interest rate caps/floors (3,848 ) (956 ) (4,159 )
Net interest settlements (15,143 ) (39,077 ) (47,670 )
Mortgage delivery commitments 2,207
(952 ) 1,067
Total net gains (losses) related to derivatives not designated as hedging instruments 2,629
(17,354 ) (39,965 )
Other¹
(22 ) —
—
NET GAINS (LOSSES) ON DERIVATIVES AND HEDGING ACTIVITIES $ (1,245 ) $ (11,627 ) $ (42,843 )


¹	~~Amount represents price alignment amount on derivatives for which variation margin is characterized as a daily settled contract.~~

The FHLBank carries derivative instruments at fair value on its Statements of Condition. Any change in the fair value of derivatives designated under a fair value hedging relationship is recorded each period in current period earnings. Fair value hedge accounting allows for the offsetting fair value of the hedged risk in the hedged item to also be recorded in current period earnings. For the years ended December 31, 2017, 2016, and 2015, the2021, FHLBank recorded net gains (losses) on derivatives and the related hedged items in fair value hedging relationships and the impact of those derivatives on ~~the~~ FHLBank’s net interest income as presented in Table ~~8.3~~6.2 (in thousands):

Table ~~8.3~~6.2


	2023


	Interest Income/Expense
	Advances		Available-for-sale Securities		Consolidated Obligation Discount Notes		Consolidated Obligation Bonds
Total amounts presented in the Statements of Income	$	2,409,840	$	594,548	$	1,102,702	$	2,206,160
Gains (losses) on fair value hedging relationships:
Interest rate contracts:
Derivatives1	$	85,927	$	31,991	$	(6,312)	$	(78,556)
Hedged items2	163,568		162,227		(28,552)		(244,352)
NET GAINS (LOSSES) ON FAIR VALUE HEDGING RELATIONSHIPS	$	249,495	$	194,218	$	(34,864)	$	(322,908)

2017
Gains (Losses) on Derivatives Gains (Losses) on Hedged Items Net Fair Value Hedge Ineffectiveness
Effect of Derivatives on Net Interest Income¹
Advances $ 54,517
$ (55,003 ) $ (486 ) $ (48,928 )
Investments 8,296
(10,885 ) (2,589 ) (9,271 )
Consolidated obligation bonds (11,913 ) 11,172
(741 ) 14,514
Consolidated obligation discount notes 16
(52 ) (36 ) (15 )
TOTAL $ 50,916
$ (54,768 ) $ (3,852 ) $ (43,700 )

2016
Gains (Losses) on Derivatives Gains (Losses) on Hedged Items Net Fair Value Hedge Ineffectiveness
Effect of Derivatives on Net Interest Income¹
Advances $ 82,222
$ (75,364 ) $ 6,858
$ (91,660 )
Investments 33,459
(33,799 ) (340 ) (11,878 )
Consolidated obligation bonds (24,668 ) 24,147
(521 ) 31,559
Consolidated obligation discount notes 84
(354 ) (270 ) (67 )
TOTAL $ 91,097
$ (85,370 ) $ 5,727
$ (72,046 )

2015
Gains (Losses) on Derivatives Gains (Losses) on Hedged Items Net Fair Value Hedge Ineffectiveness
Effect of Derivatives on Net Interest Income¹
Advances $ 47,544
$ (48,323 ) $ (779 ) $ (125,346 )
Investments 1,750
(1,114 ) 636
(1,657 )
Consolidated obligation bonds (2,829 ) (212 ) (3,041 ) 69,213
Consolidated obligation discount notes (100 ) 406
306
215
TOTAL $ 46,365
$ (49,243 ) $ (2,878 ) $ (57,575 )


	2022


	Interest Income/Expense
	Advances		Available-for-sale Securities		Consolidated Obligation Discount Notes		Consolidated Obligation Bonds
Total amounts presented in the Statements of Income	$	742,694	$	197,809	$	368,075	$	638,751
Gains (losses) on fair value hedging relationships:
Interest rate contracts:
Derivatives1	$	464,852	$	531,080	$	(43,327)	$	(606,760)
Hedged items2	(448,444)		(518,173)		30,865		564,081
NET GAINS (LOSSES) ON FAIR VALUE HEDGING RELATIONSHIPS	$	16,408	$	12,907	$	(12,462)	$	(42,679)


	2021


	Interest Income/Expense
	Advances		Available-for-sale Securities		Consolidated Obligation Discount Notes		Consolidated Obligation Bonds
Total amounts presented in the Statements of Income	$	129,586	$	44,239	$	5,481	$	160,173
Gains (losses) on fair value hedging relationships:
Interest rate contracts:
Derivatives1	$	132,292	$	115,716	$	13	$	(42,427)
Hedged items2	(198,791)		(213,559)		(33)		75,168
NET GAINS (LOSSES) ON FAIR VALUE HEDGING RELATIONSHIPS	$	(66,499)	$	(97,843)	$	(20)	$	32,741


¹	The differentials between accruals of interest receivables and payables on derivatives designated as fair value hedges as well as the amortization/accretion of hedging activities are recognized as adjustments to the interest income or expense of the designated underlying hedged item.

1 Includes net interest settlements in interest income/expense.

2 Includes amortization/accretion on closed fair value relationships in interest income.

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Table 6.3 presents the cumulative basis adjustments on hedged items designated as fair value hedges and the related amortized cost of the hedged items as of December 31, 2023 and 2022 (in thousands):

Table 6.3


12/31/2023
Line Item in Statements of Condition of Hedged Item	Carrying Value of Hedged Asset/(Liability)1		Basis Adjustments for Active Hedging Relationships2		Basis Adjustments for Discontinued Hedging Relationships2		Cumulative Amount of Fair Value Hedging Basis Adjustments2
Advances	$	13,545,019	$	(206,332)	$	(8,924)	$	(215,256)
Available-for-sale securities	6,367,691		(256,757)		—		(256,757)
Consolidated obligation discount notes	(3,874,550)		2,313		—		2,313
Consolidated obligation bonds	(20,374,603)		366,180		(5,937)		360,243

12/31/2022
Line Item in Statements of Condition of Hedged Item	Carrying Value of Hedged Asset/(Liability)1		Basis Adjustments for Active Hedging Relationships2		Basis Adjustments for Discontinued Hedging Relationships2		Cumulative Amount of Fair Value Hedging Basis Adjustments2
Advances	$	8,161,351	$	(387,377)	$	8,553	$	(378,824)
Available-for-sale securities	5,959,781		(418,984)		—		(418,984)
Consolidated discount notes	(7,562,117)		30,865		—		30,865
Consolidated obligation bonds	(11,657,093)		604,595		—		604,595

1 Includes only the portion of carrying value representing the hedged items in fair value hedging relationships. For available-for-sale securities, amortized cost is considered to be carrying value (i.e., the fair value adjustment recorded in accumulated other comprehensive income (AOCI) is excluded).

2 Included in amortized cost of the hedged asset/liability.

Table 6.4 provides information regarding net gains (losses) on derivatives recorded in non-interest income (in thousands).

Table 6.4


	2023		2022		2021


Derivatives not designated as hedging instruments:
Economic hedges:
Interest rate swaps	$	(17,414)	$	107,552	$	83,501
Interest rate caps/floors	(1,088)		1,406		195
Net interest settlements	35,033		(13,661)		(50,398)
Price alignment interest	(799)		(186)		24
Mortgage delivery commitments	(809)		(8,619)		(2,920)

NET GAINS (LOSSES) ON DERIVATIVES	$	14,923	$	86,492	$	30,402

Managing Credit Risk on Derivatives: ~~The~~ FHLBank is subject to credit risk due to the risk of nonperformance by counterparties to its derivative transactions and manages credit risk through credit analyses, collateral requirements, and adherence to the requirements set forth in its RMP, U.S. Commodity Futures Trading Commission regulations, and FHFA regulations.

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Uncleared derivatives. For uncleared derivatives, the degree of credit risk depends on the extent to which master netting arrangements are included in these contracts to mitigate the risk. ~~The~~ FHLBank requires collateral agreements with collateral delivery thresholds on all uncleared derivatives. All bilateral security agreements include bilateral-collateral-exchange provisions that require all credit exposures be collateralized, subject to minimum transfer amounts. Additionally, collateral related to derivatives with member institutions includes collateral assigned to ~~the~~ FHLBank, as evidenced by a written security agreement.

Based on credit analyses and collateral requirements, FHLBank management does not anticipate any credit losses on its derivative agreements. ~~The maximum credit risk applicable~~

Bilateral derivative transactions executed on or after September 1, 2022, are subject to two-way initial margin requirements if aggregate uncleared derivative exposure to a ~~single~~ counterparty ~~was $19,118,000~~exceeds a specified threshold. The initial margin is required to be held at a third-party custodian, and ~~$21,112,000 as~~the secured party can only take ownership upon the occurrence of certain events, including an event of default due to bankruptcy, insolvency, or similar proceeding. As of December 31, ~~2017 and 2016, respectively. The counterparty~~2023, FHLBank was ~~the same for both periods.~~not required to pledge to or receive initial margin from bilateral derivative counterparties.

The FHLBank recently entered into updated bilateral security agreements with its non-member counterparties with bilateral-collateral-exchange provisions that require all credit exposures be collateralized, subject to minimum transfer amounts. Previously, certain of the FHLBank’s uncleared derivative instruments contained provisions that required the FHLBank to post additional collateral with its counterparties if there was deterioration in the FHLBank’s credit rating.

Cleared derivatives. For cleared derivatives, ~~the~~a Clearinghouse is ~~the~~ FHLBank’s counterparty. The applicable Clearinghouse notifies the clearing agent of the required initial and variation margin, and the clearing agent in turn notifies ~~the~~ FHLBank. ~~The~~ FHLBank utilizes two Clearinghouses for all cleared derivative transactions, ~~LCH.Clearnet LLC~~LCH Ltd and CME Clearing. ~~Effective January 3, 2017, CME Clearing made certain amendments to its rulebook changing the legal characterization of~~At both Clearinghouses, variation margin ~~payments to represent~~is characterized as daily settlement payments rather than collateral. Variation margin related to LCH.Clearnet LLC contracts was characterized as cash collateral as of December 31, 2017 because amendments to its rulebook were not effective until January 16, 2018. At both Clearinghouses,and initial margin is considered cash collateral. The requirement that ~~the~~ FHLBank ~~posts~~post initial and variation margin to the Clearinghouse through the clearing agent ~~to the Clearinghouse,~~ exposes ~~the~~ FHLBank to institutional credit risk if the clearing agent or the Clearinghouse fails to meet its obligations. The use of cleared derivatives is intended to mitigate credit risk exposure because a central counterparty is substituted for individual counterparties and collateral/~~payments~~payment for changes in the value of cleared derivatives is posted daily through a clearing agent.

The Clearinghouse determines initial margin requirements, and ~~generally,~~ credit ratings generally are not factored into the initial margin. However, clearing agents may require additional initial margin to be posted based on credit considerations, including, but not limited to, credit rating downgrades. ~~The~~ FHLBank was not required to post additional initial margin by its clearing agents as of December 31, ~~2017~~2023 and ~~2016.~~2022.

~~The~~ FHLBank’s net exposure on derivative agreements is presented in Note ~~12.~~10.

NOTE 97 – DEPOSITS

~~The~~ FHLBank offers demand, overnight and short-term deposit programs to its members and to other qualifying non-members. ~~Table 9.1 details~~A member that services mortgage loans may also deposit funds collected in connection with the ~~types~~mortgage loans, pending disbursement of ~~deposits held by~~these funds to the owners of the mortgage loans. FHLBank classifies these funds as ~~of December 31, 2017 and 2016 (in thousands):~~

~~Table 9.1~~

12/31/2017 12/31/2016
Interest-bearing:
Demand $ 246,831
$ 269,341
Overnight 161,900
278,200
Total interest-bearing 408,731
547,541
Non-interest-bearing:
Demand 53,038
51,390
Total non-interest-bearing 53,038
51,390
TOTAL DEPOSITS $ 461,769
$ 598,931

other deposits. Deposits classified as demand and overnight pay interest based on a daily interest rate. Term deposits pay interest based on a fixed rate determined at the issuance of the deposit. ~~The weighted-average interest rate paid on interest-bearing~~

Table 7.1 details the types of deposits ~~was 0.69 percent, 0.17 percent and 0.09 percent for the years ended December 31, 2017, 2016, and 2015, respectively.~~

~~There were no term deposits~~held by FHLBank as of December 31, ~~2017~~2023 and ~~2016.~~2022 (in thousands):

Table 7.1


	12/31/2023		12/31/2022
Interest-bearing:
Demand	$	297,267	$	301,073
Overnight	391,900		352,400
Term	10,650		12,000

Total interest-bearing	699,817		665,473
Non-interest-bearing:
Other	52,383		45,588

Total non-interest-bearing	52,383		45,588
TOTAL DEPOSITS	$	752,200	$	711,061

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NOTE 108 – CONSOLIDATED OBLIGATIONS

Consolidated obligations are the joint and several obligations of the FHLBanks and consist of consolidated bonds and discount notes and, as provided by the Bank Act or FHFA regulation, are backed only by the financial resources of the FHLBanks. The FHLBanks jointly issue consolidated obligations with the Office of Finance acting as their agent. The Office of Finance tracks the amounts of debt issued on behalf of each FHLBank. In addition, ~~the~~ FHLBank records as a liability its specific portion of consolidated obligations for which it is the primary obligor. The FHLBank utilizes a debt issuance process to provide a scheduled monthly issuance of global bullet consolidated obligation bonds. As part of this process, management from each of the FHLBanks determines and communicates a firm commitment to the Office of Finance for an amount of scheduled global debt to be issued on its behalf. If the FHLBanks’ commitments do not meet the minimum debt issue size, the proceeds are allocated to all FHLBanks based on the larger of the FHLBank’s commitment or allocated proceeds based on the individual FHLBank’s regulatory capital to total system regulatory capital. If the FHLBanks’ commitments exceed the minimum debt issue size, the proceeds are allocated based on relative regulatory capital of the FHLBanks with the allocation limited to the lesser of the allocation amount or actual commitment amount.

The FHFA and the U.S. Secretary of the Treasury oversee the issuance of FHLBank debt through the Office of Finance. ~~The FHLBanks can, however, pass on any scheduled calendar slot and not issue any global bullet consolidated obligation bonds upon agreement of 8 of the 11 FHLBanks.~~ Consolidated obligation bonds may be issued to raise short-, intermediate-, and long-term funds for the FHLBanks and are not subject to any statutory or regulatory limits as to maturities. Consolidated obligation discount notes, which are issued to raise short-term funds, are generally issued at less than their face amounts and redeemed at par when they mature.

Although ~~the~~ FHLBank Topeka is primarily liable for its portion of consolidated obligations, ~~the~~ FHLBank Topeka is also jointly and severally liable with the other 10 FHLBanks for the payment of principal and interest on all consolidated obligations of each of the FHLBanks. The FHFA, at its discretion, may require any FHLBank to make principal or interest payments due on any consolidated obligations for which ~~the~~ FHLBank is not the primary obligor. Although it has never occurred, to the extent that an FHLBank would be required to make a payment on a consolidated obligation on behalf of another FHLBank, the paying FHLBank would be entitled to reimbursement from the non-complying FHLBank. However, if the FHFA determines that the non-complying FHLBank is unable to satisfy its obligations, then the FHFA may allocate the non-complying FHLBank’s outstanding consolidated obligation debt among the remaining FHLBanks on a pro rata basis in proportion to each FHLBank’s participation in all consolidated obligations outstanding, or on any other basis the FHFA may determine to ensure that the FHLBanks operate in a safe and sound manner.

The par value of outstanding consolidated obligations of all FHLBanks, including outstanding consolidated obligations issued on behalf of ~~the~~ FHLBank Topeka, was ~~approximately $1,034,259,761,000~~$1,204,316,000,000 and ~~$989,311,064,000~~$1,181,742,527,000 as of December 31, ~~2017~~2023 and ~~2016,~~2022, respectively. ~~See Note 19 for FHLBank obligations acquired by FHLBank Topeka as investments.~~ FHFA regulations require that each FHLBank maintain unpledged qualifying assets equal to its participation in the total consolidated obligations outstanding. Qualifying assets are defined as cash; secured advances; obligations of or fully guaranteed by the United States; obligations, participations or other instruments of or issued by Fannie Mae or Ginnie Mae; mortgages, obligations or other securities, which are or have ever been sold by Freddie ~~Mac under the Bank Act;~~Mac; and such securities as fiduciary and trust funds may invest in under the laws of the state in which ~~the~~ FHLBank is located.

Consolidated Obligation Bonds: Table ~~10.1~~8.1 presents ~~the~~ FHLBank’s participation in consolidated obligation bonds outstanding as of December 31, ~~2017~~2023 and ~~2016~~2022 (dollar amounts in thousands):

Table ~~10.1~~8.1


	12/31/2023				12/31/2022
Year of Contractual Maturity	Amount		Weighted Average Interest Rate		Amount		Weighted Average Interest Rate
Due in one year or less	$	28,152,305	4.90	%	$	21,936,100	3.77	%
Due after one year through two years	9,327,370		4.21		7,074,505		2.97
Due after two years through three years	4,294,125		2.01		3,508,370		1.95
Due after three years through four years	1,780,895		2.01		4,254,750		1.74
Due after four years through five years	1,467,440		2.96		1,694,660		1.79
Thereafter	4,387,255		2.63		4,638,150		1.99
Total par value	49,409,390		4.15	%	43,106,535		3.02	%
Premiums	12,874				18,950
Discounts	(3,108)				(3,789)
Concession fees	(11,424)				(11,262)
Hedging adjustments	(360,243)				(604,595)
TOTAL	$	49,047,489			$	42,505,839

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Table of Contents

12/31/2017 12/31/2016
Year of Contractual Maturity Amount
Weighted
Average
Interest
Rate
Amount
Weighted
Average
Interest
Rate
Due in one year or less $ 11,098,440
1.40 % $ 11,001,615
0.92 %
Due after one year through two years 6,001,000
1.46
2,460,440
1.46
Due after two years through three years 1,240,300
1.60
1,190,750
1.51
Due after three years through four years 1,249,050
1.66
739,600
1.56
Due after four years through five years 865,650
1.97
1,215,600
1.60
Thereafter 4,053,100
2.57
4,088,400
2.39
Total par value 24,507,540
1.65 % 20,696,405
1.37 %
Premiums 19,795
26,812

Discounts (2,843 ) (2,342 )
Concession fees (9,753 ) (9,441 )
Hedging adjustments (271 ) 10,901

TOTAL $ 24,514,468
$ 20,722,335

~~The~~ FHLBank issues optional principal redemption bonds (callable bonds) that may be redeemed in whole or in part at the discretion of ~~the~~ FHLBank on predetermined call dates in accordance with terms of bond offerings. ~~The~~ FHLBank’s ~~participation in~~ consolidated obligation bonds outstanding as of December 31, ~~2017~~2023 and ~~2016~~2022 includes callable bonds totaling ~~$6,452,000,000~~$22,940,000,000 and ~~$6,097,000,000,~~$16,008,000,000, respectively. The FHLBank uses the unswapped callable bonds for financing its callable fixed rate advances (Note 5), MBS (Note 4) and mortgage loans (Note 6). Contemporaneous with a portion of its fixed rate callable bond issuances, the FHLBank also enters into interest rate swap agreements (in which the FHLBank generally pays a variable rate and receives a fixed rate) with call features that mirror the options in the callable bonds (a sold callable swap). The combined sold callable swap and callable debt transaction allows the FHLBank to obtain attractively priced variable rate financing. Table ~~10.2~~8.2 summarizes ~~the~~ FHLBank’s ~~participation in~~ consolidated obligation bonds outstanding by year of maturity, or by the next call date for callable bonds as of December 31, ~~2017~~2023 and ~~2016~~2022 (in thousands):

Table ~~10.2~~8.2


Year of Maturity or Next Call Date	12/31/2023		12/31/2022
Due in one year or less	$	40,475,305	$	35,682,600
Due after one year through two years	6,503,370		4,789,005
Due after two years through three years	1,227,125		940,370
Due after three years through four years	362,895		1,067,750
Due after four years through five years	493,940		256,660
Thereafter	346,755		370,150
TOTAL PAR VALUE	$	49,409,390	$	43,106,535

Year of Maturity or Next Call Date 12/31/2017 12/31/2016
Due in one year or less $ 17,243,440
$ 16,581,615
Due after one year through two years 5,460,000
2,275,440
Due after two years through three years 830,300
694,750
Due after three years through four years 259,050
389,600
Due after four years through five years 280,650
190,600
Thereafter 434,100
564,400
TOTAL PAR VALUE $ 24,507,540
$ 20,696,405

In addition to having fixed rate or simple variable rate coupon payment terms, consolidated obligation bonds may also have the following broad terms, regarding the coupon payment:


▪	Range bonds that have coupon rates at fixed or variable rates and pay the fixed or variable rate as long as the index rate is within the established range, but generally pay zero percent or a minimal interest rate if the specified index rate is outside the established range;


▪	Conversion bonds that have coupon rates that convert from fixed to variable, or variable to fixed, rates or from one index to another, on predetermined dates according to the terms of the bond offerings; and


▪	Step bonds that have coupon rates at fixed or variable rates for specified intervals over the lives of the bonds. At the end of each specified interval, the coupon rate or variable rate spread increases (decreases) or steps up (steps down). These bond issues generally contain call provisions enabling the bonds to be called at the FHLBank’s discretion on the step dates.

▪Range bonds that have coupon rates at fixed or variable rates and pay the fixed or variable rate as long as the index rate is within the established range, but generally pay zero percent or a minimal interest rate if the specified index rate is outside the established range;

▪Conversion bonds that have coupon rates that convert from fixed to variable, or variable to fixed, rates or from one index to another, on predetermined dates according to the terms of the bond offerings; and

▪Step bonds that have coupon rates at fixed or variable rates for specified intervals over the lives of the bonds. At the end of each specified interval, the coupon rate or variable rate spread increases (decreases) or steps up (steps down). These bond issues generally contain call provisions enabling the bonds to be called at FHLBank’s discretion on the step dates.

Table ~~10.3~~8.3 summarizes interest rate payment terms for consolidated obligation bonds as of December 31, ~~2017~~2023 and ~~2016~~2022 (in thousands):

Table ~~10.3~~8.3


	12/31/2023		12/31/2022
Fixed rate	$	28,093,390	$	19,194,535
Simple variable rate	19,524,000		21,625,000
Step	1,792,000		2,287,000



TOTAL PAR VALUE	$	49,409,390	$	43,106,535

12/31/2017 12/31/2016
Simple variable rate $ 12,900,000
$ 9,537,000
Fixed rate 10,597,540
10,164,405
Fixed to variable rate 535,000
545,000
Step 430,000
420,000
Range 45,000
30,000
TOTAL PAR VALUE $ 24,507,540
$ 20,696,405

Consolidated Discount Notes: Table ~~10.4~~8.4 summarizes ~~the~~ FHLBank’s participation in consolidated obligation discount notes, all of which are due within one year (dollar amounts in thousands):

Table ~~10.4~~8.4

Book Value Par Value
Weighted
Average
Interest
Rate¹
December 31, 2017 $ 20,420,651
$ 20,445,225
1.23 %

December 31, 2016 $ 21,775,341
$ 21,784,924
0.47 %


	Carrying Value		Par Value		Weighted Average Interest Rate1
December 31, 2023	$	20,743,249	$	20,903,145	5.15	%

December 31, 2022	$	24,775,405	$	24,997,018	3.81	%


¹	~~Represents yield to maturity excluding concession fees.~~

1 Represents yield to maturity excluding concession fees.

Information about the fair value of the consolidated obligations is included in Note 16.14.

F-42

Table of Contents

NOTE 119 – AFFORDABLE HOUSING PROGRAM

The Bank Act ~~as amended by the Financial Institutions Reform, Recovery and Enforcement Act of 1989,~~ requires each FHLBank to establish an AHP. As a part of its AHP, ~~the~~ FHLBank provides subsidies in the form of direct grants or below-market interest ~~rate~~rates on advances to members that ~~use~~provide the funds to assist in the purchase, construction or rehabilitation of housing for very low-, low- and moderate-income households. ~~By regulation,~~Each FHLBank recognizes AHP assessment expense equal to ~~fund the AHP, the FHLBanks as a group must annually set aside~~ the greater ~~of $100,000,000 or~~of: (a) 10 percent of its previous year's income subject to assessment; or (b) the ~~current year’s~~prorated sum required to ensure the aggregate contribution by all FHLBanks is no less than $100,000,000 each year, except that the required annual AHP contribution shall not exceed an FHLBank's net ~~earnings.~~earnings in the previous year. For purposes of the AHP calculation, the term ~~“net earnings”~~“income subject to assessment” is defined as income before interest expense related to mandatorily redeemable capital stock and the assessment for AHP. ~~The~~ FHLBank accrues this expense monthly based on its ~~net earnings.~~income subject to assessment.

The amount set aside for AHP is charged to expense and recognized as a liability. As subsidies are provided through the disbursement of grants or issuance of subsidized advances, the AHP liability is reduced accordingly. If ~~the~~ FHLBank’s ~~net earnings before AHP~~income subject to assessment would ever be zero or less, the amount of AHP liability would generally be equal to zero. However, if the result of the aggregate 10 percent calculation described above is less than the $100,000,000 minimum for all FHLBanks as a group, then the Bank Act requires the shortfall to be allocated among ~~the~~ FHLBanks based on the ratio of each FHLBank’s income for the previous year. If an FHLBank determines that its required AHP contributions are exacerbating any financial instability of that FHLBank, it may apply to the FHFA for a temporary suspension of its AHP ~~contributions. The~~contributions under the FHLBank Act. FHLBank has never applied to the FHFA for a temporary suspension of its AHP contributions.

Table ~~11.1~~9.1 details the change in the AHP liability for the years ended December 31, ~~2017, 2016,~~2023, 2022, and ~~2015~~2021 (in thousands):

Table ~~11.1~~9.1


									2023
									2023
									2023	2022	2021

Appropriated and reserved AHP funds as of the beginning of the period

Appropriated and reserved AHP funds as of the beginning of the period
	2017			2016			2015
Appropriated and reserved AHP funds as of the beginning of the period	$	33,242		$	28,011		$	30,863
AHP set aside based on current year income	21,934			17,984			10,378
Direct grants disbursed	(12,752		)	(13,189		)	(13,413		)
Recaptured funds¹	581			436			183
Appropriated and reserved AHP funds as of the end of the period	$	43,005		$	33,242		$	28,011

Recaptured funds are direct grants returned to the FHLBank in those instances where the commitments associated with the approved use of funds are not met and repayment to the FHLBank is required by regulation. Recaptured funds are returned as a result of: (1) AHP-assisted homeowner’s transfer or sale of property within the five-year retention period that the assisted homeowner is required to occupy the property; (2) homeowner’s failure to acquire sufficient loan funding (funds previously approved and disbursed cannot be used); (3) over-subsidized projects; or (4) previously disbursed but unused grants.

1 Recaptured funds are direct grants returned to FHLBank in those instances where the commitments associated with the approved use of funds are not met and repayment to FHLBank is required by regulation. Recaptured funds are returned as a result of: (1) AHP-assisted homeowner’s transfer or sale of property within the five-year retention period that the assisted homeowner is required to occupy the property; (2) homeowner’s failure to acquire sufficient loan funding (funds previously approved and disbursed cannot be used); (3) over-subsidized projects; or (4) previously disbursed but unused grants.

As of December 31, ~~2017, the~~2023, FHLBank’s AHP accrual on its Statements of Condition consisted of ~~$23,408,000~~$41,245,000 for the ~~2018~~2024 AHP (uncommitted, including amounts recaptured and reallocated from prior years) and ~~$19,597,000~~$36,549,000 for prior years’ AHP (committed but undisbursed).

NOTE 1210 – ASSETS AND LIABILITIES SUBJECT TO OFFSETTING

~~The~~ FHLBank presents certain financial instruments, including derivatives, repurchase agreements and securities purchased under agreements to resell, on a net basis by clearing agent by Clearinghouse, or by counterparty, when it has met the netting requirements. For these financial instruments, ~~the~~ FHLBank has elected to offset its asset and liability positions, as well as cash collateral ~~including initial and certain variation margin,~~ received or pledged, ~~and~~including associated accrued interest.

~~The~~ FHLBank has analyzed the enforceability of offsetting rights incorporated in its cleared derivative transactions and determined that the exercise of those offsetting rights by a non-defaulting party under these transactions should be upheld under applicable law upon an event of default including a bankruptcy, insolvency, or similar proceeding involving the Clearinghouse or clearing agent, or both. Based on this analysis, ~~the~~ FHLBank presents a net derivative receivable or payable for all of its transactions through a particular clearing agent with a particular Clearinghouse.

F-43

Table of Contents

Tables ~~12.1~~10.1 and ~~12.2~~10.2 present the fair value of financial assets, including the related collateral received from or pledged to clearing agents or counterparties, based on the terms of ~~the~~ FHLBank’s master netting arrangements or similar agreements as of December 31, ~~2017~~2023 and ~~2016~~2022 (in thousands):

Table ~~12.1~~10.1

																	12/31/2017
12/31/2023
12/31/2023
12/31/2023
Description	Gross Amounts of Recognized Assets		Gross Amounts Offset in the Statement of Condition			Net Amounts of Assets Presented in the Statement of Condition		Gross Amounts Not Offset in the Statement of Condition¹			Net Amount		Description	Gross Amounts of Recognized Assets	Gross Amounts Offset in the Statements of Condition	Net Amounts of Assets Presented in the Statements of Condition		Gross Amounts Not Offset in the Statement of Condition1	Net Amount
Derivative assets:													Derivative assets:
Uncleared derivatives	$	54,164	$	(52,330	)	$	1,834	$	(73	)	$	1,761
Cleared derivatives	6,322		28,874			35,196		—			35,196
Total derivative assets	60,486		(23,456		)	37,030		(73		)	36,957
Securities purchased under agreements to resell	3,161,446		—			3,161,446		(3,161,446		)	—
TOTAL	$	3,221,932	$	(23,456	)	$	3,198,476	$	(3,161,519	)	$	36,957


¹	Represents noncash collateral received on financial instruments that: (1) do not qualify for netting on the Statement of Condition; or (2) are not subject to an enforceable netting agreement (e.g., mortgage delivery commitments).

1 Represents noncash collateral received on financial instruments that: (1) do not qualify for netting on the Statements of Condition; or (2) are not subject to an enforceable netting agreement (e.g., mortgage delivery commitments).

Table ~~12.2~~10.2

																	12/31/2016
12/31/2022
12/31/2022
12/31/2022
Description	Gross Amounts of Recognized Assets		Gross Amounts Offset in the Statement of Condition			Net Amounts of Assets Presented in the Statement of Condition		Gross Amounts Not Offset in the Statement of Condition¹			Net Amount		Description	Gross Amounts of Recognized Assets	Gross Amounts Offset in the Statements of Condition	Net Amounts of Assets Presented in the Statements of Condition		Gross Amounts Not Offset in the Statement of Condition1	Net Amount
Derivative assets:													Derivative assets:
Uncleared derivatives	$	51,765	$	(39,540	)	$	12,225	$	(214	)	$	12,011
Cleared derivatives	24,640		24,035			48,675		—			48,675
Total derivative assets	76,405		(15,505		)	60,900		(214		)	60,686
Securities purchased under agreements to resell	2,400,000		—			2,400,000		(2,400,000		)	—
TOTAL	$	2,476,405	$	(15,505	)	$	2,460,900	$	(2,400,214	)	$	60,686


¹ 1Represents noncash collateral received on financial instruments that: (1) do not qualify for netting on the Statements of Condition; or (2) are not subject to an enforceable netting agreement (e.g., mortgage delivery commitments). F-44 Table of Contents	Represents noncash collateral received on financial instruments that: (1) do not qualify for netting on the Statement of Condition; or (2) are not subject to an enforceable netting agreement (e.g., mortgage delivery commitments).

Tables ~~12.3~~10.3 and ~~12.4~~10.4 present the fair value of financial liabilities, including the related collateral received from or pledged to counterparties, based on the terms of ~~the~~ FHLBank’s master netting arrangements or similar agreements as of December 31, ~~2017~~2023 and ~~2016~~2022 (in thousands):

Table ~~12.3~~10.3

																			12/31/2017
12/31/2023													12/31/2023
Description	Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Statement of Condition			Net Amounts of Liabilities Presented in the Statement of Condition		Gross Amounts Not Offset in the Statement of Condition¹			Net Amount		Description	Gross Amounts of Recognized Liabilities	Gross Amounts Offset in the Statements of Condition	Net Amounts of Liabilities Presented in the Statements of Condition	Gross Amounts Not Offset in the Statement of Condition1	Net Amount
Derivative liabilities:													Derivative liabilities:
Uncleared derivatives	$	31,805	$	(29,388	)	$	2,417	$	(43	)	$	2,374
Cleared derivatives	9,881		(9,881		)	—		—			—
Total derivative liabilities	41,686		(39,269		)	2,417		(43		)	2,374

TOTAL	$	41,686	$	(39,269	)	$	2,417	$	(43	)	$	2,374
TOTAL
TOTAL


¹	Represents noncash collateral received on financial instruments that: (1) do not qualify for netting on the Statement of Condition; or (2) are not subject to an enforceable netting agreement (e.g., mortgage delivery commitments).

Table ~~12.4~~10.4

																			12/31/2016
12/31/2022													12/31/2022
Description	Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Statement of Condition			Net Amounts of Liabilities Presented in the Statement of Condition		Gross Amounts Not Offset in the Statement of Condition¹			Net Amount		Description	Gross Amounts of Recognized Liabilities	Gross Amounts Offset in the Statements of Condition	Net Amounts of Liabilities Presented in the Statements of Condition	Gross Amounts Not Offset in the Statement of Condition1	Net Amount
Derivative liabilities:													Derivative liabilities:
Uncleared derivatives	$	72,039	$	(64,868	)	$	7,171	$	(372	)	$	6,799
Cleared derivatives	34,628		(34,628		)	—		—			—
Total derivative liabilities	106,667		(99,496		)	7,171		(372		)	6,799

TOTAL	$	106,667	$	(99,496	)	$	7,171	$	(372	)	$	6,799
TOTAL
TOTAL



Federally chartered corporation of the United States						48-0561319
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)
500 SW Wanamaker Road Topeka, KS						66606
(Address of principal executive offices)						(Zip Code)



	~~Shares outstanding as of~~
	~~March 13, 2018~~
~~Class A Stock, par value $100 per share~~	~~2,383,024~~
~~Class B Stock, par value $100 per share~~	~~14,952,521~~



PART I		46
Item 1.	Business		46
Item 1A.	Risk Factors		2019
Item 1B.	Unresolved Staff Comments		27
Item 2.	Properties		27
Item 3.	Legal Proceedings		27
Item 4.	Mine Safety Disclosures		27
PART II			2730
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		2730
Item 6.	~~Selected Financial Data~~[Reserved]		28
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		30
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk		8574
Item 8.	Financial Statements and Supplementary Data		9278
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure		9478
Item 9A.	Controls and Procedures		9478
Item 9B.	Other Information		9478
~~PART III~~Item 9C.	Disclosure Regarding Foreign Jurisdictions that Prevent Inspections		79
PART III
Item 10.	Directors, Executive Officers and Corporate Governance		9479
Item 11.	Executive Compensation		~~101~~86
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		~~119~~102
Item 13.	Certain Relationships and Related Transactions, and Director Independence		~~120~~103
Item 14.	Principal ~~Accounting~~Accountant Fees and Services		~~122~~105
PART IV
Item 15.	~~Exhibits,~~Exhibit and Financial Statement Schedules		~~123~~107
Item 16.	Form 10-K Summary		~~124~~108



~~Product Name~~	~~Size of the FHLBank’s FLA~~	~~PFI CE Obligation Description~~	~~CE Fee~~ ~~Paid to PFI~~	~~CE Fee Offset~~¹	~~Servicing Fee~~ ~~to PFI~~
~~MPF Original~~	~~4 basis points (bps) per year against unpaid balance, accrued monthly~~	~~Aggregate sum of the loan level credit enhancements (LLCEs)~~	~~10 bps per year, paid monthly based on remaining UPB; guaranteed~~²	No	~~25 bps per year, paid monthly~~
~~MPF 100~~³	~~100 bps fixed based on gross fundings at closing~~	~~Aggregate sum of the LLCEs less FLA~~	~~7 to 10 bps per year, paid monthly based on remaining UPB; performance-based after 3 years~~	~~Yes; after first 3 years, to the extent recoverable in future periods~~	~~25 bps per year, paid monthly~~
~~MPF 125~~	~~100 bps fixed based on gross fundings at closing~~	~~Aggregate sum of the LLCEs less FLA~~	~~7 to 10 bps per year, paid monthly based on remaining UPB; performance-based~~	~~Yes; to the extent recoverable in future periods~~	~~25 bps per year, paid monthly~~
~~MPF Plus~~⁴	~~Sized to equal expected losses~~	~~0 to 20 bps after FLA and SMI~~	~~7 bps per year plus 6 to 7 bps per year, performance-based (delayed for 1 year); all fees paid monthly based on remaining UPB~~	~~Yes; to the extent recoverable in future periods~~	~~25 bps per year, paid monthly~~
~~MPF Xtra~~	~~N/A~~	~~N/A~~	~~N/A~~	~~N/A~~	~~25 bps per year, paid monthly~~
~~MPF Government~~	~~N/A~~	~~N/A (unreimbursed servicing expenses only)~~	~~N/A~~⁵	~~N/A~~	~~44 bps per year, paid monthly~~
~~MPF Government MBS~~	~~N/A~~	~~N/A (unreimbursed servicing expenses only)~~	~~N/A~~	~~N/A~~	~~Based on note rate~~



~~Product Name~~	~~FLA~~	~~CE Obligation Calculation~~
~~MPF Original~~	~~4 bps x unpaid principal, annually~~¹	~~(LLCE~~² ~~x PSF~~³~~) x Gross Fundings~~
~~MPF 100~~	~~100 bps x loan funded amount~~	~~((LLCE x PSF) - FLA) x Gross Fundings~~
~~MPF 125~~	~~100 bps x loan funded amount~~	~~((LLCE x PSF) - FLA) x Gross Fundings~~
~~MPF Plus~~	~~5 x variable CE Fee~~	~~(LLCE x PSF) - FLA - SMI~~⁴ ~~= PCE~~⁵


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
None	N/A	N/A


			Shares outstanding as of
			February 29, 2024
Class A Stock, par value $100 per share			3,298,033
Class B Stock, par value $100 per share			20,687,257


•	~~The volume and quality of eligible mortgage loans originated and sold by participating members to the FHLBank through its various mortgage finance products (Mortgage Partnership Finance~~^® ~~(MPF~~^®~~) Program). “Mortgage Partnership Finance,” “MPF,” and “MPF Xtra” are registered trademarks of the FHLBank of Chicago.~~


▪	Line of credit advances are variable rate, non-amortizing, prepayable, revolving line products that provide an alternative to the purchase of Federal funds, brokered deposits or repurchase agreement borrowings;


▪	~~Regular fixed rate advances are non-amortizing loans, prepayable potentially with a fee, with terms to maturity from 94 days to 360 months;~~


▪	Symmetrical fixed rate advances are non-amortizing loans with terms to maturity from 94 days to 360 months, prepayable with a fee, but the borrower also has the contractual ability to realize a gain from the market movement of interest rates upon prepayment;


▪	Callable advances can have a fixed or variable rate of interest for the term of the advance and contain an option(s) that allows for the prepayment of the advance without a fee on specified dates, with terms to maturity of 12 to 360 months for fixed rate loans or terms to maturity of 4 to 180 months for variable rate loans;


▪	Amortizing advances are fixed rate loans with terms to maturity of 12 to 360 months, prepayable with a fee, that contain a set of predetermined principal payments to be made during the life of the advance;


▪	~~Forward settling advance commitments lock in the rate and term of future funding of regular and amortizing fixed rate advances up to 24 months in advance;~~


▪	Member option advances are fixed rate advances with terms from 12 to 360 months that provide the member with an option to prepay without a fee at specific intervals throughout the life of the advance and are issued at a discount to reflect the cost of that option;


▪	Structured advances are other advance types (e.g., regular fixed rate, callable, amortizing or adjustable rate) with terms from 12 to 180 months with an embedded interest rate cap, floor, or collar; and


▪	~~Standby credit facilities are variable rate, non-amortizing, prepayable, revolving standby credit lines that provide the ability to draw advances after normal cutoff times.~~


▪	~~Fully disbursed, whole first mortgages on 1-4 family residential property or securities representing a whole interest in such mortgages;~~


▪	Securities issued and guaranteed or insured by the U.S. government, U.S. government agencies and mortgage GSEs including, without limitation, MBS issued or guaranteed by Federal National Mortgage Association (Fannie Mae), Federal Home Loan Mortgage Corporation (Freddie Mac) or Government National Mortgage Association (Ginnie Mae);


▪	Other acceptable real estate-related collateral, provided such collateral has a readily ascertainable market value and we can perfect a security interest in such property (e.g., privately issued collateralized mortgage obligations (CMOs), mortgages on multifamily residential real property, second mortgages on 1-4 family residential property, mortgages on commercial real estate); or


▪	~~In the case of any CFI, secured loans to small business, small farm and small agri‑business or securities representing a whole interest in such secured loans.~~


▪	Mortgage characteristics: MPF loans must be qualifying 5- to 30-year conforming conventional, fixed rate, fully amortizing mortgage loans, secured by first liens on owner-occupied 1- to 4-unit single-family residential properties and single-unit second homes.


▪	Documentation and compliance: Mortgage documents and transactions are required to comply with all applicable laws. MPF mortgage loans are documented using standard Fannie Mae/Freddie Mac uniform instruments.


▪	Government loans: Government mortgage loans sold under the MPF Program have substantially the same parameters as conventional MPF mortgage loans except that their LTVs may not exceed the LTV limits set by the applicable government agency and they must meet all requirements to be insured or guaranteed by the applicable government agency.


¹	Future payouts of performance-based CE fees are reduced when losses are allocated to the FLA. The annual offset is limited to fees payable in a given year but could be reduced in subsequent years if losses exceed the annual CE fee. The overall reduction is limited to the FLA amount for the life of the pool of loans covereddetermined by ~~a master commitment agreement.~~


²	~~The credit enhancement paid upfront when the mortgage loan is purchased is based upon the present value of the monthly CE fee payments, with consideration for expected prepayments.~~


³	~~The MPF 100 product is currently inactive due to regulatory requirements relating to loan originator compensation under the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act).~~


⁴	~~Due to higher costs associated with the acquisition of supplemental insurance policies, the MPF Plus product is currently not active.~~


⁵	~~Two government master commitments have been grandfathered and paid 2 bps per year. All other government master commitments are not paid a CE fee.~~


¹	~~Starts at zero and increases monthly over the life of the master commitment.~~


²	~~LLCE represents the sum of the loan level credit enhancement amounts of the loans sold into the pool of loans covered by the master commitment agreement.~~


³	~~The S&P Level’s Pool Size Factor (PSF) is applied at the MPF FHLBank level against the total of loans in portfolio.~~


⁵	~~PCE represents the CE obligation that the PFI elects to retain rather than covering with SMI. Under this MPF product, the retained amount can range from 0 to 20 bps.~~


▪	Instruments, such as common stock, that represent an ownership in an entity, other than stock in small business investment companies or certain investments targeted to low-income persons or communities;


▪	~~Instruments issued by non-U.S. entities other than those issued by U.S. branches and agency offices of foreign commercial banks;~~