12/31/2019 12/31/2018
Par value of consolidated obligations of FHLBank Topeka $ 59,481
$ 44,623

Par value of consolidated obligations of all FHLBanks $ 1,025,895
$ 1,031,617

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, ~~2019~~2022 and ~~2018~~2021 (dollar amounts in thousands):

Table 42


	12/31/2022		12/31/2021
Total non-pledged assets	$	71,641,535	$	47,781,713
Total carrying value of consolidated obligations	$	67,281,243	$	44,199,598
Ratio of non-pledged assets to consolidated obligations	1.06		1.08

12/31/2019 12/31/2018
Total non-pledged assets $ 63,017,801
$ 47,568,214
Total carrying value of consolidated obligations $ 59,461,225
$ 44,574,726
Ratio of non-pledged assets to consolidated obligations 1.06
1.07

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, Secured Overnight Financing Rate (SOFR), 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 and/or on the funding needs of the FHLBanks. Discount notes are sold at a discount and mature at par.

Derivatives

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, 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.

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. Generally, we designate derivatives as a fair value hedge of an underlying financial instrument or firm commitment. 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 asset/liability management.

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 terms 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 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 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 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” 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., Federal funds) 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~~credit risk, and includes ~~detailed calculations of five components:~~

▪

Market risk, which is calculated using the percentage change method at a 99 percent confidence level for an 120-business day period (consistent with the market component of our regulatory risk‐based capital value-at-risk requirement). For periods prior to March 31, 2019, market risk was calculated using a Monte Carlo simulation where the 99 percent confidence level result over a 90-day simulation horizon represented 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;~~

▪

Operations risk, which is calculated using a combination of: (1) the Basel II basic indicator approach; and (2) the Basel II standardized approach. For periods prior to September 30, 2019, operations risk was 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 at the average overnight Federal funds rate on average stock for the most recent calendar quarter. For periods prior to December 31, 2019, the dividend payment risk subcomponent was 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 declaredestimates for risk exposure from operational risk, settlement risk related to unsettled consolidated obligations, and paid. Tables 5 and 6 reflect the quarterly retained earnings threshold calculations utilized during 2019 and 2018 (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) 12/31/2019 09/30/2019 06/30/2019 03/31/2019
Market Risk $ 108,053
$ 107,575
$ 155,131
$ 142,109
Credit Risk 50,732
64,756
50,933
55,035
Pre-settlement Risk 30,000
30,000
30,000
30,000
Operations Risk 44,296
44,296
34,003
31,230
Net Income Volatility 68,525
120,208
150,598
124,285
Total Retained Earnings Threshold 301,606
366,835
420,665
382,659
Actual Retained Earnings as of End of Quarter 999,809
972,948
950,276
942,840
Overage $ 698,203
$ 606,113
$ 529,611
$ 560,181

~~Table 6~~

Retained Earnings Component (based upon prior quarter end) 12/31/2018 09/30/2018 06/30/2018 03/31/2018
Market Risk $ 123,960
$ 134,678
$ 135,894
$ 82,048
Credit Risk 60,928
62,329
78,556
60,963
Pre-settlement Risk 30,000
30,000
30,000
30,000
Operations Risk 31,219
30,817
30,791
27,544
Net Income Volatility 123,440
131,568
144,184
127,517
Total Retained Earnings Threshold 369,547
389,392
419,425
328,072
Actual Retained Earnings as of End of Quarter 914,022
894,016
875,790
854,241
Overage $ 544,475
$ 504,624
$ 456,365
$ 526,169

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, 2022, our retained earnings threshold was $0.4 billion. Retained earnings of $1.3 billion exceeded our retained earnings threshold by $0.9 billion at December 31, 2022.

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, 2022, 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. 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 not available to pay dividends and are presented separately on the Statements of Condition.

Tax Status

Section 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 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 of our core missions is to support related housing and community development. 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.

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 to finance the purchase, construction, or rehabilitation of very low-, low-, and moderate-income owner occupied or rental housing. In addition to the competitive AHP program funds, a customized homeownership set-aside program called the Homeownership Set-aside Program (HSP) is offered under the AHP. The HSP provides down payment, closing cost, and purchase-related repair assistance to first-time homebuyers in Colorado, Kansas, Nebraska, and Oklahoma.

Community Investment Cash Advance (CICA) Program: CICA loans to members specifically target underserved markets in both rural and urban areas. CICA loans represented ~~2.8~~1.4 percent, 3.0 percent and ~~3.5~~3.8 percent of total advances outstanding as of December 31, ~~2019, 2018,~~2022, 2021, and ~~2017,~~2020, respectively. Programs offered during ~~2019~~2022 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, small farms, small agri-business, 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 Native American Area, Federally Declared Disaster Area, or United States Department of Agriculture Drought 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.

▪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, small farms, small agri-business 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, 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 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 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.

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 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 the availability of alternative funding sources to members can influence member demand for advances, the cost of the alternative funding relative to advances is ~~the~~a primary consideration when accessing alternative funding. Other considerations include product availability through 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. 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, structure of the debt, liquidity of the 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 Federal Housing Finance Oversight 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 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 ~~March 13, 2020,~~December 31, 2022, we had ~~233~~243 full-time and 5 part-time employees. As of December 31, 2022, approximately 52 percent of our workforce identifies as female and 48 percent identifies as male. As of December 31, 2022, 87 percent are non-minority and 13 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 a diverse and inclusive workforce and equitable workplace. As of December 31, 2022, the average tenure of our employees was 10.1 years. There are ~~not represented by a~~no collective bargaining ~~unit, and we have a good relationship~~agreements with our employees.

Total Rewards: We seek to attract, develop and retain talented employees to achieve our strategic business initiatives, enhance business performance and 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:

•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 plans with a competitive employer match;

•Wellness program – employee assistance program, interactive education sessions focused on employee total health, and 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 educational and 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 event of an unplanned or planned absence of executives, designed to help assure the successor executives are fully qualified to assume responsibility for ongoing operations;

•Our Performance Management framework includes planned quarterly, documented discussions coordinated between manager and employee. At the start of every quarter, managers and employees are asked to 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 natural opportunity for feedback and development conversations to occur between employee and manager throughout the year; and

•We are committed to the health, safety and wellness of our employees. In response to the COVID-19 pandemic, we implemented significant operating environment changes, some of which we continue to exercise, and adopted safety protocols and procedures that we believe are in the best interest of our employees and members, and which are designed to comply with or exceed government regulations.

Diversity, Equity and Inclusion: Diversity, Equity and Inclusion (DEI) is a strategic business priority for us and one of our defined corporate Values. Our Office of Minority and Women Inclusion (OMWI) Officer, Chief Human Resources and Inclusion Officer, is a member of our Executive Team, reports to our Chief Executive Officer (CEO), and serves as a liaison to the 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 in order to optimize success; and inclusion helps us to leverage the unique perspectives of all employees to help ensure optimal decision-making and strengthen our retention efforts. We operationalize our commitment through the development and execution of a three-year DEI strategic plan that includes quantifiable metrics to measure success and we report regularly on our performance to management and the board of directors. We offer a range of opportunities for our employees to connect, and grow personally and professionally through our Inclusion, Diversity, and Equity Advisory council. We consider learning an important component of our DEI strategy and regularly offer educational opportunities to our employees and strive to evaluate equitable and inclusive behaviors as part of our recruiting, promotion and succession planning processes. We also incorporate DEI as a key component of our incentive plan framework to attempt to ensure organizational focus and individual and collective accountability.

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 can 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) 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

~~FHFA Advisory Bulletin 2020-01 - Acquired Member Assets Risk Management.~~Proposed SEC Rule on Climate-related Disclosures. On ~~January 31, 2020,~~March 21, 2022, the ~~FHFA~~SEC issued an Advisory Bulletin on risk management of AMA (the AMA AB). The guidance communicates the FHFA’s expectations with respect to an FHLBank’s funding of its members through the purchase of eligible mortgage loans and includes expectations that an FHLBank will have board-established limits on AMA portfolios and management-established thresholds to serve as monitoring tools to manage AMA-related risk exposure. The AMA AB provides that the board of an FHLBank should ensure that the FHLBank serves as a liquidity source for members, and an FHLBank should ensure that its portfolio limits do not result in the FHLBank’s acquisition of mortgages from smaller members being “crowded out” by the acquisition of mortgages from larger members. The AMA AB contains the expectation that the board of an FHLBank should set limits on the size and growth of portfolios and on acquisitions from a single PFI. In addition, the guidance sets forth that the board of an FHLBank should consider concentration risk in the geographic area, high-balance loans, and third-party loan originations. The FHLBanks are expected to demonstrate their progress toward adherence to the AMA AB by September 30, 2020 and should have final limits in place by December 31, 2020.

~~We continue to evaluate the potential impact of the AMA AB on our financial condition and results of operations.~~

~~FHLBank Membership Request for Input.~~ On February 24, 2020, the FHFA issued a Request for Input on FHLBank membership (the Membership RFI). The Membership RFI, as part of a holistic review of FHLBank membership, seeks public input on whether the FHFA's existing regulation on FHLBank membership, located at 12 CFR part 1263, remains adequate to ensure: (1) the FHLBank System remains safe and sound and able to provide liquidity to members in a variety of conditions; and (2) the advancement of the FHLBank's housing finance and community development mission. The FHFA is seeking input on several broad questions relating to FHLBank membership requirements, as well as on certain more specific questions related to the implementation of the current membership regulation. Responses are due no later than June 23, 2020.

Any rulemaking actions taken by the FHFA as a result of the Membership RFI to update the current FHLBank membership regulation may impact FHLBank membership eligibility or requirements, and ultimately our business, business opportunities, and results of operations.

~~FHFA Proposed Amendments to Stress Test Rule.~~ ~~On December 16, 2019, the FHFA published~~ a proposed rule ~~amending its stress testing rule, consistent with section 401 of the Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018, to: (1) raise the minimum threshold~~that would require us to ~~conduct~~make specific climate-related disclosures in our periodic stress tests for entities regulated by the FHFA from those with consolidated assets of more than $10 billion to those with consolidated assets of more than $250 billion; (2) remove the requirements for FHLBanks to conduct stress tests; and (3) remove the adverse scenario from the list of required scenarios.reports. The proposed rule ~~maintains~~would require us to account for and disclose certain direct, indirect and third-party greenhouse gas emissions, provide additional disclosures of material impact of climate-change risks on our strategy, business model and outlook, disclose climate-event impacts, discuss board of director and management governance and oversight of climate-related risks, climate-change risk management framework considering both physical and transitional risks, and plans to reduce such risks, and provide and discuss climate-related financial impact metrics and expenditure metrics. We are unable to predict when a rule will be finalized and the extent to which a final rule will apply or deviate from the proposed rule. Should the rule become final in its current form, we anticipate a significant increase in our compliance costs given the complexity of these prospective obligations.

FHFA’s Review and Analysis of the FHLBank System. On July 20, 2022, Director of the FHFA Sandra L. Thompson provided testimony to the U.S. House Committee on Financial Services, indicating that the FHFA would conduct a review and analysis of the FHLBank System. As part of its review and analysis, FHFA has held a series of public listening sessions and regional roundtable discussions, and has requested written comments from stakeholders. The review has been examining matters covering such areas as the FHLBanks’ adequate fulfillment of their 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. We anticipate that the FHFA’s ~~discretion~~review and analysis will culminate in a written report. The report may involve recommendations for changes related to ~~require~~a number of areas such as the FHLBanks’ fulfillment of their mission, membership requirements, contributions to affordable housing and support to community investment and may lead to recommendations for statutory revisions, proposals for new or modified regulations, regulatory guidance under existing regulations, and/or other regulatory or supervisory actions consistent with FHFA’s statutory authority.

Amendments to FINRA Rule 4210: Margining of Covered Agency Transactions. On August 15, 2022, the SEC published amendments to Financial Industries Regulatory Authority (FINRA) Rule 4210 that ~~an FHLBank with total consolidated assets below~~delayed the $250 billion threshold conduct stress testing. The proposed amendments align the FHFA’s stress testing rules with rules adopted by other financial institution regulators that implement the Dodd-Frank Act stress testing requirements, as amended by the Economic Growth, Regulatory Relief, and Consumer Protection Acteffectiveness of ~~2018.~~

The results of our most recent annual severely adverse economic conditions stress test were published to our public website on November 15, 2019. If the proposed rule is adopted as proposed, it will eliminate these stress testingmargining requirements for ~~FHLBanks.~~covered agency transactions from October 26, 2022 until at least April 24, 2023. Once the margining requirements are effective, we may be required to collateralize our transactions that are covered agency transactions, which include to be announced transactions (TBAs). These collateralization requirements could have the effect of reducing the overall profitability of engaging in covered agency transactions, including TBAs. Further, the collateralization requirements could expose us to credit risk from our counterparties for such transactions. We do not expect this rule ~~if adopted as proposed, to materially impact our financial condition or results of operations.~~

~~FDIC Brokered Deposits Restrictions.~~ On December 12, 2019, the Federal Deposit Insurance Corporation (FDIC) issued a proposed rule to amend its brokered deposits restrictions that apply to less than well-capitalized insured depository institutions. The FDIC states that the proposed amendments are intended to modernize its brokered deposit regulations and would establish a new framework for analyzing whether deposits placed through deposit placement arrangements qualify as brokered deposits. These deposit placement arrangements include those between insured depository institutions and third parties, such as financial technology companies, for a variety of business purposes, including access to deposits. By creating a new framework for analyzing certain provisions of the “deposit broker” definition, including shortening the list of activities considered “facilitating” and expanding the scope of the “primary purpose” exception, the proposed rule would narrow the definition of “deposit broker” and exclude more deposits from treatment as “brokered deposits.” The proposed rule would also establish an application and reporting process with respect to the primary purpose exception.

If this rule is adopted as proposed, it may have an effect on member demand for advances, but we cannot predict the extent of the impact. We do not expect this rule, if adopted as proposed, to materially affect our financial condition or results of operations.

~~FHFA Supervisory Letter on Planning for LIBOR Phase-Out.~~ On September 27, 2019, the FHFA issued a supervisory letter (the Supervisory Letter) to the FHLBanks that the FHFA stated is designed to ensure the FHLBanks will be able to identify and prudently manage the risks associated with the termination of LIBOR in a safe and sound manner. The Supervisory Letter provides that the FHLBanks should cease entering into new LIBOR referenced financial assets, liabilities, and derivatives with maturities beyond December 31, 2021 for all product types except investments. On March 16, 2020, in light of market volatility, the FHFA extended from March 31, 2020 to June 30, 2020 the FHLBanks’ ability to enter into instruments referencing LIBOR that mature after December 31, 2021, except for investments and option embedded products. With respect to investments, the FHLBanks should, by December 31, 2019, stop purchasing investments that reference LIBOR and mature after December 31, 2021. These phase-out dates do not apply to collateral accepted by the FHLBanks. The Supervisory Letter also directs the FHLBanks to update their pledged collateral certification reporting requirements by March 31, 2020 in an effort to encourage members to distinguish LIBOR-linked collateral maturing after December 31, 2021. The FHLBanks are expected to cease entering into LIBOR-indexed financial instruments maturing after December 31, 2021 by the deadlines specified in the Supervisory Letter, subject to limited exceptions granted by the FHFA under the Supervisory Letter for LIBOR-linked products serving compelling mission, risk mitigating, and/or hedging purposes that do not currently have readily available alternatives.

As a result of the Supervisory Letter and the extension, beginning July 1, 2020, we expect to suspend transactions in advances with terms directly linked to LIBOR that mature after December 31, 2021. In addition, beginning July 1, 2020, we expect to no longer enter into consolidated obligation bonds and derivatives with swaps, caps, or floors indexed to LIBOR that terminate after December 31, 2021. We have ceased purchasing investments that reference LIBOR and mature after December 31, 2021.

We continue to evaluate the potential impact of the Supervisory Letter on our financial condition and results of operations and LIBOR transition planning, but we may experience increased basis risk from our inability to fund LIBOR-indexed assets with LIBOR-indexed debt, reduced investment opportunities, and lower overall demand or increased costs for advances, which in turn may negatively impact the future composition of our balance sheet, capital stock levels, primary mission assets ratio, and net income.

~~For additional information on our LIBOR transition efforts and LIBOR exposure, see “Risk Management – Interest Rate Risk Management” under Item 7.~~

~~FHFA Advisory Bulletin 2019-03 - Capital Stock Management.~~ On August 14, 2019, the FHFA issued an Advisory Bulletin (the Capital Stock Management AB) providing for each FHLBank to maintain a ratio of at least two percent of capital stock to total assets in order to help preserve the cooperative structure incentives that encourage members to remain fully engaged in the oversight of their investment in the FHLBank. In February 2020, the FHFA began to consider the proportion of capital stock to assets, measured on a daily average basis at month end, when assessing each FHLBank’s capital management practices.

~~We do not expect the Capital Stock Management AB to have a material impact on our capital management practices, financial condition, or results of operations.~~

~~SEC Final Rule on Auditor Independence with Respect to Certain Loans or Debtor-Creditor Relationships.~~ On July 5, 2019, the SEC published a final rule, which became effective on October 3, 2019 (Final Rule), that adopts amendments to its auditor independence rules to modify the analysis that must be conducted to determine whether an auditor is independent when the auditor has a lending relationship with certain shareholders of an audit client at any time during an audit or professional engagement period. The Final Rule, among other things, focuses the analysis on beneficial ownership rather than on both record and beneficial ownership; replaces the existing ten percent bright-line shareholder ownership test with a “significant influence” test; and adds a “known through reasonable inquiry” standard with respect to identifying beneficial owners of the audit client’s equity securities.

Under the prior loan rule on debtor-creditor relationships, the independence of an accounting firm generally could be called into question if it or a covered person in the accounting firm received a loan from a lender that is a “record or beneficial owner of more than ten percent of the audit client’s equity securities.” A covered person in the firm includes personnel on the audit engagement team, personnel in the chain of command, partners and managers who provide ten or more hours of non-audit services to the audit client, and partners in the office where the lead engagement partner practices in connection with the client. The Final Rule replaced the existing ten percent bright-line test with a significant influence test similar to that referenced in other SEC rules and based on concepts applied in Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 323.

Under the Final Rule, which is now in effect, with certain exceptions, the receipt of loans from the beneficial owners of an audit client’s equity securities where such beneficial owner has significant influence over the audit client would impair the independence of the auditor. The analysis under the Final Rule would be based on the facts and circumstances and would focus on whether the beneficial owners of an audit client’s equity securities have the ability to exercise significant influence over the operating and financial policies of an audit client.

~~There were no members with the ability to exercise significant influence over the operating and financial policies of FHLBank at December 31, 2019.~~

~~FHFA Advisory Bulletin 2019-01 Business Resiliency Management.~~ On May 7, 2019, the FHFA issued an advisory bulletin on Business Resiliency Management for FHLBanks and other entities regulated by the FHFA (the Business Resiliency AB) that communicates the FHFA’s expectations with respect to minimizing the impact of disruptions in service from uncontrolled events and the maintenance of business operations at predefined levels. The Business Resiliency AB rescinds the FHFA’s 2002 disaster recovery guidance. The new guidance states that a business resiliency program should guide the regulated entity to respond appropriately to disruptions affecting business operations, personnel, equipment, facilities, information technology systems, and information assets. The Business Resiliency AB provides guidance on the elements of a safe and sound business resiliency program, which include governance, risk assessment and business impact analysis, risk mitigation and plan development, testing and analysis, and risk monitoring and program sustainability.

~~We do not expect the Business Resiliency AB~~ to have a material effect on our financial condition or results of operations.

Final Rule ~~on FHLBank Capital Requirements.~~ ~~On February 20, 2019,~~Implementing the FHFA published a final rule, effective January 1, 2020, that adopted, with amendments, the regulations of the Federal Housing Finance Board (FHFB, predecessor to the FHFA) pertaining to the capital requirements for the FHLBanks. This final rule carries over most of the prior FHFB regulations without material change but substantively revises the credit risk component of the risk-based capital requirement, as well as the limitations on extensions of unsecured credit. The main revisions remove requirements that we calculate credit risk capital charges and unsecured credit limits based on ratings issued by an NRSRO, and instead require that we establish and use our own internal rating methodology (which may include, but not solely rely on, NRSRO ratings)Adjustable Interest Rate (LIBOR) Act. The rule imposes a new credit risk capital charge for cleared derivatives. This final rule also revises the percentages used in the regulation’s tables to calculate credit risk capital charges for advances and for non-mortgage assets. This final rule also rescinds certain contingency liquidity requirements that were part of the FHFB regulations, as these requirements are now addressed in an Advisory Bulletin on FHLBank Liquidity Guidance issued by the FHFA in 2018.

~~We do not expect this rule to materially affect our financial condition or results of operations.~~

~~FDIC Final Rule on Reciprocal Deposits.~~ On February 4, 2019, the FDIC published a final rule, effective March 6, 2019, related to the treatment of “reciprocal deposits,” which implements Section 202 of the Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018. This final rule exempts, for certain insured depository institutions (depositories), certain reciprocal deposits (deposits acquired by a depository from a network of participating depositories that enables depositors to receive FDIC insurance coverage for the entire amount of their deposits) from being subject to FDIC restrictions on brokered deposits. Under the rule, well-capitalized and well-rated depositories are not required to treat reciprocal deposits as brokered deposits up to the lesser of twenty percent of their total liabilities or $5 billion. Reciprocal deposits held by depositories that are not well-capitalized and well-rated may also be excluded from brokered deposit treatment in certain circumstances.

We do not expect the rule to materially affect our financial condition or results of operations. The rule could, however, enhance depositories’ liquidity by increasing the attractiveness of deposits that exceed FDIC insurance limits. This could affect the demand for certain advance products.

~~Developments applicable to interest rate swaps:~~

~~Uncertainty Regarding Brexit~~. In June 2016, the United Kingdom (the UK) voted in favor of leaving the European Union (the EU), and in March 2017, Article 50 of the Lisbon Treaty was invoked, commencing a period of negotiations between the UK and the European Council for the UK’s withdrawal from the EU, which was subsequently extended by the European Council members in agreement with the UK. On January 31, 2020, the UK withdrew from the EU, with a transition period to last until December 31, 2020, which period may be extended for an additional two years. During this transition period, the UK and the EU will negotiate the details of their future relationship, including what conditions will apply to EU-based entities that want to do business with the UK, and vice versa, after the transition period.

~~We do not have material exposure to non-cleared swap counterparties based in the UK or the EU.~~

~~CFTC No-action Relief for LIBOR Amendments.~~ On December 17, 2019, three divisions of the Commodity Futures Trading Commission (CFTC) issued no-action letters to provide relief with respect to the transition away from LIBOR and other interbank offered rates (IBORs). Among other forms of relief, the letters, subject to certain limitations:

permit registered swap dealers, major swap participants, security-based swap participants, and major security-based swap participants (covered swap entities) to amend an uncleared swap entered into before the compliance date of the CFTC’s uncleared swap margin requirements (such swap, a legacy swap, and such requirements, the CFTC margin rules) to include LIBOR or other IBOR fallbacks without the legacy swap becoming subject to the CFTC margin rules; and

provide time-limited relief, until December 31, 2021, for: (1) swaps that are not subject to the central clearing requirement because they were executed prior to the relevant compliance date; and (2) swaps that are subject to the trade execution requirement to be amended to include LIBOR or other IBOR fallbacks without becoming subject to such clearing or trade execution requirements.

~~We do not expect these no-action letters to have a material effect on our financial condition or results of operations.~~

~~Margin and Capital Requirements for Agency Covered Swap Entities.~~ ~~On November 7, 2019, the Office of the Comptroller of the Currency,~~16, 2022. the Federal Reserve Board of Governors adopted a final rule that implements the ~~FDIC,~~Adjustable Interest Rate (LIBOR) Act. enacted in March 2022. The rule, which went into effect February 27, 2023, establishes benchmark replacement rates based on SOFR for certain contracts, to apply following the ~~Farm Credit Administration~~first London banking day after June 30, 2023 (the “LIBOR replacement date”). Generally, the rule provides that Board-selected benchmark replacements will apply by operation of law to contracts which have the following characteristics: (1) contain no fallback provisions; (2) contain fallback provisions but fail to specify either the fallback rate or the party that can determine the fallback rate; or (3) contain a fallback provision that identifies the party that can determine the fallback rate, but the determining party has failed to do so before (i) the LIBOR replacement date or (ii) the latest date to select a benchmark replacement according to the contract terms. For FHLBank advances that have any of the above characteristics, the final rule sets the replacement benchmark rate as the Fallback Rate (SOFR) in the International Swaps and Derivatives Association, Inc. 2020 IBOR Fallbacks Protocol. For any other FHLBank contract with the above characteristics, references to overnight LIBOR would be replaced with SOFR and one-, three-, six-, or 12-month LIBOR will be replaced with 30-day Average SOFR, in each case plus the applicable tenor spread adjustment specified in the LIBOR Act.

Federal Reserve Bank Term Funding Program. Effective March 12, 2023, the Federal Reserve implemented a Bank Term Funding Program (BTFP), which offers loans for a term of up to one year to eligible borrowers, secured by eligible collateral owned as of March 12, 2023. Eligible borrowers include any federally insured depository institution or U.S. branch or agency of a foreign bank that is eligible for primary credit with the Federal Reserve. Eligible collateral is any collateral eligible for purchase by the Federal Reserve in open market operations, which collateral includes U.S. Treasuries, agency debt and MBS, among other assets. Eligible collateral will be valued at par and the ~~FHFA (collectively,~~loans will be made at a fixed rate equal to the Agencies) jointly published a proposed rule that would amend the Agencies’ regulations that established minimum margin and capital requirements for uncleared swaps (the prudential margin rules) for coveredone-year overnight index swap ~~entities~~rate plus 10 basis points. Loans can be requested under the ~~jurisdiction~~program until at least March 11, 2024 and borrower may prepay advances (including for purposes of ~~one~~refinancing) at any time without penalty. The BTFP is backstopped by the U.S. Department of Treasury, which will provide up to $25 billion in credit protection to the Federal Reserve in connection with the program. While it is difficult to predict the impact of this new program on our business, financial condition and results of operations at this time, the BTFP is likely to provide an alternative funding source for our members and could reduce their demand for advances during the term of the Agencies (Agency covered swap entities). In addition to other changes, the proposed amendments would permit those uncleared swaps entered into by Agency covered swap entities before the compliance date of the prudential margin rules (Agency legacy swaps) to retain their legacy status and not become subject to the prudential margin rules in the event that they are amended to replace LIBOR or another rate that is reasonably expected to be discontinued or is reasonably determined to have lost its relevance as a reliable benchmark due to a significant impairment. Among other things, the proposed rule would also amend the prudential margin rules to: (1) extend the phase-in compliance date for initial margin requirements from September 1, 2020 to September 1, 2021 for Agency covered swap entity counterparties with an average daily aggregate notional amount of non-cleared swaps from $8 billion to $50 billion; (2) clarify that an Agency covered swap entity does not have to execute initial margin trading documentation with a counterparty prior to the time that the counterparty is required to collect or post initial margin; and (3) permit Agency legacy swaps to retain their legacy status and not become subject to the prudential margin rules in the event that they are amended due to certain life-cycle activities, such as reductions of notional amounts or portfolio compression exercises.program.

We ~~do not expect this rule, if adopted~~continue to monitor these actions and guidance as ~~proposed, to have a material effect on our financial condition or results of operations.~~

~~CFTC Advisory on Initial Margin Documentation Requirements.~~ On July 9, 2019, the CFTC issued an advisory (the Advisory) on the CFTC margin rules to clarify that documentation governing the posting, collection, and custody of initial margin is not required to be completed until such time as the aggregate unmargined exposure to a counterparty (and its margin affiliates) exceeds a threshold of $50 million. The CFTC margin rules provide that CFTC covered swap entities are required to post and collect initial margin with counterparties that are swap dealers or financial end users with material swaps exposure, as defined under the rule. The CFTC margin rules, however, contain an initial margin threshold amount of $50 million between a covered swap entity (and its margin affiliates) on the one hand, and its counterparty (and its margin affiliates) on the other. The Advisory clarifies that no initial margin documentation is required until the amount of initial margin exchangeable between a covered swap entity (and its margin affiliates) and its counterparty (and its margin affiliates) exceeds the initial margin threshold amount of $50 million. The Advisory, however, does instruct CFTC covered swap entities to closely monitor initial margin amounts if they ~~are approaching the $50 million initial margin threshold with a counterparty~~evolve and to ~~take appropriate steps to ensure that the required documentation is in place at such time as the threshold is reached.~~evaluate their potential impact on us.

~~We are monitoring the initial margin thresholds and do not currently expect our documentation requirements to change based on the clarification to the CFTC margin rules provided by the Advisory.~~

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) ~~and~~ 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.

~~An economic downturn, natural disaster, or pandemic~~ The Federal Open Market Committee (FOMC) has indicated that ongoing increases in the ~~FHLBank’s region~~target Federal funds rate for 2023 would likely be appropriate, while continuing to slow balance sheet growth, in an effort to curb inflationary pressures. Recent efforts by the FOMC to ease inflation, such as increases in policy interest rates, have contributed to volatility in the financial markets, financial difficulties experienced by some depository institutions, and uncertainties about the economic outlook, including concerns about a possible recession. Slowing the growth in their balance sheet holdings of U.S. government bonds and MBS, coupled with rising short term interest rates, may also introduce risks to the market that could trigger an economic recession. Further, adverse trends in employment levels, a slowdown in regional or national economic activity, prolonged inflation, geopolitical instability or conflicts (including Russia’s ongoing war against Ukraine), trade disruptions, pandemics, and economic or other sanctions could adversely affect ~~our profitability and financial condition.~~ ~~Economic recession over a prolonged period or other unfavorable~~overall economic conditions ~~in our region~~ (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 ~~portfolio.~~ the FHLBank’s region could have a material adverse impact on our members and our business. Portions of our region ~~also~~ are subject to risks from tornadoes, floods, drought, or other natural ~~disasters,~~disasters. Climate change is increasing the frequency and ~~all are subject to pandemic risk.~~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, ~~may~~ 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.

~~Additionally, the impact~~ Any of ~~widespread health emergencies~~these situations may adversely impact our financial condition and results of ~~operations, such as~~operations.

Climate change regulation and market reactions to climate change could adversely impact our members and our business, including the potential ~~impact from the recent outbreak of the coronavirus, which was first detected~~for an increase in ~~Wuhan, Hubei Province, China but~~climate risk assessment, disclosure, and supervision by our regulators. Furthermore, increased focus on climate change and other environmental, social, and governance matters has ~~now spread~~led to ~~other countries,~~heightened legislative and regulatory attention in these areas, including the ~~United States. If~~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 ~~are~~and alter the environment in which they conduct their businesses, which could adversely ~~affected,~~ affect our business. The shift toward a lower-carbon economy, driven by policy regulations, low-carbon technology advancement, consumer sentiment, and/or ~~if the virus leads to a widespread health emergency that impacts~~liability risks, may negatively impact our ~~employees or vendors,~~ business model and/or the ~~borrowers~~business models of our members, ~~or economic growth generally, our financial condition~~asset valuations, and ~~results of operations could be adversely affected.~~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 significant legislation.~~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, 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 FHLBank or the FHLBank System. We are, or may also become, subject to further regulations promulgated by the SEC, ~~CFTC,~~Commodity Futures Trade Commission (CFTC), Federal Reserve Bank, Financial Crimes Enforcement Network, or other regulatory agencies. 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.

Recently, the FHFA initiated a comprehensive review of the FHLBank System, covering 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; addressing the unique needs of rural and financially vulnerable communities; member products, services, and collateral requirements; and membership eligibility and requirements. It remains uncertain what legislative, regulatory or other actions, if any, may be proposed or implemented as a result of the FHFA’s review of the FHLBank System, or what their potential effect on the FHLBanks may be. Any of these factors could negatively affect the FHLBanks’ business operations, results of operations, and the value of FHLBank membership

We cannot predict ~~whether new regulatory or other requirements~~what, regulations will be ~~promulgated by the FHFA~~issued or ~~other regulatory agencies,~~revised or ~~whether Congress~~legislation will ~~enact new legislation,~~be enacted or repealed, and we cannot predict the effect of any ~~new regulatory requirements~~such regulations or legislation on our ~~operations. Changes in~~business operations and/or financial condition. Legislative, regulatory, ~~statutory~~ or other ~~requirements~~changes could result in, ~~among other things,~~for example, an increase in the FHLBanks' cost of funding, a change in permissible business activities, including limitations to lend to members, change in our membership, limitations on advances made to our members, an increase in our ~~cost of funding and the cost of operating our business, a change in our permissible business activities,~~mandatory contribution to affordable housing or community development programs, or a decrease in the size, scope, or nature of ~~our membership or our~~the FHLBanks' lending, investment, or ~~mortgage loan~~mortgage-financing activities, any of which could ~~negatively affect~~adversely impact our financial condition and results of operations.

A majority of the states, and some municipalities, have enacted laws prohibiting mortgage loans 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 reduce our exposure to potential liability under these laws and are not aware of any potential or 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 negatively impact our financial condition and results of operations and potentially negatively impact our reputation.

Business Risk - Strategic

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 (such as the new BTFP of the Federal Reserve) 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~~Federal Deposit Insurance Corporation (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 concentration of advances (see Table ~~26)~~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 ~~March 13, 2020,~~February 28, 2023, 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 and negatively affect our financial condition. As of ~~March 13, 2020,~~February 28, 2023, 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.

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, ~~the majority~~some of which are ~~located within~~outside of the United ~~States, Canada, Australia, and Europe.~~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 ~~additional regulation following the financial crisis~~regulations 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~~future severe financial, economic, geopolitical, or other ~~disruption.~~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. ~~Given the unpredictability of the financial markets, capturing all potential outcomes in these analyses is extremely difficult.~~ 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 ~~advances~~advance volumes and pricing, ~~MPF~~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 2021 to 2022 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.

~~There~~

Prepayment risk is ~~substantial uncertainty regarding~~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. 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.

Our business, results of operations and financial condition could be adversely impacted by the replacement of the LIBOR benchmark interest rate ~~which could adversely affect our business, results of operations, and financial condition.~~ In July 2017, the United Kingdom's Financial Conduct Authority (FCA) announced that it plans to phase out the regulatory oversight of LIBOR interest rate indices by 2021. The FCA and the submitting LIBOR banks have indicated they will support the LIBOR indices through 2021 to allow for an orderly transition to an alternative reference rate. While we currently expect LIBOR to be viable benchmark until the end of 2021, it is possible that LIBOR will become unavailable prior to the end of 2021. We are unable to predict when LIBOR will cease to be available and market participants have not agreed on a cessation trigger. The Alternative Reference Rates Committee (ARRC) in the United States has identified SOFR as the rate that represents best practice for use in new US Dollar (USD) derivatives and other financial contracts as its recommended alternative to USD LIBOR in the United States. SOFR is intended to be a broad measure of the average cost of borrowing cash overnight collateralized by Treasury securities. The Federal Reserve Bank of New York began publishing SOFR rates in April 2018. As noted throughout this annual report, many of our assets and liabilities, including derivative assets and derivative liabilities, are indexed to USD LIBOR. A portion of these assets and liabilities and related collateral have maturity dates that extend beyond 2021.

~~We are evaluating the potential impact of the replacement of the LIBOR benchmark interest rate, including the likelihood of SOFR prevailing as the most widely adopted replacement reference rate.~~. The market transition away from LIBOR has been and is expected to continue to be ~~gradual and~~ complicated, including the development of term and credit adjustments to accommodate differences between LIBOR, an unsecured rate, and SOFR, a secured rate. Introduction of an alternative reference rate also may introduce additional basis risk for market participants as an alternative index is utilized along with LIBOR. ~~There can~~Demand for SOFR term debt has gained momentum as LIBOR approaches cessation. Among other factors, demand for SOFR-indexed instruments will continue to be ~~no guarantee that~~dependent upon market participants' preference for SOFR ~~will become widely used and that other~~over existing alternative reference rates ~~may~~ or ~~may~~an alternative reference rate that has yet to be developed. The publication of LIBOR on a representative basis ceased for one-week and two-month LIBOR effective January 1, 2022. The remaining LIBOR tenors will cease publication immediately after June 30, 2023, and although the Financial Conduct Authority (FCA) does not ~~be developed with additional complications. We are not able~~expect these remaining LIBOR tenors to ~~predict whether~~become unrepresentative prior to the cessation date, there is no assurance LIBOR will ~~cease~~continue to be ~~available after 2021, whether SOFR will become~~ a widely accepted reference rate in place of LIBOR, or what the precise impact of a possible transition to SOFR or another alternate replacement reference rate will have on our business, financial condition, or results of operations.viable index through any particular date. The upcoming discontinuance of LIBOR and transition to SOFR or an alternative reference rate could adversely impact existing financial assets and liabilities indexed to LIBOR, including the effectiveness of existing hedging transactions, which could have an adverse impact on our business, financial condition, and results of operations.

For additional information on our LIBOR transition efforts and LIBOR exposure, see “Risk Management – Interest Rate Risk Management” under Item 7.

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 (OTC) 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 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 ~~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 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~~board of ~~Directors~~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.~~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 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~~board of ~~Directors~~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.

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.

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. 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.~~business, and we rely on vendors and other third parties to perform certain critical services. 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 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, asuch 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,~~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 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.

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 2022, 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 2: Properties

We own our primary facility located at 500 SW Wanamaker Road, Topeka, Kansas. Our facility is Leadership in Energy and Environment Design Certified Gold status, in alignment with 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. 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, 2020,~~February 28, 2023, we had ~~706~~671 stockholders of record and ~~4,524,494~~3,598,461 shares of Class A Common Stock and ~~13,099,122~~21,808,565 shares of Class B Common Stock outstanding, including ~~15,214~~2,690 shares of Class A Common Stock and ~~8,500~~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. 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.

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.

~~Due to the decline in interest rates in recent periods,~~Base stock dividends on Class A Common Stock and Class B Common Stock ~~will likely be lower~~are anticipated to remain at or near current levels in ~~2020 than~~2023 relative to what was paid in ~~2019. Historically, dividend levels have been~~2022. Dividend rates are influenced by ~~several factors, including the following objectives: (1) moving dividend rates gradually over time; (2) having dividends reflective of the level of current short‑term interest rates;~~capital levels and ~~(3) 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 2022, 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.

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

~~Table 7 presents Selected Financial Data for the periods indicated (dollar amounts in thousands):~~

~~Table 7~~

12/31/2019 12/31/2018 12/31/2017 12/31/2016 12/31/2015
Statement of Condition (as of period end):
Total assets $ 63,276,654
$ 47,715,256
$ 48,076,605
$ 45,216,749
$ 44,426,133
Investments¹
20,086,473
10,305,382
13,998,599
13,609,653
13,606,080
Advances 30,241,315
28,730,113
26,295,849
23,985,835
23,580,371
Mortgage loans, net²
10,633,009
8,410,462
7,286,397
6,640,725
6,390,708
Total liabilities 60,485,603
45,261,004
45,570,502
43,254,301
42,584,381
Deposits 790,640
473,820
461,769
598,931
759,366
Consolidated obligation discount notes, net³
27,447,911
20,608,332
20,420,651
21,775,341
21,813,446
Consolidated obligation bonds, net³
32,013,314
23,966,394
24,514,468
20,722,335
19,866,034
Total consolidated obligations, net³
59,461,225
44,574,726
44,935,119
42,497,676
41,679,480
Mandatorily redeemable capital stock 2,415
3,597
5,312
2,670
2,739
Total capital 2,791,051
2,454,252
2,506,103
1,962,448
1,841,752
Capital stock 1,766,456
1,524,537
1,640,039
1,226,675
1,208,947
Total retained earnings 999,809
914,022
840,406
735,196
651,782
Accumulated other comprehensive income (loss) (AOCI) 24,786
15,693
25,658
577
(18,977 )
Statement of Income (for the year ended):
Net interest income 256,064
271,197
270,008
257,184
239,680
Provision (reversal) for credit losses on mortgage loans 387
27
(186 ) (109 ) (1,909 )
Other income (loss) 22,973
(12,847 ) 15,987
(13,830 ) (80,089 )
Other expenses 72,816
69,108
67,036
63,706
57,762
Income before assessments 205,834
189,215
219,145
179,757
103,738
AHP 20,597
18,944
21,934
17,984
10,378
Net income 185,237
170,271
197,211
161,773
93,360
Selected Financial Ratios and Other Financial Data (for the year ended):
Dividends paid in cash⁴
281
399
267
291
296
Dividends paid in stock⁴
99,169
96,256
91,734
78,068
68,415
Weighted average dividend rate⁵
6.46 % 6.13 % 5.77 % 5.29 % 5.26 %
Dividend payout ratio⁶
53.69 % 56.77 % 46.65 % 48.44 % 73.60 %
Return on average equity 7.32 % 6.82 % 8.18 % 7.45 % 4.78 %
Return on average assets 0.33 % 0.31 % 0.37 % 0.33 % 0.21 %
Average equity to average assets 4.45 % 4.62 % 4.55 % 4.47 % 4.45 %
Net interest margin⁷
0.45 % 0.50 % 0.51 % 0.53 % 0.55 %
Total capital ratio⁸
4.41 % 5.14 % 5.21 % 4.34 % 4.14 %
Regulatory capital ratio⁹
4.38 % 5.12 % 5.17 % 4.34 % 4.19 %


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 $985,000, $812,000, $1,208,000, $1,674,000, and $1,972,000 as of December 31, 2019, 2018, 2017, 2016, and 2015, 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 $139,000, $229,000, $195,000, $79,000, and $39,000 for the years ended December 31, 2019, 2018, 2017, 2016, and 2015, 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.~~

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 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~~“Management’s Discussion and Analysis of Financial Condition and Results of ~~Operations"~~Operations” in our ~~2018~~202 1 Annual Report on Form 10-K for our MD&A for the fiscal year ~~2018~~2021 compared to fiscal year ~~2017.~~2020.

Executive Level Overview

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

Table 3


	12/31/2022			12/31/2021			12/31/2020			12/31/2019			12/31/2018
Statement of Condition (as of period end):
Total assets	$	71,992,842		$	48,021,238		$	52,591,712		$	63,276,654		$	47,715,256
Investments1	19,261,151			16,058,574			17,251,975			20,086,473			10,305,382
Advances	44,262,750			23,484,288			21,226,823			30,241,315			28,730,113
Mortgage loans, net	7,905,135			8,135,046			9,205,207			10,633,009			8,410,462
Total liabilities	68,316,298			45,306,972			49,923,945			60,485,603			45,261,004
Deposits	711,061			946,207			1,229,361			790,640			473,820


Consolidated obligations, net2	67,281,244			44,199,598			48,530,494			59,461,225			44,574,726

Total capital	3,676,544			2,714,266			2,667,767			2,791,051			2,454,252
Capital stock	2,507,709			1,499,301			1,574,004			1,766,456			1,524,537
Retained earnings	1,253,105			1,142,650			1,051,455			999,809			914,022

Statement of Income (for the year ended):
Net interest income	362,991			296,648			251,012			256,064			271,197

Other income (loss)	(13,942)			(41,434)			(40,148)			22,973			(12,847)
Other expenses	80,854			77,529			80,407			72,816			69,108
Income before assessments	267,485			178,435			131,173			205,834			189,215
AHP	26,749			17,845			13,123			20,597			18,944
Net income	240,736			160,590			118,050			185,237			170,271
Selected Financial Ratios and Other Financial Data (for the year ended):

Dividends paid	130,281			69,395			70,824			99,450			96,655
Weighted average dividend rate3	6.47		%	4.49		%	4.38		%	6.46		%	6.13		%
Dividend payout ratio4	54.12		%	43.21		%	59.99		%	53.69		%	56.77		%
Return on average equity	7.47		%	5.88		%	4.50		%	7.32		%	6.82		%
Return on average assets	0.39		%	0.33		%	0.21		%	0.33		%	0.31		%
Average equity to average assets	5.28		%	5.54		%	4.59		%	4.45		%	4.62		%
Net interest margin5	0.60		%	0.61		%	0.44		%	0.45		%	0.50		%
Total capital ratio6	5.11		%	5.65		%	5.07		%	4.41		%	5.14		%
Regulatory capital ratio7	5.22		%	5.50		%	5.00		%	4.38		%	5.12		%

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 total 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 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.CDFIs.

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 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 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 our Capital 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 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 resulting from 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.

2022 Financial Highlights:

•Net income:Net income for the year ended December 31, ~~2019~~2022 was ~~$185.2~~$240.7 million compared to ~~$170.3~~$160.6 million for the year ended December 31, ~~2018.~~2021. The ~~$14.9~~$80.1 million ~~or 8.8 percent,~~ increase ~~in net income~~ for the year ~~ended December 31, 2019 compared to the prior year~~ was ~~due largely to~~primarily a ~~$37.7~~result of an increase of $66.4 million in net interest income and a $27.6 million increase related to fluctuations in ~~unrealized net gains on economic~~fair value of derivatives and trading securities, resulting from declines in longer-term market interest rates since December 31, 2018. The unrealized net gains on trading securities were due to decreases in mortgage and U.S. Treasury interest rates and were partially offset by ~~negative fair value fluctuations on some~~a $3.4 million increase in other expenses driven by compensation and benefits.

•Net interest rate swaps caused by a decrease in LIBOR between periods. Detailed discussion relating to the fluctuations in net gains (losses) on derivatives and hedging activities and net gains (losses) on trading securities can be found in "Results of Operations" under this MD&A.

income/margin: For the year ended December 31, ~~2019,~~2022, net interest income was ~~$256.1~~$363.0 million compared to ~~$271.2~~$296.6 million for the same period in the prior year. The ~~volume~~increase in net interest income resulted from higher advance rates and average balances, combined with the impact of ~~interest-earning assets increased for the year ended December 31, 2019 compared~~higher interest rates on fair value hedges. Higher investment yields also contributed to the ~~prior year, but an~~ increase ~~in premium amortization and tightening spreads caused a $15.1 million, or 5.6 percent, decline~~ in net interest income. ~~Premium amortization on mortgage-related assets increased due~~Prepayments continued to ~~the decline in long-term market interest rates during 2019. This decline resulted in an increase in prepayment speeds~~slow on mortgage-related assets, which ~~accelerates~~increased interest income due to less premium amortization thereby reducing net interest income. However, this decrease in long-term market interest rates also allowed us to replace some callable debt at a lower cost, which will provide a greater benefit in future periods. The accelerated amortization of concessions (i.e., broker fees) on the called debt further reduced net interest income for the year ended December 31, 2019. Changes in regulatory liquidity requirements effective March 31, 2019 changed the level and composition of assets held for liquidity purposes and the structure of the related funding, which has resulted in spread compression.

The change in net interest income for the year ended December 31, 2019 was also impacted by the adoption of a new hedge accounting standard on January 1, 2019 that requires fair value fluctuations on designated fair value hedges to be presented in the income statement line item related to the hedged item, which is interest income/expense for us. The guidance was adopted prospectively, so the fair value fluctuations on fair value hedges in the prior year are presented in other income, which creates a lack of comparability between periods. ~~Fair value fluctuations on designated fair value hedges decreased net~~Net interest ~~income by $2.4 million for the year ended December 31, 2019.~~

Total assets increased $15.6 billion, or 32.6 percent, from December 31, 2018 to December 31, 2019. Although we experienced growth in mortgage loans and advances, the majority of the increase was in short- and long-term investments in response to changes to regulatory liquidity requirements that became effective March 31, 2019, including the purchase of $5.7 billion in U.S. Treasury obligations since the third quarter of 2018. We believe the MPF Program continues to meet the needs of members by providing a reliable option for mortgage sales, as indicated by mortgage deliveries of over $1.0 billion for each of the last two quarters of 2019.

Total liabilities increased $15.2 billion, or 33.6 percent, from December 31, 2018 to December 31, 2019, which corresponded with the increase in assets, but the funding mix remained consistent between periods. Our funding mix generally is driven by asset composition, but we may also shift our debt composition as a result of market conditions that impact the cost of consolidated obligations swapped or indexed to LIBOR, SOFR, Prime, Treasury bills, or the overnight index swap (OIS) rate. For additional information on market trends impacting the cost of issuing debt, including discussion of the transition from LIBOR to an alternate reference rate, see "Market Trends" and "Financial Condition" under this MD&A.

~~Total capital increased $336.8 million, or 13.7 percent,~~margin declined slightly between periods, ~~primarily due to an increase in capital stock held in excess of activity requirements, capital stock related to advance utilization, and growth in retained earnings.~~

~~An increase in average assets and average equity combined with the increase in net income resulted in a return on average equity (ROE) of 7.32~~from 0.61 percent for the year ended December 31, ~~2019 compared~~2021 to ~~6.82~~0.60 percent ~~for the prior year. Dividends paid to members totaled $99.5 million~~ for the year ended December 31, ~~2019 compared to $96.7 million for the prior year. From~~2022, due to: (1) asset growth in lower-spread advance products; and (2) an increase in funding costs, primarily short-term borrowing costs.

•Total assets: Total assets increased from $48.0 billion as of December 31, ~~2018~~2021 to $72.0 billion as of December 31, ~~2019,~~2022, driven by the ~~dividend rate for Class A Common Stock increased~~$20.8 billion increase in advances between periods.

•Primary Mission Assets: Advances to ~~2.50 percent~~members and housing associates and mortgage loans purchased from 2.00 percent and the dividend rate for Class B Common Stock increased to 7.50 percent from 7.25 percent. The weighted average dividend rate for the year ended December 31, 2019 was 6.46 percent, which represented a dividend payout ratio of 53.7 percent, compared to a weighted average dividend rate of 6.13 percent and a payout ratio of 56.8 percent for the same period in 2018. Differences in the weighted average dividend rates between periodsmembers are ~~due~~Primary Mission Assets because they are fundamental to the ~~difference in the mix~~business and mission 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 during 2019 and, therefore, the average dividend rates, include regular 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).

~~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 core mission achievement guidance.~~FHLBank. The Primary Mission Asset ratio, as defined by the FHFA, is calculated as average advances and average mortgage loans to average consolidated obligations ~~less average~~(less certain U.S. Treasury ~~securities classified as trading or available-for-sale with maturities~~securities), based on year-to-date averages. As of ~~ten years or less, utilizing par balances. Our~~December 31, 2022 and 2021, our Primary Mission Asset ratio was 7580 percent and 77 percent, respectively.

•Advances: Advances increased from $23.5 billion at December 31, 2021 to $44.3 billion at December 31, 2022. The majority of the $20.8 billion increase was in short-term advances. The average balance of advances increased $11.1 billion, or 47.9 percent, and the average yield increased 161 basis points for the year ended December 31, 2022 when compared to the prior year period. Advance demand has increased as members' earning assets have grown and deposit outflows have increased throughout our district. Members have also increased advance utilization as a source of on-balance sheet liquidity and to manage funding costs in a rising interest rate environment.

•Mortgage loans: Mortgage loans decreased by $0.2 billion from December 31, 2021 to December 31, 2022, representing 11.0 percent of total assets as of December 31, 2022, compared to 16.9 percent as of December 31, 2021. The average balance of mortgage loans decreased $0.5 billion, or 5.4 percent, for ~~2019. We intend~~the year ended December 31, 2022 when compared to ~~manage our~~the prior year period as the rising interest rate environment reduced origination volume, although originations were at interest rates higher than that of the existing portfolio. Higher interest rates also slowed prepayments, so the interest income impact of the decrease in balance ~~sheet with~~was also offset by lower premium amortization.

•Performance ratios: Return on average equity (ROE) increased to 7.47 percent for the ~~goal~~year ended December 31, 2022 compared to 5.88 percent for the prior year period due primarily to the increase in net income for the year, partially offset by the increase in average capital.

•Dividends: The Class A Common Stock weighted average dividend rate of ~~maintaining~~1.69 percent per annum and the Class B Common Stock weighted average dividend rate of 7.28 percent per annum combined for a ~~Primary Mission Asset ratio within~~weighted average dividend rate of 6.47 percent per annum for the year ended December 31, 2022, compared to a ~~range~~weighted average dividend rate of ~~70 to 80 percent. However, this ratio is dependent on several variables such as member demand~~4.49 percent per annum for ~~our advance and mortgage loan products, so it is possible that we will be unable to maintain this level indefinitely.~~the same period in 2021.

Financial Market Trends

The primary external factors that affect net interest income are market interest rates and the general state of the economy.

General discussion of the level of market interest rates:

Table 84 presents selected market interest rates as of the dates or for the periods shown.

Table 84


Market Instrument	Average Rate				12/31/2019		12/31/2018		Market Instrument	2022		2021		12/31/2022		12/31/2021
	2019		2018		Ending Rate		Ending Rate			Average Rate				Ending Rate		Ending Rate
Secured Overnight Financing Rate^1,2	2.21	%	N/A		1.55	%	3.00	%

Secured Overnight Financing Rate1									Secured Overnight Financing Rate1	1.64	%	0.04	%	4.30	%	0.05	%
Federal funds effective rate¹	2.16		1.83	%	1.55		2.40		Federal funds effective rate1	1.68		0.08		4.33		0.07
Federal Reserve interest rate on excess reserves¹	2.13		1.88		1.55		2.40
Federal Reserve interest rate on reserve balances1									Federal Reserve interest rate on reserve balances1	1.76		0.13		4.40		0.15
3-month U.S. Treasury bill¹	2.09		1.96		1.55		2.36		3-month U.S. Treasury bill1	2.04		0.04		4.37		0.04
3-month LIBOR¹	2.33		2.31		1.91		2.81		3-month LIBOR1	2.40		0.16		4.77		0.21
2-year U.S. Treasury note¹	1.97		2.53		1.57		2.51		2-year U.S. Treasury note1	2.99		0.26		4.43		0.73
5-year U.S. Treasury note¹	1.95		2.75		1.69		2.53		5-year U.S. Treasury note1	3.00		0.86		4.00		1.26
10-year U.S. Treasury note¹	2.14		2.91		1.92		2.70		10-year U.S. Treasury note1	2.95		1.44		3.88		1.51
30-year residential mortgage note rate^1,3	4.22		4.80		3.95		4.84
30-year residential mortgage note rate1,2									30-year residential mortgage note rate1,2	5.55		3.14		6.58		3.33

12/31/2019
Index Pay Side Receive Side
Fixed rate $ 14,555,853
$ 4,622,282
LIBOR 1,310,000
7,049,661
SOFR 1,743,781
5,371,203
OIS 1,938,500
2,404,988
Other —
100,000
TOTAL $ 19,548,134
$ 19,548,134

Table 5144 presents the notional amount of interest rate swaps (excludes interest rate caps and mortgage delivery commitments) indexed to LIBOR outstanding by termination date as of December 31, ~~2019~~2022 (in thousands). Actual terminations of certain derivatives will differ from contractual termination dates because derivative counterparties may have call options within the derivative contracts. Likewise, if the financial instrument being hedged by the derivative (either as a qualifying fair value hedge or as an economic hedge) is called or paid off prior to contractual maturity, we could potentially call or terminate the corresponding derivative prior to the termination date.

~~Table 51~~

12/31/2019
Year Pay Side Receive Side
Cleared Bilateral Cleared Bilateral
2020 $ 235,000
$ 130,000
$ 239,223
$ 158,000
2021 —
635,000
630,481
15,000
Thereafter —
310,000
1,615,412
4,391,545
TOTAL $ 235,000
$ 1,075,000
$ 2,485,116
$ 4,564,545

Table ~~52 presents the par value~~44


12/31/2022
Year	Pay Side				Receive Side
	Cleared		Bilateral		Cleared		Bilateral


Prior to June 30, 2023	—		—		44,440		6,000
Thereafter	—		25,000		357,001		2,190,113
TOTAL	$	—	$	25,000	$	401,441	$	2,196,113

As of December 31, 2022, all $21.6 billion of variable rate consolidated obligation bonds ~~by the related interest rate index as of December 31, 2019 (dollar amounts in thousands):~~

~~Table 52~~

12/31/2019
Index Amount Percent
SOFR $ 7,227,000
44.4 %
LIBOR 6,510,000
39.9
U.S. Treasury 2,550,000
15.7
TOTAL $ 16,287,000
100.0 %

~~Table 53 presents the par value of consolidated obligation bonds~~were indexed to ~~LIBOR outstanding by year of maturity and by year of maturity or next call date for callable bonds as of December 31, 2019 (in thousands):~~SOFR.

~~Table 53~~

12/31/2019
Year Maturity Date Maturity or Next Call Date
2020 $ 5,490,000
$ 5,760,000
2021 750,000
750,000
Thereafter 270,000
—
TOTAL $ 6,510,000
$ 6,510,000

Credit Risk Management: Credit risk is defined as the potential that a borrower or counterparty will fail to meet its financial obligations in accordance with agreed terms. We manage credit risk by following established policies, evaluating the creditworthiness of our counterparties, and utilizing collateral agreements and settlement netting for derivative transactions where enforceability of the legal right of offset has been determined. The most important step in the management of credit risk is the initial decision to extend credit. Continuous monitoring of counterparties is completed for all areas where we are exposed to credit risk, whether that is through lending, investing or derivative activities.

Lending and AMA Activities – Credit risk with members arises largely as a result of our lending and AMA activities (members’ CE obligations on conventional mortgage loans that we acquire through the MPF Program). We manage our exposure to credit risk on advances, letters of credit, and members’ CE obligations on conventional mortgage loans through a combined approach that provides ongoing review of the financial condition of our members coupled with credit enhancement sufficiency analysis, investment grade determination, and prudent collateralization.

At the time an advance is originated, we are required to obtain and then to maintain a security interest in sufficient collateral of the borrower, which is eligible in one or more of the following categories:

▪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 Fannie Mae, Freddie Mac or Ginnie Mae;

▪Cash or deposits;

▪Other acceptable real estate-related collateral, which includes privately issued collateralized mortgage obligations, mortgages on multifamily residential real property, second mortgages on 1-4 family residential property, and 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.

In order for collateral to be eligible for acceptance, we must be able to determine that the collateral has a readily ascertainable market value, can be reliably discounted to account for liquidation and other risks, and is able to be liquidated in due course.

The Bank Act affords any security interest granted to us by any of our members, or any affiliate of any such member, priority over the claims and rights of any party, including any receiver, conservator, trustee, or similar party that has rights of a lien creditor. The only exceptions are claims and rights held by actual bona fide purchasers for value or by parties that are secured by actual perfected security interests, and provided that such claims and rights would otherwise be entitled to priority under applicable law. In addition, our claims are given certain preferences pursuant to the receivership provisions in the Federal Deposit Insurance Act. Most members provide us a blanket lien covering substantially all of the member’s assets and their consent for us to file a financing statement evidencing the blanket lien. Based on the blanket lien, the financing statement and the statutory preferences, we normally do not take control of collateral, other than securities collateral, pledged by blanket lien borrowers. We take control of all securities collateral through delivery of the securities to us or to an approved third-party custodian. With respect to non-blanket lien borrowers (typically insurance companies, CDFIs, and housing associates), and given the interaction with certain state insurance laws with the Bank Act, we take control of all pledged collateral. If the financial condition of a blanket lien member warrants such action because of the deterioration of the member’s financial condition, regulatory concerns about the member or other factors, we will take control of sufficient collateral intended to fully collateralize the member’s indebtedness to us.

Since the FHLBank System was established in 1932, the U.S. has experienced a wide range of economic conditions, including periods of depression, recession, and expansion, but no degree of economic downturn has ever resulted in a credit loss on an advance. Even during the most recent financial crisis, which resulted in the failure of a number of member financial institutions, there were no credit losses on advances. In addition, the FHLBanks have never accepted collateral in satisfaction of an advance, but rather have been paid in full by an institution that assumes the advance, the FDIC, or some other receiver.

As also provided in the Bank Act, a member’s investment in our capital stock is held as additional collateral for the member’s advances and other credit obligations (letters of credit, CE obligations, etc.). In addition, we can call for additional collateral or substitute collateral during the life of an advance or other credit obligation to protect our security interest.

Credit risk arising from AMA activities under our MPF Program falls into three categories: (1) the risk of credit losses on the mortgage loans represented in our FLA and last loss positions; (2) the risk that a PFI will not perform as promised with respect to its loss position provided through its CE obligations on conventional mortgage loan pools, which are covered by the same collateral arrangements as those described for advances; and (3) the risk that a third-party insurer (obligated under PMI or SMI arrangements) will fail to perform as expected. Should a PMI third-party insurer fail to perform, it would increase our credit risk exposure because our FLA is the next layer to absorb credit losses on conventional mortgage loan pools. Likewise, if ana SMI third-party insurer fails to perform, it would increase our credit risk exposure because it would reduce the participating member’s CE obligation loss layer since SMI is purchased by PFIs to cover all or a portion of their CE obligation exposure for mortgage pools under certain MPF Program products. Credit risk exposure to third-party insurers to which we have PMI and/or SMI exposure is monitored on ~~a monthly~~an ongoing basis and regularly reported to the ~~Board~~board of ~~Directors. We~~directors. In addition, we perform a credit analysis of third-party PMI and SMI ~~insurers on at least a semi-annual basis.~~insurers. On ~~a monthly~~an ongoing basis, we review trends that could identify changing risks ~~with~~within our mortgage loan portfolio for macro- and micro-economic environment-related issues, including adverse changes in credit characteristics (loan purpose, low FICO scores, ~~and~~high debt-to-income ratios, high LTV ~~ratios.~~ratios, etc.) and/or various types of concentrations (geographic, high-balance loans, third-party originated, etc.). Based on the credit underwriting standards under the MPF Program and this ~~monthly~~ongoing review, we have concluded that the mortgage loans we hold would not be considered subprime.

Investments – Our RMP restricts the acquisition of investments to high-quality, short-term money market instruments and highly rated long-term securities. The short-term investment portfolio represents unsecured credit and reverse repurchase agreements. Counterparty ratings are monitored daily while performance and capital adequacy are monitored on a monthly basis in an effort to mitigate unsecured credit risk on our short-term investments. Collateral eligibility and transaction margin requirements on our reverse repurchase agreements are monitored daily. U.S. Treasury obligations and MBS securitized by Fannie Mae or Freddie Mac represent the majority of our long-term investments. Other long-term investments include MBS issued by Ginnie Mae, unsecured GSE debentures and collateralized state and local ~~housing finance agency~~HFA securities.

Derivatives – We transact most of our derivatives with large banks and major broker-dealers. ~~Over-the-counter~~OTC derivative transactions may be either executed with a counterparty (uncleared derivatives) or with an executing broker and cleared through a Futures Commission Merchant (i.e., clearing agent) that acts on our behalf to clear and settle derivative transactions through a Clearinghouse (cleared derivatives).

We are subject to credit risk due to the risk of nonperformance by counterparties to our derivative transactions. The amount of credit risk on derivatives depends on the extent to which netting procedures and collateral requirements are used and are effective in mitigating the risk. We manage this risk through credit analysis and collateral management. We are also required to follow the requirements set forth by applicable regulation.

Uncleared Derivatives. We are subject to non-performance by the counterparties to our uncleared derivative transactions. All bilateral security agreements with our non-member counterparties include ~~bilateral-collateral-exchange~~bilateral collateral exchange provisions that require all credit exposures be collateralized, subject to a minimum transfer amount. As a result of these risk mitigation practices, we do not anticipate any credit losses on our uncleared derivative transactions as of December 31, ~~2019.~~2022.

Cleared Derivatives. We are subject to nonperformance by the Clearinghouse(s) and clearing agent(s). The requirement that we post initial and variation margin, through the clearing agent, to the Clearinghouse, exposes us 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 and/or payments are posted daily for changes in the value of cleared derivatives through a clearing agent. We do not anticipate any credit losses on our cleared derivatives as of December 31, ~~2019.~~2022.

We regularly monitor the exposures on our derivative transactions by determining the market value of positions using internal pricing models. The market values generated by the pricing model used to value derivatives are compared to dealer model results on a monthly basis to ensure that our derivative pricing model is reasonably calibrated to actual market pricing methodologies utilized by the dealers. In addition, we have our internal pricing model validated ~~annually~~regularly by an independent consultant. As a result of these risk mitigation initiatives, management does not anticipate any credit losses on our derivative transactions. See Note 86 of the Notes to Financial Statements under ~~Part II,~~ Item 8 for additional information on managing credit risk on derivatives.

The contractual or notional amount of derivative transactions reflects our involvement in the various classes of financial instruments. The maximum credit risk with respect to derivative transactions is the estimated cost of replacing the derivative transactions if there are defaults, minus the value of any related collateral posted to satisfy the initial margin (if required). Our derivative transactions are subject to variation margin which is derived from the change in market value of the transaction and must be posted by the net debtor on demand. Cleared transactions are subject to initial margin as well as variation margin. The initial margin is intended to protect the Clearinghouse against default of a customer. Initial margin is calculated to cover the potential price volatility of the derivative transaction between the time of the default and the assignment of the transaction to another clearing agent or termination of the transaction. Although the initial margin requirement should decrease over time as the duration and market volatility decrease, it remains outstanding for the life of the transaction; thus, it is possible that we could either have: (1) net credit exposure with a Clearinghouse even if our net creditor position has been fully satisfied by the receipt of variation margin; or (2) net credit exposure with a Clearinghouse despite being the net debtor (i.e., being in a liability position). In determining maximum credit risk, we consider accrued interest receivables and payables as well as the netting requirements to net assets and liabilities.

Tables 54 and 55 present derivative notional amounts and counterparty credit exposure by whole-letter rating (in the event of a split rating, we use the lowest rating published by Moody's or S&P) for derivative positions with counterparties to which we had credit exposure (in thousands):

~~Table 54~~

12/31/2019
Credit Rating Notional Amount Net Derivatives Fair Value Before Collateral Cash Collateral Pledged From (To) Counterparty Net Credit Exposure to Counterparties
Asset positions with credit exposure:
Uncleared derivatives:
Single-A $ 63,500
$ 257
$ —
$ 257
Cleared derivatives¹
14,150,148
1,821
(145,658 ) 147,479
Liability positions with credit exposure:
Uncleared derivatives²:

Single-A 6,123,478
(78,575 ) (84,633 ) 6,058
Triple-B 286,008
(5,894 ) (6,409 ) 515
TOTAL DERIVATIVE POSITIONS WITH CREDIT EXPOSURE $ 20,623,134
$ (82,391 ) $ (236,700 ) $ 154,309

Represents derivative transactions cleared with LCH Limited and CME Clearing. LCH Limited was rated AA- by S&P; LCH Limited's parent company, LCH Group Holdings Limited, was not rated; and London Stock Exchange Group, LCH Group Holdings Limited's ultimate parent, was rated A3 by Moody's and A by S&P as of ~~December 31, 2019. CME Clearing is not rated; however, CME Clearing's parent company, CME Group, Inc., was rated Aa3 by Moody's and AA- by S&P as of~~ ~~December 31, 2019~~.


²	~~Exposure can change on a daily basis; thus, there is often a short lag time between the date the exposure is identified, collateral is requested and collateral is returned.~~

~~Table 55~~

12/31/2018
Credit Rating Notional Amount Net Derivatives Fair Value Before Collateral Cash Collateral Pledged From (To) Counterparty Net Credit Exposure to Counterparties
Asset positions with credit exposure:
Uncleared derivatives:
Single-A $ 36,000
$ 14
$ —
$ 14
Liability positions with credit exposure:
Uncleared derivatives¹:

Single-A 1,225,774
(18,975 ) (22,261 ) 3,286
Cleared derivatives²
4,623,289
(4,963 ) (36,140 ) 31,177
TOTAL DERIVATIVE POSITIONS WITH CREDIT EXPOSURE $ 5,885,063
$ (23,924 ) $ (58,401 ) $ 34,477


¹	~~Exposure can change on a daily basis; thus, there is often a short lag time between the date the exposure is identified, collateral is requested and collateral is returned.~~

Represents derivative transactions cleared with LCH Limited and CME Clearing. LCH Limited was rated A+ by S&P; LCH Limited's parent company, LCH Group Holdings Limited, was not rated; and London Stock Exchange Group, LCH Group Holdings Limited's ultimate parent, was rated A3 by Moody's and A- by S&P as of December 31, 2018. CME Clearing is not rated; however, CME Clearing's parent company, CME Group, Inc., was rated Aa3 by Moody's and AA- by S&P as of December 31, 2018.

~~Foreign Counterparty Risk~~– Loans, acceptances, interest-bearing deposits with other banks, other interest-bearing investments and any other monetary assets payable to us by entities of foreign countries, regardless of the currency in which the claim is denominated are referred to as "cross-border outstandings." Our cross-border outstandings consist primarily of short-term trading securities and Federal funds sold issued by banks and other financial institutions, which are non-sovereign entities, and derivative asset exposure with counterparties that are also non-sovereign entities. Secured reverse repurchase agreements outstanding are excluded from cross-border outstandings because they are fully collateralized.

In addition to credit risk, cross-border outstandings have the risk that, as a result of political or economic conditions in a country, borrowers may be unable to meet their contractual repayment obligations of principal and/or interest when due because of the unavailability of, or restrictions on, foreign exchange needed by borrowers to repay their obligations. We continue to cautiously place unsecured cross-border outstandings.

~~Table 56 presents the fair value of cross-border outstandings as of December 31, 2019 (dollar amounts in thousands):~~

~~Table 56~~

Total¹
Amount Percent of Total Assets
Federal funds sold²
$ 450,000
0.7 %

Derivative assets:
Net exposure at fair value (12,235 )
Cash collateral held 12,869

Net exposure after cash collateral 634
—

TOTAL $ 450,634
0.7 %


¹	~~Represents foreign countries where individual exposure is less than one percent of total assets.~~


²	~~Consists solely of overnight Federal funds sold.~~

~~Table 57 presents the fair value of cross-border outstandings to countries in which we do business as of December 31, 2018 (dollar amounts in thousands).~~

~~Table 57~~

Total¹
Amount Percent of Total Assets
Federal funds sold²
$ 50,000
0.1 %

Derivative assets:
Net exposure at fair value (18,961 )
Cash collateral held 22,261

Net exposure after cash collateral 3,300
—

TOTAL $ 53,300
0.1 %

~~__________~~


¹	~~Represents foreign countries where individual exposure is less than one percent of total assets.~~


²	~~Consists solely of overnight Federal funds sold.~~

~~Table 58 presents the fair value of cross-border outstandings to countries in which we do business as of December 31, 2017 (dollar amounts in thousands).~~

~~Table 58~~

Canada
Other¹
Total
Amount Percent of Total Assets Amount Percent of Total Assets Amount Percent of Total Assets
Federal funds sold²
$ 400,000
0.8 % $ 775,000
1.6 % $ 1,175,000
2.4 %

Trading securities³
400,017
0.8
184,967
0.4
584,984
1.2

Derivative assets:
Net exposure at fair value 1,420
(9,883 ) (8,463 )
Cash collateral held (1,402 ) 11,626
10,224

Net exposure after cash collateral 18
—
1,743
—
1,761
—

TOTAL $ 800,035
1.6 % $ 961,710
2.0 % $ 1,761,745
3.6 %

~~__________~~


¹	Represents other foreign countries where individual exposure is less than one percent of total assets. Total cross-border outstandings to countries that individually represented between 0.75 and 1.0 percent of our total assets as of December 31, 2017 were $0.4 billion (Netherlands).


²	~~Consists solely of overnight Federal funds sold.~~


³	~~Consists of certificates of deposit with remaining maturities of less than three months.~~

Liquidity Risk Management: Maintaining the ability to meet our obligations as they come due and to meet the credit needs of our members and housing associates in a timely and cost-efficient manner is the primary objective of managing liquidity risk. We seek to be in a position to meet the credit needs of our members, as well as our debt service and liquidity needs, without maintaining excessive holdings of low-yielding liquid investments or being forced to incur unnecessarily high borrowing costs.

We maintain daily liquidity levels above certain thresholds and consider hypothetical adverse scenarios. These thresholds are outlined in our internal policies and comply with federal statutes, FHFA regulations and other FHFA guidance not issued in the form of regulations. We remained in compliance with liquidity regulatory requirements throughout 2022.

We are focused on maintaining a cost-effective liquidity and funding balance between our financial assets and financial liabilities. The FHLBanks work collectively to manage the system-wide liquidity and funding management and jointly monitor the combined refinancing risk. In managing and monitoring the amounts of assets that require refunding, we may consider contractual maturities of the financial assets, as well as certain assumptions regarding expected cash flows (i.e., estimated prepayments and scheduled amortizations). See the Notes to the Financial Statements under Part I, Item 8 for more detailed information regarding contractual maturities of certain of our financial assets and liabilities.

Our derivative instruments contain provisions that require all credit exposures be collateralized. See Note 6 of the Notes to Financial Statements under Item 8 for additional information on collateral posting requirements.

FHFA regulations require us to always have at least an amount equal to our current deposits received from our members invested in obligations of the United States, deposits in eligible banks or trust companies, or advances with remaining maturities not exceeding five years. ~~Table 59 summarizes our~~We were in compliance with these regulations at all times during the ~~Bank Act liquidity requirements as of~~year ended December 31, ~~2019 and 2018 (in thousands):~~2022.

~~Table 59~~

12/31/2019 12/31/2018
Liquid assets¹
$ 3,688,874
$ 735,702
Total qualifying deposits 790,640
473,820
Excess liquid assets over requirement $ 2,898,234
$ 261,882


¹	Although we have other assets that qualify as eligible investments under the liquidity requirements, only interest-earning deposits, Federal funds sold, and deposits with the Federal Reserve are listed because these exceed the liquidity requirements without the consideration of any other eligible investments.

We generally maintained stable access to the capital markets throughout ~~2019.~~2022. For additional discussion of the market for our consolidated obligations and the overall market affecting liquidity see “Financial Market Trends” under this Item 7.

An entity’s liquidity position is vulnerable to any rating, event, performance or ratio trigger (collectively called triggers) that would lead to the termination of the entity’s credit availability or the acceleration of repayment of credit obligations owed by the entity. We have reviewed documents concerning our vulnerability to transactions that contain triggers to gain an understanding of the manner in which risks can arise from such triggers. Triggers adverse to us currently exist in agreements for uncleared derivative transactions and SBPAs. Our staff monitors triggers in order to properly manage any type of potential risks from triggers. For additional information regarding our credit exposure relating to derivative contracts, see Note 86 of the Notes to Financial Statements under ~~Part II,~~ Item 8 – “Financial Statements and Supplementary Data.”

With respect to advances, letters of credit, ~~standby credit facility commitments,~~ and SBPAs, credit practices are impacted by certain triggers based on the member’s or housing associate’s financial performance (or the ratings of bonds underlying SBPAs) as defined in detail in our policies and/or the appropriate agreements. See Notes 1, 4 and 715 in Item 8 – “Financial Statements and Supplementary Data – Notes to Financial Statements” for collateral requirements designed for our credit products.

We have executed SBPAs with multiple state housing finance authorities. All of the SBPAs contain rating triggers beneficial to us providing that if the housing finance authority bonds covered by the SBPA are rated below investment grade (triple-B), we would not be obligated to purchase the bonds even though we were otherwise required to do so under the terms of the SBPA contract. In addition, some transactions also contain a provision that allows us to terminate our obligation to purchase these bonds under the SBPA upon 30 days prior written notice if the long-term rating on the underlying bonds were to be withdrawn, suspended or reduced below single-A. As of December 31, ~~2019~~2022 and ~~2018,~~2021, we were a party to, or participated in, 2331 and 2425 SBPAs, respectively, in which our ~~aggregate~~ principal ~~and interest~~ commitments were $0.9 billion and $0.7 billion, ~~and $0.8 billion,~~ respectively. We were not required to purchase any bonds under any agreements during the year ended December 31, 2022.

Business Risk Management: Business risk is the risk of an adverse impact on our profitability resulting from external factors that may occur in both the short and long run. We manage business risk, in part, through a commitment to strategic planning and by having a strategic business plan in effect at all times that describes how the business activities will achieve our mission and also details the operating goals and strategic objectives for each major business activity. The Strategic Business Plan is intended to make transparent our strategic plans as well as the strategic planning process that helps formulate that plan. The Strategic Business Plan is augmented from time-to-time, at least annually, with appropriate research and analysis. The Strategic Business Plan provides a mechanism for management and the ~~Board~~board of ~~Directors~~directors to be fully engaged in fulfilling their responsibilities for establishing our long-term strategic direction. Directors’ knowledge of the external environment through their positions with member institutions in the financial services industry as well as a variety of other professions provides a strong experience base to complement the capabilities and competencies of management. Full development of the Strategic Business Plan, including tactical strategies and implementation, is delegated to ~~management and facilitated by the Strategic Planning and Member Solutions department.~~management. We use planning scenarios to develop the Strategic Business Plan and we continue to refine and enhance the scenario planning process each year. We believe this process results in the development of robust and effective future scenarios, thereby enhancing the overall effectiveness of our strategic planning process and the development of risk strategies for each scenario. The ~~Board~~board of ~~Directors~~directors plays a key role in the development of the Strategic Business Plan and regularly monitors progress in the achievement of business objectives. Two ~~Board~~board of ~~Directors’~~directors’ meetings are set aside each year for strategic planning purposes.

To manage business and strategic risk, earnings simulations are conducted annually with estimated base-, best- and worst-case scenarios. These earnings simulations are based upon a set of assumptions developed for each of the three scenarios that consider factors such as: (1) the effects of changes in interest rates and ~~spreads,~~spreads; (2) the balances of advances, mortgage loans, and ~~investments,~~investments; (3) operating ~~expenses,~~expenses; and (4) dividends. The worst-case scenario assumptions typically include a pessimistic interest rate assumption, an overall decline in advance balances of approximately 20 percent due to either a declining economy, the loss of a large borrowing member due to merger or acquisition, or changes in mortgage flow as a result of ~~the~~a declining economy. ~~The Strategic Planning and Member Solutions department monitors~~We monitor key indicators tied to the various scenario assumptions and ~~provides~~provide a monthly report to the Executive Committee and the ~~Board~~board of ~~Directors.~~directors. This key indicator report includes advance balance monitoring for our largest eight members and our overall membership. See Table 2621 under this Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Financial Condition – Advances” for advance concentration to the top five borrowers.

Business risk also includes political, reputation, and regulatory risk. Congress occasionally considers legislation that could have an impact on the housing GSEs, including the FHLBanks. Legislation has the power to impact our cost of funds and our cost of doing business. It could also limit or expand existing authorities or change the competitive balance among the FHLBanks and other housing GSEs. Consequently, we seek to: (1) positively influence legislative outcomes; (2) support, oppose, or comment on regulatory proposals; and (3) continually educate all stakeholders about our positive impact on the communities we serve. To manage these types of business risks, we maintain a Director of Government and Industry Relations ~~Officer~~ position and work with lobbying firms in Washington, D.C. Additionally, we, along with the other 10 FHLBanks, partner with our Washington, D.C.-based trade association, the Council of FHLBanks, to ensure that the FHLBank System's common legislative and regulatory interests are served. More specifically, we promote the enactment of laws and regulations that are beneficial to FHLBank Topeka and our members, and we oppose detrimental laws and regulations. We also work to enhance awareness and understanding of the FHLBanks among Washington leaders, including members of Congress and their staff, Executive departments, regulators, trade associations, and the financial media.

For additional discussions of general business risk, legislative and regulatory business risk and strategic business risk, see Item 1A - ~~"Risk~~“Risk Factors."”

Joint and Several Liability - Although we are primarily liable for our portion of consolidated obligations (i.e., those issued on our behalf), we are also jointly and severally liable with the other FHLBanks for the payment of principal and interest on consolidated obligations of all the FHLBanks. See Item 1 – “Business – Debt Financing – Consolidated Obligations” and Note 108 of the Notes to Financial Statements under ~~Part II,~~ Item 8 for additional information regarding FHLBank’s joint and several liability.

Operations Risk Management: Operations risk is defined as the risk of loss resulting from inadequate or failed internal processes, people, or systems, or from external events. This category of risk is inherent in our daily business activities and involves people, information technology (IT) systems, processes, and external events (including fraud, ~~information~~ security incidents, and business disruptions). A number of strategies are used to manage and mitigate operations risk, including systems and procedures to monitor transactions and financial positions, segregation of duties, documentation of transactions, secondary reviews, comprehensive risk assessments conducted at the entity and business unit level, and periodic reviews by our Internal Audit department. The Operations Risk Committee serves as the primary venue for overseeing all of our operations risk management initiatives and activities.

Human Error and Circumvention or Failure of Internal Controls and Procedures - Employees play a vital role in implementing our risk management practices and strategies. We look to recruit, develop, promote, and retain high-quality employees by offering a fair and competitive compensation package and by providing a comfortable, secure and professional work environment in a cost-effective manner. To ensure our employees understand the importance of establishing and maintaining an effective internal control system, we maintain an Internal Control Policy which, in addition to defining internal control and describing the five interrelated components and underlying principles of FHLBank’s internal control framework, outlines the objectives for our internal controls, establishes and delineates management’s responsibilities for implementing and maintaining internal controls, and establishes the Internal Audit department as the business unit responsible for reviewing the adequacy of our internal controls. We have established and maintain an effective internal control system, guided by the Internal Control Policy, that addresses: (1) the establishment of strategies aligned with our mission and vision; (2) the efficiency and effectiveness of our activities; (3) the safeguarding of our assets: (4) the reliability, completeness and timely reporting of financial and management information (and the transparency of that information) to the ~~Board~~board of ~~Directors~~directors and outside parties, including the Office of Finance, the SEC and the FHFA; and (5) compliance with applicable laws, regulations, policies, supervisory determinations and directives. The annual business unit risk assessment program serves to reinforce our focus on maintaining strong internal controls by identifying significant inherent risks and the internal controls and strategies used to mitigate those risks to acceptable residual risk levels. The business unit risk assessment program provides management and the ~~Board~~board of ~~Directors~~directors with a thorough understanding of our risk management and internal control structure.

Systems Malfunctions and ~~Information~~ Security Threats - We rely heavily on IT systems and other technology to conduct our business. To manage operations risk as it relates to IT systems, we devote significant management attention and resources to technology. Our Technology Committee assists executive management in overseeing the development and implementation of significant technology strategies. The Technology Committee is also charged with providing strategic oversight of all technology-related activities, monitoring the strategic alignment and synchronization of IT services with our Strategic Business Plan (as well as our immediate and long-term goals and objectives), reviewing the operational health of IT systems, and reviewing new and/or anticipated projects related to our strategic initiatives. Protection of our information assets is also necessary to establish and maintain trust between us and our customers, maintain compliance with applicable laws and regulations, and protect our reputation. Consequently, we maintain an enterprise-wide ~~information~~ security program. The goal of our enterprise ~~information~~ security program is to maintain ~~an information~~a security framework such that: (1) physical and information assets are protected from unauthorized access, modification, disclosure and destruction; (2) integrity and confidentiality of information is maintained; (3) physical and information assets and information systems are available when needed; and (4) ~~cyber security~~cybersecurity threats and/or other information security risks are identified, monitored, ~~assessed,~~ and ~~appropriately managed or mitigated~~addressed through our enterprise information security program.

Man-made or Natural Disasters - ~~Business~~We manage the risk of business disruption and systems failure due to man-made or natural disasters ~~are managed~~ by having in place at all times a ~~disaster recovery~~business resiliency plan, the purpose of which is to provide contingency plans for situations where operations cannot be carried out in their normal manner. We maintain ~~contingency plans~~an alternate data center that is geographically located far enough from our primary data center to prevent both data centers from being impacted by the same event. We also maintain an off-site business resumption center which ~~deal with business interruptions lasting for a prolonged period of time. An off-site recovery~~includes computer equipment, office space, supplies, and other resources to allow our employees to resume operations ~~center~~if our headquarters is also maintained which is an important component of our overall disaster recovery planning effort. The recovery center is maintained on a different power grid and is serviced by another telephone central office than our main headquarters. Aninaccessible. Our on-site power ~~generator supports~~generators support both the ~~site~~alternate data center and business resumption center in case of total power failure. ~~The off-site recovery center~~Business partners may also resume operations by working remotely in situations where our headquarters is ~~also used to store computer equipment, information, supplies, and other resources specifically acquired for~~inaccessible. Comprehensive business ~~continuity purposes. Comprehensive testing is conducted~~resiliency exercises utilizing the ~~off-site recovery location at least once each year with additional limited tests~~alternate data center and business resumption center are conducted ~~on a quarterly basis.~~routinely and vary in scope and duration to simulate various types of disruptions. The disaster recovery plans are reviewed and updated ~~semi-annually with employee emergency contact information updated weekly through our human resource information system.~~annually. We also have a reciprocal back-up agreement in place with FHLBank Boston to provide short-term advances to our members on our behalf in the event that our facilities are inoperable. In the event that FHLBank Boston’s facilities are inoperable, we have agreed to provide short-term liquidity advances to FHLBank Boston’s members. We complete an annual test of this agreement with FHLBank Boston to ensure the process and related systems are functioning properly. We also ~~maintained~~maintain a funds transfer contingency agreement with ~~the~~ FHLBank Boston that is tested annually, which authorizes either FHLBank Topeka or FHLBank Boston to process wire transfers for the other during a contingency situation.

Internal or External Fraud - Our Anti-Fraud Policy, which includes our Whistleblower Procedures, along with our Anti-Money Laundering Policy, forms the foundation of our Fraud Awareness Program. Our Fraud Awareness Program establishes our methodology or framework for preventing, detecting, deterring, reporting, remediating, and punishing suspicious activities, money laundering activities, dishonest activities, violations of the Code of Ethicsand other fraudulent activities that could create risks for us or undermine the public’s confidence in the integrity of our activities. Employees may submit good faith complaints or concerns regarding accounting or auditing matters, fraud concerns, potential wrongdoing or violations of applicable securities laws and regulations, or violations of the Commodity Exchange Act and relevant implementing regulations to management or our anonymous reporting service without fear of dismissal or retaliation of any kind. We are committed to achieving compliance with all applicable securities laws and regulations, the Commodity Exchange Act and relevant implementing regulations, accounting standards, accounting controls and audit practices. Decisions to prosecute or refer fraud investigation results to the appropriate law enforcement and/or regulatory agencies for independent investigation shall be made in conjunction with legal counsel and appropriate senior management, as will final decisions on disposition of the case.

Recently Issued Accounting Standards

See Note 2 of the Notes to Financial Statements under ~~Part II,~~ Item 8 – "Financial Statements and Supplementary Data" for a discussion of recently issued accounting standards.

Item 7A:Quantitative and Qualitative Disclosures About Market Risk

Market risk is the risk that changes in market value may adversely affect our financial condition and performance. Interest rate risk is a component of market risk and represents our most significant market risk exposure. Interest rate risk is the risk that the market value of our asset, liability, and derivative portfolios will be negatively impacted by interest rate volatility or that earnings will be affected significantly by interest rate changes. We ~~measure~~manage interest rate risk ~~exposure~~through the characteristics of our portfolio of assets and liabilities and by ~~various methods, including~~using derivative transactions to limit duration mismatches and reduce MVE sensitivity. Matching the ~~calculation~~duration of ~~DOE~~assets with the duration of liabilities funding those assets is accomplished through the use of different debt maturities and ~~MVE in different~~embedded option characteristics, as well as the use of derivatives, primarily interest rate ~~scenarios.~~swaps, interest rate caps, and interest rate floors. Interest rate

swaps increase the flexibility of our funding alternatives by providing cash flows or characteristics that might not be as readily available or cost-effective if obtained in the standard GSE debt market.

Duration of Equity: DOE aggregates the estimated sensitivity of market value for each of our financial assets and liabilities to changes in interest rates. In essence, DOE indicates the sensitivity of theoretical MVE to changes in interest rates. However, MVE should not be considered indicative of our market value as a going concern or our value in a liquidation scenario. A positive DOE results when the duration of assets and designated derivatives is greater than the duration of liabilities and designated ~~derivatives. A positive DOE generally indicates~~derivatives, indicating a degree of interest rate risk exposure in a rising interest rate environment. A negative DOE ~~indicates~~results in the opposite scenario, indicating a degree of interest rate risk exposure in a declining interest rate environment. Higher DOE numbers, whether positive or negative, indicate greater volatility of ~~MVE~~market value in response to changing interest rates. That is, if we have a DOE of 3.0, a 100 basis point (one percent) increase in interest rates would cause our MVE to decline by approximately three percent whereas a 100 basis point decrease in interest rates would cause our MVE to increase by approximately three percent. It should be noted that aA decline in ~~MVE~~market value does not necessarily translate directly into a decline in ~~near-term~~ income, especially for entities that do not trade financial instruments. Changes in market value may indicate trends in income over longer periods, and knowing the sensitivity of our market value to changes in interest rates provides a measure of the interest rate risk we take.

Under the RMP, ~~approved by our Board of Directors,~~ our DOE is generally limited to a range of ±5.0 assuming current interest rates. In addition, our DOE is generally limited to a range of ±7.0 assuming an instantaneous parallel increase or decrease in interest rates of 200 basis points. During periods of extremely low interest rates, the FHFA requires that the FHLBanks employ a constrained down shock analysis to limit the evolution of forward interest rates to positive non-zero values. Since our market risk model imposes a positive non-zero boundary on post-shock interest rates, no additional calculations are necessary in order to meet this FHFA requirement when applicable.

The DOE parameters established by our Board of Directors represent one way to establish general limits on the amount of interest rate risk that we find acceptable. If our DOE exceeds the policy limits established by the Board of Directors, we either: (1) take asset/liability actions to bring the DOE back within the ranges established in our RMP; or (2) review and discuss potential asset/liability management actions with the Board of Directors at the next regularly scheduled meeting that could bring the DOE back within the ranges established in the RMP and ascertain a course of action, which can include a determination that no asset/liability management actions are necessary. A determination that no asset/liability management actions are necessary can be made only if the Board of Directors agrees with management’s recommendations. All of our DOE measurements were inside Board of Director established policy limits (discussed in previous paragraph) and operating ranges (discussed in next paragraph) as of December 31, 2019. On an ongoing basis, we actively monitor portfolio relationships and overall DOE dynamics as a part of our evaluation processes for determining acceptable future asset/liability management actions.

We typically maintain DOE within the above ranges through management of the durations of our assets, liabilities and derivatives. Significant resources in terms of staffing, software and equipment are continuously devoted to assuring that the level of interest rate risk existing in our balance sheet is properly measured and limited to prudent and reasonable levels. The DOE that management and the Board of Directors consider prudent and reasonable is somewhat lower than the RMP limits mentioned above and can change depending upon market conditions and other factors. As set forth in our Risk Appetite Metrics approved by the Board of Directors, we typically manage our DOE in the current base scenario to remain in the range of ±2.5 and in the ±200 basis point interest rate shock scenarios to remain in the range of ±4.0. When DOE exceeds ~~either~~ the limits established by the RMP, ~~or the more narrowly-defined ranges to which we manage DOE,~~ corrective actions taken may include: (1) the purchase of interest rate caps, interest rate floors, ~~swaptions~~ or other derivatives; (2) the sale of assets; and/or (3) the addition to the balance sheet of assets or liabilities having characteristics that are such that they counterbalance the excessive duration observed. For example, if our DOE has become more positive than desired due to variable rate MBS that have reached interest rate cap limits, we may purchase interest rate caps that have the effect of removing those MBS cap limits. We would be short caps in the MBS investments and long caps in the offsetting derivative positions, thus reducing our DOE. Further, if an increase in our DOE were due to the extension of mortgage loans, MBS or new advances to members, the more appropriate action would be to add new long-term liabilities, whether callable or non-callable, to the balance sheet to offset the lengthening asset position.

Table 6045 presents our DOE in the base and the up and down 200 basis point interest rate shock scenarios:

Table 6045


Duration of Equity
Date	Up 200 Basis Points	Base	Down 200 Basis Points
12/31/2022	1.7	1.7	2.1
09/30/2022	1.6	1.8	2.6
06/30/2022	1.6	2.2	3.3
03/31/2022	1.5	0.7	3.4
12/31/2021	0.6	-0.4	1.5
09/30/2021	0.4	-2.7	1.5
06/30/2021	-0.1	-2.4	1.2
03/31/2021	-0.4	-4.0	1.7

Duration of Equity
Date Up 200 Basis Points Base Down 200 Basis Points
12/31/2019 0.8 -0.9 2.4
09/30/2019 1.0 -0.7 2.0
06/30/2019 1.4 -0.4 2.6
03/31/2019 1.6 0.0 3.8
12/31/2018 2.3 1.3 2.8
09/30/2018 2.9 1.2 1.9
06/30/2018 3.0 0.7 1.9
03/31/2018 3.4 0.5 2.2

All DOE results continue to remain inside our operating range of ±2.5 in the base scenario and ±4.0 in the ±200 basis point interest rate shock scenarios. Our DOE as of December 31, 2019 decreased in all scenarios from December 31, 2018. The primary factors contributing to ~~these~~the net changes in duration ~~during the period~~from December 31, 2021 to December 31, 2022 were: (1) the ~~decrease~~significant increase in ~~long-term~~ interest rates and the relative level of mortgage rates during the period; (2) the ~~increase~~decrease in outstanding balance of and percent of total assets represented by the fixed rate mortgage loan portfolio during the period; and (3) asset/liability actions taken by management throughout the period, including ~~replacing either called or matured long-term unswapped callable consolidated obligation bonds with newly issued bonds with relatively short lock-out periods as conditions permitted and~~ the continued issuance of discount notes ~~funding~~and short-term variable rate consolidated obligations to fund new advance activity. The significant increase in interest rates during the ~~growth~~period caused the mortgage loan portfolio contribution to duration to lengthen slightly less than the associated liabilities, contributing to the decreasing asset sensitive DOE profile in ~~short-term advances.~~the base case. The mortgage loan portfolio generally has a longer duration profile in the interest rate shock scenarios contributing to the asset-sensitive DOE in the up and down 200 basis point shock scenarios. However, the prepayment sensitivity and market value changes in our mortgage portfolio currently align well with our non-swapped callable debt portfolio in these scenarios generating a relatively stable sensitivity profile in the interest rate shock scenarios.

The ~~decrease~~overall increase in ~~longer-term~~ interest rates ~~from~~since December 31, ~~2018~~2021 generally ~~shortens~~lengthened the duration profile for both the fixed rate mortgage loan portfolio and the associated unswapped callable consolidated obligation bonds funding these assets. With the ~~increase~~decrease in our mortgage loan portfolio during this period, as discussed in Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Financial Condition – MPF Program,” the duration profile changed as expected since a general ~~decrease~~increase in ~~long-term~~ interest rates typically generates ~~faster~~slower prepayments for both new production mortgage loans, as well as the outstanding fixed rate mortgage loan portfolio. Generally, lower interest rates indicate a relative ~~increase~~decrease in refinancing incentive for borrowers.

The fixed rate mortgage loan portfolio increased in net outstanding balance, but decreased as an overall percentage of total assets with the increase in total assets during the period, decreasing from 17.6 percent of total assets as of December 31, 2018 to 16.8 percent as of December 31, 2019. Even with this slight weighting decrease, the mortgage loan portfolio remains a sizable portion of our balance sheet and changes occurring with this portfolio tend to be magnified in terms of DOE. Since the DOE calculation is a market value based measurement and as portfolio market values increase or decrease, they become larger or smaller contributors to the overall market value of total assets. With the mortgage loan portfolio continuing to comprise a significant percentage of overall assets, its behavior is quite visible in the duration risk profile and changes in this portfolio are typically magnified as interest rates change.

This magnification occurs when a portfolio market value weighting as a percent of the overall net market value of the balance sheet changes, causing the remaining portfolios to be a smaller or larger component of the total balance sheet composition. For example, when our advance balances increase, our mortgage loan portfolio effectively decreases as a proportion of our total assets, assuming all other asset portfolios and interest rates remain constant. This relationship then causes the duration of the mortgage loan portfolio to have a somewhat smaller contribution impact to the overall DOE since DOE is a market value weighted measurement. With the absolute growth in the mortgage loan portfolio during the period, the mortgage loan portfolio increased as a percentage of the market value of the net balance sheet, causing the DOE profile to have a marginally larger impact from the mortgage loan duration profile. With these balance sheet dynamics, we continue to actively manage and monitor the contributing factors of our market risk profile, including DOE. As the relationship of the fixed rate mortgage loan assets and the associated callable liabilities vary based on market conditions, we evaluate and manage these market driven sensitivities as both portfolios change in balance level and overall proportion.

New mortgage loans were continually added to the mortgage loan portfolio to replace mortgage loans that were prepaid during the period and we continue to actively manage this ongoing growth to position the balance sheet sensitivity to perform within our established risk tolerances. To effectively manage these changes in the mortgage loan portfolio (including new production and prepaid loans) and related sensitivity to changes in market conditions, unswapped callable consolidated obligation bonds that either matured or were called were replaced with reissuance of unswapped callable consolidated obligation bonds with relatively long maturities and short lock-out periods (generally three months to one year). This reissuance continues to favorably position us for potential declines in the interest rate environment. Generally, the maturity or the call of higher rate callable bonds and reissuance of these bonds generally extends the duration profile of this portfolio. This liability extension corresponds with the expected longer duration profile of the new fixed rate mortgage loans, all else being ~~equal.~~

As long-term interest rates decreased during 2019, we experienced prepayments of the fixed rate mortgage loan portfolio. As interest rates fluctuated during 2019, the shorter lock-out periods of the callable bonds plus maturities of non-callable bonds provided the opportunity to refinance a measured amount of our liabilities during this period. The overall decrease in long-term interest rates caused the duration profile of the existing portfolio of unswapped callable bonds to shorten as expected. In addition, the unswapped callable bond portfolio became a slightly larger percentage ofequal, and positions the balance sheet as the portfolio expanded during the period and based on the elevated issuance of discount notes in response to the growth in short-term advances and associated capital stock activity. The discount note portfolio level naturally diluted the percentage of outstanding unswapped callable bonds and impacts the weighting of this portfolio as an overall percentage of liabilities. As discussed previously, a portfolio weighting change can alter the impact of a portfolio's overall contribution to net DOE. While the unswapped callable bonds relative weighting led to a slightly smaller contribution to DOE, the overall shortening of the absolute portfolio duration served to lessen the impact of the weighting change. This liability behavior includes the inherent convexity (discussed below) profile of these portfolios and demonstrates the specific duration sensitivity tofor future changes in rates, including interest ~~rates~~rate increases where the mortgage loan portfolio will likely lengthen in ~~certain shock scenarios. Further~~duration as expected prepayments slow. For further discussion of the ~~unswapped callable bond calls, maturities on non-callable bonds~~call and reissuance of ~~callable~~consolidated obligation bonds, ~~in relation to the mortgage portfolios is discussed in~~see Item 7 – ~~"Management’s~~“Management's Discussion and Analysis of Financial Condition and Results of Operations – Financial Condition – Consolidated Obligations.” The combination of these factors contributed to the net DOE ~~decrease~~changes in all ~~scenarios.~~

~~We purchased $1.1 billion of fixed rate multi-family GSE MBS~~scenarios during the period. These fixed rate securities were effectively swapped to LIBOR and impact DOE only slightly since they are reflected as variable rate instruments and are further described in Item 7 – "Management’s Discussion and Analysis of Financial Condition and Results of Operations – Results of Operations – Net Gains (Losses) on Trading Securities." As mentioned previously, the addition of mortgage securities, whether fixed or variable rate, typically lengthens the duration profile of the respective portfolios and generally lengthens our DOE. The relationship of the variable rate GSE MBS/CMOs and the purchased interest rate cap portfolio provides a measured impact on the positively shocked duration results as well. We did not purchase additional interest rate caps during 2019.

We generally purchase interest rate caps to offset the impact of embedded caps in variable rate GSE MBS/CMOs in rising interest rate scenarios. As expected, these interest rate caps are a satisfactory interest rate risk hedge to rising interest rates and provide an offsetting risk response to the risk profile changes in variable rate GSE CMOs with embedded caps. We periodically assess derivative strategies to ensure that overall balance sheet risk is appropriately hedged within our established risk appetite and make adjustments to the derivative portfolio as needed. This evaluation is completed considering not only the par value of the variable rate MBS/CMO investments with embedded caps being hedged with purchased interest rate caps, but also the composition of the purchased cap portfolio and expected prepayments of the variable rate MBS/CMO investments with embedded caps. This evaluation of the relative relationship between the variable rate investment portfolio and the purchased cap portfolio continues to indicate a sufficient hedging relationship, including a convexity profile that continues to perform well within our expectations. Our purchases of interest rate caps tend to partially offset the negative convexity of our mortgage assets and the effects of any interest rate caps embedded in the variable rate MBS/CMOs.

Convexity is the measure of the exponential change in prices for a given change in interest rates; or more simply stated, it measures the rate of change in duration as interest rates change. When an instrument is negatively convex, price generally increases at a slower pace as interest rates decline. When an instrument’s convexity profile approaches zero, it simply demonstrates that the duration profile is flattening or that the duration is changing at an increasingly slower rate. When an instrument’s convexity profile moves further from zero, the duration profile is steepening and is changing in price at an increasingly faster rate. Duration is a measure of the relative risk of a financial instrument, and the more rapidly duration changes as interest rates change, the riskier the instrument. The variable rate MBS/CMOs have negative convexity as a result of the embedded caps and prepayment options. Additionally, all of our mortgage loans are fixed rate, so they have negative convexity as a result of the prepayment options. We seek to mitigate this negative convexity with purchased options that have positive convexity (interest rate caps) and callable liabilities that have negative convexity (unswapped callable bonds), which offset some or all of the negative convexity risk in our assets. With the changes in current capital market conditions, the relatively low level of interest rates and the general shape of the yield curve, all of which make it challenging to manage our market risk position, we continue to take measured asset/liability actions to stay within established policy limits.

With respect to the down instantaneous shock scenarios, the sensitivities of both the assets and liabilities are impacted to a large extent by the absolute level of rates and the positive non-zero boundary methodology as discussed previously. Since the term structure of interest rates is at or near historically low levels, an instantaneous parallel shock of down 100 basis points or 200 basis points will effectively produce a flattened term structure of interest rates near zero for much of the interest rate term structure. This flattened term structure will produce slight, if any, variations in valuations, which generate near zero duration results since the duration measurement captures the sensitivity of valuations to changes in rates. These near zero duration results should be viewed in the context of the broader risk profile of the base and positive interest rate shock scenarios to establish a sufficient vantage point for helping discern the overall sensitivity of our balance sheet and of DOE. The net DOE decrease in the down 200 basis point interest rate shock scenario during the period is generally a function of related factors noted previously, including the impact of the changing term structure of interest rates. As with all scenario changes that occurred during the period, the impact from various sensitivities was expected and discussed during our regular interest-rate risk profile review process.

As noted previously, if at any point a risk measurement nears or exceeds an operating range or policy limit established by the Board of Directors, certain actions may be implemented both by management and the Board of Directors. We typically manage a DOE measurement that exceeds the established limits with various asset/liability management actions. Whenever an established limit is exceeded, the Board of Directors is advised by management and the issue is discussed at the next regularly scheduled Board of Directors’ meeting. If after discussion, the Board of Directors determines that asset/liability management action is required, management implements the Board-approved approach to address the situation. Even though all of our DOE measurements are inside management’s operating range as of December 31, 2019, active monitoring of portfolio relationships and overall DOE dynamics continues as do evaluation processes for acceptable future asset/liability management actions.

~~In calculating DOE, we also calculate our duration~~ gap ~~which~~ is the difference between the duration of our assets and the duration of our liabilities. Our base duration gap was ~~-0.5~~1.1 months and ~~0.8~~-0.3 months for December 31, ~~2019~~2022 and ~~2018,~~2021, respectively. Again, as discussed previously, the relative performance of the duration gap was primarily the result of the changes in the fixed rate mortgage loan portfolio and the associated funding decisions made by management in response to the interest rate environment. All FHLBanks are required to submit this base duration gap number to the Office of Finance as part of the quarterly reporting process created by the FHFA.

Matching the duration of assets with the duration of liabilities funding those assets is accomplished through the use of different debt maturities and embedded option characteristics, as well as the use of derivatives, primarily interest rate swaps, caps, floors and swaptions as discussed previously. Interest rate swaps increase the flexibility of our funding alternatives by providing desirable cash flows or characteristics that might not be as readily available or cost-effective if obtained in the standard GSE debt market. FHFA regulation prohibits the speculative use of derivatives, and we do not engage in derivatives trading for short-term profit. Because we do not engage in the speculative use of derivatives through trading or other activities, the primary risk posed by derivative transactions is credit risk in that a counterparty may fail to meet its contractual obligations on a transaction and thereby force us to replace the derivative at market price (see Item 7 – “Management's Discussion and Analysis of Financial Condition and Results of Operations - Risk Management – Credit Risk Management” for additional information).

As discussed earlier, the funding of mortgage loans and prepayable assets with liabilities that have similar duration or average cash flow patterns over time is our primary strategy for and means of managing the interest rate risk for these assets. To achieve the desired liability durations, we issue debt across a broad spectrum of final maturities. Because the durations of mortgage loans and other prepayable assets change as interest rates change, callable consolidated obligation bonds with similar duration characteristics, on average, are frequently issued. The duration of callable bonds shortens when interest rates decrease and lengthens when interest rates increase, allowing the duration of the debt to better match the typical duration of mortgage loans and other prepayable assets as interest rates change. In addition to actively monitoring this relationship, the funding and hedging profile and process are continually measured and reevaluated. We may also use purchased interest rate caps, floors and swaptions to manage the duration of our assets and liabilities. For example, in order to manage our interest-rate risk in rising interest rate environments, we may purchase out-of-the-money interest rate caps to help manage the duration extension of mortgage assets, especially variable rate MBS/CMOs with periodic and lifetime embedded interest rate caps. We may also purchase receive-fixed or pay-fixed swaptions (options to enter into receive-fixed rate or pay-fixed rate interest rate swaps) to manage our overall DOE in falling or rising interest rate environments, respectively. During times of falling interest rates, when mortgage assets are prepaying quickly and shortening in duration, we may also synthetically convert fixed rate debt to variable rate using interest rate swaps in order to shorten the duration of our liabilities to more closely match the shortening duration of mortgage assets. As we need to lengthen the liability duration, we terminate selected interest rate swaps to effectively extend the duration of the previously swapped debt.

Market Value of Equity

MVE is the net value of our assets and liabilities. Estimating sensitivity of MVE to changes in interest rates is another measure of interest rate risk. ~~We generally maintain an MVE within limits specified by the Board of Directors in the RMP.~~ The RMP measures our market value risk in terms of the MVE in relation to total regulatory capital stock outstanding (TRCS). TRCS includes all capital stock outstanding, including stock subject to mandatory redemption. As a cooperative, we believe using the TRCS results is an appropriate measure because it reflects our market value relative to the book value of our capital stock. Our RMP stipulates MVE shall not be less than: (1) 100 percent of TRCS under the base case scenario; or (2) 90 percent of TRCS under a ±200 basis point instantaneous parallel shock in interest rates. Table 6146 presents MVE as a percent of TRCS. As of December 31, ~~2019~~,2022, all scenarios are well above the specified limits and much of the relative level in the ratios during the periods covered by the table can be attributed to the relative level of the fixed rate mortgage loan and associated funding portfolio market values ~~as rates have continued to remain historically low~~ along with the relative level of outstanding capital.

The MVE to TRCS ratios can be ~~greatly~~ impacted by the market value of equity sensitivity and level of capital outstanding based on our capital management approach. Typically, as advances increase and the associated capital level increases, the ratio will generally decline since the new advances are primarily short-term with market values at or near par. Conversely, as advance balances decrease and the capital level decreases as capital stock is repurchased, the ratio will generally increase. However, if excess capital stock is not repurchased, the capital level remains higher thereby causing a decrease in the ratio. The relative level of advance, mortgage loan, and letters of credit balances, which trigger required stock, and excess stock as of December 31, ~~2019~~2022 (see Table 4438 under Part I, Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources - Capital”) contributed to the MVE levels as of December 31, ~~2019.~~2022. These relationships and associated risk sensitivity primarily generate the changes in the MVE/TRCS levels and produce the changes in the ratios in all interest rate scenarios in the table below.

Generally, a positive duration position accompanied by rising interest rates would negatively impact the base market value of equity (numerator). Likewise, as capital increases, the MVE/TRCS ratio declines since the capital level is the denominator in the ratio. While rising interest rates contributed to a negative impact on base MVE during the period (mortgage loan portfolio market values declined more than the unswapped callable consolidated obligation bond portfolio), the declining trend in the following ratios over the past few quarters is primarily the result of the increasing capital position as discussed and referenced above.

Table 6146


Market Value of Equity as a Percent of Total Regulatory Capital Stock
Date	Up 200 Basis Points	Base	Down 200 Basis Points
12/31/2022	143	148	154
09/30/2022	147	151	158
06/30/2022	154	159	168
03/31/2022	176	177	182
12/31/2021	186	184	195
09/30/2021	209	201	206
06/30/2021	201	192	196
03/31/2021	205	194	191

Market Value of Equity as a Percent of Total Regulatory Capital Stock
Date Up 200 Basis Points Base Down 200 Basis Points
12/31/2019 175 174 176
09/30/2019 174 174 179
06/30/2019 171 174 176
03/31/2019 172 176 176
12/31/2018 167 173 174
09/30/2018 167 174 175
06/30/2018 168 175 174
03/31/2018 164 171 170

Detail of Derivative Instruments by Type of Instrument by Type of Risk

Various types of derivative instruments are utilized to mitigate the interest rate risks described in the preceding sections as well as to better match the terms of assets and liabilities. Generally, we designate derivative instruments as either: (1) a fair value hedge of an underlying financial instrument; or (2) an economic hedge used in asset/liability management. An economic hedge is defined as a derivative hedging specific or non-specific underlying assets, liabilities or firm commitments that either does not qualify for hedge accounting, or for which we have not elected hedge accounting, but is an acceptable hedging strategy under our RMP. For hedging relationships that are not designated for shortcut hedge accounting, we formally assess (both at the hedge’s inceptionTables 47 and monthly on an ongoing basis) whether the derivatives used have been highly effective in offsetting changes in the fair values of hedged items and whether those derivatives may be expected to remain highly effective in future periods. We typically use regression analyses or similar statistical analyses to assess the quantitative effectiveness of our long haul hedges. We determine the hedge accounting to be applied when the hedge is entered into by completing detailed documentation, which includes a checklist setting forth criteria that must be met to qualify for hedge accounting.

~~Tables 62 and 63~~48 present the notional amount and fair value amount (fair value includes net accrued interest receivable or payable on the derivative) for derivative instruments by hedged item, hedging instrument, hedging objective and accounting designation (in thousands):

~~Table 62~~

12/31/2019
Hedged Item Hedging Instrument Hedging Objective Accounting Designation Notional Amount Fair Value Amount
Advances
Fixed rate non-callable advances Pay fixed, receive variable interest rate swap Convert the advance’s fixed rate to a variable rate index Fair Value Hedge $ 3,160,580
$ 953
Fixed rate convertible advances Pay fixed, receive variable interest rate swap Convert the advance’s fixed rate to a variable rate index and offset option risk in the advance Fair Value Hedge 1,607,500
(24,784 )
Firm commitment to issue a fixed rate advance Forward settling interest rate swap Protect against fair value risk Fair Value Hedge 35,504
28
Firm commitment to issue a fixed rate advance Forward settling interest rate swap Protect against fair value risk Economic Hedge 35,077
(532 )
Fixed rate non-callable advances Pay fixed, receive variable interest rate swap Convert the advance’s fixed rate to a variable rate index Economic Hedge 6,000
(62 )
Investments
Fixed rate non-MBS available-for-sale investments Pay fixed, receive variable interest rate swap Convert the investment’s fixed rate to a variable rate index Fair Value Hedge 4,200,000
(352 )
Fixed rate MBS available-for-sale investments Pay fixed, receive variable interest rate swap Convert the investment’s fixed rate to a variable rate index Fair Value Hedge 2,822,646
(49,571 )
Fixed rate non-MBS trading investments Pay fixed, receive variable interest rate swap Convert the investment’s fixed rate to a variable rate index Economic Hedge 1,898,500
248
Adjustable rate MBS with embedded caps Interest rate cap Offset the interest rate cap embedded in a variable rate investment Economic Hedge 1,130,000
117
Fixed rate MBS trading investments Pay fixed, receive variable interest rate swap Convert the investment’s fixed rate to a variable rate index Economic Hedge 790,045
(24,861 )
Mortgage Loans Held for Portfolio
Fixed rate mortgage purchase commitments Mortgage purchase commitment Protect against fair value risk Economic Hedge 221,800
470
Consolidated Obligation Discount Notes
Fixed rate non-callable consolidated obligation discount notes with tenors of 6 to 12 months Receive fixed, pay variable interest rate swap Convert the discount note's fixed rate to a variable rate Fair Value Hedge 1,383,782
47
Consolidated Obligation Bonds
Fixed rate non-callable consolidated obligation bonds Receive fixed, pay variable interest rate swap Convert the bond’s fixed rate to a variable rate index Fair Value Hedge 2,628,500
14,013
Fixed rate callable consolidated obligation bonds Receive fixed, pay variable interest rate swap Convert the bond’s fixed rate to a variable rate index and offset option risk in the bond Fair Value Hedge 500,000
2,635
Variable rate consolidated obligation bonds Receive variable interest rate, pay variable interest rate swap Reduce basis risk by converting an undesirable variable rate index in the bond to a more desirable variable rate index Economic Hedge 370,000
(342 )
Callable step-up/step-down consolidated obligation bonds Receive variable interest rate with embedded features, pay variable interest rate swap Reduce interest rate sensitivity and repricing gaps by converting the bond’s variable rate to a different variable rate index and/or to offset embedded options risk in the bond Fair Value Hedge 110,000
95
TOTAL $ 20,899,934
$ (81,898 )

Table 6347

12/31/2022

Hedged Item

Hedging Instrument

Hedging Objective

Accounting Designation

Notional Amount

Fair Value Amount

Advances

Fixed rate non-callable advances

Pay fixed, receive variable interest rate swap

Convert the advance’s fixed rate to a variable rate index

Fair Value Hedge

8,219,720

39,770

Fixed rate convertible advances

Pay fixed, receive variable interest rate swap

Convert the advance’s fixed rate to a variable rate index and offset option risk in the advance

Fair Value Hedge

309,650

9,795

Fixed rate non-callable advances

Pay fixed, receive variable interest rate swap

Convert the advance’s fixed rate to a variable rate index

Economic Hedge

34,257

1,107

Firm commitment to issue a fixed rate advance

Forward settling interest rate swap

Protect against fair value risk

Fair Value Hedge

176,464

234

Investments

Fixed rate non-MBS available-for-sale investments

Pay fixed, receive variable interest rate swap

Convert the investment’s fixed rate to a variable rate index

Fair Value Hedge

3,250,000

770

Fixed rate MBS available-for-sale investments

Pay fixed, receive variable interest rate swap

Convert the investment’s fixed rate to a variable rate index

Fair Value Hedge

3,243,924

74,972

Fixed rate non-MBS trading investments

Pay fixed, receive variable interest rate swap

Convert the investment’s fixed rate to a variable rate index

Economic Hedge

798,500

Fixed rate MBS trading investments

Pay fixed, receive variable interest rate swap

Convert the investment’s fixed rate to a variable rate index

Economic Hedge

652,700

32,883

Adjustable rate MBS with embedded caps

Interest rate cap

Offset the interest rate cap embedded in a variable rate investment

Economic Hedge

304,000

1,727

Mortgage Loans Held for Portfolio

Fixed rate mortgage purchase commitments

Mortgage purchase commitment

Protect against fair value risk

Economic Hedge

33,882

(149)

Consolidated Obligation Discount Notes

Fixed rate non-callable consolidated obligation discount notes with tenors less than 6 months

Receive fixed, pay variable interest rate swap

Convert the discount note's fixed rate to a variable rate

Economic Hedge

12,564,086

(1,095)

Fixed rate non-callable consolidated obligation discount notes with tenors of 6 to 12 months

Receive fixed, pay variable interest rate swap

Convert the discount note's fixed rate to a variable rate

Fair Value Hedge

7,508,162

1,003

Consolidated Obligation Bonds

Fixed rate non-callable consolidated obligation bonds

Receive fixed, pay variable interest rate swap

Convert the bond’s fixed rate to a variable rate index

Fair Value Hedge

2,304,500

(18,280)

Fixed rate callable consolidated obligation bonds

Receive fixed, pay variable interest rate swap

Convert the bond’s fixed rate to a variable rate index and offset option risk in the bond

Fair Value Hedge

8,053,000

(458,805)

Variable rate consolidated obligation bonds

Receive variable interest rate, pay variable interest rate swap

Reduce basis risk by converting an undesirable variable rate index in the bond to a more desirable variable rate index

Economic Hedge

100,000

(8)

Callable step-up/step-down consolidated obligation bonds

Receive variable interest rate with embedded features, pay variable interest rate swap

Reduce interest rate sensitivity and repricing gaps by converting the bond’s variable rate to a different variable rate index and/or to offset embedded options risk in the bond

Fair Value Hedge

1,902,000

(124,715)

TOTAL

49,454,845

(440,748)

12/31/2018
Hedged Item Hedging Instrument Hedging Objective Accounting Designation Notional Amount Fair Value Amount
Advances
Fixed rate non-callable advances Pay fixed, receive variable interest rate swap Convert the advance’s fixed rate to a variable rate index Fair Value Hedge $ 2,647,704
$ (1,102 )
Fixed rate convertible advances Pay fixed, receive variable interest rate swap Convert the advance’s fixed rate to a variable rate index and offset option risk in the advance Fair Value Hedge 1,150,850
10,028
Firm commitment to issue a fixed rate advance Forward settling interest rate swap Protect against fair value risk Fair Value Hedge 140,475
(670 )
Firm commitment to issue a fixed rate advance Forward settling interest rate swap Protect against fair value risk Economic Hedge 9,136
(38 )
Fixed rate non-callable advances Pay fixed, receive variable interest rate swap Convert the advance’s fixed rate to a variable rate index Economic Hedge 2,000
(10 )
Investments
Fixed rate MBS available-for-sale investments Pay fixed, receive variable interest rate swap Convert the investment’s fixed rate to a variable rate index Fair Value Hedge 1,752,493
40,197
Adjustable rate MBS with embedded caps Interest rate cap Offset the interest rate cap embedded in a variable rate investment Economic Hedge 1,373,200
1,044
Fixed rate MBS trading investments Pay fixed, receive variable interest rate swap Convert the investment’s fixed rate to a variable rate index Economic Hedge 847,284
12,238
Fixed rate non-MBS trading investments Pay fixed, receive variable interest rate swap Convert the investment’s fixed rate to a variable rate index Economic Hedge 648,500
(1,199 )
Mortgage Loans Held for Portfolio
Fixed rate mortgage purchase commitments Mortgage purchase commitment Protect against fair value risk Economic Hedge 101,551
549
Consolidated Obligation Discount Notes
Firm commitments to issue discount notes Discount note commitment Protect against fair value risk Economic Hedge 525,000
—
Fixed rate non-callable consolidated obligation discount notes with tenors of 6 to 12 months Receive fixed, pay variable interest rate swap Convert the discount note's fixed rate to a variable rate Fair Value Hedge 49,403
—
Consolidated Obligation Bonds
Fixed rate non-callable consolidated obligation bonds Receive fixed, pay variable interest rate swap Convert the bond’s fixed rate to a variable rate index Fair Value Hedge 1,440,000
9,443
Fixed rate callable consolidated obligation bonds Receive fixed, pay variable interest rate swap Convert the bond’s fixed rate to a variable rate index and offset option risk in the bond Fair Value Hedge 680,000
(2,729 )
Variable rate consolidated obligation bonds Receive variable interest rate, pay variable interest rate swap Reduce basis risk by converting an undesirable variable rate index in the bond to a more desirable variable rate index Economic Hedge 645,000
(15,406 )
Callable step-up/step-down consolidated obligation bonds Receive variable interest rate with embedded features, pay variable interest rate swap Reduce interest rate sensitivity and repricing gaps by converting the bond’s variable rate to a different variable rate index and/or to offset embedded options risk in the bond Fair Value Hedge 470,000
(4,325 )
Complex consolidated obligation bonds Receive variable with embedded features, pay variable interest rate swap Reduce interest rate sensitivity and re-pricing gaps by converting the bond’s variable rate to a different variable rate index and/or to offset embedded options risk in the bond Fair Value Hedge 15,000
(1,050 )
TOTAL $ 12,497,596
$ 46,970
Table 48

12/31/2021

Hedged Item

Hedging Instrument

Hedging Objective

Accounting Designation

Notional Amount

Fair Value Amount

Advances

Fixed rate non-callable advances

Pay fixed, receive variable interest rate swap

Convert the advance’s fixed rate to a variable rate index

Fair Value Hedge

4,808,953

(7,734)

Fixed rate convertible advances

Pay fixed, receive variable interest rate swap

Convert the advance’s fixed rate to a variable rate index and offset option risk in the advance

Fair Value Hedge

1,385,150

(38,292)

Fixed rate non-callable advances

Pay fixed, receive variable interest rate swap

Convert the advance’s fixed rate to a variable rate index

Economic Hedge

37,977

(1,189)

Firm commitment to issue a fixed rate advance

Forward settling interest rate swap

Protect against fair value risk

Fair Value Hedge

18,316

232

Firm commitment to issue a fixed rate advance

Forward settling interest rate swap

Protect against fair value risk

Economic Hedge

2,490

—

Investments

Fixed rate MBS available-for-sale investments

Pay fixed, receive variable interest rate swap

Convert the investment’s fixed rate to a variable rate index

Fair Value Hedge

2,970,019

(57,966)

Fixed rate non-MBS available-for-sale investments

Pay fixed, receive variable interest rate swap

Convert the investment’s fixed rate to a variable rate index

Fair Value Hedge

2,700,000

(424)

Fixed rate non-MBS trading investments

Pay fixed, receive variable interest rate swap

Convert the investment’s fixed rate to a variable rate index

Economic Hedge

1,298,500

(115)

Fixed rate MBS trading investments

Pay fixed, receive variable interest rate swap

Convert the investment’s fixed rate to a variable rate index

Economic Hedge

740,863

(27,654)

Adjustable rate MBS with embedded caps

Interest rate cap

Offset the interest rate cap embedded in a variable rate investment

Economic Hedge

477,500

335

Mortgage Loans Held for Portfolio

Fixed rate mortgage purchase commitments

Mortgage purchase commitment

Protect against fair value risk

Economic Hedge

72,025

(13)

Consolidated Obligation Bonds

Fixed rate callable consolidated obligation bonds

Receive fixed, pay variable interest rate swap

Convert the bond’s fixed rate to a variable rate index and offset option risk in the bond

Fair Value Hedge

4,682,000

(35,627)

Fixed rate non-callable consolidated obligation bonds

Receive fixed, pay variable interest rate swap

Convert the bond’s fixed rate to a variable rate index

Fair Value Hedge

1,187,000

14,261

Callable step-up/step-down consolidated obligation bonds

Receive variable interest rate with embedded features, pay variable interest rate swap

Reduce interest rate sensitivity and repricing gaps by converting the bond’s variable rate to a different variable rate index and/or to offset embedded options risk in the bond

Fair Value Hedge

924,000

(10,017)

Firm commitment to issue a consolidated obligation bond

Receive fixed, pay variable interest rate swap

Protect against fair value risk

Fair Value Hedge

20,000

(57)

TOTAL

21,324,793

(164,260)

Item 8: Financial Statements and Supplementary Data

The following financial statements and accompanying notes, including the Report of Independent Registered Public Accounting Firm, are set forth on pages F-1 to ~~F-64~~F-60 of this Form 10‑K.

Audited Financial Statements



Description		Page Number
~~Description~~		~~Page Number~~
Management's Report on Internal Control over Financial Reporting	F-~~F-1~~1
Report of Independent Registered Public Accounting Firm - PricewaterhouseCoopers LLP(PCAOB ID 238)		F-~~F-2~~2
Statements of Condition as of December 31, ~~2019~~2022 and ~~2018~~2021		F-4
Statements of Income for the Years Ended December 31, ~~2019, 2018,~~2022, 2021, and ~~2017~~2020		F-~~F-6~~8
Statements of Comprehensive Income for the Years Ended December 31, ~~2019, 2018,~~2022, 2021, and ~~2017~~2020		F-~~F-8~~10
Statements of Capital for the Years Ended December 31, ~~2019, 2018,~~2022, 2021, and ~~2017~~2020		F-~~F-9~~11
Statements of Cash Flows for the Years Ended December 31, ~~2019, 2018,~~2022, 2021, and ~~2017~~2020		F-~~F-10~~12
Notes to Financial Statements		F-~~F-13~~15

~~Tables 64 and 65 present supplementary quarterly financial information (unaudited) for the years ended December 31, 2019 and 2018 (in thousands):~~

~~Table 64~~

2019
4th Quarter 3rd Quarter 2nd Quarter 1st Quarter
Interest income $ 339,822
$ 396,060
$ 379,556
$ 373,314
Interest expense 270,418
321,645
330,326
310,299
Net interest income 69,404
74,415
49,230
63,015
Provision (reversal) for credit losses on mortgage loans (122 ) 393
38
78
Net interest income after mortgage loan loss provision 69,526
74,022
49,192
62,937
Other non-interest income (loss) 7,438
(1,507 ) 4,368
12,674
Other non-interest expense 18,880
18,633
18,313
16,990
Assessments 5,811
5,391
3,529
5,866
NET INCOME $ 52,273
$ 48,491
$ 31,718
$ 52,755

~~Table 65~~

2018
4th Quarter 3rd Quarter 2nd Quarter 1st Quarter
Interest income $ 350,382
$ 317,122
$ 313,712
$ 275,793
Interest expense 282,207
249,463
244,828
209,314
Net interest income 68,175
67,659
68,884
66,479
Provision (reversal) for credit losses on mortgage loans 372
(391 ) 16
30
Net interest income after mortgage loan loss provision 67,803
68,050
68,868
66,449
Other non-interest income (loss) (1,822 ) (1,500 ) (2,538 ) (6,987 )
Other non-interest expense 17,722
20,428
15,493
15,465
Assessments 4,831
4,618
5,089
4,406
NET INCOME $ 43,428
$ 41,504
$ 45,748
$ 39,591

The significant fluctuations that have occurred in non-interest income (loss) are primarily the result of the recognition of net gains/losses on derivatives and hedging activities as well as the recording of fair value changes on our trading securities. See Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Results of Operations” for additional information.

Item 9: Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

There were no changes in or disagreements with our accountants on accounting and financial disclosure during the two most recent fiscal years.

Item 9A:Controls and Procedures

Disclosure Controls and Procedures

Senior management is responsible for establishing and maintaining a system of disclosure controls and procedures designed to ensure that information required to be disclosed in the reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. Our disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is accumulated and communicated to management, including our principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Our disclosure controls and procedures are designed to provide a reasonable level of assurance in achieving their desired objectives; however, in designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

Management, with the participation of the President and CEO, our principal executive officer, and the Chief Financial Officer (CFO), our principal financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of December 31, ~~2019.~~2022. Based upon that evaluation, the CEO and CFO have concluded that our disclosure controls and procedures were effective at a reasonable assurance level as of December 31, ~~2019.~~2022.

Management’s Report on Internal Control Over Financial Reporting

Management’s Report on Internal Control over Financial Reporting and the Report of Independent Registered Public Accounting Firm with respect to FHLBank’s internal control over financial reporting are included under Item 8 – “Financial Statements and Supplementary Data.”

Changes in Internal Control Over Financial Reporting

There has been no change in our internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) that occurred during the fourth quarter of the year for which this annual report on Form 10-K is filed that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Item 9B: Other Information

None.

Item 9C: Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Not applicable.

PART III

Item 10: Directors, Executive Officers and Corporate Governance

Information About Our Executive Officers

Table 6649 sets forth certain information about each of our executive officers as of the filing date of this annual report on Form 10-K.

Table 66



Executive Officer		Age		Position Held
Mark E. Yardley		6467		President and Chief Executive Officer
~~Patrick C. Doran~~		59	~~EVP/Chief Compliance and Ethics Officer and General Counsel~~
Sonia R. Betsworth	5861		~~SVP/~~EVP/Chief Administrative Officer
~~Denise L. Cauthon~~Jeffrey B. Kuzbel		56		~~SVP/~~EVP/Chief ~~Accounting~~Financial Officer
~~Joe B. Edwards~~Brian J. Dreher		6352		SVP/Chief Information Officer
Dan J. Hess		5457		SVP/Chief Business Officer
Amanda J. Kiefer		47		SVP/Chief Human Resources and Inclusion Officer
Carl M. Koupal, III		39		SVP/Chief Legal and Ethics Officer, Corporate Secretary
Thomas E. Millburn1		4952		SVP/Chief Audit Executive
~~William W. Osborn~~		54	~~SVP/Chief Financial Officer~~
Martin L. Schlossman, Jr.	5154		SVP/Chief Risk Officer
Amy J. Crouch		47		VP/Chief Accounting Officer

__________

1 Although Mr. Millburn is a non-voting member of FHLBank's executive team, he is not considered an "executive officer" as defined in Rule 3b-7 of the Exchange Act because he is not in charge of a principal business unit, division or function, nor does he perform a policy making function.

No executive officer has any family relationship with any other executive officer or director. All executive officers, other than the Chief ~~Compliance and Ethics Officer (CCEO) and General Counsel, the Chief~~ Audit Executive and the Chief Risk Officer (CRO), may be removed from office or discharged by the ~~Board~~board of ~~Directors~~directors or the President and CEO with or without cause. The Chief Audit Executive may be removed from office, with or without cause, only with the approval of the Audit Committee. The ~~CCEO and General Counsel and the~~ CRO may be removed from office, with or without cause, only with the approval of the Risk Oversight Committee.

There are no arrangements or understandings between any executive officer and any other person pursuant to which the executive officer was or is to be selected as an officer of FHLBank, including no employment agreement between any executive officer and FHLBank.

Except as otherwise indicated below, each officer has been engaged in the principal occupation listed above for at least five years:

Mark E. Yardley became President and CEO in March 2017, after serving as Interim President and CEO starting in January 2017. From May 2010 through December 2016, he was Executive Vice President and CRO. Mr. Yardley previously served as Executive Vice President and CFO from February 2005 to May 2010, First Senior Vice President and CFO from December 1999 through February 2005 and as First Senior Vice President, Director of Finance, from January 1999 to December 1999. Mr. Yardley joined FHLBank in 1984 as Director of Internal Audit and was promoted to Assistant Vice President in 1990 and Vice President in 1991.

Patrick C. Doran became Executive Vice President, CCEO and General Counsel in December 2017. From March 2016 to December 2017, he served as Executive Vice President, Chief Compliance Officer and General Counsel, and from December 2015 to March 2016, he was Senior Vice President, General Counsel, Chief Compliance Officer and Corporate Secretary. He served as Senior Vice President, General Counsel and Corporate Secretary from May 2004 to December 2015.

Sonia R. Betsworth became Executive Vice President and Chief Administrative Officer (CAO) in January 2022, after serving as Senior Vice President and CAO since March 2017, ~~after serving~~and as Interim CAO starting in January 2017. Ms. Betsworth is responsible for overseeing FHLBank’s Information Technology, Building Services and Security, Corporate Portfolio Management, and Corporate Strategies activities. From March 2013 through December 2016, she was Senior Vice President and Chief Credit Officer. She served as Senior Vice President, Director of Credit from July 2009 to March 2013; Senior Vice President, Director of Member Products from April 2006 through June 2009; Director of Sales, Lending and Collateral from 2002 to April 2006; and Director of Credit and Collateral from 1999 to 2002. She joined FHLBank in 1983. Ms. Betsworth was named Assistant Vice President in 1994 and Vice President in 1998.

~~Denise L. Cauthon~~

Jeffrey B. Kuzbel became Executive Vice President and CFO in January 2022, after serving as Senior Vice President and ~~Chief~~CFO starting in April 2021. Mr. Kuzbel is responsible for overseeing FHLBank’s Accounting ~~Officer~~and Capital Markets activities. Prior to joining FHLBank in ~~December 2010. Ms. Cauthon~~2021, Mr. Kuzbel served as ~~First~~LIBOR Transition Executive at Capital One Financial from 2019 to March 2021; Treasury & Balance Sheet Management CFO at Capital One Financial from 2016 through 2018; Managing Vice President, ~~and Chief Accounting Officer~~Balance Sheet Management, at Capital One Financial from ~~May to December 2010, First~~2013 through 2015; Vice President, Balance Sheet Strategy from 2010 through 2012; and ~~Controller from March 2007~~Senior Director, Treasury Finance & Analytics during 2009. Prior to ~~April 2010, and~~his tenure at Capital One Financial, Mr. Kuzbel served as Lead Director – Market Risk Management for Freddie Mac, as Vice President – Fixed Income Portfolio Management and ~~Controller from January 2005 to March 2007. Ms. Cauthon joined FHLBank in 1989~~Trading at Advanced Investment Management, Inc., and as a staff internal auditor and was promoted to Assistant Liability Manager and then Financial Reporting Accountant in 1998. Ms. Cauthon was promoted to Financial Reporting and Operations Manager in 1999 and was named Assistant Vice President in 2000. She was promoted to Assistant Controller-Financial Reporting in 2002 and became Vice President in 2004.Head of Investments at the Federal Home Loan Bank of Pittsburgh.

~~Joe B. Edwards~~Brian Dreher became Senior Vice President and Chief Information Officer (CIO) in ~~July 2013. Prior to joining FHLBank in 2013, Mr. Edwards was Senior~~January 2022, after serving as Vice President and ~~CIO at ACE Cash Express, Inc., a multi-unit retailer~~Director of ~~financial services, where he was~~IT Infrastructure & Operations starting in 2014. Mr. Dreher is responsible for FHLBank’s Information Technology activities, including IT ~~development, operations, business intelligence~~governance, application solutions delivery, information security, infrastructure, and ~~call center operations~~operations. He served as Vice President, Assistant Director of Information Technology from ~~January 1998 through his retirement~~2010 to 2014 and Vice President, Software Development Manager from 2004 to 2010. He joined FHLBank in ~~December 2012.~~1998.

Dan J. Hess became Senior Vice President and Chief Business Officer in March 2013. Mr. Hess is responsible for overseeing FHLBank’s Product Administration and Lending, Product Development and Research, Sales, Member Solutions, and Wire Services activities. Mr. Hess previously served as Senior Vice President, Director of Member Products from July 2009 to March 2013; First Vice President, Director of Sales from April 2002 to May 2009; and Senior Vice President, Director of Sales from May 2009 to July 2009. Mr. Hess joined FHLBank in 1995 as a Correspondent Banking Account Manager for Kansas. He was promoted to Lending Officer in 1997, to Assistant Vice President and Lending Manager in 1999, and to Vice President in 2000.

Amanda J. Kiefer became Senior Vice President and Chief Human Resources and Inclusion Officer in October 2021. Ms. Kiefer is responsible for overseeing FHLBank’s Human Resources and DEI activities. Ms. Kiefer previously served as First Vice President, Director of Human Resources and Inclusion since January 2016, and as Interim Director of Human Resources from October 2015 to January 2016. Ms. Kiefer joined FHLBank in 2011 as Officer and Corporate Counsel, and was subsequently promoted to Assistant Vice President, Assistant General Counsel and OMWI Officer.

Carl M. Koupal, III became Senior Vice President and Chief Legal and Ethics Officer (CLEO), Corporate Secretary in October 2022. Mr. Koupal is responsible for overseeing FHLBank’s Legal Services, Housing and Community Development, Government and Industry Relations, and Corporate Governance activities. Mr. Koupal previously served as Chief Compliance and Ethics Officer & General Counsel, Corporate Secretary since October 2021, as First Vice President, Associate General Counsel, Director of Legal Services and Compliance, Corporate Secretary from April 2018 to October 2021, and as Vice President, Assistant General Counsel, Director of Compliance and Corporate Secretary from March 2016 through March 2018. Mr. Koupal joined FHLBank in 2008 as a Law Clerk and was promoted to Staff Attorney in 2009, Legal and Compliance Officer in 2011, Assistant Vice President, Assistant General Counsel, Director of Compliance and Assistant Corporate Secretary in 2014, and Vice President, Assistant General Counsel, Director of Compliance and Corporate Secretary in 2016.

Thomas E. Millburn became Senior Vice President, Chief Audit Executive in March 2016. Mr. Millburn is responsible for overseeing FHLBank’s Internal Audit activities. Mr. Millburn previously served as Senior Vice President, Chief Internal Audit Officer from March 2011 to March 2016 and Senior Vice President, Director of Internal Audit from December 2010 to March 2011. Mr. Millburn joined FHLBank in 1994 as a staff internal auditor and was promoted to Assistant Vice President, Director of Internal Audit in 1999, Vice President in 2000 and ~~then to~~ First Vice President in March 2004.

William W. Osborn became Senior Vice President and CFO in June 2010. Mr. Osborn joined FHLBank in May 2006 as Director of Product Profitability and Pricing. He was promoted to Director of Banking Strategies in January 2008, to First Vice President in April 2008 and to Senior Vice President in April 2009.

Martin L. Schlossman, Jr. became CRO in March 2017, after serving as Interim CRO starting in January 2017. Mr. Schlossman is responsible for overseeing FHLBank’s Credit, Mark Risk Analysis, and Operations Risk and Compliance activities. Mr. Schlossman previously served as Senior Vice President, Associate CRO from March 2012 through December 2016. He joined FHLBank in November 2000 as an Enterprise Risk Analyst and was promoted to Planning Officer in December 2001, Assistant Vice President in March 2004, Vice President in June 2005, and First Vice President in March 2009. He was named Associate CRO in June 2010 and was promoted to Senior Vice President in March 2012.

Amy J. Crouch became Chief Accounting Officer and FHLBank’s Principal Accounting Officer in January 2023. Ms. Crouch is responsible for FHLBank’s Accounting activities, including financial reporting. Ms. Crouch previously served as Vice President, Director of Financial Reporting since September. 2011, and as SEC Reporting and Compliance Manager from April 2008 to September 2011. She joined FHLBank in 2005 as SEC Reporting and Compliance Accountant.

Directors

The Bank Act (as amended by the Recovery Act) and FHFA regulations mandate that our ~~Board~~board of ~~Directors~~directors consist of 13 directors or such other number as may be provided by the FHFA, a majority of whom are to be member directors and at least two-fifths of whom are to be independent directors. Due to the interplay of the “method of equal proportions,” which the FHFA uses to allocate member directorships to each state in our four-state district, the requirement that at least two-fifths of the directorate must be comprised of independent directors, and the requirement that the number of member directorships allocated to each of those four states must be at least equal to the number allocated to each state on December 31, 1960, the FHFA may require from time to time the allocation of additional member director seats. AsOur board of ~~the date of this annual report on Form 10-K, our Board of Directors~~directors currently consists of 17 directors, 10 of whom are member directors and 7 of whom are ~~independent directors. In addition, FHLBank currently has one vacant independent directorship, which when filled will bring FHLBank’s board to 18 directors, including 8~~ independent directors. Under the FHFA regulations, new and re‑elected directors serve four-year terms, subject to adjustment by the FHFA to establish staggering of the board. Directors cannot be elected to serve more than three consecutive full terms. A director who was term-limited may be re‑elected to a directorship for a term that commences no earlier than two years after the expiration of the third full term. Each director must be: (1) a citizen of the United States; and (2) either a bona fide resident in our district or serve as an officer or director of a member located in our district. Additionally, at least two of the independent directors must qualify as public interest directors. To qualify as a public interest director, an individual must have more than four years of experience in representing consumer or community interests in banking services, credit needs, housing, or consumer financial protections.

Member directorships are designated to each of the four states in our district and each of our members is entitled to nominate and vote for candidates representing the state in which the member’s principal place of business is located. To qualify as a nominee for a member directorship, a nominee must be an officer or director of a member located in the state to which the director of the FHFA has allocated the directorship, and such member must meet all minimum capital requirements established by its appropriate Federal banking agency or appropriate state regulator. Member directors are nominated by members located in the state to which the member directorship is assigned, based on a determination by the nominating institution that the nominee possesses the applicable experience, qualifications, attributes and skills to qualify the nominee to serve as an FHLBank director, without any participation from our ~~Board~~board of ~~Directors.~~directors. Following the nomination process, a member is entitled to cast, for each applicable member directorship, one vote for each share of capital stock that the member is required to hold, subject to a statutory limitation. Under this limitation, the total number of votes that each member may cast is limited to the average number of shares of capital stock that were required to be held by all members in that state as of the record date for voting.

Each of our member directors meets the required qualifications and, as such, each is an officer or director of a member in the respective state from which they were nominated and elected.

Independent directors are elected by ballot from among those eligible persons nominated by the ~~Board~~board of ~~Directors~~directors after consultation with the Affordable Housing Advisory Council and after the nominee has been submitted to the FHFA for review. In nominating independent directors, our ~~Board~~board of ~~Directors~~directors may consider an individual’s current and prior experience on the ~~Board~~board of ~~Directors,~~directors, the qualifications of the nominee, and the skills and experience most likely to add strength to the ~~Board~~board of ~~Directors,~~directors, among other skills, qualifications and attributes. FHFA regulations require us to encourage the consideration of diversity in nominating or soliciting nominees for positions on our ~~Board~~board of ~~Directors.~~directors. Pursuant to our Procedures for Identifying and Evaluating Candidates for Independent Directorships and Filling Vacant Directorships, our ~~Board~~board of ~~Directors~~directors will consider diversity in nominating independent directors and in electing member directors when the ~~Board~~board of ~~Directors~~directors is permitted to elect or appoint member directors in the event of a vacancy, and in evaluating potential director candidates, the ~~Board~~board of ~~Directors~~directors may also identify appropriate criteria that will promote appropriate diversity on the ~~Board~~board of ~~Directors~~directors and help meet ~~FHLBank’s~~our strategic needs, including desired skill sets, experience, residence, ability to devote sufficient time to service on the ~~Board~~board of ~~Directors,~~directors, ethnicity and/or gender. If our ~~Board~~board of ~~Directors~~directors nominates only one individual for each independent directorship, then each nominee must receive at least 20 percent of the number of votes eligible to be cast in the election to be elected. If our ~~Board~~board of ~~Directors~~directors nominates more persons for the type of independent directorship to be filled than there are directorships of that type to be filled in the election, then the nominee receiving the highest number of votes will be elected. Each member voting in the independent director election is entitled to cast one vote for each share of capital stock that the member is required to hold, subject to the statutory limitation discussed above. Our ~~Board~~board of ~~Directors~~directors has adopted procedures for the nomination and election of independent directors, consistent with the requirements of the Bank Act and FHFA regulations.

There are no arrangements or understandings between any director and any other person pursuant to which the director was or is to be selected as a director or nominee. No director has any family relationship with any other director or executive officer. No director or executive officer of FHLBank has been involved in any legal proceeding during the past ten years that would affect the integrity or ability of such director or nominee to serve in such capacity, including any proceedings identified in Item 401(f) of Regulation S-K.

On November ~~15, 2019, Craig A. Meader~~8, 2022, Barry J. Lockard from the state of ~~Kansas and G. Bridger Cox and Donald R. Abernathy~~Nebraska, Douglas E. Tippens from the state of Oklahoma, and Lance L. White from the state of Kansas were each declared elected as member directors, and ~~Holly Johnson was~~Thomas E. Henning and Carla D. Pratt were each declared elected as an independent ~~director~~directors of FHLBank’s ~~Board~~board of ~~Directors.~~directors. Each of the directors elected in ~~2019~~2022 will serve four-year terms expiring December 31, ~~2023.~~2026.

Table 6750 sets forth certain information regarding each of our directors as of the filing date of this annual report on Form 10-K.

Table 67

Director

Age

Type of

Directorship

Director Since

Current Term

Expiration

Board Committee

Membership¹

Donald R. Abernathy, Jr.

6166

Member

January 2020

December 2023

(a), (d)

Milroy A. Alexander

7073

Independent

January 2015

December ~~2020~~2024

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

~~Robert~~G. Bridger Cox

Member

January 2011

December 2023

(b), (c) Chair

Thomas E. ~~Caldwell, II~~Henning

4970

Independent

January ~~2004~~2023

December ~~2022~~2026

(a), (b), (d)

Michael B. Jacobson

Member

January 2022

December 2025

(d), (f)

Holly Johnson

Independent

January 2016

December 2023

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

Lynn Jenkins Katzfey

Independent

July 2019

December 2024

(e), (f)

Barry Lockard

Member

January 2019

December 2026

(b), (c) Vice Chair, ~~(d)~~(e), (f)

~~G. Bridger Cox~~

~~Member~~

~~January 2011~~

~~December 2023~~

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

~~Holly Johnson~~

~~Independent~~

~~January 2016~~

~~December 2023~~

~~(a), (b)~~

~~Lynn Katzfey~~

~~Independent~~

~~July 2019~~

~~December 2020~~

~~(a), (e)~~

~~Jane C. Knight~~

~~Independent~~

~~January 2004~~

~~December 2022~~

~~(d), (e)~~

~~Barry Lockard~~

~~Member~~

~~January 2019~~

~~December 2022~~

~~(e), (f)~~

~~Richard S. Masinton~~

~~Independent~~

~~April 2007~~

~~December 2021~~

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

~~Neil F. M. McKay~~

~~Independent~~

~~April 2007~~

~~December 2020~~

~~(d), (f)~~

Craig A. Meader

6265

Member

January 2020

December 2023

(e), (f)

L. Kent Needham

6669

Member

January 2013

December ~~2020~~2024

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

Jeffrey R. Noordhoek

Independent

July 2020

December 2025

(b), (f)

Mark J. O’Connor

5558

Member

May 2011

December ~~2021~~2025

(c), (d), (f) Chair

Thomas H. Olson, Jr.

5457

Member

January 2013

December ~~2020~~2024

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

~~Mark W. Schifferdecker~~Carla D. Pratt

5554

~~Member~~Independent

January ~~2011~~2023

December ~~2022~~2026

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

Douglas E. Tippens

6568

Member

January 2015

December ~~2022~~2026

(b), (e), (f)

~~Gregg~~Paul E. Washington

Independent

July 2021

December 2025

(a), (e)

Lance L. ~~Vandaveer~~White

6749

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 17 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 at Legacy Bank, Hinton, Oklahoma, since June of 2021 and was Senior Vice President from December 2020 to June 2021. Prior to his positions at Legacy Bank, Mr. Abernathy served as President and CEO of The Bankers Bank, Oklahoma City, Oklahoma, since 1993, and ~~has~~had served on the board of directors of Bankers Banc Investment Services, Inc., since December 2006. Although the ~~Board~~board of ~~Directors~~directors did not participate in Mr. Abernathy's nomination since he is a member director, Mr. Abernathy possesses a bachelor's degree of business administration, has more than 40 years of banking experience, including 2530 as a 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. Prior to his current term, Mr. Abernathy served as a member director of FHLBank from January 2017 through December 2018.

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 completed his final term as a director~~commercial redevelopment authority. A former board member of the Municipal Securities Rulemaking Board, ~~in September 2013. He~~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 of the Lowry Redevelopment 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 2221 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 enhance the diversity of viewpoints among the directors serving on the ~~Board~~board of ~~Directors~~directors by providing the ~~Board~~board of ~~Directors~~directors with racial diversity, when making his nomination.

Robert E. Caldwell, II is the Vice Chair of our Board of Directors. Mr. Caldwell is currently Executive Vice President and Chief Administrative Officer for Nebco, Inc., 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 Chief Operating Officer of WRK Real Estate, LLC, which he began in January 2014. He previously served as President and CEO of Hampton Enterprises, Inc., a commercial real estate development, general contracting, construction management and property management firm, since 2006, 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, including 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~~board of ~~Directors.~~directors. Mr. Cox has been Chairman ~~and President~~ of Citizens Bank & Trust Company, Ardmore, Oklahoma, since 1996. He also served as President of Citizens Bank & Trust Company from 1996 to 2021. Although the ~~Board~~board of ~~Directors~~directors did not participate in Mr. Cox’s nomination since he is a member director, Mr. Cox is a graduate of the Stonier Graduate School of Banking at Rutgers University, possesses more than 30 years of banking management experience, has served on the board of directors of the Oklahoma Industrial Finance Authority and the Oklahoma Development Finance Authority, and has prior experience as an FHLBank director, that assists in his service as a director. Prior to his current term, Mr. Cox served as a member director of FHLBank from January 1998 through December 2006.

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 board of publicly traded companies; his more than 40 years of financial services experience; his prior 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. Jacobson served as a member director of FHLBank from January 2012 through December 2019.

Holly Johnson, a Chickasaw citizen and ~~certified public accountant,~~CPA, owns a tribal consulting company providing services to the Chickasaw Nation in the area of administrative support and policy development. She served as Secretary of the Department of Treasury for the Chickasaw Nation from October 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. 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 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. 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 enhance the diversity of viewpoints among the directors serving on the ~~Board~~board of ~~Directors~~directors by providing the ~~Board~~board of ~~Directors~~directors with gender and racial diversity, when making her nomination.

Lynn Jenkins Katzfey has been a partner at LJ Strategies since January 2019. Ms. Katzfey worked as a ~~certified public accountant~~CPA for 16 years before launching a career in public service. Ms. Katzfey served as Treasurer of the State of Kansas and was subsequently elected to serve five terms in the U.S. House of Representatives. She currently serves on the boards of directors for American Century Investments Mutual Funds and previously served on the board of directors of MGP Ingredients, Inc. The ~~Board~~board of ~~Directors~~directors considered Ms. Katzfey's qualifications, skills and attributes, including 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,~~Committee; her role as the Treasurer of the State of ~~Kansas,~~Kansas; her experience as a ~~certified public accountant~~CPA and at public accounting ~~firms,~~firms; her experience in and knowledge of auditing and accounting, financial management, organizational management, project development, and the ~~law,~~law; and her ability to enhance the diversity of viewpoints among the directors serving on the ~~Board~~board of ~~Directors~~directors by providing the ~~Board~~board of ~~Directors~~directors with gender diversity, when making her nomination.

Jane C. Knight, now retired, served as Vice President of Site-based Strategies for 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 service as Director of the Kansas Governor’s regional office, her experience with housing issues through the Governor’s office and Habitat for Humanity, her experience with not-for-profit organizations, her ability to enhance the diversity of viewpoints among the Board of Directors by providing the Board of Directors with gender diversity, and her prior service as an FHLBank director, when making her nomination.

Barry J. Lockard has served as President and CEO of Cornhusker Bank, Lincoln, Nebraska, since 2007. Mr. Lockard previously held senior leadership roles at Black and Decker, Cincinnati Bell, and First National Bank of Omaha. He also served eight years in the Nebraska Army National Guard. He has served on the boards of directors of the Nebraska Bankers Association, the American Bankers Association 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. Lockard’s nomination since he is a member director, Mr. Lockard possesses a bachelor’s degree in business administration, is a graduate of the Colorado Graduate School of Banking, and has more than 1115 years as a bank CEO, that assists in his service as a director.

Richard S. Masinton, now retired, was Executive Vice President 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 of Russell Stover Candies in Kansas City, Missouri, from 1996 until 2008. Mr. Masinton has 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 University of Kansas School of Business 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 certification as a CPA, 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 as a corporate executive, and his prior service as an FHLBank director, when making his nomination.

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.

Craig A. Meader has served as Chairman and CEO of First National Bank of Kansas since 1988. Mr. Meader has served as Chairman of the Kansas Bankers Association and the Bankers Bank of Kansas. Mr. Meader is a former member of the ~~ABA~~American Bankers Association (ABA) Community Bankers Council, Government Relations Council and the ABA ~~Board~~board of ~~Directors.~~directors. Although the ~~Board~~board of ~~Directors~~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 finance, is a graduate of the Madison Wisconsin Graduate School of Banking, served on the board of directors of Bankers’ Bank of Kansas, N.A. for seven years, including one year as Chairman, and has more than 3040 years as a bank CEO, that assists in his service as a director.

L. Kent Needham has served as Chairman, President and CEO of The First Security Bank, Overbrook, Kansas, since 2007. Although the ~~Board~~board of ~~Directors~~directors did not participate in Mr. 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 4140 years of banking experience, including more than 2120 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 3130 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 17 years of investment portfolio management experience. Mr. O’Connor serves on the Foundation Board of a local university and chairs its Investment Committee.~~company. His experience on the board of a state housing finance authority, including service as chairman, and his prior experience as an FHLBank director 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 of Points West Community Bank, Windsor, Colorado, Chairman of First Nebraska Bancs, Inc., Chairman of Bank of Estes Park, Chairman of First National Financial, Director of 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 2636 years of banking experience, including more than 21 years as CEO, that assists in his service as a director.

~~Mark W. Schifferdecker~~Carla D. Pratt has been President and CEO of The GNBank, N.A., 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 16 years of experienceserved as the ~~CEO~~Ada Lois Sipuel Fisher Chair in Civil Rights, Race, and Justice in Law at the University of ~~a community bank,~~Oklahoma College of Law since May 2022. Prior to her current position she served ~~more than 10 years~~as Dean and Professor of Law at Washburn University School of 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 Penn State’s Dickinson School of Law beginning in July 2000. Prior to joining academia, she practiced insurance law and commercial litigation. The board of directors considered Ms. Pratt’s qualifications, skills and attributes, including her position as former Dean and Professor of Law at Washburn University School of Law; her service as an ~~auditor with KPMG, served six years~~Associate Justice of the Standing Rock Sioux Supreme Court; her service on the accrediting body that is authorized by the U.S. Department of Education to accredit American law schools; her experience and deep understanding of diversity and inclusion issues and initiatives; her experience in and knowledge of auditing and accounting, financial management, organizational management, project development, risk management practices, and the law; and her ability to enhance the diversity of viewpoints among the directors serving 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~~by providing the board of directors ~~of Bankers’ Bank of Kansas, N.A., including one year as Chairman, that assists in his service as a director.~~with racial and gender diversity, when making her nomination.

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, an MBA, is a graduate of the Graduate School of Banking at the University of Wisconsin, has more than 40 years of banking experience, including 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~~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. ~~Vandaveer~~White has served as President and CEO of ~~Sooner State~~ Bank ~~Tuttle, Oklahoma,~~of the Flint Hills, Wamego, Kansas, since ~~April 2001.~~2007. Although the ~~Board~~board of ~~Directors~~directors did not participate in Mr. ~~Vandaveer's~~White’s nomination since he is a member director, Mr. ~~Vandaveer possesses~~White has a B.S. in ~~journalism,~~Accounting, is a graduate of the ~~Southwest~~Colorado Graduate School of Banking, ~~at SMU,~~has served on the Community Depository Institutions Advisory Council of the Federal Reserve Bank of Kansas City, and has ~~more than 37~~over 25 years of banking experience, including ~~21 years~~more than 15 as ~~President and~~ 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 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. 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 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~~Holly Johnson (chair), Donald R. Abernathy, Jr., Milroy A. Alexander, ~~Holly Johnson, Lynn Katzfey,~~Thomas E. Henning, L. Kent Needham, ~~and~~ Thomas H. Olson, Jr. and Paul E Washington.

The ~~Board~~board of ~~Directors~~directors has determined that ~~Mark W. Schifferdecker~~Holly Johnson is an “audit committee financial expert” as that term is defined under SEC regulations. ~~Mr. Schifferdecker~~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’ efforts to build strong communities.

During 2019, we experienced strong performance overall against our long-term objectives. 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 ~~2019 were comprised of~~2022 were: (1) the President and ~~CEO,~~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 ~~2019,~~2022, 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 ~~2019,~~2022, 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 ~~2019~~2022 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 ~~2019:~~ 2022: To implement our compensation objectives, the elements of our ~~2019~~2022 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 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.

For ~~2019~~2022 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 is 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"~~“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. Additionally, in calculating the market composite benchmark, for the commercial banks' peer group, Divisional Heads are used as the relevant comparison at the median. For the other FHLBanks' peer group, overall Functional Heads are used at the median. For the third peer group, ~~salary rank is used except for~~this only applies to the CEO and CFO ~~where the actual position is used; in addition,~~positions reflected as the low ~~quartile is used.~~quartile.

In addition to the FHLBanks, the following is a list of survey participants that were included by McLagan in the ~~2019~~ FHLBank Custom Compensation ~~Survey:~~

Survey that was used for the Named Executive Officers, excluding the CEO and CFO, 2022 compensation review:



AIB		HSBC
Ally Financial Inc.		Huntington Bancshares, Inc.
Arvest Bank		ICBC Financial Services
~~Ally Financial Inc.~~Associated Bank		ING
~~Associated Bank~~		~~Intesa Sanpaolo~~
Australia & New Zealand Banking Group	~~Investors Bancorp, Inc~~
~~Banco Bilbao Vizcaya Argentaria~~	JP Morgan Chase
~~Banco ltau Unibanco~~		~~KBC Bank~~
~~Bank Hapoalim~~	~~KeyCorp~~
Bank of America ~~Merrill Lynch~~	~~Landesbank Baden-Wuerttemberg~~KBC Bank
Bank of New York Mellon		~~Lloyds Banking Group~~KeyCorp
Bank of Nova Scotia		~~M&T Bank Corporation~~Lloyds Banking Group
Bank of the West		~~Macquarie~~M&T Bank Corporation
~~Bayerische Landesbank~~BMO Financial Group		~~MB Financial~~Macquarie Bank


BNP Paribas
~~BBVA Compass~~	MUFG Bank, Ltd.
~~BMO~~BOK Financial ~~Group~~Corporation		~~MUFG Securities~~
~~BNP Paribas~~	National Australia Bank
~~BOK Financial Corporation~~		~~Natixis~~
~~Branch Banking & Trust Co.~~	~~New York Community Bank~~
Brown Brothers Harriman	~~Nord/LB~~Natixis Corporate & Investment Banking
Capital One		~~Nordea Bank~~NatWest
~~Charles Schwab & Co.~~CIBC World Markets		~~Norinchukin Bank, New York Branch~~Nomura Securities
~~China Construction Bank~~Citigroup		Nord/LB
Citizens Financial Group		Northern Trust Corporation
~~CIBC World Markets~~		~~PacWest Bancorp~~
~~CIT Group~~	~~People's United Bank, National Assoc~~
~~Citigroup~~	~~PNC Bank~~
~~Citizens Financial Group~~	~~Popular Community Bank~~
City National Bank	~~Rabobank~~OneMain Financial
Comerica		Pinnacle Financial Partners, Inc.
Commerce Bank		PNC Bank
Commerzbank		Rabobank
Commonwealth Bank of Australia		Regions Financial Corporation
~~Commerce Bank~~Crédit Agricole CIB		Royal Bank of Canada
~~Commerzbank~~Credit Industriel et Commercial – N.Y.		~~Royal Bank of Scotland Group~~Sallie Mae
~~Commonwealth Bank of Australia~~		~~Santander Bank, NA~~
~~Credit Agricole CIB~~	~~Signature Bank - NY~~
~~Credit lndustriel et Commercial - N.Y.~~	~~Societe Generale~~
~~Cullen Frost Bankers, Inc.~~	~~Standard Chartered Bank~~
~~DBS Bank~~	~~State Street Corporation~~
~~DZ Bank~~	~~Sterling National Bank~~
East West Bancorp, Inc.	~~Sumitomo Mitsui Banking Corporation~~Santander Bank, N.A.
Fannie Mae		~~Sumitomo Mitsui Trust~~Signature Bank – NY
Federal Reserve Bank of Atlanta		~~SunTrust Banks~~Societe Generale
Federal Reserve Bank of Boston		~~SVB Financial Group~~Standard Chartered Bank
Federal Reserve Bank of Cleveland		~~Synchrony Financial~~State Street Corporation
Federal Reserve Bank of ~~New York~~Kansas City		~~Synovus~~Sterling National Bank
Federal Reserve Bank of Minneapolis		Sumitomo Mitsui Trust Bank
Federal Reserve Bank of Richmond		~~TD Ameritrade~~SVB Financial Group
Federal Reserve Bank of San Francisco		~~TD Securities~~Synovus Financial Corporation
Federal Reserve Bank of St Louis		TD Securities
Fifth Third Bank		Texas Capital Bank
~~Fifth Third Bank~~		~~The PrivateBank~~
First Citizens Bank - NC	~~U.S. Bancorp~~Truist
First National Bank of Omaha		U.S. Bancorp
First Republic Bank		UMB Financial Corporation
~~First Tennessee Bank/ First Horizon~~Freddie Mac		~~Umpqua Holding Corporation~~Valley National Bancorp
~~FNB Omaha~~Frost Bank		~~UniCredit~~Webster Bank AG
~~Freddie Mac~~Hancock Whitney Bank		~~Valley National Bank~~
~~GE Capital~~	~~Webster Bank~~
~~Hancock Bank~~	Wells Fargo Bank
~~HSBC~~Helaba Landesbank Hessen-Thuringen		~~Westpac Banking Corporation~~
~~Huntington Bancshares, Inc.~~	Zions Bancorporation

The following is a list of regional and community banks with $10 billion to $20 billion in assets, which is the peer group used for the ~~2019~~CEO and CFO 2022 compensation benchmarks:



~~Arvest~~Axos Financial, Inc.		~~FirstBank Holding Company~~Hope Bancorp, Inc.
Banner Corporation		Independent Bank ~~of Hawaii~~	~~Flagstar Bank~~Group, Inc.
Berkshire ~~Bank~~Hills Bancorp, Inc.		~~Golden 1 Credit Union~~International Bancshares Corporation
~~Boeing Employees Credit Union~~		~~Great Western Bank~~
~~Bremer Financial Corporation~~	~~MidFirst Bank~~
~~Cathay General Bancorp~~	~~SchoolsFirst Federal Credit Union~~
~~Chemical Financial Corporation~~	~~Simmons First National Corporation~~
~~City National Bank of Florida~~	~~South State Bank~~
Community Bank System, Inc.	~~Trustmark Corporation~~Merchants Bancorp
~~Eastern Bank~~Customers Bancorp, Inc.		~~United Bank - VA~~NBT Bancorp Inc.
CVB Financial Corp.		Northwest Bancshares, Inc.
Dime Community Bancshares, Inc.		OceanFirst Financial Corp.
Eagle Bancorp, Inc.		Provident Financial Services, Inc.
Enterprise Financial Services Corp		Renasant Corporation
FB Financial Corporation		Sandy Spring Bancorp, Inc.
First Busey Corporation		Silvergate Capital Corporation
First Financial Bancorp.		TFS Financial Corporation
First Financial Bankshares, Inc.		TowneBank
First Foundation Inc.		Trustmark Corporation
First Interstate BancSystem, ~~Inc~~Inc.		~~United Community Banks, Inc~~Washington Federal, Inc.
First ~~Midwest Bank~~Merchants Corporation		WesBanco, Inc.
Heartland Financial USA, Inc.		WSFS Financial Corporation
Home Bancshares, Inc. (Conway, AR)

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 FHLBank-based survey data and the broader survey data utilized, 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 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 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 ~~were~~ made effective January 1st, following an analysis of our total compensation practices and FHLBank’s performance.

For ~~2019,~~2022, 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 ~~2019~~2022 were based on: (1) each Named Executive Officer’s scope of responsibility and accountability; (2) analysis of our comparator peer groups; (3) performance of 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 FHLBank. The Compensation Committee believes that internal pay equity provides an additional perspective to that of peer group 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 thatinformation 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 ~~2019,~~2022, 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. Table 6851 presents the total base salary and the percentage of salary increase for the Named Executive Officers, effective January 1, ~~2019:~~2022:

Table68

Named Executive Officer Percentage Increase Salary
Mark E. Yardley, President & CEO¹
5.0 % $ 682,500
Patrick C. Doran, EVP, CCEO & General Counsel²
3.5
402,100
William W. Osborn, SVP & CFO²
3.5
373,000
Sonia R. Betsworth, SVP & CAO²
3.5
324,200
Joe B. Edwards, SVP & CIO²
5.5
306,750


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.~~


Named Executive Officer	Percentage Increase		Salary
Mark E. Yardley, President & CEO1	10.3	%	$	800,000
Jeffrey B. Kuzbel, EVP & CFO	2.8		442,000
Sonia R. Betsworth, EVP & CAO	3.0		345,000
Martin L. Schlossman, Jr., SVP & CRO	2.6		337,000
Carl M. Koupal, III, SVP & CLEO2	—		335,000

1 Salary increase recommended by the Compensation Committee and approved by the board of directors.

2 The CEO approved base salary in 2021. There was no adjustment for base salary in 2022.

Annual and Deferred Cash Incentive Awards - Our EICP is 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~~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 ~~2019, generally~~2022, we achieved at or above target attainment for each of the pre-established ~~goal targets. Goal attainment varied between the threshold, target, and optimum pre-established levels.~~goals.

~~Beginning in~~In the fourth quarter of ~~2018,~~2021, goal metrics, metric performance ranges and metric weights for cash incentive award opportunities under the ~~2019~~2022 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 ~~2019~~2022 performance objectives, as appropriate, before submitting the objectives to the ~~Board~~board of ~~Directors~~directors for approval.

For the Base Performance Period of January 1, ~~2019~~2022 to December 31, ~~2019,~~2022, 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 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 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, ~~2020~~2023 to December 31, ~~2022,~~2025, over which FHLBank applies ~~a six percent compounding~~an interest rate ~~per year,~~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 6952 presents the Total Base Opportunity for each Named Executive Officer for each achievement level for the Base Performance Period:

Table 6952


Position	Total Base Opportunity
	Threshold		Target		Optimum
President & CEO	37.5	%	75.0	%	112.5	%
EVP1	30.0		60.0		90.0
SVP2	25.0		50.0		75.0

1 CFO, CAO

2 CRO, CLEO

Position Total Base Opportunity
Threshold Target Optimum
CEO 37.5 % 75.0 % 112.5 %
CCEO & General Counsel, CFO and CAO 27.5
55.0
82.5
CIO 25.0
50.0
75.0

The Total Base Opportunity Goal Metrics for ~~2019~~2022 are described in Table ~~70:~~53:

Table 70



Total Base Opportunity Goal Metric			Definition
Adjusted Return Spread on Total Regulatory Capital¹			The spread between: (a) adjusted net income divided by the daily average total regulatory capital and (b) the average daily Overnight Federal funds effective rate (Fed Effective).
GAAP Return Spread on Total Regulatory Capital			The spread between: (a) GAAP net income divided by the daily average total regulatory capital; and (b) the Fed Effective rate.
Adjusted Net Income after Capital Charge			The dollar amount of adjusted net income as defined in the above metric that exceeds the cost of the required return on capital.
GAAP Net Income after Capital Charge			The dollar amount of GAAP net income that exceeds the cost of the required return on capital.
Member Product Utilization			Member product utilization is defined as the weighted average ~~2019~~2022 attainment in member utilization in each of three product categories: (1) Overnight Line of Credit or advances; (2) MPF Program; and (3) Letters of Credit.
Diversity, Equity and Inclusion Education and Culture			FHLBank’s ~~Diversity and Inclusion (D&I)~~DEI initiative is defined as the advancement of ~~D&I,~~DEI, to the maximum extent possible in balance with financially safe and sound business practices, through inclusion and utilization of diverse-owned ~~business~~businesses as vendors and the inclusion of diverse individuals within its workforce, as defined in the ~~D&I~~DEI Policy, in all business activities of FHLBank. ~~One point is~~
Diversity, Equity and Inclusion Business Practice Outcome Measures			Points are awarded ~~for~~by achievement ~~of each~~ of the following ~~(5 total points possible)~~(one point awarded for each): (1) ~~attain~~Workforce: Attain a workforce ratio of at least ~~11.0~~12 percent business partners of color as of 12/31/~~2019;~~2022; (2) ~~increase the number of viable diverse suppliers registered to do business with FHLBank~~Marketplace: Participate in ~~Supplier Gateway by 3 percent; (3) 80 percent of business partners attend one D&I Awareness Activity; (4) 80 percent of business partners complete one D&I Training; and (5) participate in 15~~10 outreach opportunities with diverse potential ~~diverse~~ directors and/or in Workforce, Vendors, Capital Markets and/or with ~~members.~~members; (3) Marketplace: Achieve an annual spend average of 17 percent with diverse-owned vendors; and (4) Marketplace: Increase the number of viable and certified diverse suppliers by 12.
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 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); (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” 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 trading securities and derivatives and hedging activities (excluding net interest settlements); (3) non-routine and/or unpredictable items, such as prepayment/yield maintenance fees and gains/losses on securities; and (4) 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. 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.

The profit-oriented objectives of “Adjusted Return Spread on Total Regulatory Capital” and “Adjusted Net Income after Capital Charge” (non-GAAP financial measures) and ~~"GAAP~~“GAAP Return Spread on Total Regulatory ~~Capital"~~Capital” and ~~"GAAP~~“GAAP Net Income after Capital ~~Charge"~~Charge” were based on the belief that profitability is critical to the long-term viability of the organization. The ~~"Member~~“Member Product ~~Utilization"~~Utilization” objective reflects our desire to be our ~~members~~members’ preferred source of liquidity and funding for housing finance, community lending and financial management activities. We divided the member product objective to focus on Overnight Line of Credit or advances, the MPF Program, and Letters of Credit. The performance objective for “Diversity, Equity and ~~Inclusion”~~Inclusion Education and Culture” establishes our commitment to ~~the advancement of D&I awareness.~~advancing DEI. Finally, the “Risk Management” 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 Total Base Opportunity available to Participants for the Financial Performance Goals shall be adjusted as reflected in Table 54 below if the daily average Total Regulatory Capital is below 4.75 percent for 2022. The Financial Performance Goals include the Adjusted Return Spread on Total Regulatory Capital, GAAP Return Spread on Total Regulatory Capital, Adjusted Net Income after Capital Charge, and GAAP Net Income after Capital Charge goals, which represent 40 percent of the Base Opportunity Metric Weights at Table 56.

Table 54


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 and Optimum percentages of annual base salary. Table 7155 sets forth the specific annual goal performance ranges, the actual achievement levels, and the incentive payout for each of our Total Base Opportunity Goal Metrics in ~~2019:~~2022:

Table 7155


Total Base Opportunity Goal Metrics	Annual Performance Range									Actual Achievement			Incentive Payout1
	Threshold			Target			Optimum
Adjusted Return Spread on Total Regulatory Capital	3.51		%	4.20		%	4.89		%	4.93		%	150.00	%
GAAP Return Spread on Total Regulatory Capital	2.84		%	4.20		%	5.55		%	5.76		%	150.00	%
Adjusted Net Income after Capital Charge	$	75,563,000		$	94,454,000		$	113,344,000		$	119,789,313		150.00	%
GAAP Net Income after Capital Charge	$	66,117,800		$	94,454,000		$	122,790,200		$	146,579,303		150.00	%
Member Product Utilization - Overnight Line of Credit or advances	20.00		%	30.00		%	40.00		%	63.53		%	113.52	%
Member Product Utilization - MPF Program	21.50		%	23.50		%	25.50		%	22.12		%
Member Product Utilization - Letters of Credit	24.50		%	28.00		%	31.50		%	27.20		%
Diversity, Equity and Inclusion Education and Culture	80.00		%	87.00		%	90.00		%	92.00		%	125.00	%
Diversity, Equity and Inclusion Business Practice Outcome Measures	Achieve 2 out of 4			Achieve 3 out of 4			Achieve 4 out of 4			Achieve 3 out of 4
Risk Management – Market, Credit and Liquidity Risks (5.0 point scoring scale)	4.00			4.50			5.00			4.62			112.00	%
Risk Management – Compliance, Business and Operations Risks (5.0 point scoring scale)	3.00			4.00			5.00			4.58			129.00	%
TOTAL WEIGHTED AVERAGE INCENTIVE PAYOUT													132.05	%

Total Base Opportunity Goal Metrics Annual Performance Range Actual Achievement Incentive Payout
Threshold Target Optimum
Adjusted Return Spread on Total Regulatory Capital 3.91 % 4.73 % 5.54 % 4.47 % 84.15 %
GAAP Return Spread on Total Regulatory Capital 3.51 % 4.73 % 5.94 % 5.21 % 119.83 %
Adjusted Net Income after Capital Charge $ 77,588,000
$ 96,985,000
$ 116,382,000
$ 95,753,535
96.83 %
GAAP Net Income after Capital Charge $ 67,889,000
$ 96,895,000
$ 126,080,000
$ 114,454,568
130.02 %
Member Product Utilization - Line of Credit or advances 66.00 % 70.50 % 75.00 % 61.69 % 66.38 %
Member Product Utilization - MPF Program 23.50 % 25.00 % 26.50 % 25.49 %
Member Product Utilization - Letters of Credit 28.00 % 30.50 % 33.00 % 32.96 %
Diversity and Inclusion Achieve 3 of 5 Achieve 4 of 5 Achieve 5 of 5 5
150.00 %
Risk Management – Market, Credit and Liquidity Risks (5.0 point scoring scale) 4.00
4.50
5.00
4.73
123.00 %
Risk Management – Compliance, Business and Operations Risks (5.0 point scoring scale) 3.00
4.00
5.00
4.09
104.50 %
TOTAL WEIGHTED AVERAGE INCENTIVE PAYOUT 106.78 %

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 ~~FHLBank's~~our balanced approach to profitability and risk management. As reflected in Table ~~71,~~55, we achieved in excess of Optimum for the Adjusted Return Spread on Total Regulatory Capital, the GAAP Return Spread on Total Regulatory Capital, the Adjusted Net Income after Capital Charge, and the GAAP Net Income after Capital Charge goals. For our Member Product Utilization goal, we exceeded ~~Threshold~~Optimum for the ~~profitability goals~~Overnight Line of Credit or advances component and ~~further, exceeded Target for the two GAAP profitability goals. We exceeded Target~~achieved Threshold for the MPF Program and the Letters of Credit ~~components of the Member Product Utilization goal but were below Threshold for the Line of Credit or advances~~ component. We exceeded Target performance for ~~each~~Market, Credit and Liquidity component and the Compliance, Business and Operations component of the Risk Management ~~goals and achieved~~goals. We exceeded Optimum for the ~~Diversity~~Education and ~~Inclusion goal in 2019.~~Culture component and achieved Target for the Business Practice Outcome Measures component of the DEI goal.

Table 7256 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 ~~2019:~~2022:

Table 72



Performance Objective	Metric Weight
Adjusted Return Spread on Total Regulatory Capital	15	%
GAAP Return Spread on Total Regulatory Capital	5
Adjusted Net Income after Capital Charge	15
GAAP Net Income after Capital Charge	5
Member Product Utilization	10
Diversity, Equity and Inclusion Education and Culture	105
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 7357 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, ~~2019~~2022 to December 31, ~~2019~~2022 and the Deferral Performance Period, which is the three-year period from January 1, ~~2020~~2023 to December 31, ~~2022:~~2025:

Table 7357

Named Executive Officer Base Salary
Incentive
Percent of Base Salary
Total Base Opportunity
Cash
Incentive¹
Deferred Incentive
Mark E. Yardley, President & CEO $ 682,500
80.08 % $ 546,568
$ 273,284
$ 273,284
Patrick C. Doran, EVP, CCEO & General Counsel 402,100
58.73
236,144
118,072
118,072
William W. Osborn, SVP & CFO 373,000
58.73
219,055
109,528
109,527
Sonia R. Betsworth, SVP & CAO 324,200
58.73
190,395
95,198
95,197
Joe B. Edwards, SVP & CIO 306,750
53.39
163,770
81,885
81,885


Named Executive Officer	Base Salary		Incentive Percent of Base Salary		Total Base Opportunity		Cash Incentive1		Deferred Incentive
Mark E. Yardley, President & CEO	$	800,000	99.04	%	$	792,312	$	396,156	$	396,156
Jeffrey B. Kuzbel, EVP & CFO	442,000		79.23		350,202		175,101		175,101
Sonia R. Betsworth, EVP & CAO	345,000		79.23		273,348		136,674		136,674
Martin L. Schlossman, Jr., SVP & CRO	337,000		66.03		222,508		111,254		111,254
Carl M. Koupal, III, SVP & CLEO	335,000		66.03		221,188		110,594		110,594


¹	~~Cash Incentive is included as non-equity incentive plan compensation in Table 78 for all Named Executive Officers.~~

1 Cash Incentive is included as non-equity incentive plan compensation in Table 61 for all Named Executive Officers.

The final value of the Deferred Incentive portion of the Total Base Opportunity for the calendar year ~~2020~~2023 to calendar year ~~2022~~2025 is measured by applying a six percent interest credit, compounded annually, to the Deferred Incentive presented in Table ~~73,~~57, as long as FHLBank has an MVE of not less than 100 percent of TRCS outstanding, as of the last day of the Deferral Performance Period. 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 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 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 EICP for ~~Participants~~the 2020-2022 Deferral Performance Period is subject to ~~be eligible to receive a Final Deferred Incentive Award,~~the following: (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 2017-2019 Deferral Performance Period, the achievement of base award opportunities is measured over a three-year performance period. The metric weight for the 2017-2019 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 ~~2017-2019 goal achievement percentage is included in Table 74:~~Deferred Incentive.

~~Table 74~~

Objective Metric Weight 2017-2019
Goal
Achievement Percentage
Total Return 50.0 % 125.00 %
MVE/Total Regulatory Capital 50.0
125.00
Overall Payout Percentage 100.0 % 125.00 %

Based on the performance results, Table 7558 presents the Final Deferred Incentive Award for the ~~2017-2019~~2020-2022 Deferral Performance Period for each Named Executive Officer:

Table 7558

Named Executive Officer Deferred Incentive Goal Achievement Percentage
Final Deferred Incentive Award¹
Mark E. Yardley, President & CEO $ 127,749
125.00 % $ 159,687
Patrick C. Doran, EVP, CCEO & General Counsel 109,758
125.00
137,198
William W. Osborn, SVP & CFO 103,500
125.00
129,375
Sonia R. Betsworth, SVP & CAO 71,769
125.00
89,712
Joe B. Edwards, SVP & CIO 85,808
125.00
107,260


Named Executive Officer	Deferred Incentive		Final Deferred Incentive Award1
Mark E. Yardley, President & CEO	$	273,284	$	325,486

Sonia R. Betsworth, EVP & CAO	95,197		113,382
Martin L. Schlossman, Jr., SVP & CRO2	84,342		100,453


¹	~~Final Deferred Incentive Award is included as non-equity incentive plan compensation in Table 78 for all Named Executive Officers.~~

1 The amount is included as non-equity incentive plan compensation in Table 61 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 2020-2022 Deferral Performance Period.

A Named Executive Officer, in the discretion of the Compensation Committee, shall be required to forfeit an award earned under the EICP if the Named Executive Officer is: (1) terminated from employment with FHLBank for Cause as defined under the EICP; (2) engages in competition with FHLBank or interferes with the business relationships of 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 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. ~~There were no such bonuses awarded~~In April 2021, Mr. 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 bonus to be paid on the first payroll date following completion of his first year of employment with FHLBank, subject to a ~~Named Executive Officer in 2019.~~clawback of the entire $150,000 bonus amount if Mr. Kuzbel’s employment with FHLBank ends within one year of the payment of the additional bonus. In 2021, Mr. Kuzbel also received an upfront relocation stipend of $25,000.

Retirement and Other Benefits - In ~~2019,~~2022, we maintained a comprehensive retirement program for our eligible employees comprised of two qualified retirement plans: (1) the Pentegra Defined Benefit Plan for Financial Institutions, a tax-qualified multiple-employer defined-benefit plan (DB Plan);, which was hard frozen December 31, 2019; and (2) the ~~Pentegra Financial Institutions Thrift~~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 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 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 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 ~~2019,~~2022, 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 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 $280,000 on earnings for 2019. 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 $225,000 for 2019. 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 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, 2019. 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 3.22 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 3.22 percent. As of December 31, 2019, the actuary’s calculations utilized: (1) the projected unit credit valuation method; (2) the PRI-2012 white collar worker annuitant tables (with Scale MP-2019); and (3) a 3.00 percent discount rate as the primary assumptions attributable to valuation of benefits under the DB portion of the BEP (see "BEP" below).

The Board of Directors decided to hard freeze the DB Plan effective as of year-end 2019. Accordingly, benefits under the DB Plan cease accruing thereafter. Additionally, the Board of Directors decided to revise the BEP to cease any further accrual of pension benefit as provided in the BEP, and described further below, as of the same date.

DC Plan - The DC Plan is a tax-qualified, defined contribution ~~pension~~ plan. Substantially all officers and employees of FHLBank are covered by the plan. 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. During ~~2019,~~2022, matching ratios for all employees, including the Named Executive Officers (with the exception of Mr. Kuzbel), under the DC Plan 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.~~

~~Beginning January 1, 2020, we match up to four percent of an employee's eligible~~ compensation ~~using the previously mentioned matching ratios based on years~~after one year of service. ~~Additionally, beginning January 1, 2020, in conjunction with the DB Plan hard freeze, all employees receive a monthly basic contribution equal to two percent of eligible compensation.~~

BEP - The BEP is an unfunded, nonqualified supplemental executive retirement plan that permits Named Executive Officers and certain other participants in the BEP to defer compensation and to receive matching contributions ~~and pension accruals~~ that would otherwise have been made or accrued under FHLBank’s DC ~~Plan or DB~~ Plan, as appropriate, but for the limitations imposed by the IRC. Each of the 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 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 ~~2019,~~2022, the rate of return earned on the defined contribution portion of the BEP was ~~7.18~~5.71 percent, which was our 2021 return on ~~equity calculated for EICP purposes for 2018.~~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, ~~2019,~~2022, 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 8265 under the column titled “Aggregate Balance at Last FYE.”

As indicated above, the pension accrual benefit of the BEP ~~ceases~~ceased further accruals as of ~~year-end~~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 ~~2019~~2022 include cell phone reimbursement, limited spousal travel and limited club dues. Total perquisites to ~~any single~~each Named Executive Officer ~~did not exceed $10,000.~~are presented in Table 62.

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 7659 presents the term and amounts that would have been payable to the Named Executive Officer under the Executive Officer Severance Policy as of December 31, ~~2019,~~2022, 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 7659


Officer	Months	Severance Amount¹		COBRA²		Severance Total		Officer	Months	Severance Amount1		COBRA2		Severance Total
Mark E. Yardley	12	$	682,500	$	13,255	$	695,755	Mark E. Yardley	12	$	800,000	$	19,839	$	819,839
Patrick C. Doran	9	301,575		14,450		316,025
William W. Osborn	6	186,500		9,497		195,997
Jeffrey B. Kuzbel								Jeffrey B. Kuzbel	9	331,500		21,619		353,119
Sonia R. Betsworth	6	162,100		6,570		168,670		Sonia R. Betsworth	9	258,750		11,215		269,965
Joe B. Edwards	6	153,375		6,628		160,003
Martin L. Schlossman, Jr.								Martin L. Schlossman, Jr.	6	168,500		10,823		179,323
Carl M. Koupal, III								Carl M. Koupal, III	6	167,500		10,824		178,324


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.~~

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.

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. The Compensation Committee approved the following Participants in the Change in Control Plan and their effective Tiers: CEO at Tier 1; ~~CCEO~~CFO and ~~General Counsel,~~CAO at Tier 2; and ~~CFO~~CRO and ~~CAO~~CLEO at Tier 3.

Table 7760 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, ~~2019~~2022 subject to FHLBank’s Change in Control Plan, as currently in effect:

Table 7760


Officer	Severance Amount¹		Incentive²		COBRA³		Change in Control Total		Officer	Severance Amount1		Incentive2		COBRA3		Change in Control Total
Mark E. Yardley	$	2,040,675	$	1,530,506	$	39,766	$	3,610,947	Mark E. Yardley	$	2,392,000	$	1,794,000	$	59,516	$	4,245,516
Patrick C. Doran	804,200		442,310		38,532		1,285,042
William W. Osborn	373,000		205,150		18,995		597,145
Jeffrey B. Kuzbel									Jeffrey B. Kuzbel	884,000		530,400		57,651		1,472,051
Sonia R. Betsworth	324,200		178,310		13,140		515,650		Sonia R. Betsworth	690,000		414,000		29,908		1,133,908
Martin L. Schlossman, Jr.									Martin L. Schlossman, Jr.	337,000		168,500		21,647		527,147
Carl M. Koupal, III									Carl M. Koupal, III	335,000		167,500		21,648		524,148


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 2019 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 2022 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.

Why We Choose to Pay These Elements: We believe the Compensation Committee’s analyses described above provided an appropriate process to determine ~~2019~~2022 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 ~~2019~~2022 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 and the 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 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 E. Caldwell, II~~

G. Bridger Cox

~~Holly Johnson~~Thomas E. Henning

~~Thomas H. Olson, Jr.~~Barry J. Lockard

~~Mark W. Schifferdecker~~Jeffrey R. Noordhoek

Carla D. Pratt

Douglas E. Tippens

100

Table 7861 presents the Summary Compensation Table for the Named Executive ~~Officers.~~Officers for the years for which they represented Named Executive Officers of FHLBank.

Table 61


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	2022	$	800,000	$	—	$	721,642	$	69,058	$	114,339	$	1,705,039
President & CEO	2021	725,000		—		481,944		407,337		105,952		1,720,233
	2020	725,000		—		431,271		1,233,185		99,021		2,488,477
Jeffrey B. Kuzbel5	2022	442,000		50,000		175,101		3,533		60,614		731,248
EVP & CFO	2021	322,500		125,000		132,942		619		161,543		742,604

Sonia R. Betsworth6	2022	345,000		—		250,056		22,762		45,376		663,194
EVP & CAO	2021	335,000		—		176,948		17,490		44,207		573,645
	2020	335,000		—		144,967		540,074		45,145		1,065,186
Martin L. Schlossman, Jr.7	2022	337,000		—		211,707		8,606		43,477		600,790
SVP & CRO	2021	328,500		—		162,659		4,211		42,668		538,038

Carl M. Koupal, III8 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 was reduced when paid in 2021, and the amounts in the table have been updated to reflect the actual amounts paid. The change reflects immaterial corrections to represent actual amounts paid, which were paid in line with an adjusted calculation of the performance metrics within the EICP. The value decreased $91,804 and $39,780 from amounts disclosed in the 2020 Form 10-K for Mr. Yardley and Ms. Betsworth, respectively.

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 2022 components of All Other Compensation are provided in Table 7862.

4 Above market earnings attributable to the BEP for Mr. Yardley were $69,058, $56,337, and $65,185 for 2022, 2021, and 2020, respectively. The aggregate change in the value of Mr. Yardley’s accumulated benefit under FHLBank’s DB Plan was $(444,000), $111,000, and $383,000 for 2022, 2021, and 2020, respectively. The aggregate change in the value of his accumulated benefit under the defined benefit portion of the BEP was $(1,077,000), $240,000, and $785,000 for 2022, 2021, and 2020, respectively.

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

6 Above market earnings attributable to the BEP for Ms. Betsworth were $22,762, $17,490, and $19,074 for 2022, 2021, and 2020, respectively. The aggregate change in the value of Ms. Betsworth's accumulated benefit under FHLBank’s DB Plan was $(651,000), $(62,000) and $361,000 for 2022, 2021, and 2020, respectively. The aggregate change in the value of her accumulated benefit under the defined benefit portion of the BEP was $(321,000), $(18,000) and $160,000 for 2022, 2021, and 2020, respectively.

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

8 Above market earnings attributable to the BEP for Mr. Koupal, III were $448 for 2022. The aggregate change in the value of Mr. Koupal, III's accumulated benefit under FHLBank’s DB Plan was $(223,000) for 2022.

101

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
2019 $ 682,500
$ —
$ 437,126
$ 2,360,858
$ 62,290
$ 3,542,774
President & CEO 2018 650,000
—
306,822
1,044,036
60,175
2,061,033
2017 550,000
—
355,720
1,297,561
58,773
2,262,054
Patrick C. Doran⁵
2019 402,100
—
258,903
513,675
35,881
1,210,559
EVP, CCEO & General 2018 388,500
—
202,515
129,384
33,855
754,254
Counsel 2017 357,500
50,000
213,443
324,590
36,455
981,988
William W. Osborn⁶
2019 373,000
—
241,950
409,268
29,047
1,053,265
SVP & CFO 2018 360,400
—
175,583
77,427
29,163
642,573
2017 330,500
—
188,557
251,542
28,521
799,120
Sonia R. Betsworth⁷
2019 324,200
—
187,491
889,388
25,588
1,426,667
SVP & CAO 2018 313,200
—
155,810
78,397
25,752
573,159
2017 286,250
1,450
159,570
525,768
24,036
997,074
Joe B. Edwards⁸
2019 306,750
—
192,368
2,346
25,207
526,671
SVP & CIO 2018 290,745
—
158,241
161
25,847
474,994
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 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 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 2019 components of All Other Compensation are provided in Table 79.~~

⁴

Above market earnings attributable to the BEP for Mr. Yardley were $48,858, $51,036, and $36,561 for 2019, 2018, and 2017, respectively. The aggregate change in the value of Mr. Yardley’s accumulated benefit under FHLBank’s DB Plan was $406,000, $(44,000), and $264,000 for 2019, 2018, and 2017, respectively. The aggregate change in the value of his accumulated benefit under the defined benefit portion of the BEP was $1,906,000, $1,037,000, and $997,000 for 2019, 2018, and 2017, respectively.

⁵

Above market earnings attributable to the BEP for Mr. Doran were $10,675, $10,384, and $6,590 for 2019, 2018, and 2017, respectively. The aggregate change in the value of Mr. Doran’s accumulated benefit under FHLBank’s DB Plan was $259,000, $12,000, and $157,000 for 2019, 2018, and 2017, respectively. The aggregate change in the value of his accumulated benefit under the defined benefit portion of the BEP was $244,000, $107,000, and $161,000 in 2019, 2018, and 2017, respectively.

⁶

Above market earnings attributable to the BEP for Mr. Osborn were $3,268, $2,427, and $542 for 2019, 2018, and 2017, respectively. The aggregate change in the value of Mr. Osborn's accumulated benefit under FHLBank’s DB Plan was $227,000, $2,000 and $132,000 for 2019, 2018, and 2017, respectively. The aggregate change in the value of his accumulated benefit under the defined benefit portion of the BEP was $179,000, $73,000 and $119,000 for 2019, 2018, and 2017, respectively.

⁷

Above market earnings attributable to the BEP for Ms. Betsworth were $13,388, $13,397, and $7,768 for 2019, 2018, and 2017, respectively. The aggregate change in the value of Ms. Betsworth's accumulated benefit under FHLBank’s DB Plan was $470,000, $(119,000), and $280,000 for 2019, 2018, and 2017, respectively. The aggregate change in the value of her accumulated benefit under the defined benefit portion of the BEP was $406,000, $184,000, and $238,000 for 2019, 2018, and 2017, respectively.


⁸	~~Above market earnings attributable to the BEP for Mr. Edwards were $2,346 and $161 in 2019 and 2018, respectively.~~

Table 7962 presents the components of “All Other Compensation” for ~~2019~~2022 as summarized in Table ~~78.~~61. There were no perquisites or personal benefits of more than $10,000 in aggregate for any Named Executive Officer for 2022.

~~Table 79~~

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
$ 8,281
$ 16,403
$ 36,256
$ 495
$ 62,290
Patrick C. Doran 681
4,758
16,800
13,430
212
35,881
William W. Osborn 631
762
15,531
12,123
—
29,047
Sonia R. Betsworth 549
667
8,973
15,399
—
25,588
Joe B. Edwards 516
627
24,064
—
—
25,207

Table 8062


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	$	5,392	$	30,500	$	77,518	$	74	$	114,339
Jeffrey B. Kuzbel	756		5,201		1,105		53,443		109		60,614
Sonia R. Betsworth	590		718		19,445		24,549		74		45,376
Martin L. Schlossman, Jr.	577		701		18,487		23,676		36		43,477
Carl M. Koupal, III	573		697		26,562		15,766		74		43,672

Table 63 presents the Grants of Plan Based Awards Table for the Named Executive Officers.

Table 8063

Name Plan
Estimated Future Payouts Under Non‑Equity Incentive Plan Awards¹
Threshold Target Optimum
Mark E. Yardley EICP-Cash Incentive $ 127,969
$ 255,938
$ 383,907
President & CEO EICP-Deferred Incentive Opportunity 127,969
255,937
383,906
Patrick C. Doran EICP-Cash Incentive 55,289
110,578
165,867
EVP, CCEO & General Counsel EICP-Deferred Incentive Opportunity 55,289
110,577
165,866
William W. Osborn EICP-Cash Incentive 51,288
102,575
153,863
SVP & CFO EICP-Deferred Incentive Opportunity 51,287
102,575
153,862
Sonia R. Betsworth EICP-Cash Incentive 44,578
89,155
133,733
SVP & CAO EICP-Deferred Incentive Opportunity 44,577
89,155
133,732
Joe B. Edwards EICP-Cash Incentive 38,344
76,688
115,032
SVP & CIO EICP-Deferred Incentive Opportunity 38,344
76,687
115,031


Name	Plan	Estimated Future Payouts Under Non‑Equity Incentive Plan Awards1
		Threshold		Target		Optimum
Mark E. Yardley	EICP-Cash Incentive	$	150,000	$	300,000	$	400,000
President & CEO	EICP-Deferred Incentive Opportunity	150,000		300,000		400,000
Jeffrey B. Kuzbel	EICP-Cash Incentive	66,300		132,600		198,900
EVP & CFO	EICP-Deferred Incentive Opportunity	66,300		132,600		198,900
Sonia R. Betsworth	EICP-Cash Incentive	51,750		103,500		155,250
EVP & CAO	EICP-Deferred Incentive Opportunity	51,750		103,500		155,250
Martin L. Schlossman, Jr.	EICP-Cash Incentive	42,125		84,250		126,375
SVP & CRO	EICP-Deferred Incentive Opportunity	42,125		84,250		126,375
Carl M. Koupal, III	EICP-Cash Incentive	41,875		83,750		125,625
SVP & CLEO	EICP-Deferred Incentive Opportunity	41,875		83,750		125,625

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, 2019. 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.

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, 2022. 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.

102

Pension Benefits: Table 8164 presents the ~~2019~~2022 Pension Benefits Table for the participating Named Executive Officers.

Table 8164


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	$	2,857,000	$	—
President & CEO	FHLBank Benefit Equalization Plan	30.000	5,566,000		—


Sonia R. Betsworth	Pentegra Defined Benefit Plan for Financial Institutions	30.000	1,986,000		—
EVP & CAO	FHLBank Benefit Equalization Plan	30.000	813,000		—
Martin L. Schlossman, Jr.	Pentegra Defined Benefit Plan for Financial Institutions	18.083	787,000		—
SVP & CRO	FHLBank Benefit Equalization Plan	18.083	294,000		—
Carl M. Koupal, III	Pentegra Defined Benefit Plan for Financial Institutions	10.500	202,000		—
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 $ 2,807,000
$ —
President & CEO FHLBank Benefit Equalization Plan 30.000 5,618,000
—
Patrick C. Doran Pentegra Defined Benefit Plan for Financial Institutions 14.667 1,045,000
—
EVP, CCEO & General Counsel FHLBank Benefit Equalization Plan 14.667 860,000
—
William W. Osborn Pentegra Defined Benefit Plan for Financial Institutions 12.583 792,000
—
SVP & CFO FHLBank Benefit Equalization Plan 12.583 542,000
—
Sonia R. Betsworth Pentegra Defined Benefit Plan for Financial Institutions 30.000 2,338,000
—
SVP & CAO FHLBank Benefit Equalization Plan 30.000 992,000
—

Deferred Compensation: Table 8265 presents the ~~2019~~2022 Nonqualified Deferred Compensation Table for the participating Named Executive Officers. Our fiscal year (FY) is ~~2019,~~2022, with a fiscal year end (FYE) of December 31, ~~2019.~~2022.

Table 65


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	$	81,019	$	77,518	$	111,706	$	—	$	2,182,362
Jeffrey B. Kuzbel EVP & CFO	31,308		53,443		5,715		—		150,535
Sonia R. Betsworth EVP & CAO	78,238		24,549		36,818		—		751,663
Martin L. Schlossman, Jr. SVP & CRO	99,644		23,676		13,921		—		318,909
Carl M. Koupal, III SVP & CLEO	6,661		15,766		725		—		31,149

1 All amounts are also included in the salary column of Table 8261.

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 (2006-2021) was $385,981 for Mr. Yardley, $619 for Mr. Kuzbel, $72,414 for Ms. Betsworth and $4,211 for Mr. Schlossman, Jr. Mr. Koupal, III was not a Named Executive Officer for previous years. The amounts reported as preferential (above market) earnings for the current year are presented in 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 $ 18,128
$ 36,256
$ 99,589
$ —
$ 1,469,147
Patrick C. Doran,
EVP, CCEO & General Counsel 18,864
13,430
21,758
—
336,606
William W. Osborn,
SVP & CFO 21,090
12,123
6,660
—
120,894
Sonia R. Betsworth,
SVP & CAO 15,987
15,399
27,290
—
410,165
Joe B. Edwards,
SVP & CIO 57,685
—
4,782
—
81,073


¹	~~All amounts are also included in the salary column of Table 78.~~

~~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 (2006-2018) was $215,601 for Mr. Yardley, $34,006 for Mr. Doran, $3,210 for Mr. Osborn, $22,462 for Ms. Betsworth, and $161 for Mr. Edwards. The amounts reported as preferential (above market) earnings for the current year are presented in Table 78.

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 (the ~~"Median Employee"~~“Median Employee”), and the annual total compensation of Mr. Yardley, our CEO who is our principal executive officer. We identified the original Median Employee in ~~2017~~2020 (see methodology below), ~~and~~but as a result of employee turnover, we had to identify a new median employee in 2021. Per SEC guidance, we are permitted to use the ~~identified Median Employee was used in the last two years’ disclosures. The identified Median Employee terminated employment during 2019.~~median employee methodology for a period of three years. We used the original calculation from ~~2017~~2020 to identify a new Median Employee for 2021 because we believe there have been no material changes to our employee population or our employee compensation arrangements that would significantly affect our pay ratio disclosure. As a result, the ~~new~~ Median Employee presented herein has substantially similar compensation to the previously identified Median ~~Employee.~~Employee and was also used in last year’s disclosures.

103

Methodology used to determine the Median Employee

We identified the Median Employee by comparing the ~~2017~~2020 compensation (i.e., ~~2017~~2020 annual ~~salary~~earnings and incentive earned for ~~2016~~2019 paid in ~~2017)~~2020) for each of the employees who were employed by FHLBank on ~~October~~December 1, ~~2017,~~2020, and ranking all ~~235~~233 employees by that consistently applied compensation measure from lowest to highest, excluding the CEO. We next identified the initial median employee based on that calculation, and identified the five employees with ~~2017~~2020 compensation higher than that initial median employee and the five employees with ~~2017~~2020 compensation lower than that initial median employee, constituting a total pool of 11 employees (the ~~"Identified Pool"~~“Identified Pool”). We then calculated the ~~2017~~2020 Total Compensation for each employee in the Identified Pool for ~~2017~~2022 in the same ~~manner.~~manner as “Total Compensation” for ~~2017~~2020 is shown for our CEO in the Summary Compensation Table (see Table ~~78)~~61), which includes among other things, amounts attributable to the change in pension value, which will vary among employees based upon their tenure at FHLBank. We ranked the ~~2017~~2020 Total Compensation for each employee in the Identified Pool from lowest to highest, and the median employee from the Identified Pool based on ~~2017~~2020 Total Compensation was identified as our Median Employee. The employees in the calculation included all full-time and part-time employees, and we annualized all such ~~employees~~employees' earnings who were not employed by us for all of ~~2017.~~2020. Interns and those employees retiring at the end of 2020 were not included in the calculation. As indicated above, this analysis was reviewed to identify the Median Employee reflected herein.

Methodology used to determine the CEO Pay Ratio for ~~2019~~2022

For the year ended December 31, ~~2019,~~2022, the ratio of our CEO’s Total Compensation to the Total Compensation of our Median Employee was approximately ~~31:~~14:1. For the year ended December 31, ~~2019,~~2022, the Total Compensation of the CEO, as reported in the Summary Compensation Table, was ~~$3,542,774,~~$1,705,039, and the Total Compensation of the Median Employee for the same year ended December 31, ~~2019~~2022 was ~~$114,973.~~$120,469. 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 8366 presents the Director Compensation Table for the persons who served on our ~~Board~~board of ~~Directors~~directors during ~~2019.~~2022.

Table 66


Name	Fees Earned or Paid in Cash		Nonqualified Deferred Compensation Earnings1		Total
Donald R. Abernathy, Jr.	$	112,500	$	1,142	$	113,642
Milroy A. Alexander	122,500		3,506		126,006
Robert E. Caldwell, II	122,500		5,754		128,254
G. Bridger Cox	142,500		11,633		154,133
Michael B. Jacobson	112,500				112,500
Holly Johnson	112,500				112,500
Lynn Katzfey	112,500				112,500
Jane C. Knight	112,500		4,940		117,440
Barry J. Lockard	112,500				112,500
Craig A. Meader	112,500				112,500
L. Kent Needham	122,500		3,282		125,782
Jeffrey R. Noordhoek	112,500				112,500
Mark J. O’Connor	122,500				122,500
Thomas H. Olson, Jr.	122,500				122,500
Mark W. Schifferdecker	122,500				122,500
Douglas E. Tippens	112,500		18,247		130,747
Paul E. Washington	112,500				112,500

~~Table 83~~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.

104

Name
Fees Earned or Paid in Cash
Nonqualified Deferred Compensation Earnings¹
Total
Milroy A. Alexander $ 117,500
$ 680
$ 118,180
Robert E. Caldwell, II 117,500

117,500
G. Bridger Cox 137,500
3,408
140,908
Andrew C. Hove, Jr. 67,740

67,740
Michael B. Jacobson 117,500

117,500
Holly Johnson 107,500

107,500
Lynn Katzfey 54,192
54,192
Jane C. Knight 107,500
1,328
108,828
Barry J. Lockard 107,500

107,500
Richard S. Masinton 117,500
5,804
123,304
Neil F. M. McKay 80,625

80,625
L. Kent Needham 107,500
1,925
109,425
Mark J. O’Connor 107,500

107,500
Thomas H. Olson, Jr. 107,500

107,500
Donde L. Plowman 53,308

53,308
Mark W. Schifferdecker 117,500

117,500
Bruce A. Schriefer 117,500

117,500
Douglas E. Tippens 107,500
5,298
112,798
Gregg Vandaveer 107,500
1,414
108,914


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.

Director Fees - The ~~Board~~board of ~~Directors~~directors establishes on an annual basis a board of directors Compensation Policy governing compensation for board of director meeting attendance. Our 2022 Board of Directors Compensation Policy ~~governing compensation for Board meeting attendance. Our 2019 Board of Directors Compensation Policy (2019~~(2022 Policy) was adopted ~~June 22, 2018~~September 24, 2021 and became effective January 1, ~~2019.~~2022. 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 compensate them for their time while serving as directors, our ~~2019~~2022 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 an FHLBank System review of director compensation in 2019, which included a study prepared by McLagan. FHLBank director compensation that was established by the ~~Board~~board of directors under the ~~2019~~2022 Policy reflected this analysis. The ~~2019~~2022 Policy established annual compensation limits of ~~$137,500~~$142,500 for the Chair, ~~$117,500~~$122,500 for the ~~Vice-Chair~~Vice Chair and Committee Chairs and ~~$107,500~~$112,500 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~~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 ~~2020~~2023 Board of Directors Compensation Policy ~~(2020~~(2023 Policy) governing compensation for board of director meeting attendance on ~~September 20, 2019.~~January 26, 2023. The ~~2020~~2023 Policy is similar to the ~~2019~~2022 Policy, except that the ~~2020 Policy~~2023 policy reflects increases in the established annual compensation limits to ~~$142,500~~$155,000 for the Chair, ~~$122,500~~$134,500 for the ~~Vice-Chair and~~Vice Chair, $130,000 for Committee Chairs, and ~~$112,500~~$120,000 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 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 FHLBank are authorized for issuance.

105

Table 8467 presents information on ~~member institutions~~members holding five percent or more of the total outstanding capital stock, which includes mandatorily redeemable capital stock, of FHLBank as of ~~March 13, 2020.~~February 28, 2023. No affiliated officer or director of these stockholders currently serves on our ~~Board~~board of ~~Directors.~~directors.

Table 8467

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

5,420,759

21.3

BOKF, NA

1 Williams Center-BOK Tower 16 SW

Tulsa

2,169,416

8.5

TOTAL

7,590,175

29.8

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 OK 3,885,750
22.0 %
BOKF, NA 1 Williams Center-BOK Tower 16 SW Tulsa OK 3,600,000
20.4
Capitol Federal Savings Bank 700 S Kansas Ave Topeka KS 998,605
5.7
TOTAL 8,484,355
48.1 %

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 8568 presents total outstanding capital stock, which includes mandatorily redeemable capital stock, held as of ~~March 13, 2020,~~February 28, 2023, for ~~member institutions~~members whose affiliated officers or directors ~~served as~~currently serve on our ~~directors as~~board of ~~March 13, 2020:~~directors:

Table 8568

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

Bank of the Flint Hills

806 5th Street

Wamego

48,240

0.2

Cornhusker Bank

8310 O Street

Lincoln

43,258

0.2

NebraskaLand Bank

1400 S Dewey Street

North Platte

25,801

0.1

Citizens Bank & Trust Co of Ardmore

1100 N Commerce Street

Ardmore

10,776

—

Points West Community Bank

1291 Main Street

Windsor

9,109

—

First National Bank of Kansas

600 N 4th Street

Burlington

7,952

—

Legacy Bank

101 W Main Street

Hinton

6,500

—

BancFirst

100 N Broadway Ave

Oklahoma City

6,500

—

First Security Bank

312 Maple Street

Overbrook

2,244

—

Bank of Estes Park

255 Park Lane

Estes Park

1,732

—

Nebraska State Bank

218 Main Street

Oshkosh

1,139

—

Impact Development Fund

200 E. 7th Street, Suite 412

Loveland

629

—

TOTAL

163,880

0.5

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
Cornhusker Bank 8310 O Street Lincoln NE 24,217
0.1 %
Points West Community Bank 1291 Main Street Windsor CO 17,915
0.1
GNBank, NA 100 E Forest Girard KS 15,341
0.1
Citizens Bank & Trust Co of Ardmore 1100 N Commerce Street Ardmore OK 9,237
0.1
FirstBank 10403 W Colfax Ave Lakewood CO 7,207
0.1
BancFirst 101 N Broadway Ste 200 Oklahoma City OK 5,500
—
First National Bank of Kansas 600 N 4th Street Burlington KS 4,153
—
Sooner State Bank 2 SE 4th Street Tuttle OK 3,199
—
The Bankers Bank 9020 N May Ave Ste 200 Oklahoma City OK 3,025
—
First Security Bank 312 Maple Street Overbrook KS 2,520
—
Bank of Estes Park 255 Park Lane Estes Park CO 1,313
—
Nebraska State Bank 218 Main Street Oshkosh NE 1,044
—
TOTAL 94,671
0.5 %

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 our directors are classified as related persons under SEC regulations. Transactions with members deemed related persons of 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.”

106

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.

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 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.~~

▪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 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 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 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 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.

107

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 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 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.~~

▪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.

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 FHLBank; or (2) be an affiliated person of 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 Committee. Under NASDAQ rules, in order to be considered an independent compensation committee member, the ~~Board~~board of ~~Directors~~directors must affirmatively determine the independence of each director on the Compensation 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 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 Committee is independent in accordance with the NASDAQ Independence Standards for compensation committee members.

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

Prior to approving PricewaterhouseCoopers LLP as our independent accountants for ~~2019,~~2022, 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 ~~2019~~2022 and ~~2018.~~2021. 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.

108

Table 8669 sets forth the aggregate fees we were billed for the years ended December 31, ~~2019~~2022 and ~~2018~~2021 by our external accounting firm, PricewaterhouseCoopers LLP (in thousands):

Table 8669


	2022		2021
Audit fees	$	892	$	866
Audit-related fees	65		61
Tax fees	—		—
All other fees	1		1
TOTAL	$	958	$	928

2019 2018
Audit fees $ 936
$ 841
Audit-related fees 70
54
Tax fees —
—
All other fees 1
1
TOTAL $ 1,007
$ 896

Audit fees during the years ended December 31, ~~2019~~2022 and ~~2018~~2021 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 fees during the years ended December 31, ~~2019~~2022 and ~~2018~~2021 were for discussions regarding miscellaneous accounting-related matters.

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 ~~2019~~2022 and ~~2018,~~2021, we were assessed ~~$38,000 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.

Section 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, ~~2019~~2022 and ~~2018.~~2021.

All other fees during the years ended December 31, ~~2019~~2022 and ~~2018~~2021 were for a license fee for an electronic disclosure checklist application.

109

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 3.1 to the Current Report on Form 8-K, filed ~~December 18, 2018,~~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 4.1 to the 2019 Annual Report on Form 10-K, filed March 20, 2020, Federal Home Loan Bank of Topeka Capital ~~Plan.~~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.~~Plan, is incorporated herein by reference as Exhibit 4.2.
10.1*		Exhibit 10.1 to the Current Report on Form 8-K, filed ~~October 30, 2019,~~December 18, 2020, Federal Home Loan Bank of Topeka Benefit Equalization Plan, is incorporated herein by reference as Exhibit 10.1.
~~10.2~~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~~	Exhibit 10.2.4 to the 2017 Annual Report on Form 10-K, filed March 15, 2018, Federal Home Loan Bank of Topeka Office Complex Fourth Lease Amendment, is incorporated herein by reference as Exhibit 10.2.4.
~~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 10.1 to the Current Report on Form 8-K, filed ~~January 8, 2019,~~February 16, 2022, Executive Incentive Compensation Plan, is incorporated herein by reference as Exhibit ~~10.10.~~10.9.
~~10.11~~10.10*		Exhibit 10.2 to the Current Report on Form 8-K, filed January 21, 2016, Federal Home Loan Bank of Topeka 2015 Executive Incentive Compensation Plan Targets, is incorporated herein by reference as Exhibit 10.11.
~~10.12~~^*	Exhibit 10.16 to the 2015 Annual Report on Form 10-K, filed March 10, 2016, Federal Home Loan Bank of Topeka 2016 Executive Incentive Compensation Plan Targets, is incorporated herein by reference as Exhibit 10.12.
~~10.13~~^*	Exhibit 10.1 to the Current Report on Form 8-K, filed February 15, 2017, Federal Home Loan Bank of Topeka 2017 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 January 22, 2018, Federal Home Loan Bank of Topeka 2018 Executive Incentive Compensation Plan Targets, is incorporated herein by reference as Exhibit ~~10.14.~~10.10.
~~10.15~~10.11*		Exhibit 10.2 to the Current Report on Form 8-K, filed January 8, 2019, Federal Home Loan Bank of Topeka 2019 Executive Incentive Compensation Plan Targets, is incorporated herein by reference as Exhibit ~~10.15.~~10.11.
~~10.16~~10.1²*		Exhibit 10.1 to the Current Report on Form 8-K, filed February 6, 2020, Federal Home Loan Bank of Topeka 2020 Executive Incentive Compensation Plan Targets, is incorporated herein by reference as Exhibit ~~10.16.~~10.12
~~10.17~~10.1³*		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 10.13.
10.1 4*		Exhibit 10.2 to the Current Report on Form 8-K, filed February 16, 2022, Federal Home Loan Bank of Topeka 2022 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 March 7, 2023, Federal Home Loan Bank of Topeka 2023 Executive Incentive Compensation Plan Targets, is incorporated herein by reference as Exhibit 10.15.
10.1 6*		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 ~~10.17.~~10.16.
~~10.18~~10.1⁷*		Exhibit 10.1 to the Current Report on Form 8-K, filed August 1, 2018, Federal Home Loan Bank of Topeka Executive Officer Severance Policy, is incorporated herein by reference as Exhibit ~~10.18.~~

110


Exhibit No.			Description
~~10.20~~10.19*			Exhibit 10.1 to the Current Report on Form 8-K, filed ~~November 19, 2019~~February 16, 2023, Federal Home Loan Bank of Topeka ~~2020~~2023 Board of Directors Compensation Policy, is incorporated herein by reference as Exhibit ~~10.20.~~10.19.
~~10.21~~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 ~~10.21.~~10.20.
~~10.22~~10.²¹*			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 ~~10.22.~~10.21.
~~10.23~~10.2²***			Exhibit ~~10.24~~10.23 to the ~~2017~~2021 Annual Report on Form 10-K, filed March ~~15, 2018,~~21, 2022, Federal Home Loan Bank of Topeka ~~2015~~Non-NEO Executive Incentive Compensation Plan, is incorporated herein by reference as Exhibit 10.22.
10.2 3*			Exhibit 10.24 to the 2021 Annual Report on Form 10-K, filed March 21, 2022, Federal Home Loan Bank of Topeka 2018 Non-NEO Executive Incentive Compensation Plan Targets, is incorporated herein by reference as Exhibit 10.23.
~~10.24~~10.2⁴***			Exhibit 10.25 to the ~~2017~~2021 Annual Report on Form 10-K, filed March ~~15, 2018,~~21, 2022, Federal Home Loan Bank of Topeka ~~2016~~2019 Non-NEO Executive Incentive Compensation Plan Targets, is incorporated herein by reference as Exhibit 10.24.
~~14.1~~10.2 5*			Exhibit ~~14.1~~10.26 to the ~~2017~~2021 Annual Report on Form 10-K, filed March ~~15, 2018,~~21, 2022, Federal Home Loan Bank of Topeka 2020 Non-NEO Executive Incentive Compensation Plan Targets, is incorporated herein by reference as Exhibit 10.25.
10.2 6*			Exhibit 10.1 to the Current Report on Form 8-K, filed January 8, 2019, Executive Incentive Compensation Plan, is incorporated herein by reference as Exhibit 10.26.
14.1			Exhibit 14.1 to the 2021 Annual Report on Form 10-K, filed March 21, 2022, Federal Home Loan Bank of Topeka Code of Ethics, is incorporated herein by reference as Exhibit 14.1.
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~~Executive Vice President and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32			Certification of President and Principal Executive Officer and ~~Senior~~Executive 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			Exhibit 99.1 to the ~~2018~~2021 Annual Report on Form 10-K, filed March ~~18, 2019,~~21, 2022, Federal Home Loan Bank of Topeka Audit Committee Charter, is incorporated herein by reference as Exhibit 99.1.
99.2			Exhibit 99.2 to the 2021 Annual Report on Form 10-K, filed March 21, 2022, Federal Home Loan Bank of Topeka Audit Committee ~~Report.~~Report, is incorporated herein by reference as Exhibit 99.2.
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.

111

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 20, 2023		By: /s/ Mark E. Yardley
Date		Mark E. Yardley
		President and Chief Executive Officer

March 20, 2023		By: /s/ Jeffrey B. Kuzbel
Date		Jeffrey B. Kuzbel
		Executive Vice President and Chief Financial Officer


		~~Federal Home Loan Bank of Topeka~~


~~March 20, 2020~~	~~By: /s/ Mark E. Yardley~~
~~Date~~	~~Mark E. Yardley~~
	~~President and Chief Executive 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

/s/ Mark E. Yardley			President and Chief Executive Officer	March 20, 2023
Mark E. Yardley			(principal executive officer)

~~Signature~~/s/ Jeffrey B. Kuzbel			~~Title~~	~~Date~~

~~/s/Mark E. Yardley~~	~~President and Chief~~ Executive ~~Officer~~	~~March 20, 2020~~
~~Mark E. Yardley~~	~~(principal executive officer)~~

~~/s/William W. Osborn~~	~~Senior~~ Vice President and Chief Financial Officer	March 20, ~~2020~~2023
~~William W. Osborn~~Jeffrey B. Kuzbel			(principal financial officer)

/s/~~Denise L. Cauthon~~ Amy J. Crouch			~~Senior~~ Vice President and Chief Accounting Officer	March 20, ~~2020~~2023
~~Denise L. Cauthon~~Amy J. Crouch			(principal accounting officer)

~~/s/G. Bridger Cox~~¹	~~Chair of the Board of Directors~~	~~March 20, 2020~~
~~G. Bridger Cox~~

~~/s/Robert E. Caldwell, II~~¹	~~Vice Chair of the Board of Directors~~	~~March 20, 2020~~
~~Robert E. Caldwell, II~~

~~/s/ Donald R. Abernathy, Jr.~~¹	~~Director~~	~~March 20, 2020~~
~~Donald R. Abernathy, Jr.~~

~~/s/Milroy A. Alexander~~¹	~~Director~~	~~March 20, 2020~~
~~Milroy A. Alexander~~

~~/s/Holly Johnson~~¹	~~Director~~	~~March 20, 2020~~
~~Holly Johnson~~

~~/s/Lynn Katzfey~~¹	~~Director~~	~~March 20, 2020~~
~~Lynn Katzfey~~

~~/s/Jane C. Knight~~¹	~~Director~~	~~March 20, 2020~~
~~Jane C. Knight~~

~~/s/Barry Lockard~~¹	~~Director~~	~~March 20, 2020~~
~~Barry Lockard~~



/s/~~Richard S. Masinton~~^{G. Bridger Cox1}			~~Director~~Chair of the Board of Directors	March 20, ~~2020~~2023
~~Richard S. Masinton~~G. Bridger Cox

~~/s/Neil F. M. McKay~~¹	~~Director~~	~~March 20, 2020~~
~~Neil F. M. McKay~~

~~/s/Craig A. Meader~~¹	~~Director~~	~~March 20, 2020~~
~~Craig A. Meader~~

~~/s/L. Kent Needham~~¹	~~Director~~	~~March 20, 2020~~
~~L. Kent Needham~~

~~/s/Mark J. O’Connor~~¹	~~Director~~	~~March 20, 2020~~
~~Mark J. O’Connor~~

~~/s/Thomas H. Olson, Jr.~~¹	~~Director~~	~~March 20, 2020~~
~~Thomas H. Olson, Jr.~~

~~/s/Mark W. Schifferdecker~~¹	~~Director~~	~~March 20, 2020~~
~~Mark W. Schifferdecker~~

~~/s/Douglas E. Tippens~~¹	~~Director~~	~~March 20, 2020~~
~~Douglas E. Tippens~~

~~/s/Gregg L. Vandaveer~~¹	~~Director~~	~~March 20, 2020~~
~~Gregg L. Vandaveer~~


^{/s/ Barry J. Lockard1}	~~Pursuant to Power~~Vice Chair of ~~Attorney~~the Board of Directors	March 20, 2023
Barry J. Lockard

/s/ Donald R. Abernathy, Jr.1	Director	March 20, 2023
Donald R. Abernathy, Jr.

/s/ Milroy A. Alexander1	Director	March 20, 2023
Milroy A. Alexander

/s/ Thomas E. Henning1	Director	March 20, 2023
Thomas E. Henning

/s/ Michael B. Jacobson1	Director	March 20, 2023
Michael B. Jacobson

/s/ Holly Johnson1	Director	March 20, 2023
Holly Johnson

112



/s/ Lynn Jenkins Katzfey1	Director	March 20, 2023
Lynn Jenkins Katzfey

/s/ Craig A. Meader1	Director	March 20, 2023
Craig A. Meader

/s/ L. Kent Needham1	Director	March 20, 2023
L. Kent Needham

/s/ Jeffrey R. Noordhoek1	Director	March 20, 2023
Jeffrey R. Noordhoek

/s/ Mark J. O’Connor1	Director	March 20, 2023
Mark J. O’Connor

/s/ Thomas H. Olson, Jr.1	Director	March 20, 2023
Thomas H. Olson, Jr.

/s/ Carla D. Pratt1	Director	March 20, 2023
Carla D. Pratt

/s/ Douglas E. Tippens1	Director	March 20, 2023
Douglas E. Tippens

/s/ Paul E. Washington1	Director	March 20, 2023
Paul E. Washington

/s/ Lance L. White1	Director	March 20, 2023
Lance L. White

1 Pursuant to Power of Attorney

113

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, ~~2019.~~2022.

The effectiveness of the FHLBank’s internal control over financial reporting as of December 31, ~~2019~~2022 has been audited by PricewaterhouseCoopers LLP, the FHLBank’s independent registered public accounting firm, as stated in their accompanying report.


/s/Mark E. Yardley
Mark E. Yardley
President and Chief Executive Officer

/s/Jeffrey B. Kuzbel
Jeffrey B. Kuzbel
Executive Vice President and Chief Financial 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 the Board of Directors and 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, ~~2019~~2022 and ~~2018,~~2021, 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, ~~2019,~~2022, 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, ~~2019,~~2022, 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, ~~2019~~2022 and ~~2018,~~2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, ~~2019~~2022 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, ~~2019,~~2022, 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 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) 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, 2022 was $49.5 billion, of which 71% were designated as hedging instruments, and the fair value of derivative assets and liabilities as of December 31, 2022 was $272.1 million and $2.4 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.

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

F-3

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 20, ~~2020~~2023

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)
12/31/2019 12/31/2018
ASSETS
Cash and due from banks (Note 3) $ 1,917,166
$ 15,060
Interest-bearing deposits 921,453
670,660
Securities purchased under agreements to resell (Note 12) 4,750,000
1,251,096
Federal funds sold 850,000
50,000

Investment securities:
Trading securities (Note 4) 2,812,562
2,151,113
Available-for-sale securities (Note 4) 7,182,500
1,725,640
Held-to-maturity securities¹ (Note 4)
3,569,958
4,456,873
Total investment securities 13,565,020
8,333,626

Advances (Notes 5, 7, 18) 30,241,315
28,730,113
Mortgage loans held for portfolio, net of allowance for credit losses of $985 and $812 (Notes 6, 7, 18) 10,633,009
8,410,462
Accrued interest receivable 143,765
109,366
Derivative assets, net (Notes 8, 12) 154,804
36,095
Other assets (Note 17) 100,122
108,778

TOTAL ASSETS $ 63,276,654
$ 47,715,256

LIABILITIES
Deposits (Notes 9, 18) $ 790,640
$ 473,820

Consolidated obligations, net:
Discount notes (Notes 10, 17) 27,447,911
20,608,332
Bonds (Notes 10, 17) 32,013,314
23,966,394
Total consolidated obligations, net 59,461,225
44,574,726

Mandatorily redeemable capital stock (Note 13) 2,415
3,597
Accrued interest payable 117,580
87,903
Affordable Housing Program payable (Note 11) 43,027
43,081
Derivative liabilities, net (Notes 8, 12) 202
7,884
Other liabilities (Notes 15, 17) 70,514
69,993

TOTAL LIABILITIES 60,485,603
45,261,004

Commitments and contingencies (Note 17)

F-5

¹~~Fair value:~~ ~~$3,556,938~~ ~~and~~ ~~$4,447,078~~ as

Table of ~~December 31, 2019~~ ~~and~~ ~~2018, respectively.~~Contents


FEDERAL HOME LOAN BANK OF TOPEKA
STATEMENTS OF CONDITION
(In thousands, except par value)
	12/31/2022		12/31/2021
ASSETS
Cash and due from banks (Note 1)	$	25,964	$	25,841
Interest-bearing deposits (Note 3)	2,039,852		693,249
Securities purchased under agreements to resell (Notes 3, 10)	2,350,000		1,500,000
Federal funds sold (Note 3)	3,750,000		3,360,000

Investment securities:
Trading securities (Note 3)	1,421,453		2,339,955
Available-for-sale securities, amortized cost of $9,438,859 and $7,644,496 (Note 3)	9,354,416		7,719,185
Held-to-maturity securities, fair value of $340,259 and $450,771 (Note 3)	345,430		446,185
Total investment securities	11,121,299		10,505,325

Advances (Notes 4, 16)	44,262,750		23,484,288




Mortgage loans held for portfolio, net of allowance for credit losses of $6,378 and $5,317 (Notes 5, 16)	7,905,135		8,135,046


Accrued interest receivable	186,594		78,032

Derivative assets, net (Notes 6, 10)	272,076		156,926
Other assets (Note 15)	79,172		82,531

TOTAL ASSETS	$	71,992,842	$	48,021,238

LIABILITIES
Deposits (Notes 7, 16)	$	711,061	$	946,207

Consolidated obligations, net:
Discount notes (Notes 8, 15)	24,775,405		6,568,989
Bonds (Notes 8, 15)	42,505,839		37,630,609
Total consolidated obligations, net	67,281,244		44,199,598


Mandatorily redeemable capital stock (Note 11)	280		582
Accrued interest payable	197,175		42,753
Affordable Housing Program payable (Note 9)	53,635		42,224
Derivative liabilities, net (Notes 6, 10)	2,359		4,580
Other liabilities (Notes 13, 15)	70,544		71,028

TOTAL LIABILITIES	68,316,298		45,306,972

Commitments and contingencies (Note 15)

The accompanying notes are an integral part of these financial statements.

~~F-4~~6

Table of Contents


FEDERAL HOME LOAN BANK OF TOPEKA
STATEMENTS OF CONDITION
(In thousands, except par value)
	12/31/2022		12/31/2021

CAPITAL
Capital stock outstanding - putable:
Class A ($100 par value; 2,388 and 2,342 shares issued and outstanding) (Notes 11, 16)	$	238,777	$	234,190
Class B ($100 par value; 22,689 and 12,651 shares issued and outstanding) (Notes 11, 16)	2,268,932		1,265,111
Total capital stock	2,507,709		1,499,301

Retained earnings:
Unrestricted	914,716		852,408
Restricted (Note 11)	338,389		290,242
Total retained earnings	1,253,105		1,142,650

Accumulated other comprehensive income (loss) (Note 12)	(84,270)		72,315

TOTAL CAPITAL	3,676,544		2,714,266

TOTAL LIABILITIES AND CAPITAL	$	71,992,842	$	48,021,238

The accompanying notes are an integral part of these financial statements.

FEDERAL HOME LOAN BANK OF TOPEKA
STATEMENTS OF CONDITION
(In thousands, except par value)
12/31/2019 12/31/2018
CAPITAL
Capital stock outstanding - putable:
Class A ($100 par value; 4,476 and 2,473 shares issued and outstanding) (Notes 13, 18) $ 447,610
$ 247,361
Class B ($100 par value; 13,188 and 12,772 shares issued and outstanding) (Notes 13, 18) 1,318,846
1,277,176
Total capital stock 1,766,456
1,524,537

Retained earnings:
Unrestricted 765,295
716,555
Restricted (Note 13) 234,514
197,467
Total retained earnings 999,809
914,022

Accumulated other comprehensive income (loss) (Note 14) 24,786
15,693

TOTAL CAPITAL 2,791,051
2,454,252

TOTAL LIABILITIES AND CAPITAL $ 63,276,654
$ 47,715,256

Table of Contents


FEDERAL HOME LOAN BANK OF TOPEKA
STATEMENTS OF INCOME
(In thousands)
	Year Ended December 31,
	2022		2021		2020


INTEREST INCOME:
Interest-bearing deposits	$	33,548	$	943	$	6,092
Securities purchased under agreements to resell	42,895		1,672		17,812
Federal funds sold	68,392		2,146		5,050
Trading securities	57,899		64,657		74,555
Available-for-sale securities	197,809		44,239		54,311
Held-to-maturity securities	8,570		7,777		33,283
Advances	742,694		129,586		268,051

Mortgage loans held for portfolio	228,583		211,770		280,708
Other	885		938		1,211
Total interest income	1,381,275		463,728		741,073

INTEREST EXPENSE:
Deposits	10,342		400		1,802
Consolidated obligations:
Discount notes	368,075		5,481		123,124
Bonds	638,751		160,173		363,896
Mandatorily redeemable capital stock	7		19		59
Other	1,109		1,007		1,180
Total interest expense	1,018,284		167,080		490,061

NET INTEREST INCOME	362,991		296,648		251,012
Provision (reversal) for credit losses on mortgage loans	710		(750)		(716)
NET INTEREST INCOME AFTER LOAN LOSS PROVISION (REVERSAL)	362,281		297,398		251,728

OTHER INCOME (LOSS):
Net gains (losses) on trading securities	(112,548)		(84,089)		78,142
Net gains (losses) on sale of available-for-sale securities	—		—		1,523
Net gains (losses) on sale of held-to-maturity securities	(89)		—		—
Net gains (losses) on derivatives	86,492		30,402		(129,445)

Standby bond purchase agreement commitment fees	2,642		2,505		2,257
Letters of credit fees	6,558		6,136		6,297
Other	3,003		3,612		1,078
Total other income (loss)	(13,942)		(41,434)		(40,148)

The accompanying notes are an integral part of these financial statements.

Table of Contents

FEDERAL HOME LOAN BANK OF TOPEKA
STATEMENTS OF INCOME
(In thousands)
Year Ended December 31,
2019 2018 2017
INTEREST INCOME:
Interest-bearing deposits $ 19,801
$ 14,957
$ 4,204
Securities purchased under agreements to resell 104,397
71,298
23,937
Federal funds sold 32,834
40,306
27,994
Trading securities (Note 4) 87,534
72,659
60,048
Available-for-sale securities (Note 4) 116,866
46,154
24,364
Held-to-maturity securities (Note 4) 105,099
116,189
73,692
Advances (Note 5) 716,199
637,203
402,071
Mortgage loans held for portfolio (Note 6) 304,582
256,698
214,388
Other 1,440
1,545
1,280
Total interest income 1,488,752
1,257,009
831,978

INTEREST EXPENSE:
Deposits (Note 9) 9,820
8,912
3,371
Consolidated obligations:
Discount notes (Note 10) 532,155
451,380
237,019
Bonds (Note 10) 689,275
524,255
320,895
Mandatorily redeemable capital stock (Note 13) 139
229
195
Other 1,299
1,036
490
Total interest expense 1,232,688
985,812
561,970

NET INTEREST INCOME 256,064
271,197
270,008
Provision (reversal) for credit losses on mortgage loans (Note 7) 387
27
(186 )
NET INTEREST INCOME AFTER LOAN LOSS PROVISION (REVERSAL) 255,677
271,170
270,194

OTHER INCOME (LOSS):
Net gains (losses) on trading securities (Note 4) 70,261
(21,910 ) 6,914
Net gains (losses) on sale of held-to-maturity securities (Note 4) (46 ) 1,591
—
Net gains (losses) on derivatives and hedging activities (Note 8) (57,623 ) (3,191 ) (1,245 )
Standby bond purchase agreement commitment fees 2,283
2,864
4,492
Letters of credit fees 4,832
4,384
3,820
Other 3,266
3,415
2,006
Total other income (loss) 22,973
(12,847 ) 15,987


FEDERAL HOME LOAN BANK OF TOPEKA
STATEMENTS OF INCOME
(In thousands)
	Year Ended December 31,
	2022		2021		2020


OTHER EXPENSES:
Compensation and benefits	$	42,479	$	41,125	$	39,883
Other operating	21,011		19,557		18,689
Federal Housing Finance Agency	5,599		4,743		4,178
Office of Finance	4,455		4,503		4,062

Mortgage loans transaction service fees	6,079		6,401		7,819
Other	1,231		1,200		5,776
Total other expenses	80,854		77,529		80,407

INCOME BEFORE ASSESSMENTS	267,485		178,435		131,173

Affordable Housing Program	26,749		17,845		13,123

NET INCOME	$	240,736	$	160,590	$	118,050

The accompanying notes are an integral part of these financial statements.

FEDERAL HOME LOAN BANK OF TOPEKA
STATEMENTS OF INCOME
(In thousands)
Year Ended December 31,
2019 2018 2017
OTHER EXPENSES:
Compensation and benefits (Note 15) $ 37,848
$ 37,673
$ 37,889
Other operating (Note 17) 19,519
18,729
17,019
Federal Housing Finance Agency 3,460
2,956
2,909
Office of Finance 3,700
3,207
3,052
Other 8,289
6,543
6,167
Total other expenses 72,816
69,108
67,036

INCOME BEFORE ASSESSMENTS 205,834
189,215
219,145

Affordable Housing Program (Note 11) 20,597
18,944
21,934

NET INCOME $ 185,237
$ 170,271
$ 197,211

Table of Contents


FEDERAL HOME LOAN BANK OF TOPEKA								FEDERAL HOME LOAN BANK OF TOPEKA
STATEMENTS OF COMPREHENSIVE INCOME								STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)								(In thousands)
	Year Ended December 31,								Year Ended December 31,
	2019		2018			2017			2022		2021		2020

Net income	$	185,237	$	170,271		$	197,211	Net income	$	240,736	$	160,590	$	118,050

Other comprehensive income (loss):								Other comprehensive income (loss):
Net unrealized gains (losses) on available-for-sale securities	7,720		(12,138		)	21,861		Net unrealized gains (losses) on available-for-sale securities	(159,132)		29,493		18,408
Net non-credit portion of other-than-temporary impairment losses on held-to-maturity securities	—		4,163			1,678

Defined benefit pension plan	1,373		(1,990		)	1,542		Defined benefit pension plan	2,547		514		(886)
Total other comprehensive income (loss)	9,093		(9,965		)	25,081		Total other comprehensive income (loss)	(156,585)		30,007		17,522

TOTAL COMPREHENSIVE INCOME	$	194,330	$	160,306		$	222,292
TOTAL COMPREHENSIVE INCOME (LOSS)								TOTAL COMPREHENSIVE INCOME (LOSS)	$	84,151	$	190,597	$	135,572

The accompanying notes are an integral part of these financial statements.

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, 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
Comprehensive income 136,217
34,054
170,271
(9,965 ) 160,306
Proceeds from issuance of capital stock 16
1,541
16,537
1,653,706
16,553
1,655,247
1,655,247
Repurchase/redemption of capital stock (8,176 ) (817,568 ) (91 ) (9,121 ) (8,267 ) (826,689 ) (826,689 )
Net reclassification of shares to mandatorily redeemable capital stock (2,045 ) (204,456 ) (8,359 ) (835,860 ) (10,404 ) (1,040,316 ) (1,040,316 )
Net transfer of shares between Class A and Class B 10,327
1,032,710
(10,327 ) (1,032,710 ) —
—
—
Dividends on capital stock (Class A - 1.8%, Class B - 7.0%):
Cash payment (399 ) (399 ) (399 )
Stock issued 963
96,256
963
96,256
(96,256 ) (96,256 ) —
Balance at December 31, 2018 2,473
$ 247,361
12,772
$ 1,277,176
15,245
$ 1,524,537
$ 716,555
$ 197,467
$ 914,022
$ 15,693
$ 2,454,252
Comprehensive income 148,190
37,047
185,237
9,093
194,330
Proceeds from issuance of capital stock 18
1,804
14,039
1,403,916
14,057
1,405,720
1,405,720
Repurchase/redemption of capital stock (7,130 ) (713,027 ) (2,661 ) (266,112 ) (9,791 ) (979,139 ) (979,139 )
Net reclassification of shares to mandatorily redeemable capital stock (1,387 ) (138,681 ) (1,452 ) (145,150 ) (2,839 ) (283,831 ) (283,831 )
Net transfer of shares between Class A and Class B 10,502
1,050,153
(10,502 ) (1,050,153 ) —
—
—
Dividends on capital stock (Class A - 2.4%, Class B - 7.5%):

Cash payment

(281 ) (281 ) (281 )
Stock issued 992
99,169
992
99,169
(99,169 ) (99,169 ) —
Balance at December 31, 2019 4,476
$ 447,610
13,188
$ 1,318,846
17,664
$ 1,766,456
$ 765,295
$ 234,514
$ 999,809
$ 24,786
$ 2,791,051

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, 2019	4,476	$	447,610	13,188	$	1,318,846	17,664	$	1,766,456	$	765,295	$	234,514	$	999,809	$	24,786	$	2,791,051
Adjustment for cumulative effect of accounting change										(6,123)		—		(6,123)				(6,123)
Comprehensive income										94,440		23,610		118,050		17,522		135,572
Proceeds from issuance of capital stock	22	2,270		21,126	2,112,552		21,148	2,114,822										2,114,822
Repurchase/redemption of capital stock	(1,697)	(169,719)		(1,094)	(109,407)		(2,791)	(279,126)										(279,126)
Net reclassification of shares to mandatorily redeemable capital stock	(10,715)	(1,071,524)		(10,272)	(1,027,175)		(20,987)	(2,098,699)										(2,098,699)
Net transfer of shares between Class A and Class B	12,036	1,203,588		(12,036)	(1,203,588)		—	—										—
Partial recovery of prior capital distribution to Financing Corporation										10,543		—		10,543				10,543
Dividends on capital stock (Class A - 0.8%, Class B - 5.8%):
Cash payment										(273)				(273)				(273)
Stock issued				706	70,551		706	70,551		(70,551)				(70,551)				—
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

¹Putable

The accompanying notes are an integral part of these financial statements.

FEDERAL HOME LOAN BANK OF TOPEKA
STATEMENTS OF CASH FLOWS
(In thousands)
Year Ended December 31,
2019 2018 2017
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 185,237
$ 170,271
$ 197,211
Adjustments to reconcile income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization:
Premiums and discounts on consolidated obligations, net (10,559 ) 2,467
9,475
Concessions on consolidated obligations 12,376
5,448
5,406
Premiums and discounts on investments, net 10,567
3,644
3,869
Premiums, discounts and commitment fees on advances, net (1,606 ) (4,698 ) (6,002 )
Premiums, discounts and deferred loan costs on mortgage loans, net 29,566
18,116
21,626
Fair value adjustments on hedged assets or liabilities 3,385
1,453
4,464
Premises, software and equipment 3,127
2,975
2,282
Other 334
399
657
Provision (reversal) for credit losses on mortgage loans 387
27
(186 )
Non-cash interest on mandatorily redeemable capital stock 137
227
193
Net realized (gains) losses on sale of held-to-maturity securities 46
(1,591 ) —
Net other-than-temporary impairment losses on held-to-maturity securities —
26
468
Net realized (gains) losses on sale of premises and equipment (2 ) (880 ) 82
Other adjustments (188 ) (382 ) (212 )
Net (gains) losses on trading securities (70,261 ) 21,910
(6,914 )
Net change in derivatives and hedging activities (107,537 ) 13,961
16,670
(Increase) decrease in accrued interest receivable (34,587 ) (23,913 ) (17,175 )
Change in net accrued interest included in derivative assets (1,247 ) (6,616 ) (131 )
(Increase) decrease in other assets 3,135
590
(3,200 )
Increase (decrease) in accrued interest payable 29,475
31,949
6,341
Change in net accrued interest included in derivative liabilities 4,700
(4,272 ) (1,944 )
Increase (decrease) in Affordable Housing Program liability (54 ) 76
9,763
Increase (decrease) in other liabilities 933
(2,388 ) (284 )
Total adjustments (127,873 ) 58,528
45,248
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 57,364
228,799
242,459

Table of Contents


FEDERAL HOME LOAN BANK OF TOPEKA
STATEMENTS OF CASH FLOWS
(In thousands)
	Year Ended December 31,
	2022		2021		2020


CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	240,736	$	160,590	$	118,050
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization:
Premiums and discounts on consolidated obligations, net	145,675		(15,563)		(54,707)
Concessions on consolidated obligations	5,112		5,694		26,485
Premiums and discounts on investments, net	(1,522)		14,116		18,636
Premiums, discounts and commitment fees on advances, net	(3,713)		(5,179)		(4,846)
Premiums, discounts and deferred loan costs on mortgage loans, net	20,119		50,188		66,476
Fair value adjustments on hedged assets or liabilities	1,421		3,767		4,802
Premises, software and equipment	3,172		3,285		3,339
Other	249		531		291
Provision (reversal) for credit losses on mortgage loans	710		(750)		(716)
Non-cash interest on mandatorily redeemable capital stock	5		17		58
Net realized (gains) losses on sale of available-for-sale securities	—		—		(1,523)
Net realized (gains) losses on sale of held-to-maturity securities	89		—		—

Net realized (gains) losses on disposal of premises, software and equipment	263		13		3,471

Other adjustments, net	(376)		(335)		4,318
Net (gains) losses on trading securities	112,548		84,089		(78,142)
Net change in derivatives and hedging activities	693,354		239,455		(224,167)
(Increase) decrease in accrued interest receivable	(111,073)		19,699		46,325
Change in net accrued interest included in derivative assets	(41,566)		(6,628)		31,310
(Increase) decrease in other assets	(1,213)		173		(21)
Increase (decrease) in accrued interest payable	154,524		(2,822)		(72,006)
Change in net accrued interest included in derivative liabilities	9,643		(8,149)		1,992
Increase (decrease) in Affordable Housing Program liability	11,411		1,095		(1,898)
Increase (decrease) in other liabilities	2,147		(342)		(64)
Total adjustments	1,000,979		382,354		(230,587)
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES	1,241,715		542,944		(112,537)

The accompanying notes are an integral part of these financial statements.

Table of Contents


FEDERAL HOME LOAN BANK OF TOPEKA										FEDERAL HOME LOAN BANK OF TOPEKA
STATEMENTS OF CASH FLOWS										STATEMENTS OF CASH FLOWS
(In thousands)										(In thousands)
											Year Ended December 31,
											2022		2021		2020
	Year Ended December 31,
	2019			2018			2017
CASH FLOWS FROM INVESTING ACTIVITIES:										CASH FLOWS FROM INVESTING ACTIVITIES:
Net (increase) decrease in interest-bearing deposits	$	(428,403	)	$	(227,101	)	$	(8,879	)	Net (increase) decrease in interest-bearing deposits	$	(1,789,189)	$	205,509	$	(57,502)
Net (increase) decrease in securities purchased under resale agreements	(3,498,904		)	1,910,350			(761,446		)	Net (increase) decrease in securities purchased under resale agreements	(850,000)		1,100,000		2,150,000
Net (increase) decrease in Federal funds sold	(800,000		)	1,125,000			1,550,000			Net (increase) decrease in Federal funds sold	(390,000)		(1,580,000)		(930,000)
Proceeds from sale of trading securities	19,184			—			—			Proceeds from sale of trading securities	12,448		—		275,186
Proceeds from maturities of and principal repayments on trading securities	3,269,002			4,179,361			2,000,288			Proceeds from maturities of and principal repayments on trading securities	3,583,506		2,299,333		817,141
Purchases of trading securities	(3,879,375		)	(3,482,969		)	(2,360,000		)	Purchases of trading securities	(2,790,000)		(2,100,000)		(825,000)
Proceeds from sale of available-for-sale securities										Proceeds from sale of available-for-sale securities	—		—		289,045
Proceeds from maturities of and principal repayments on available-for-sale securities	11,846			18,793			6,027			Proceeds from maturities of and principal repayments on available-for-sale securities	1,300,457		2,393,669		827,813
Purchases of available-for-sale securities	(5,329,326		)	(281,489		)	(399,437		)	Purchases of available-for-sale securities	(3,611,488)		(1,558,584)		(430,610)
Proceeds from sale of held-to-maturity securities	9,442			87,827			—			Proceeds from sale of held-to-maturity securities	19,930		—		—
Proceeds from maturities of and principal repayments on held-to-maturity securities	875,027			942,637			1,099,083			Proceeds from maturities of and principal repayments on held-to-maturity securities	80,745		330,258		821,718
Purchases of held-to-maturity securities	—			(625,170		)	(1,483,101		)	Purchases of held-to-maturity securities	—		(45,000)		—
Advances repaid	322,056,867			392,375,489			522,851,282			Advances repaid	608,948,836		494,697,338		392,881,159
Advances originated	(323,451,173		)	(394,828,014		)	(525,215,855		)	Advances originated	(630,170,723)		(497,153,655)		(383,664,775)
Principal collected on mortgage loans	1,676,691			922,423			947,143			Principal collected on mortgage loans	1,178,272		3,159,747		4,085,162
Purchases of mortgage loans	(3,927,543		)	(2,070,971		)	(1,616,044		)	Purchases of mortgage loans	(977,459)		(2,142,818)		(2,738,299)
Proceeds from sale of foreclosed assets	2,378			5,038			2,455			Proceeds from sale of foreclosed assets	805		1,341		1,071
Purchases of other long-term assets	—			(6,000		)	(29,000		)

Other investing activities	3,120			2,884			2,538			Other investing activities	1,877		3,568		3,336
Net (increase) decrease in loans to other FHLBanks	—			—			600,000
Proceeds from sale of premises, software and equipment	—			2,416			48

Purchases of premises, software and equipment	(1,576		)	(9,282		)	(30,119		)	Purchases of premises, software and equipment	(2,093)		(1,208)		(590)
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES	(13,392,743		)	41,222			(2,845,017		)	NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES	(25,454,076)		(390,502)		13,504,855

CASH FLOWS FROM FINANCING ACTIVITIES:										CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits										Net increase (decrease) in deposits	(184,008)		(283,454)		438,821
Net proceeds from issuance of consolidated obligations:										Net proceeds from issuance of consolidated obligations:
Discount notes										Discount notes	395,436,136		265,126,314		630,992,025
Bonds										Bonds	45,857,494		40,017,798		47,968,831
Payments for maturing and retired consolidated obligations:										Payments for maturing and retired consolidated obligations:
Discount notes										Discount notes	(377,359,026)		(269,439,854)		(647,521,949)
Bonds										Bonds	(40,408,800)		(39,950,150)		(42,349,800)

Proceeds from financing derivatives										Proceeds from financing derivatives	—		—		3,470
Net interest payments received (paid) for financing derivatives										Net interest payments received (paid) for financing derivatives	(7,132)		(22,513)		(16,885)
Proceeds from issuance of capital stock										Proceeds from issuance of capital stock	3,808,380		1,684,321		2,114,822
Payments for repurchase/redemption of capital stock										Payments for repurchase/redemption of capital stock	(2,117,310)		(1,158,180)		(279,126)
Payments for repurchase of mandatorily redeemable capital stock										Payments for repurchase of mandatorily redeemable capital stock	(812,999)		(671,043)		(2,099,548)
Cash dividends paid										Cash dividends paid	(251)		(255)		(273)
Partial recovery of prior capital distribution to Financing Corporation										Partial recovery of prior capital distribution to Financing Corporation	—		—		10,543
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES										NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES	24,212,484		(4,697,016)		(10,739,069)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS										NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	123		(4,544,574)		2,653,249
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD										CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	25,841		4,570,415		1,917,166
CASH AND CASH EQUIVALENTS AT END OF PERIOD										CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	25,964	$	25,841	$	4,570,415

The accompanying notes are an integral part of these financial statements.

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FEDERAL HOME LOAN BANK OF TOPEKA
STATEMENTS OF CASH FLOWS
(In thousands)
Year Ended December 31,
2019 2018 2017
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits $ 239,562
$ 48,856
$ (107,106 )
Net proceeds from issuance of consolidated obligations:
Discount notes 818,115,910
1,036,653,023
937,784,053
Bonds 24,700,487
10,832,505
18,002,624
Payments for maturing and retired consolidated obligations:
Discount notes (811,278,050 ) (1,036,479,071 ) (939,161,380 )
Bonds (16,686,500 ) (11,368,440 ) (14,191,615 )
Net increase (decrease) in other borrowings —
6,000
29,000
Proceeds from financing derivatives 3,329
—
3,227
Net interest payments received (paid) for financing derivatives 1,597
(1,785 ) (19,261 )
Proceeds from issuance of capital stock 1,405,720
1,655,247
1,817,323
Payments for repurchase/redemption of capital stock (979,139 ) (826,689 ) (715,714 )
Payments for repurchase of mandatorily redeemable capital stock (285,150 ) (1,042,258 ) (777,530 )
Cash dividends paid (281 ) (399 ) (267 )
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 15,237,485
(523,011 ) 2,663,354
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,902,106
(252,990 ) 60,796
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 15,060
268,050
207,254
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,917,166
$ 15,060
$ 268,050

Supplemental disclosures:
Interest paid $ 1,202,135
$ 948,392
$ 535,268
Affordable Housing Program payments $ 20,973
$ 19,027
$ 12,752
Net transfers of mortgage loans to other assets $ 771
$ 3,768
$ 2,218


FEDERAL HOME LOAN BANK OF TOPEKA
STATEMENTS OF CASH FLOWS
(In thousands)
	Year Ended December 31,
	2022		2021		2020


Supplemental disclosures:
Interest paid	$	308,581	$	184,420	$	587,287
Affordable Housing Program payments	$	15,653	$	17,124	$	15,137
Net transfers of mortgage loans to other assets	$	176	$	449	$	1,226
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.

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FEDERAL HOME LOAN BANK OF TOPEKA

Notes to Financial Statements

For the years ended December 31, ~~2019~~, ~~2018~~2022, 2021 and ~~2017~~2020

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).

~~Reclassifications: Presentation of cash flow~~Reclassification: Certain amounts ~~in the prior period~~ have been revised or reclassified and may not agree to ~~reflect short-term trading securities purchases and proceeds on a gross, rather than net, basis. Certain other immaterial~~previously issued financial reports. These amounts ~~in the financial statements have been reclassified~~were not deemed to ~~conform to current period presentations.~~be material.

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Use of Estimates: The preparation of financial statements ~~in accordance with accounting principles generally accepted in the United States of America (GAAP)~~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 and the fair value of 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.

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. 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 Notes 86 and 1210 for additional 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. If~~counterparty will replenish in accordance with its contractual terms. The credit loss would be limited to the 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 the intent of realizing gains~~ and holds these investments indefinitely as management periodically evaluates its asset/liability and liquidity needs. 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. ~~The~~ FHLBank might also sell mortgage-backed securities (MBS) held in its trading portfolio to reduce its London Interbank Offered Rate (LIBOR) exposure.

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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. Beginning January 1, 2019,~~ the ~~FHLBank adopted new hedge accounting guidance, which, among other things, impacts the presentation~~Statements of ~~gains (losses) on derivatives and hedging activities for qualifying hedges, including fair value hedges of available-for-sale securities.~~ Condition.

For available-for-sale securities in ~~hedge~~hedging relationships that qualify as 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 ~~available-for-sale~~ interest income ~~together with the related change in the fair value of the derivative,~~on 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.

~~Prior to January 1, 2019,~~For securities classified as available-for-sale, FHLBank evaluates an individual security for ~~available-for-sale securities in hedge relationships that qualified as~~impairment on a quarterly basis by comparing the security’s fair value ~~hedges, the FHLBank recorded the portion of the change in~~to its amortized cost. Impairment exists when the fair value of the investment ~~related~~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 ~~risk being hedged~~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 ~~non-interest income~~earnings as net gains (losses) on ~~derivatives and hedging activities together with the related change in the fair value~~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 ~~derivative, and recorded~~amortized cost basis, the ~~remainder~~credit portion of the ~~change in~~impairment is recognized as an allowance for credit losses while the ~~fair value of the investment in OCI~~non-credit portion is recognized as net unrealized gains (losses) on available-for-sale ~~securities.~~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. 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 a maturity for purposes of assessing ability and intent to hold to maturity:


▪	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 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 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 computes the amortization of premiums and accretion of discounts on other investments using the level-yield method to the contractual maturities of the securities.

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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).

Advances: ~~The~~ FHLBank ~~presents~~records advances ~~(secured loans to members, former members or housing associates)~~at amortized cost, which is 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.

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 fee when the borrower prepays certain advances before the original maturity. ~~The~~ FHLBank records prepayment fees net of basis adjustments related to hedging activities included in the carrying value of the advance as advance interest income in the Statements of Income.

If a new advance does not qualify as a modification of an existing advance, the existing advance is treated as an advance termination and any prepayment fee, net of hedging adjustments, is recorded to advance interest income in the Statements of Income.

If a new advance qualifies as a modification of an existing advance, any prepayment fee, net of hedging adjustments, is deferred, recorded in the basis of the modified 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 and meets hedge accounting requirements, the modified advance is marked to a benchmark ~~or full~~ fair value ~~depending on the risk being hedged,~~using full contractual coupon cash flows, and subsequent fair value changes that are attributable to the hedged risk are recorded in advance interest ~~income effective January 1, 2019. Prior to January 1, 2019, subsequent fair value changes were recorded in non-interest income as net gains (losses) on derivatives and hedging activities.~~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 MBS. As a part of the methodology used to determine the amount of credit enhancement necessary, ~~the~~ FHLBank analyzes the risk characteristics of each mortgage loan using a model licensed from a Nationally Recognized Statistical Rating Organization (NRSRO). ~~The~~ FHLBank uses the model to evaluate loan data provided by the PFI as well as other relevant information.

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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 iswas 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. The required CE obligation amount may vary depending on the various product alternatives selected by the PFI. CE fees 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.

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 is a valuation allowance separately established for each identified portfolio segment, if necessary, to provide for probable losses inherent in the FHLBank’s portfolios as of the Statement of Condition date.Nonaccrual Loans: A ~~mortgage~~past due loan is ~~considered impaired when, based on current information~~one where the borrower has failed to make a full payment of principal and ~~events, it is probable that the FHLBank will be unable to collect all amounts~~interest within 30 days of its due according to the contractual terms of the mortgage loan agreement. 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~~date. 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 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.

Collateral-dependent Loans: ~~An impaired~~ A loan is considered collateral dependent ifwhen the borrower is experiencing financial difficulty and repayment is expected to be substantially provided ~~solely by~~through the sale of the underlying ~~property; that is, there is no other available and reliable source of repayment.~~collateral. A loan that is considered collateral-dependent is measured for ~~impairment~~credit loss based on the fair value of the underlying property less estimated selling costs, with any shortfall recognized as an allowance for loan loss or charged off. ~~Interest income on impaired loans is recognized in the same manner as non-accrual loans.~~

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 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, 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.

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FHLBank utilizes two Derivative Clearing Organizations (Clearinghouses) for all cleared derivative transactions, LCH Ltd and CME Clearing. At both Clearinghouses, variation margin is characterized as daily settlement payments and initial margin is considered cash collateral.

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; or~~


▪	~~a non-qualifying hedge of an asset or liability (an economic hedge) for asset/liability management purposes.~~

▪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 the 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 hedged items attributable to the hedged risk and whether those derivatives may be expected to remain highly effective in future periods; and

▪

Shortcut hedge accounting - Interest rate swap 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 of the hedged asset or liability.

▪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 hedged items attributable to the hedged risk and whether those derivatives may be expected to remain highly effective in future periods; and

▪Shortcut hedge accounting - 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 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.

Beginning January 1, 2019, the FHLBank adopted new hedge accounting guidance, which, among other things, impacts the presentation of gains (losses) on derivatives and hedging activities for qualifying hedges. 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, are recorded in net interest income in the same line as the earnings effect of the hedged item. Net gains (losses) on derivatives and hedging activities for qualifying hedges recorded in net interest income include unrealized and realized gains (losses), which include net interest settlements.

Prior to January 1, 2019, fair value hedge ineffectiveness (which represented the amount by which the change in the fair value of the derivative differed from the change in the fair value of the hedged item) was recorded in non-interest income as net gains (losses) on derivatives and hedging activities.

Accounting for Non-Qualifying Hedges: An economic hedge is ~~defined as~~ a derivative hedging 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 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.

Accrued Interest Receivables and Payables: The net settlements of interest receivables and payables onrelated to derivatives designated asin fair value ~~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 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 of a hedged item attributable to the hedged risk (including hedged items such as firm commitments); (2) the derivative and/or the hedged item expires or is sold, terminated or exercised; (3) a hedged firm commitment no longer meets the definition of a firm commitment; or (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 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 other income (loss) as net gains (losses) on ~~derivatives and hedging activities.~~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: Premises, software, and equipment are included in other assets on the Statements of Condition. ~~The~~ 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. The cost of purchased software and certain costs incurred in developing computer software for internal use are capitalized and amortized over future periods. Gains and losses on disposals are included in other income (loss) on the Statements of Income.

As of December 31, ~~2019~~2022 and ~~2018,~~2021, premises, software, and equipment were ~~$46,619,000~~$36,968,000 and ~~$48,167,000,~~$38,310,000, which was net of the accumulated depreciation and amortization of ~~$24,202,000~~$32,356,000 and ~~$21,106,000,~~$29,264,000, respectively. For the years ended December 31, ~~2019, 2018,~~2022, 2021, and ~~2017,~~2020, the depreciation and amortization expense for premises, software and equipment was ~~$3,127,000, $2,975,000~~$3,172,000, $3,285,000 and ~~$2,282,000,~~$3,339,000, respectively.

Consolidated Obligations: Consolidated obligations are recorded at amortized 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 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: ~~Under the~~ The Joint Capital Enhancement Agreement, as amended, ~~the~~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

Troubled Debt Restructurings and Vintage Disclosures (Accounting Standards Update (ASU) 2022-02). In March 2022, the Financial Accounting Standards Board (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 entity apply the loan refinancing and restructuring guidance in ASC 310-20-35-9 through ASC 310-20-35-11 to determine whether a modification results in a new loan or a continuation of an existing loan. Additionally, the amendments require that an entity disclose current-period gross writeoffs by year of origination for financing receivables and net investments in leases within the scope of ASC 326. FHLBank adopted this guidance as of January 1, 2023. While this guidance is intended to enhance disclosures, FHLBank does not expect this guidance to have a material effect on FHLBank’s financial condition, results of operations, cash flows, and disclosures.

Fair Value Hedging – Portfolio Layer Method (ASU 2022-01). In March 2022, the FASB issued 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 expands the scope and application of the portfolio layer method and provides guidance on the accounting for and disclosure of hedge basis adjustments. FHLBank adopted this guidance as of January 1, 2023. FHLBank does not currently hedge interest rate risk for portfolios of financial assets so adoption of this guidance will have no effect on FHLBank’s financial condition, results of operations, cash flows, or disclosures given current strategies.

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Facilitation of the Effects of Reference Rate Reform on Financial Reporting (ASU 2020-04). In March 2020, the ~~Financial Accounting Standards Board (FASB)~~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 iswas effective immediately for ~~the~~ FHLBank, and the amendments may be applied prospectively through December 31, ~~2022. The~~2024 (as amended by ASU 2022-06). During the fourth quarter of 2022, FHLBank ~~is in the process of evaluating the guidance, and its effect on the FHLBank's financial condition, results of operations and cash flows has not yet been determined.~~

~~Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes (Accounting Standards Update (ASU) 2018-16). In October 2018, the FASB issued an amendment that permits use of the OIS rate based on SOFR as a U.S. benchmark~~began to transition certain interest rate swaps in designated hedges to a new reference rate, all of which met the scope requirements of ASC 848 for ~~hedge accounting purposes under Topic 815 in addition to~~ the U.S. Treasury rate, the LIBOR swap rate, the OIS rate based on the Fed Funds Effective Rate, and the Securities Industry and Financial Markets Association Municipal Swap Rate. The amendments apply to all entities that elect to apply hedge accounting of the benchmark interest rate. The amendments were adopted on a prospective basis for qualifying new or redesignated hedging relationships entered into on or after the date of adoption. The amendment was effective concurrently with ASU 2017-12 (see below) beginning January 1, 2019. The adoption of this guidance did not materially impact the FHLBank's application of ~~hedge~~expedients. As such, FHLBank made the elections to not reassess a previous accounting ~~or utilization of~~determination and to not dedesignate a hedging ~~strategies.~~

~~Customer's Accounting for Implementation Costs Incurred~~relationship due to a change in a ~~Cloud Computing Arrangement that is a Service Contract (ASU 2018-15).~~ In August 2018, the FASB issued an amendment to align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). Accordingly, the amendments in this ASU require an entity in a hosting arrangement that is a service contract to follow existing guidance relating to internal-use software to determine which implementation costs to capitalize as an asset related to the service contract and which costs to expense. Costs to develop or obtain internal-use software that cannot be capitalized also cannot be capitalized for a hosting arrangement that is a service contract. Therefore, an entity in a hosting arrangement that is a service contract determines to which project stage (that is, preliminary project stage, application development stage, or post-implementation stage) an implementation activity relates. Costs for implementation activities in the application development stage are capitalized depending on the nature of the costs, while costs incurred during the preliminary project and post-implementation stages are expensed as the activities are performed. The amendments in this ASU also require the entity to expense the capitalized implementation costs of a hosting arrangement that is a service contract over the term of the hosting arrangement. The amendments in this ASU were effective January 1, 2020 for the FHLBank. The adoption of this guidancecritical term. These transactions did ~~not materially impact on the FHLBank's financial condition, results of operations or cash flows.~~

~~Changes to the Disclosure Requirements for Defined Benefit Plans (ASU 2018-14).~~ ~~In August 2018,~~the FASB issued an amendment modifying the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans to improve disclosure effectiveness. The amendments in the ASU remove disclosures that are no longer considered cost beneficial, clarify the specific requirements of disclosures, and add disclosure requirements identified as relevant. The amendments in this ASU are effective for annual periods ending after December 15, 2020, which is the year ending December 31, 2020 for the FHLBank, and will be applied retrospectively for all comparative periods presented. Early adoption is permitted. The FHLBank does not plan on early adoption. The adoption of this guidance will not have a material ~~impact~~effect on ~~the disclosures related to defined benefit plans and will not impact the~~ FHLBank’s financial condition, results of operations, or cash flows.

~~Changes to the Disclosure Requirements for Fair Value Measurement (ASU 2018-13).~~ ~~In August 2018,~~the FASB issued an amendment that modifies the disclosure requirements for fair value measurements. This ASU removes the requirement to disclose: (1) the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy; (2) the policy for timing of transfers between levels; and (3) the valuation processes for Level 3 fair value measurements. The ASU requires disclosure of changes in unrealized gains and losses for the period included in OCI for recurring Level 3 fair value measurements held at the end of the reporting period and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. The amendments in this ASU were effective January 1, 2020 for the FHLBank. The adoption of While FHLBank is still evaluating other transition options, FHLBank does not expect this guidance ~~will not~~to have a material ~~impact~~effect on ~~the disclosures related to fair value measurements and did not impact the FHLBank’s~~its financial condition, results of operations, or cash flows.

~~Targeted Improvements to Accounting for Hedging Activities, as amended (ASU 2017-12)~~. In ~~August 2017,~~December 2022, the FASB issued an amendment to ~~simplify~~defer the ~~application~~sunset date of ~~hedge accounting guidance~~Topic 848 from December 31, 2022 to December 31, 2024. Topic 848 provides temporary relief during the reference rate reform transition period. The intended cessation date of several remaining tenors of LIBOR was postponed until June 30, 2023 so the amendments recognize that a significant number of modifications may take place up to and after LIBOR cessation. The amendments are effective immediately.

NOTE 3 – INVESTMENTS

FHLBank's investment portfolio consists of interest-bearing deposits, securities purchased under agreements to resell, Federal funds sold, and debt securities.

Interest-Bearing Deposits, Securities Purchased under Agreements to Resell, and Federal Funds Sold: FHLBank invests in ~~current GAAP~~interest-bearing deposits, securities purchased under agreements to resell, and Federal funds sold to ~~improve the financial reporting~~provide short-term liquidity. These investments are generally transacted with counterparties that have received a credit rating of ~~hedging relationships to better portray the economic results of~~triple-B or greater (investment grade) by an ~~entity's risk management activities in its financial statements. This guidance requires that, for fair value hedges, the entire change in the fair value~~NRSRO. These may differ from internal ratings of the ~~hedging instrument included in the assessment~~investments, if applicable. As of ~~hedge effectiveness be presented in the same income statement line~~December 31, 2022, approximately 27 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 ~~is used to present the earnings effect of the hedged item. In addition, the amendments~~are generally transacted on an overnight term. FHFA regulations 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~~a limit on the ~~basis~~amount of ~~the benchmark rate component~~unsecured credit FHLBank may extend to a counterparty. As of ~~the contractual coupon cash flows determined at hedge inception;~~

~~Measurement of the hedged item~~December 31, 2022 and 2021, all investments 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;

For a cash flow hedge of interest rate risk of a variable rate financial instrument, an entity can designate the variability in cash flows attributable to the contractually specified interest rate as the hedged risk;interest-bearing deposits and

~~If an entity that applies the shortcut method determines that use of that method was not~~ Federal funds sold were repaid or is no longer appropriate, the entity may apply a long-haul method for assessing hedge effectiveness as long as the hedge is highly effective and the entity documents at inception, or at the adoption date for existing shortcut hedging relationships, which long-haul methodology it will use.

The amendment became effective January 1, 2019 for the FHLBank. The guidance did not impact the FHLBank's application of hedge accounting for existing hedge strategies. For all short-cut hedge accounting trades, the FHLBank updated existing documentation to designate a long-haul method to be utilized in the event a hedge ceases to qualify for the short-cut method. The guidance also provided opportunities to enhance risk management through new hedge strategies, including partial term hedges. The adoption of this guidance did not have a material impact on the FHLBank's financial condition, results of operations or cash flows beyond a prospective change in income statement presentation for fair value hedge relationships and new required disclosures.

~~Premium Amortization on Purchased Callable Debt Securities (ASU 2017-08).~~ In March 2017, the 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 became effective January 1, 2019 for the FHLBank. The adoption of this guidance did not have an impact on the FHLBank's financial condition, results of operations or cash flows.

~~Measurement of Credit Losses on Financial Instruments, as amended (ASU 2016-13).~~ In June 2016, the FASB issued amended guidance 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 collectability of the reported amount. An entity must use judgment in determining the relevant information and estimation methods that are appropriate in its circumstances. Additionally, under the new guidance, a financial asset, or a group of financial assets, measured 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~~repaid according 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~~contractual terms. No allowance for credit losses was recorded for these assets as of December 31, 2022 and 2021. Carrying values of interest-bearing deposits and Federal funds sold exclude accrued interest receivable of $2,278,000 and $903,000, respectively, as of December 31, 2022, and $51,000 and $7,000, respectively, as of December 31, 2021.

Securities purchased ~~financial assets~~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 ~~a more-than-insignificant amount of credit deterioration since origination~~its counterparties, FHLBank determined that ~~are measured at amortized cost basis in a similar manner to other financial assets measured at amortized cost basis. The initial~~no allowance for credit losses ~~is required~~was needed for its securities purchased under agreements 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 became effective for the FHLBank on January 1, 2020 and was applied using a modified-retrospective approach, through a cumulative-effect adjustment to retained earnings. Adoption of this guidance did not have a material impact on the FHLBank’s financial condition, results of operations, or cash flows.

~~Leases (ASU 2016-02).~~ In February 2016, FASB issued amendments to lease accounting guidance. Under the new guidance, lessees are 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 became effective January 1, 2019 for the FHLBank. The adoption of this guidance did not have a material impact on the FHLBank's financial condition, results of operations or cash flows.

~~NOTE~~ 3 - ~~CASH AND DUE FROM BANKS~~

~~Cash and due from banks represents non-interest-bearing deposits in banks.~~

~~Pass-through Deposit Reserves~~: The FHLBank acts as a pass-through correspondent 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 $3,820,000 and $2,044,000resell as of December 31, ~~2019~~2022 and ~~2018,~~2021. The carrying value of securities purchased under agreements to resell excludes accrued interest receivable of $565,000 and $3,000 as of December 31, 2022 and 2021, 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~~

~~The~~ Table of Contents

FHLBank's ~~investment~~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 obligations -~~ 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 multi-family MBS issued by Fannie Mae and Federal Home Loan Mortgage Corporation (Freddie Mac).~~

▪Certificates of deposit - unsecured negotiable promissory notes issued by banks;

▪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, ~~2019~~2022 and ~~2018~~2021 are summarized in Table ~~4.1~~3.1 (in thousands):

Table ~~4.1~~3.1


	Fair Value
	12/31/2022		12/31/2021
Non-mortgage-backed securities:

Certificates of deposit	$	—	$	200,023
U.S. Treasury obligations	396,233		917,472
GSE debentures	388,955		415,918
Non-mortgage-backed securities	785,188		1,533,413
Mortgage-backed securities:

GSE MBS	636,265		806,542
Mortgage-backed securities	636,265		806,542
TOTAL	$	1,421,453	$	2,339,955

Fair Value
12/31/2019 12/31/2018
Non-mortgage-backed securities:
U.S. Treasury obligations $ 1,530,518
$ 252,377
GSEobligations
416,025
1,000,495
Non-mortgage-backed securities 1,946,543
1,252,872
Mortgage-backed securities:
U.S. obligation MBS —
467
GSE MBS 866,019
897,774
Mortgage-backed securities 866,019
898,241
TOTAL $ 2,812,562
$ 2,151,113

Net gains (losses) on trading securities during the years ended December 31, ~~2019, 2018,~~2022, 2021, and ~~2017~~2020 are shown in Table ~~4.2~~3.2 (in thousands):

Table ~~4.2~~3.2


	2022		2021		2020


Net gains (losses) on trading securities held as of December 31, 2022	$	(102,889)	$	(58,716)	$	63,372
Net gains (losses) on trading securities sold or matured prior to December 31, 2022	(9,659)		(25,373)		14,770
NET GAINS (LOSSES) ON TRADING SECURITIES	$	(112,548)	$	(84,089)	$	78,142

Table of Contents

2019 2018 2017
Net gains (losses) on trading securities held as of December 31, 2019 $ 69,865
$ (19,186 ) $ 10,657
Net gains (losses) on trading securities sold or matured prior to December 31, 2019 396
(2,724 ) (3,743 )
NET GAINS (LOSSES) ON TRADING SECURITIES $ 70,261
$ (21,910 ) $ 6,914

Available-for-sale Securities: Available-for-sale securities by major security type as of December 31, ~~2019~~2022 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 $28,784,000 as of December 31, 2022.

Table ~~4.3~~3.3


	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

12/31/2019

Amortized
Cost
Gross
Unrecognized
Gains
Gross
Unrecognized
Losses
Fair
Value
Non-mortgage-backed securities:
U.S. Treasury obligations $ 4,258,608
$ 3,580
$ (397 ) $ 4,261,791
Non-mortgage-backed securities 4,258,608
3,580
(397 ) 4,261,791
Mortgage-backed securities:
GSE MBS 2,897,104
28,353
(4,748 ) 2,920,709
Mortgage-backed securities 2,897,104
28,353
(4,748 ) 2,920,709
TOTAL $ 7,155,712
$ 31,933
$ (5,145 ) $ 7,182,500

Available-for-sale securities by major security type as of December 31, ~~2018~~2021 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 $19,457,000 as of December 31, 2021.

~~Table 4.4~~

12/31/2018
Amortized
Cost Gross
Unrecognized
Gains Gross
Unrecognized
Losses
Fair
Value
Mortgage-backed securities:
GSE MBS $ 1,706,572
$ 25,815
$ (6,747 ) $ 1,725,640
TOTAL $ 1,706,572
$ 25,815
$ (6,747 ) $ 1,725,640

Table ~~4.5~~3.4


	12/31/2021
	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Fair Value
Non-mortgage-backed securities:
U.S. Treasury obligations	$	2,814,519	$	3,377	$	(1,459)	$	2,816,437
Non-mortgage-backed securities	2,814,519		3,377		(1,459)		2,816,437
Mortgage-backed securities:
U.S. obligation MBS	50,512		261		(6)		50,767
GSE MBS	4,779,465		78,246		(5,730)		4,851,981
Mortgage-backed securities	4,829,977		78,507		(5,736)		4,902,748
TOTAL	$	7,644,496	$	81,884	$	(7,195)	$	7,719,185

Table of Contents

Table 3.5 summarizes the available-for-sale securities with gross unrealized losses as of December 31, ~~2019~~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 4.5~~

12/31/2019
Less Than 12 Months 12 Months or More Total

Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
Non-mortgage-backed securities:
U.S. Treasury obligations $ 1,579,004
$ (397 ) $ —
$ —
$ 1,579,004
$ (397 )
Non-mortgage-backed securities 1,579,004
(397 ) —
—
1,579,004
(397 )
Mortgage-backed securities:
GSE MBS 787,809
(932 ) 301,161
(3,816 ) 1,088,970
(4,748 )
Mortgage-backed securities 787,809
(932 ) 301,161
(3,816 ) 1,088,970
(4,748 )
TOTAL TEMPORARILY IMPAIRED SECURITIES $ 2,366,813
$ (1,329 ) $ 301,161
$ (3,816 ) $ 2,667,974
$ (5,145 )

Table ~~4.6~~3.5


	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)

Table 3.6 summarizes the available-for-sale securities with gross unrealized losses as of December 31, ~~2018~~2021 (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


	12/31/2021
	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	$	786,606	$	(1,459)	$	—	$	—	$	786,606	$	(1,459)
Non-mortgage-backed securities	786,606		(1,459)		—		—		786,606		(1,459)
Mortgage-backed securities:
U.S. obligation MBS	—		—		6,191		(6)		6,191		(6)
GSE MBS	331,546		(4,166)		740,451		(1,564)		1,071,997		(5,730)
Mortgage-backed securities	331,546		(4,166)		746,642		(1,570)		1,078,188		(5,736)
TOTAL	$	1,118,152	$	(5,625)	$	746,642	$	(1,570)	$	1,864,794	$	(7,195)

12/31/2018
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 MBS $ 570,042
$ (6,747 ) $ —
$ —
$ 570,042
$ (6,747 )
TOTAL TEMPORARILY IMPAIRED SECURITIES $ 570,042
$ (6,747 ) $ —
$ —
$ 570,042
$ (6,747 )

Table of Contents

The amortized cost and fair values of available-for-sale securities by contractual maturity as of December 31, ~~2019~~2022 and ~~2018~~2021 are shown in Table ~~4.7~~3.7 (in thousands). Expected maturities of 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 ~~4.7~~3.7


	12/31/2022				12/31/2021
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Non-mortgage-backed securities:
Due in one year or less	$	1,240,015	$	1,241,508	$	907,110	$	907,908
Due after one year through five years	1,876,301		1,858,697		1,660,664		1,661,260
Due after five years through ten years	215,928		215,151		246,745		247,269
Due after ten years	—		—		—		—
Non-mortgage-backed securities	3,332,244		3,315,356		2,814,519		2,816,437
Mortgage-backed securities	6,106,615		6,039,060		4,829,977		4,902,748
TOTAL	$	9,438,859	$	9,354,416	$	7,644,496	$	7,719,185

Net gains (losses) realized on the sale of available-for-sale securities are recorded in other income (loss) on the Statements of Income.

12/31/2019 12/31/2018

Amortized
Cost
Fair
Value
Amortized
Cost
Fair
Value
Non-mortgage-backed securities:
Due in one year or less $ 754,003
$ 753,891
$ —
$ —
Due after one year through five years 3,504,605
3,507,900
—
—
Due after five years through ten years —
—
—
—
Due after ten years —
—
—
—
Non-mortgage-backed securities 4,258,608
4,261,791
—
—
Mortgage-backed securities 2,897,104
2,920,709
1,706,572
1,725,640
TOTAL $ 7,155,712
$ 7,182,500
$ 1,706,572
$ 1,725,640
Table 3.8 presents details of the sales for the year ended December 31, 2020 (in thousands). There were no sales of available-for-sale

securities during the years ended December 31, 2022 and 2021.

Table 3.8


	2020
Proceeds from sale of available-for-sale securities	$	289,045

Gross gains on sale of available-for-sale securities	$	1,526
Gross losses on sale of available-for-sale securities	(3)
NET GAINS (LOSSES) ON SALE OF AVAILABLE-FOR-SALE SECURITIES	$	1,523

Held-to-maturity Securities: Held-to-maturity securities by major security type as of December 31, ~~2019~~2022 are summarized in Table ~~4.8~~3.9 (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 $896,000 as of December 31, 2022.

Table ~~4.8~~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

Table of Contents

12/31/2019

Amortized
Cost
Carrying Value
Gross
Unrecognized
Gains
Gross
Unrecognized
Losses
Fair
Value
Non-mortgage-backed securities:
State or local housing agency obligations $ 82,805
$ 82,805
$ 5
$ (1,956 ) $ 80,854
Non-mortgage-backed securities 82,805
82,805
5
(1,956 ) 80,854
Mortgage-backed securities:
U.S. obligation MBS 93,375
93,375
—
(496 ) 92,879
GSE MBS 3,393,778
3,393,778
6,558
(17,131 ) 3,383,205
Mortgage-backed securities 3,487,153
3,487,153
6,558
(17,627 ) 3,476,084
TOTAL $ 3,569,958
$ 3,569,958
$ 6,563
$ (19,583 ) $ 3,556,938

Held-to-maturity securities by major security type as of December 31, ~~2018~~2021 are summarized in Table ~~4.9~~3.10 (in thousands):

~~Table 4.9~~

12/31/2018

Amortized
Cost
Carrying Value
Gross
Unrecognized
Gains
Gross
Unrecognized
Losses
Fair
Value
Non-mortgage-backed securities:
State or local housing agency obligations $ 86,430
$ 86,430
$ 1
$ (3,480 ) $ 82,951
Non-mortgage-backed securities 86,430
86,430
1
(3,480 ) 82,951
Mortgage-backed securities:
U.S. obligation MBS 109,866
109,866
125
(99 ) 109,892
GSE MBS 4,260,577
4,260,577
12,164
(18,506 ) 4,254,235
Mortgage-backed securities 4,370,443
4,370,443
12,289
(18,605 ) 4,364,127
TOTAL $ 4,456,873
$ 4,456,873
$ 12,290
$ (22,085 ) $ 4,447,078

~~Table 4.10 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 $224,000 as of December 31, ~~2019 (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.~~2021.

Table ~~4.10~~3.10


	12/31/2021
	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Fair Value
Non-mortgage-backed securities:
State or local housing agency obligations	$	74,865	$	—	$	(1,250)	$	73,615
Non-mortgage-backed securities	74,865		—		(1,250)		73,615
Mortgage-backed securities:

GSE MBS	371,320		5,913		(77)		377,156
Mortgage-backed securities	371,320		5,913		(77)		377,156
TOTAL	$	446,185	$	5,913	$	(1,327)	$	450,771

12/31/2019
Less Than 12 Months 12 Months or More Total

Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
Non-mortgage-backed securities:
State or local housing agency obligations $ —
$ —
$ 28,044
$ (1,956 ) $ 28,044
$ (1,956 )
Non-mortgage-backed securities —
—
28,044
(1,956 ) 28,044
(1,956 )
Mortgage-backed securities:
U.S. obligation MBS 68,433
(293 ) 24,446
(203 ) 92,879
(496 )
GSE MBS 383,910
(1,457 ) 2,422,598
(15,674 ) 2,806,508
(17,131 )
Mortgage-backed securities 452,343
(1,750 ) 2,447,044
(15,877 ) 2,899,387
(17,627 )
TOTAL TEMPORARILY IMPAIRED SECURITIES $ 452,343
$ (1,750 ) $ 2,475,088
$ (17,833 ) $ 2,927,431
$ (19,583 )

Table 4.11 summarizes the held-to-maturity securities with unrealized losses as of December 31, 2018 (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 4.11~~

12/31/2018
Less Than 12 Months 12 Months or More Total

Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
Non-mortgage-backed securities:
State or local housing agency obligations $ —
$ —
$ 26,520
$ (3,480 ) $ 26,520
$ (3,480 )
Non-mortgage-backed securities —
—
26,520
(3,480 ) 26,520
(3,480 )
Mortgage-backed securities:
U.S. obligation MBS —
—
30,702
(99 ) 30,702
(99 )
GSE MBS 1,655,048
(4,769 ) 1,567,728
(13,737 ) 3,222,776
(18,506 )
Mortgage-backed securities 1,655,048
(4,769 ) 1,598,430
(13,836 ) 3,253,478
(18,605 )
TOTAL TEMPORARILY IMPAIRED SECURITIES $ 1,655,048
$ (4,769 ) $ 1,624,950
$ (17,316 ) $ 3,279,998
$ (22,085 )

The amortized cost ~~carrying value~~ and fair values of held-to-maturity securities by contractual maturity as of December 31, ~~2019~~2022 and ~~2018~~2021 are shown in Table ~~4.12~~3.11 (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 ~~4.12~~3.11


	12/31/2022		12/31/2021
	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	40,505		40,036		44,865		44,736
Due after ten years	30,000		28,732		30,000		28,879
Non-mortgage-backed securities	70,505		68,768		74,865		73,615
Mortgage-backed securities	274,925		271,491		371,320		377,156
TOTAL	$	345,430	$	340,259	$	446,185	$	450,771

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.

12/31/2019 12/31/2018

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 —
—
—
—
—
—
Due after five years through ten years —
—
—
—
—
—
Due after ten years 82,805
82,805
80,854
86,430
86,430
82,951
Non-mortgage-backed securities 82,805
82,805
80,854
86,430
86,430
82,951
Mortgage-backed securities 3,487,153
3,487,153
3,476,084
4,370,443
4,370,443
4,364,127
TOTAL $ 3,569,958
$ 3,569,958
$ 3,556,938
$ 4,456,873
$ 4,456,873
$ 4,447,078

Net gains (losses) were realized on the sale of held-to-maturity securities 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 and were therefore considered maturities under GAAP. Table ~~4.13~~3.12 presents details of the sales (in thousands). NoThere were no sales of held-to-maturity securities ~~were sold~~ during the ~~year~~years ended December 31, ~~2017.~~2021 and 2020.

Table ~~4.13~~3.12


	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)

2019 2018
Proceeds from sale of held-to-maturity securities $ 9,442
$ 87,827
Carrying value of held-to-maturity securities sold (9,488 ) (86,236 )
NET REALIZED GAINS (LOSSES) $ (46 ) $ 1,591

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~~Other-than-temporary Impairment:~~ Allowance for Credit Losses on Available-for-Sale and Held-to-Maturity Securities: FHLBank evaluates available-for-sale and held-to-maturity investment securities for credit losses on a quarterly basis. As of December 31, ~~2019, the fair value of~~2022 and 2021, 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 investments.

Although certain available-for-sale securities were ~~below the amortized cost of the securities. However, the decline~~ in ~~fair value of~~an unrealized loss position, these ~~securities is~~losses are considered temporary ~~and not attributable to credit quality~~ 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. ~~The~~

FHLBank's held-to-maturity and available-for-sale securities: (1) were all highly rated and/or had short remaining terms to maturity; (2) had not experienced, nor did FHLBank ~~determined~~expect, any payment default on the instruments; (3) in the case of U.S. obligations, carry an explicit government guarantee such that ~~all~~FHLBank considers the risk of nonpayment to be zero; and (4) in the ~~gross unrealized losses were temporary because~~case of GSE debentures or MBS, the ~~strength of~~securities are purchased under an assumption that the ~~underlying collateral~~issuers’ obligation to pay principal and ~~credit enhancements was sufficient to protect the FHLBank from losses based~~interest 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 December 31, ~~2019~~2022 and ~~2018, the~~2021, FHLBank had advances outstanding at interest rates ranging from ~~0.96~~0.29 percent to ~~7.41~~7.20 percent and ~~0.88~~0.12 percent to ~~7.41~~7.20 percent, respectively. Table ~~5.1~~4.1 presents advances summarized by redemption term as of December 31, ~~2019~~2022 and ~~2018~~2021 (dollar amounts in thousands): . The redemption term represents the period in which principal amounts are contractually due. Carrying amounts exclude accrued interest receivable of $108,891,000 and $13,140,000 as of December 31, 2022 and 2021, respectively.

Table ~~5.1~~4.1


	12/31/2022				12/31/2021
Redemption Term	Amount		Weighted Average Interest Rate		Amount		Weighted Average Interest Rate
Due in one year or less	$	31,796,396	4.31	%	$	13,279,735	0.34	%
Due after one year through two years	3,147,406		3.24		1,825,235		1.31
Due after two years through three years	2,784,200		3.30		2,359,249		0.98
Due after three years through four years	2,625,365		3.64		1,511,691		1.18
Due after four years through five years	1,894,308		3.52		1,314,949		1.09
Thereafter	2,407,040		3.07		3,141,969		1.76
Total par value	44,654,715		4.03	%	23,432,828		0.77	%
Discounts	(13,141)				(16,856)
Hedging adjustments	(378,824)				68,316
TOTAL	$	44,262,750			$	23,484,288

12/31/2019 12/31/2018
Redemption Term Amount Weighted Average Interest Rate Amount Weighted Average Interest Rate
Due in one year or less $ 13,188,118
1.88 % $ 14,844,804
2.60 %
Due after one year through two years 10,448,433
1.96
1,482,844
2.40
Due after two years through three years 1,254,153
2.27
1,442,333
2.53
Due after three years through four years 1,067,662
2.42
7,496,058
2.66
Due after four years through five years 1,208,854
2.22
816,702
2.68
Thereafter 3,004,835
2.25
2,695,008
2.58
Total par value 30,172,055
1.99 % 28,777,749
2.60 %
Discounts (1,807 ) (3,413 )
Hedging adjustments 71,067
(44,223 )
TOTAL $ 30,241,315
$ 28,730,113

~~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). 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, $309,650,000 remain outstanding at December 31, 2022.

Table of Contents

Table ~~5.2~~4.2 presents advances summarized by redemption term or next call date (for callable advances) and by redemption term or next conversion date (for convertible advances) as of December 31, ~~2019~~2022 and ~~2018~~2021 (in thousands):

Table ~~5.2~~4.2


	Redemption Term or Next Call Date				Redemption Term or Next Conversion Date
Redemption Term	12/31/2022		12/31/2021		12/31/2022		12/31/2021
Due in one year or less	$	33,289,458	$	14,582,991	$	31,992,646	$	14,324,735
Due after one year through two years	2,709,465		1,552,690		3,240,306		2,034,485
Due after two years through three years	2,552,756		1,821,308		2,801,700		2,452,148
Due after three years through four years	2,403,502		1,280,597		2,625,365		1,507,341
Due after four years through five years	1,568,168		1,308,086		1,884,308		1,314,949
Thereafter	2,131,366		2,887,156		2,110,390		1,799,170
TOTAL PAR VALUE	$	44,654,715	$	23,432,828	$	44,654,715	$	23,432,828

Redemption Term
or Next Call Date
Redemption Term
or Next Conversion Date
Redemption Term 12/31/2019 12/31/2018 12/31/2019 12/31/2018
Due in one year or less $ 24,271,238
$ 23,343,939
$ 14,053,068
$ 15,133,204
Due after one year through two years 1,133,077
1,271,660
10,637,833
1,683,644
Due after two years through three years 728,429
1,021,189
1,524,153
1,629,233
Due after three years through four years 764,990
555,901
1,215,412
7,752,058
Due after four years through five years 686,594
598,282
1,304,254
954,452
Thereafter 2,587,727
1,986,778
1,437,335
1,625,158
TOTAL PAR VALUE $ 30,172,055
$ 28,777,749
$ 30,172,055
$ 28,777,749

Interest Rate Payment Terms: Table ~~5.3~~4.3 details additional interest rate payment and redemption terms for advances as of December 31, ~~2019~~2022 and ~~2018~~2021 (in thousands):

Table ~~5.3~~4.3


Redemption Term	12/31/2022		12/31/2021
Fixed rate:
Due in one year or less	$	31,307,096	$	13,061,185
Due after one year through three years	3,984,356		2,593,884
Due after three years through five years	3,050,314		1,871,575
Due after five years through fifteen years	2,050,428		2,752,551
Due after fifteen years	35,010		37,371
Total fixed rate	40,427,204		20,316,566
Variable rate:
Due in one year or less	489,300		218,550
Due after one year through three years	1,947,250		1,590,600
Due after three years through five years	1,469,360		955,065
Due after five years through fifteen years	319,101		349,547
Due after fifteen years	2,500		2,500
Total variable rate	4,227,511		3,116,262
TOTAL PAR VALUE	$	44,654,715	$	23,432,828

Redemption Term 12/31/2019 12/31/2018
Fixed rate:
Due in one year or less $ 2,691,528
$ 1,635,464
Due after one year 5,912,124
5,455,193
Total fixed rate 8,603,652
7,090,657
Variable rate:

Due in one year or less 10,496,590
13,209,340
Due after one year 11,071,813
8,477,752
Total variable rate 21,568,403
21,687,092
TOTAL PAR VALUE $ 30,172,055
$ 28,777,749

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, 2019 and 2018, the FHLBank had outstanding advances of $13,085,000,000 and $12,660,000,000, respectively, to two members that individually held 10 percent or more of the FHLBank’s advances, which represents 43.4 percent and 44.0 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 16 for information about the fair value of advances.~~

~~See Note~~ 18 ~~for detailed information on transactions with related parties.~~

~~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, the Department of Veterans Affairs, the Rural Housing Service of the Department of Agriculture and/or the Department of Housing and Urban Development) 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 PFI. 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, 2019 and 2018 on mortgage loans held for portfolio (in thousands):~~

~~Table 6.1~~

12/31/2019 12/31/2018
Real estate:
Fixed rate, medium-term¹, single-family mortgages
$ 1,347,385
$ 1,179,087
Fixed rate, long-term, single-family mortgages 9,128,268
7,111,856
Total unpaid principal balance 10,475,653
8,290,943
Premiums 155,793
120,548
Discounts (2,503 ) (2,936 )
Deferred loan costs, net 184
223
Other deferred fees (38 ) (50 )
Hedging adjustments 4,905
2,546
Total before Allowance for Credit Losses on Mortgage Loans 10,633,994
8,411,274
Allowance for Credit Losses on Mortgage Loans (985 ) (812 )
MORTGAGE LOANS HELD FOR PORTFOLIO, NET $ 10,633,009
$ 8,410,462


¹	~~Medium-term defined as a term of 15 years or less at origination.~~

~~Table 6.2 presents information as of December 31, 2019 and 2018 on the outstanding UPB of mortgage loans held for portfolio (in thousands):~~

~~Table 6.2~~

12/31/2019 12/31/2018
Conventional loans $ 9,849,542
$ 7,619,498
Government-guaranteed or -insured loans 626,111
671,445
TOTAL UNPAID PRINCIPAL BALANCE $ 10,475,653
$ 8,290,943

~~See Note~~ 7 ~~for information related to the FHLBank’s credit risk on mortgage loans and allowance for credit losses.~~

~~See Note 16 for information about the fair value of mortgage loans held for portfolio.~~

~~See Note~~ 18 ~~for detailed information on transactions with related parties.~~

~~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 effectively manage credit risk from 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, ~~2019~~2022 and ~~2018, the~~2021, 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, 2022 and 2021, 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, 2022 and 2021.

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, 2022 and 2021.

FHLBank’s potential credit risk from advances is concentrated in commercial banks, insurance companies, and savings institutions. 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 represents 34.6 percent of total outstanding advances. As of December 31, 2021, FHLBank had outstanding advances of $9,045,000,000 to one member that individually held 10 percent or more of FHLBank’s advances, which represented 38.6 percent of total outstanding advances. One of the members was 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.

Table of Contents

Mortgage Loans Held for Portfolio: Table 5.1 presents information as of December 31, 2022 and 2021 on mortgage loans held for portfolio (in thousands). Carrying amounts exclude accrued interest receivable of $38,358,000 and $36,959,000 as of December 31, 2022 and 2021, respectively.

Table 5.1


	12/31/2022		12/31/2021
Real estate:
Fixed rate, medium-term1, single-family mortgages	$	1,189,428	$	1,375,318
Fixed rate, long-term, single-family mortgages	6,640,750		6,664,654
Total unpaid principal balance	7,830,178		8,039,972
Premiums	97,210		107,697
Discounts	(2,230)		(1,371)
Deferred loan costs, net	46		76

Hedging adjustments	(13,691)		(6,011)
Total before allowance for credit losses on mortgage loans	7,911,513		8,140,363
Allowance for credit losses on mortgage loans	(6,378)		(5,317)
MORTGAGE LOANS HELD FOR PORTFOLIO, NET	$	7,905,135	$	8,135,046

1 Medium-term defined as a term of 15 years or less at origination.

Table 5.2 presents information as of December 31, 2022 and 2021 on the outstanding unpaid principal balance of mortgage loans held for portfolio (in thousands):

Table 5.2


	12/31/2022		12/31/2021
Conventional loans	$	7,486,591	$	7,644,184
Government-guaranteed or -insured loans	343,587		395,788
TOTAL UNPAID PRINCIPAL BALANCE	$	7,830,178	$	8,039,972

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 in order 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, 2022, 2021, and 2020 (in thousands):

Table 5.3


	2022		2021		2020
CE fees paid to PFIs	$	6,414	$	6,432	$	7,743
Performance-based CE fees recovered from PFIs	(42)		(54)		(83)
NET CE FEES PAID	$	6,372	$	6,378	$	7,660

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, 2022 (dollar amounts in thousands):

Table 5.4


	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.

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 $13,288,000 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.

Table of Contents

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, 2021 (dollar amounts in thousands):

Table 5.5


	12/31/2021
	Conventional Loans															Government Loans			Total
	Origination Year												Subtotal
	Prior to 2017		2017		2018		2019		2020		2021
Amortized Cost:1
Past due 30-59 days delinquent	$	17,460	$	4,799	$	6,567	$	9,385	$	3,472	$	2,743	$	44,426		$	8,539		$	52,965
Past due 60-89 days delinquent	2,908		1,258		1,653		2,408		1,063		—		9,290			2,187			11,477
Past due 90 days or more delinquent	8,530		3,271		6,241		13,199		353		1,103		32,697			13,290			45,987
Total past due	28,898		9,328		14,461		24,992		4,888		3,846		86,413			24,016			110,429
Total current loans	1,719,777		415,762		356,936		1,299,061		1,853,232		2,007,773		7,652,541			377,393			8,029,934
Total mortgage loans	$	1,748,675	$	425,090	$	371,397	$	1,324,053	$	1,858,120	$	2,011,619	$	7,738,954		$	401,409		$	8,140,363

Other delinquency statistics:
In process of foreclosure2													$	3,065		$	1,868		$	4,933
Serious delinquency rate3													0.4		%	3.3		%	0.6		%
Past due 90 days or more and still accruing interest													$	—		$	13,290		$	13,290
Loans on nonaccrual status4													$	37,867		$	—		$	37,867

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 $25,211,000 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.

The balance of troubled debt restructurings related to conventional mortgage loans was immaterial as of December 31, 2022 and 2021.

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 allowances 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.

Table of Contents

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, 2022, 2021, and 2020.

~~Government~~Table 5.6


	2022		2021		2020


Balance, beginning of the period	$	5,317	$	5,177	$	985
Adjustment for cumulative effect of accounting change	—		—		6,123
Net (charge-offs) recoveries	351		890		(1,215)
Provision (reversal) for credit losses	710		(750)		(716)
Balance, end of the period	$	6,378	$	5,317	$	5,177

Government-Guaranteed or -Insured Mortgage ~~Loans Held for Portfolio:~~ ~~The~~Loans: FHLBank invests in ~~government-guaranteed~~fixed rate mortgage loans that are insured or ~~-insured (by~~guaranteed by 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) fixed rate mortgage loans secured by one-to-four family residential properties.~~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 the guarantor are absorbed by the ~~servicers.~~servicer. Therefore, ~~the~~ FHLBank only has credit risk for these loans if the servicer fails to pay for losses not covered by the guarantee or insurance, ~~or guarantee so~~but in such instance, FHLBank would have recourse against the ~~FHLBank has not established an allowance~~servicer for ~~credit losses~~such failure. Based on ~~government mortgage loans.~~

~~Conventional Mortgage Loans Held for Portfolio~~: The allowance for conventional 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 allowance for conventional mortgage loan losses may consist of losses from: (1) individually evaluated mortgage loans, including collateral-dependent loans; (2) collectively evaluated homogeneous pools of residential mortgage loans; and/or (3) estimated additional credit losses in the portfolio. The formula analysis is consistently applied, but loss factors may be adjusted in response to changing conditions, as a result of management’sFHLBank's assessment of its servicers and the ~~adequacy of~~collateral backing the ~~allowance to absorb losses inherent in~~loans, 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 are required to have a CE obligation in an amount based on a documented analysis, including consideration of applicable insurance, credit enhancements, and/or other sources for repayment on the asset or pool, that FHLBank has a high degree of confidence that it will absorb losses in excess of the FLA, even under reasonably likely adverse changes to expected economic conditions. 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. 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 PFIs as a reduction to mortgage interest income. Table 7.1 presents net CE fees paid to PFIs for the years ended December 31, 2019, 2018, and 2017 (in thousands):

~~Table 7.1~~

2019 2018 2017
CE fees paid to PFIs¹
$ 7,019
$ 6,196
$ 5,767
Performance-based CE fees recovered from PFIs (125 ) (107 ) (103 )
NET CE FEES PAID $ 6,894
$ 6,089
$ 5,664


¹	~~CE fees paid to PFIs excludes the amortization of CE fees paid up front, which is included with premium amortization as a reduction to mortgage interest income.~~

~~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. 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.

~~Allowance for Credit Losses: Table 7.2 presents a roll-forward of the~~was immaterial; consequently, no allowance for credit losses for ~~the years ended December 31, 2019, 2018, and 2017 (in thousands):~~

~~Table 7.2~~

Conventional Loans 2019 2018 2017
Balance, beginning of the period $ 812
$ 1,208
$ 1,674
Net (charge-offs) recoveries (214 ) (423 ) (280 )
Provision (reversal) for credit losses 387
27
(186 )
Balance, end of the period $ 985
$ 812
$ 1,208

~~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, ~~2019 (in thousands). The recorded investment in a financing receivable is~~2022 and 2021. 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.~~mortgage loans held for portfolio.

~~Table 7.3~~See Note 16 for detailed information on transactions with related parties.



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, 2020~~February 28, 2023
Class A Stock, par value $100 per share			~~4,524,494~~3,598,461
Class B Stock, par value $100 per share			~~13,099,122~~21,808,565



PART I		56
Item 1.	Business	56
Item 1A.	Risk Factors	2418
Item 1B.	Unresolved Staff Comments	3126
Item 2.	Properties	3126
Item 3.	Legal Proceedings	3126
Item 4.	Mine Safety Disclosures	3126
PART II		3127
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	3127
Item 6.	~~Selected Financial Data~~[Reserved]	32
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3427
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	8374
Item 8.	Financial Statements and Supplementary Data	9079
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	9179
Item 9A.	Controls and Procedures	9279
Item 9B.	Other Information	9279
~~PART III~~Item 9C.	Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	80
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	9280
Item 11.	Executive Compensation	9887
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	~~116~~105
Item 13.	Certain Relationships and Related Transactions, and Director Independence	~~117~~106
Item 14.	Principal ~~Accounting~~Accountant Fees and Services	~~119~~108
PART IV
Item 15.	~~Exhibits,~~Exhibit and Financial Statement Schedules	~~119~~110
Item 16.	Form 10-K Summary	~~121~~111



~~Product Name~~	~~Size of~~ ~~FHLBank’s FLA~~	~~PFI CE Obligation Description~~	~~CE Fee~~ ~~Paid to PFI~~	~~CE Fee Offset~~¹	~~Servicing Fee~~ ~~to PFI~~²
~~MPF Original~~	~~4 basis points (bps) per year against unpaid balance, accrued monthly~~	~~Greater of aggregate sum of the loan level credit enhancements (LLCEs) or one percent of gross fundings~~	~~10 bps per year, paid monthly based on remaining UPB; guaranteed~~³	No	~~25 bps per year, paid monthly~~
~~MPF 100~~⁴	~~100 bps fixed based on gross fundings~~	~~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~~	~~Greater of aggregate sum of the LLCEs less FLA or 25 bps~~	~~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~~⁵	~~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~~⁶	~~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~~
~~MPF Direct~~	~~N/A~~	~~N/A~~	~~N/A~~	~~N/A~~	~~Servicing released only~~



~~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


•	~~The volume and quality of eligible mortgage loans originated and sold by participating members to FHLBank through its various mortgage finance products (Mortgage Partnership Finance~~^® ~~(MPF~~^®~~) Program). “Mortgage Partnership Finance,” “MPF,” “MPF Xtra,” and “MPF Direct” are registered trademarks of FHLBank 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;


▪	~~Short-term fixed rate advances are non-amortizing, non-prepayable loans with terms to maturity from 3 to 93 days;~~


▪	~~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 covered by a master commitment agreement.


²	The PFI has the option of retaining or selling the servicing on all MPF products except MPF Direct. If the servicing is sold (servicing released), the PFI will receive an upfront servicing released premium as opposed to receiving servicing fees over time.


³	~~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.~~


⁴	~~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).~~


⁵	~~Due to higher costs associated with the acquisition of supplemental insurance policies, the MPF Plus product is currently not active.~~


⁶	~~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 ownership in an entity, other than stock in small business investment companies or certain investments targeted to low-income persons or communities;~~

~~Exhibit No.~~

~~Description~~

~~10.19~~10.18*

Exhibit 10.1 to the Current Report on Form 8-K, filed ~~October 4, 2018~~November 9, 2021, Federal Home Loan Bank of Topeka ~~2019~~2022 Board of Directors Compensation Policy, is incorporated herein by reference as Exhibit ~~10.19.~~10.18.