UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

____________________________________

FORM 10-Q

______________________________________________________


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 30, 2023~~March 31, 2024


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 000-51398

FEDERAL HOME LOAN BANK OF SAN FRANCISCO

(Exact name of registrant as specified in its charter)

___________________________________________

Federally chartered corporation of the United States

94-6000630

(State or other jurisdiction of incorporation or organization)

(I.R.S. employer identification number)

333 Bush Street, Suite 2700

San Francisco,

94104

(Address of principal executive offices)

(Zip code)

(415) 616-1000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

—

___________________________________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☒

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.


			Shares Outstanding as of ~~October 31, 2023~~April 30, 2024
Class B Stock, par value $100 per share			~~31,625,983~~30,702,056

Table of Contents

Federal Home Loan Bank of San Francisco

Form 10-Q

Index

PART I.

FINANCIAL INFORMATION

Item 1.

Financial Statements

Statements of Condition (Unaudited)

Statements of Income (Unaudited)

Statements of Comprehensive Income/(Loss) (Unaudited)

Statements of Capital Accounts (Unaudited)

Statements of Cash Flows (Unaudited)

Notes to Financial Statements (Unaudited)

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Results of Operations

Financial Condition

~~Financial Condition~~

Liquidity and Capital Resources

6047

Risk Management

6149

Critical Accounting Policies and Estimates

7156

Recently Issued Accounting Guidance and Interpretations

7157

~~Recent~~ Legislative and Regulatory Developments

7157

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

7258

Item 4.

Controls and Procedures

PART II.

Item 1.

Item 1A.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

7764

Item 3.

Defaults Upon Senior Securities

7764

Item 4.

Mine Safety Disclosures

Item 5.

Item 6.

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Federal Home Loan Bank of San Francisco

Statements of Condition

(Unaudited)


(In millions-except par value)	(In millions-except par value)	September 30, 2023		December 31, 2022		(In millions-except par value)	March 31, 2024	December 31, 2023
Assets:	Assets:
Cash and due from banks	Cash and due from banks	$	10	$	9
Cash and due from banks
Cash and due from banks
Interest-bearing deposits	Interest-bearing deposits	3,777		3,677
Securities purchased under agreements to resell	Securities purchased under agreements to resell	2,750		7,000
Federal funds sold	Federal funds sold	5,533		4,719
Trading securities		1		1
Available-for-sale (AFS) securities, net of allowance for credit losses of $34 and $30, respectively (amortized cost of $16,352 and $12,757, respectively)(a)		16,279		12,713
Held-to-maturity (HTM) securities (fair values of $1,852 and $2,136, respectively)		1,895		2,181
Advances (includes $2,302 and $2,059 at fair value under the fair value option, respectively)		63,584		89,400

Available-for-sale (AFS) securities, net of allowance for credit losses of $26 and $31, respectively (amortized cost of $17,988 and $18,105, respectively)(a)
Available-for-sale (AFS) securities, net of allowance for credit losses of $26 and $31, respectively (amortized cost of $17,988 and $18,105, respectively)(a)
Available-for-sale (AFS) securities, net of allowance for credit losses of $26 and $31, respectively (amortized cost of $17,988 and $18,105, respectively)(a)
Held-to-maturity (HTM) securities (fair values of $1,729 and $1,818, respectively)
Advances (includes $2,535 and $1,898 at fair value under the fair value option, respectively)
Mortgage loans held for portfolio, net of allowance for credit losses of $1 and $1, respectively	Mortgage loans held for portfolio, net of allowance for credit losses of $1 and $1, respectively	770		815

Accrued interest receivable
Accrued interest receivable
Accrued interest receivable	Accrued interest receivable	192		313
Derivative assets, net	Derivative assets, net	6		26
Other assets	Other assets	224		202
Total Assets	Total Assets	$	95,021	$	121,056
Liabilities:	Liabilities:
Deposits	Deposits	$	768	$	989
Deposits
Deposits
Consolidated obligations:	Consolidated obligations:
Bonds (includes $605 and $2,226 at fair value under the fair value option, respectively)		70,907		75,768
Bonds (includes $590 and $604 at fair value under the fair value option, respectively)
Bonds (includes $590 and $604 at fair value under the fair value option, respectively)
Bonds (includes $590 and $604 at fair value under the fair value option, respectively)
Discount notes	Discount notes	14,293		35,929
Total consolidated obligations	Total consolidated obligations	85,200		111,697
Mandatorily redeemable capital stock	Mandatorily redeemable capital stock	776		5
Borrowings from other Federal Home Loan Banks (FHLBanks)		300		—

Accrued interest payable
Accrued interest payable
Accrued interest payable	Accrued interest payable	510		326
Affordable Housing Program (AHP) payable	Affordable Housing Program (AHP) payable	132		111
Derivative liabilities, net	Derivative liabilities, net	14		2
Other liabilities	Other liabilities	669		203
Total Liabilities	Total Liabilities	88,369		113,333
Commitments and Contingencies (Note 13)
Commitments and Contingencies (Note 12)						Commitments and Contingencies (Note 12)
Capital:	Capital:
Capital stock—Class B—Putable ($100 par value) issued and outstanding:	Capital stock—Class B—Putable ($100 par value) issued and outstanding:
25 shares and 38 shares, respectively		2,485		3,758
Capital stock—Class B—Putable ($100 par value) issued and outstanding:
Capital stock—Class B—Putable ($100 par value) issued and outstanding:
24 shares and 25 shares, respectively
24 shares and 25 shares, respectively
24 shares and 25 shares, respectively
Unrestricted retained earnings	Unrestricted retained earnings	3,406		3,262
Restricted retained earnings	Restricted retained earnings	816		732
Total Retained Earnings	Total Retained Earnings	4,222		3,994
Accumulated other comprehensive income/(loss) (AOCI)	Accumulated other comprehensive income/(loss) (AOCI)	(55)		(29)
Total Capital	Total Capital	6,652		7,723
Total Liabilities and Capital	Total Liabilities and Capital	$	95,021	$	121,056

(a) At ~~September 30, 2023,~~March 31, 2024, and December 31, ~~2022, $799~~2023, $638 million and ~~$435~~$771 million, respectively, of these securities were pledged as collateral that may be repledged.

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

Table of Contents

Federal Home Loan Bank of San Francisco

Statements of Income

(Unaudited)


		Three Months Ended September 30,				Nine Months Ended September 30,
				Three Months Ended March 31,
				Three Months Ended March 31,
				Three Months Ended March 31,

(In millions)	(In millions)	2023		2022		2023		2022
(In millions)
(In millions)
Interest Income:
Interest Income:
Interest Income:	Interest Income:

Advances	Advances	$	867	$	345	$	3,184	$	501

Advances

Advances
Interest-bearing deposits
Interest-bearing deposits
Interest-bearing deposits	Interest-bearing deposits	61		14		167		17
Securities purchased under agreements to resell	Securities purchased under agreements to resell	50		51		252		65
Securities purchased under agreements to resell
Securities purchased under agreements to resell
Federal funds sold
Federal funds sold
Federal funds sold	Federal funds sold	123		72		414		96

AFS securities	AFS securities	246		109		645		247

AFS securities

AFS securities
HTM securities
HTM securities
HTM securities	HTM securities	25		17		74		34
Mortgage loans held for portfolio	Mortgage loans held for portfolio	9		8		21		38
Mortgage loans held for portfolio
Mortgage loans held for portfolio
Total Interest Income
Total Interest Income
Total Interest Income	Total Interest Income	1,381		616		4,757		998
Interest Expense:	Interest Expense:
Interest Expense:
Interest Expense:
Consolidated obligations:
Consolidated obligations:
Consolidated obligations:	Consolidated obligations:
Bonds	Bonds	963		143		3,008		205
Bonds
Bonds
Discount notes
Discount notes
Discount notes	Discount notes	218		310		1,050		399
Deposits	Deposits	16		5		45		7
Deposits
Deposits
Borrowings from other FHLBanks
Borrowings from other FHLBanks
Borrowings from other FHLBanks	Borrowings from other FHLBanks	—		1		2		1
Mandatorily redeemable capital stock	Mandatorily redeemable capital stock	13		—		15		—
Mandatorily redeemable capital stock
Mandatorily redeemable capital stock
Total Interest Expense
Total Interest Expense
Total Interest Expense	Total Interest Expense	1,210		459		4,120		612
Net Interest Income	Net Interest Income	171		157		637		386
Net Interest Income
Net Interest Income
Provision for/(reversal of) credit losses
Provision for/(reversal of) credit losses
Provision for/(reversal of) credit losses	Provision for/(reversal of) credit losses	7		9		7		9
Net Interest Income After Provision for/(Reversal of) Credit Losses	Net Interest Income After Provision for/(Reversal of) Credit Losses	164		148		630		377
Net Interest Income After Provision for/(Reversal of) Credit Losses
Net Interest Income After Provision for/(Reversal of) Credit Losses
Other Income/(Loss):
Other Income/(Loss):
Other Income/(Loss):	Other Income/(Loss):

Net gain/(loss) on advances and consolidated obligation bonds held under fair value option	Net gain/(loss) on advances and consolidated obligation bonds held under fair value option	(12)		(20)		(27)		(53)

Net gain/(loss) on advances and consolidated obligation bonds held under fair value option

Net gain/(loss) on advances and consolidated obligation bonds held under fair value option
Net gain/(loss) on derivatives	Net gain/(loss) on derivatives	15		(1)		(6)		(13)
Private-label residential mortgage-backed securities (PLRMBS) trust settlement		—		—		—		28
Net gain/(loss) on derivatives
Net gain/(loss) on derivatives

Standby letters of credit fees	Standby letters of credit fees	4		4		15		11

Standby letters of credit fees

Standby letters of credit fees
Termination of long-term funding arrangement
Termination of long-term funding arrangement
Termination of long-term funding arrangement
Other, net
Other, net
Other, net	Other, net	—		(1)		3		(4)
Total Other Income/(Loss)	Total Other Income/(Loss)	7		(18)		(15)		(31)
Total Other Income/(Loss)
Total Other Income/(Loss)
Other Expense:
Other Expense:
Other Expense:	Other Expense:
Compensation and benefits	Compensation and benefits	26		24		78		70
Compensation and benefits
Compensation and benefits
Other operating expense
Other operating expense
Other operating expense	Other operating expense	17		15		48		40
Federal Housing Finance Agency	Federal Housing Finance Agency	2		2		7		5
Federal Housing Finance Agency
Federal Housing Finance Agency
Office of Finance
Office of Finance
Office of Finance	Office of Finance	2		1		5		4

Other, net	Other, net	8		(1)		10		(2)

Other, net

Other, net
Total Other Expense
Total Other Expense
Total Other Expense	Total Other Expense	55		41		148		117
Income/(Loss) Before Assessment	Income/(Loss) Before Assessment	116		89		467		229
Income/(Loss) Before Assessment
Income/(Loss) Before Assessment
AHP assessment
AHP assessment
AHP assessment	AHP assessment	13		9		48		23
Net Income/(Loss)	Net Income/(Loss)	$	103	$	80	$	419	$	206
Net Income/(Loss)
Net Income/(Loss)

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

Table of Contents

Federal Home Loan Bank of San Francisco

Statements of Comprehensive Income/(Loss)

(Unaudited)


				Three Months Ended March 31,
				Three Months Ended March 31,
				Three Months Ended March 31,

(In millions)
(In millions)
(In millions)
Net Income/(Loss)
Net Income/(Loss)
Net Income/(Loss)
Other Comprehensive Income/(Loss):
Other Comprehensive Income/(Loss):
Other Comprehensive Income/(Loss):
Net unrealized gain/(loss) on AFS securities
Net unrealized gain/(loss) on AFS securities
Net unrealized gain/(loss) on AFS securities

		Three Months Ended September 30,				Nine Months Ended September 30,

(In millions)		2023		2022		2023		2022
Net Income/(Loss)		$	103	$	80	$	419	$	206
Other Comprehensive Income/(Loss):
Net unrealized gain/(loss) on AFS securities		(35)		(88)		(25)		(317)
Net change in pension and postretirement benefits		(1)		—		(1)		(2)
Total other comprehensive income/(loss)

Total other comprehensive income/(loss)

Total other comprehensive income/(loss)	Total other comprehensive income/(loss)	(36)		(88)		(26)		(319)
Total Comprehensive Income/(Loss)	Total Comprehensive Income/(Loss)	$	67	$	(8)	$	393	$	(113)
Total Comprehensive Income/(Loss)
Total Comprehensive Income/(Loss)

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

Table of Contents

Federal Home Loan Bank of San Francisco

Statements of Capital Accounts

(Unaudited)

Capital Stock
Class B—Putable Retained Earnings Total
Capital
(In millions) Shares Par Value Restricted Unrestricted Total AOCI
Balance, June 30, 2022 28 $ 2,754 $ 692 $ 3,198 $ 3,890 $ 100 $ 6,744
Comprehensive income/(loss) 16 64 80 (88) (8)
Issuance of capital stock 23 2,296 2,296
Repurchase of capital stock (18) (1,724) (1,724)
Capital stock reclassified from/(to) mandatorily redeemable capital stock, net — (4) (4)
Cash dividends paid on capital stock (6.00%) (40) (40) (40)
Balance, September 30, 2022 33 $ 3,322 $ 708 $ 3,222 $ 3,930 $ 12 $ 7,264
Balance, June 30, 2023 26 $ 2,600 $ 795 $ 3,387 $ 4,182 $ (19) $ 6,763
Comprehensive income/(loss) 21 82 103 (36) 67
Issuance of capital stock 3 246 246
Repurchase of capital stock (4) (360) (360)
Capital stock reclassified from/(to) mandatorily redeemable capital stock, net — (1) (1)
Cash dividends paid on capital stock (7.75%) (63) (63) (63)
Balance, September 30, 2023 25 $ 2,485 $ 816 $ 3,406 $ 4,222 $ (55) $ 6,652


		Capital Stock Class B—Putable			Retained Earnings								Total Capital
	Capital Stock Class B—Putable															Capital Stock Class B—Putable	Retained Earnings	Total Capital
(In millions)	(In millions)	Shares	Par Value		Restricted		Unrestricted		Total		AOCI				Total Capital

Balance, December 31, 2021		21	$	2,061	$	708	$	3,124	$	3,832	$	331	$	6,224
Comprehensive income/(loss)					16		190		206		(319)		(113)
Issuance of capital stock		54	5,385										5,385
Repurchase of capital stock		(41)	(4,088)										(4,088)
Capital stock reclassified from/(to) mandatorily redeemable capital stock, net		(1)	(36)										(36)
Transfers from restricted retained earnings					(16)		16		—				—
Cash dividends paid on capital stock (6.00%)							(108)		(108)				(108)
Balance, December 31, 2022

Balance, September 30, 2022		33	$	3,322	$	708	$	3,222	$	3,930	$	12	$	7,264

Balance, December 31, 2022

Balance, December 31, 2022	Balance, December 31, 2022	38	$	3,758	$	732	$	3,262	$	3,994	$	(29)	$	7,723
Comprehensive income/(loss)	Comprehensive income/(loss)				84		335		419		(26)		393
Issuance of capital stock	Issuance of capital stock	28	2,768										2,768
Repurchase of capital stock	Repurchase of capital stock	(28)	(2,789)										(2,789)
Capital stock reclassified from/(to) mandatorily redeemable capital stock, net	Capital stock reclassified from/(to) mandatorily redeemable capital stock, net	(13)	(1,252)										(1,252)

Cash dividends paid on capital stock (7.26%)							(191)		(191)				(191)
Balance, September 30, 2023		25	$	2,485	$	816	$	3,406	$	4,222	$	(55)	$	6,652
Cash dividends paid on capital stock (7.00%)
Cash dividends paid on capital stock (7.00%)
Cash dividends paid on capital stock (7.00%)

Balance, March 31, 2023

Balance, March 31, 2023

Balance, March 31, 2023

Balance, December 31, 2023
Balance, December 31, 2023
Balance, December 31, 2023
Comprehensive income/(loss)
Issuance of capital stock
Repurchase of capital stock
Capital stock reclassified from/(to) mandatorily redeemable capital stock, net

Cash dividends paid on capital stock (8.75%)
Cash dividends paid on capital stock (8.75%)
Cash dividends paid on capital stock (8.75%)
Balance, March 31, 2024

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

Table of Contents

Federal Home Loan Bank of San Francisco

Statements of Cash Flows

(Unaudited)

Three Months Ended March 31,

(In millions)

Cash Flows from Operating Activities:

Net Income/(Loss)

Adjustments to reconcile net income/(loss) to net cash provided by/(used in) operating activities:

Depreciation and amortization/(accretion)

Provision for/(reversal of) credit losses

Change in net fair value adjustment on advances and consolidated obligation bonds held under the fair value option

Change in net derivatives and hedging activities

Other adjustments, net

Net change in:

Accrued interest receivable

Other assets

Accrued interest payable

Other liabilities

Total adjustments

Net cash provided by/(used in) operating activities

Cash Flows from Investing Activities:

Net change in:

Interest-bearing deposits

Securities purchased under agreements to resell

Federal funds sold

Nine Months Ended September 30,

(In millions)

2023

2022

Cash Flows from Operating Activities:

Net Income/(Loss)

419

206

Adjustments to reconcile net income/(loss) to net cash provided by/(used in) operating activities:

Depreciation and amortization/(accretion)

(10)

255

Provision for/(reversal of) credit losses

Change in net fair value adjustment on advances and consolidated obligation bonds held under the fair value option

Change in net derivatives and hedging activities

393

1,334

PLRMBS trust settlement

—

(28)

Other adjustments, net

Net change in:

Accrued interest receivable

116

(34)

Other assets

(28)

Accrued interest payable

178

Other liabilities

(33)

PLRMBS contingent liability

—

(41)

Total adjustments

725

1,603

Net cash provided by/(used in) operating activities

1,144

1,809

Cash Flows from Investing Activities:

Net change in:

Interest-bearing deposits

122

(1,901)

Securities purchased under agreements to resell

4,250

3,500

Federal funds sold

(814)

(7,298)

AFS securities:

Trading securities:

AFS securities:

Proceeds from maturities and paydowns

—

251

AFS securities:

Proceeds from sales

—

Proceeds from maturities and paydowns

206

1,157

Purchases

(3,706)

(4,332)

Purchases

HTM securities:

Proceeds from maturities and paydowns

285

763

Advances:

Repaid

1,140,925

1,096,765

Originated

(1,115,365)

(1,146,306)

Originated

Mortgage loans held for portfolio:

Principal collected

159

Principal collected

Other investing activities, net

(2)

Net cash provided by/(used in) investing activities

25,945

(57,216)

Net cash provided by/(used in) investing activities

Table of Contents

Federal Home Loan Bank of San Francisco

Statements of Cash Flows (continued)

(Unaudited)

Nine Months Ended September 30,

Three Months Ended March 31,

(In millions)

2023

2022

(In millions)

Cash Flows from Financing Activities:

Net change in deposits and other financing activities

(124)

243

Net change in borrowings from other FHLBanks

300

2,320

Net (payments)/proceeds on derivative contracts with financing elements

(11)

Net change in deposits and other financing activities

Net proceeds/(payments) on derivative contracts with financing elements

Net proceeds from issuance of consolidated obligations:

Bonds

73,250

25,062

Bonds

Discount notes

105,878

174,394

Payments for matured and retired consolidated obligations:

Bonds

(78,243)

(11,283)

Discount notes

(127,470)

(136,521)

Discount notes

Proceeds from issuance of capital stock

2,768

5,385

Payments for repurchase/redemption of mandatorily redeemable capital stock

(481)

(35)

Payments for repurchase/redemption of mandatorily redeemable capital stock

Payments for repurchase of capital stock

(2,789)

(4,088)

Payments for repurchase of capital stock

Cash dividends paid

(191)

(108)

Net cash provided by/(used in) financing activities

(27,088)

55,358

Net cash provided by/(used in) financing activities

Net increase/(decrease) in cash and due from banks

(49)

Cash and due from banks at beginning of the period

Cash and due from banks at end of the period

Supplemental Disclosures:

Interest paid

4,134

373

AHP payments, net

Supplemental Disclosures of Noncash Investing and Financing Activities:

AHP payments, net

Supplemental Disclosures of Non-cash Investing and Financing Activities:

Transfers of HTM securities to AFS securities

Transfers of capital stock to mandatorily redeemable capital stock

1,252

Transfers of capital stock to mandatorily redeemable capital stock

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

Table of Contents

Federal Home Loan Bank of San Francisco

Notes to Financial Statements

Note 1 — Basis of Presentation and Significant Accounting Policies

The information about the Federal Home Loan Bank of San Francisco (Bank) included in these unaudited financial statements reflects all adjustments that, in the opinion of the Bank, are necessary for a fair statement of results for the periods presented. These adjustments are of a recurring nature, unless otherwise disclosed. The results of operations in these interim statements are not necessarily indicative of the results to be expected for any subsequent period or for the entire year ending December 31, ~~2023.~~2024. These unaudited financial statements should be read in conjunction with the Bank’s Annual Report on Form 10-K for the year ended December 31, ~~2022 (2022~~2023 (2023 Form 10-K).

There have been no changes to the basis of presentation of the Bank’s financial instruments meeting netting requirements or of the Bank’s investments in variable interest entities disclosed in “Item 8. Financial Statements and Supplementary Data – Note 1 – Summary of Significant Accounting Policies” in the Bank’s ~~2022~~2023 Form 10-K.

Use of Estimates. The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) requires management to make a number of judgments, estimates, and assumptions that may affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported amounts of income, expenses, gains, and losses during the reporting period. The most significant of these estimates include:

•accounting for ~~derivatives;~~hedging activities; and

•estimating fair values of investments classified as trading and available-for-sale (AFS), derivatives and associated hedged items carried at fair value in accordance with the accounting for derivative instruments and associated hedging activities, and financial instruments carried at fair value under the fair value ~~option; and~~

•estimating the prepayment speeds on mortgage-backed securities (MBS) and mortgage loans for the accounting of amortization of premiums and accretion of discounts and credit losses previously recorded before the adoption of accounting guidance related to the measurement of credit losses on MBS and mortgage loans.option

Actual results could differ significantly from these estimates.

Termination of Long-Term Funding Arrangement. The Bank recognized $30 million as income in the first quarter of 2024 in connection with the termination of a long-term funding arrangement entered into with a member borrower in 2017.

Descriptions of the Bank’s significant accounting policies are included in “Item 8. Financial Statements and Supplementary Data – Note 1 – Summary of Significant Accounting Policies” in the Bank’s ~~2022~~2023 Form 10-K. Other changes to these policies as of ~~September 30, 2023,~~March 31, 2024, are discussed in Note 2 – Recently Issued and Adopted Accounting Guidance.

Table of Contents

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

Note 2 — Recently Issued and Adopted Accounting Guidance

The following table provides a summary of recently issued and adopted accounting standards that may have an effect on the Bank’s financial statements.

Accounting Standards Update (ASU)

Description

Effective Date

Effect on the Financial Statements or Other Significant Matters

~~Facilitation of the Effects of Reference Rate Reform on Financial~~

Segment Reporting ~~as amended (ASU 2020-04)~~(Topic 280): Improvements to Reportable Segment Disclosures

(ASU 2023-07)

This update provides temporary optional guidance to ease the potential burden in accounting for reference rate reform. The new guidance provides optional expedients and exceptions for applying generally accepted accounting principles to transactions affected by reference rate reform if certain criteria are met. These transactions include:
• contract modifications,
• hedging relationships, and
• sale or transfer of debt securities classified as HTM.

This guidance ~~became~~improves reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses, including if an entity only has a single reportable segment.

This guidance becomes effective ~~beginning March 2020 through~~for the Bank for the annual period ending December 31, ~~2024.~~2024, and for interim and annual periods thereafter.

~~The Bank has assessed~~While the adoption of this guidance ~~and has elected some of the optional expedients and exceptions provided related to the discounting transition for uncleared derivative transactions on a prospective basis since 2021, which did~~will not have ~~a material~~any effect on the Bank’s financial condition, results of operations, or cash flows, ~~and financial statement disclosures.~~

~~Troubled Debt Restructurings and Vintage Disclosures~~

~~(ASU 2022-02)~~

This guidance eliminates the accounting guidance for troubled debt restructurings by creditors that have adopted the current expected credit losses methodology while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors made to borrowers experiencing financial difficulty. Additionally, this guidance requires disclosure of current-period gross write-offs by year of origination for financing receivables and net investment in leases.

~~The guidance became effective for~~ the Bank ~~for~~is in the ~~interim and annual periods beginning on January 1, 2023.~~

~~The Bank adopted this guidance as~~process of ~~January 1, 2023. The adoption~~evaluating the impact of this guidance ~~did not have a material~~and its effect on the Bank’s ~~financial condition, results of operations, cash flows, and financial statement~~ disclosures.

Note 3 — Investments

The Bank makes short-term investments in interest-bearing deposits, securities purchased under agreements to resell, and ~~Federal~~federal funds sold, and may make other investments in debt securities, which are classified as trading, AFS, or HTM.

Interest-Bearing Deposits, Securities Purchased under Agreements to Resell, and Federal Funds Sold. The Bank invests in interest-bearing deposits, securities purchased under agreements to resell, and ~~Federal~~federal funds sold.

Federal funds sold are unsecured loans that are generally transacted on an overnight term. Federal Housing Finance Agency (Finance Agency) regulations include a limit on the amount of unsecured credit the Bank may extend to a counterparty. At ~~September 30, 2023,~~March 31, 2024, and December 31, ~~2022,~~2023, all investments in interest-bearing deposits and ~~Federal~~federal funds sold were repaid or expected to be repaid according to the relevant contractual terms. No allowance for credit losses was recorded for these assets at ~~September 30, 2023,~~March 31, 2024, and December 31, ~~2022.~~2023. Carrying values of interest-bearing

~~Table of Contents~~

~~Federal Home Loan Bank of San Francisco~~

~~Notes to Financial Statements (continued)~~

deposits and ~~Federal~~federal funds sold exclude accrued interest receivable of ~~$17~~$18 million and $2 million, respectively, as of ~~September 30, 2023,~~March 31, 2024, and ~~$13~~$16 million and $1$2 million, respectively, as of December 31, ~~2022.~~2023.

Based upon the collateral held as security and collateral maintenance provisions with its counterparties, the Bank determined that no allowance for credit losses was needed for its securities purchased under agreements to resell at ~~September 30, 2023,~~March 31, 2024, and December 31, ~~2022.~~2023. The carrying value of securities purchased under agreements to resell excludes $1 million and $2 million of accrued interest receivable as of ~~September 30, 2023,~~March 31, 2024, and December 31, ~~2022,~~2023, respectively.

Debt Securities

The Bank invests in debt securities, which are classified as trading, AFS, or HTM. Within these investments, the Bank is primarily subject to credit risk related to ~~PLRMBS~~private-label residential mortgage-backed securities (PLRMBS) that are supported by underlying mortgage loans. The Bank is prohibited by Finance Agency regulations from purchasing certain higher risk securities, such as equity securities and debt instruments that are not investment quality at the time of purchase.

~~Trading Securities.~~ ~~The estimated fair value~~Table of ~~trading securities that were MBS - other U.S. obligations was $1 million as~~Contents

Federal Home Loan Bank of ~~September 30, 2023, and December 31, 2022. The unrealized net gain/(loss) on trading securities held at September 30, 2023 and 2022, were de minimis amounts.~~San Francisco

Notes to Financial Statements (continued)

Available-for-Sale Securities. The amortized cost and fair value of AFS securities by major security type as of ~~September 30, 2023,~~March 31, 2024, and December 31, ~~2022,~~2023, were as follows:


September 30, 2023
March 31, 2024
(In millions)
(In millions)
(In millions)	(In millions)	Amortized Cost(1)		Allowance for Credit Losses		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Amortized Cost(1)	Allowance for Credit Losses	Gross Unrealized Gains	Gross Unrealized Losses	Estimated Fair Value

U.S. Treasury obligations
U.S. Treasury obligations
U.S. Treasury obligations	U.S. Treasury obligations	$	4,034	$	—	$	10	$	—	$	4,044

MBS:	MBS:

MBS:

MBS:
Government Sponsored Enterprises (GSEs) – multifamily
Government Sponsored Enterprises (GSEs) – multifamily
Government Sponsored Enterprises (GSEs) – multifamily	Government Sponsored Enterprises (GSEs) – multifamily	11,218		—		7		(65)		11,160

PLRMBS	PLRMBS	1,100		(34)		34		(25)		1,075

PLRMBS

Total MBS		12,318		(34)		41		(90)		12,235

PLRMBS

Total mortgage-backed securities (MBS)

Total mortgage-backed securities (MBS)

Total mortgage-backed securities (MBS)
Total	Total	$	16,352	$	(34)	$	51	$	(90)	$	16,279


December 31, 2022
December 31, 2023
(In millions)
(In millions)
(In millions)	(In millions)	Amortized Cost(1)		Allowance for Credit Losses		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Amortized Cost(1)	Allowance for Credit Losses	Gross Unrealized Gains	Gross Unrealized Losses	Estimated Fair Value

U.S. Treasury obligations
U.S. Treasury obligations
U.S. Treasury obligations	U.S. Treasury obligations	$	4,012	$	—	$	12	$	—	$	4,024

MBS:	MBS:

MBS:

MBS:
GSEs – multifamily
GSEs – multifamily
GSEs – multifamily	GSEs – multifamily	7,562		—		2		(57)		7,507

PLRMBS	PLRMBS	1,183		(30)		54		(25)		1,182

PLRMBS

PLRMBS

Total MBS

Total MBS

Total MBS	Total MBS	8,745		(30)		56		(82)		8,689
Total	Total	$	12,757	$	(30)	$	68	$	(82)	$	12,713

(1) Amortized cost includes unpaid principal balance, unamortized premiums and discounts, net charge-offs, and valuation adjustments for hedging activities, and excludes accrued interest receivable of ~~$57~~$69 million and ~~$46~~$68 million at ~~September 30, 2023,~~March 31, 2024, and December 31, ~~2022,~~2023, respectively.

At March 31, 2024, the amortized cost of the Bank’s MBS classified as AFS included premiums of $56 million, discounts of $187 million, and previous credit losses related to the prior methodology of evaluating credit losses of $314 million for PLRMBS. At December 31, 2023, the amortized cost of the Bank’s MBS classified as AFS included premiums of $58 million, discounts of $191 million, and previous credit losses related to the prior methodology of evaluating credit losses of $312 million for PLRMBS.

The following tables summarize the AFS securities with unrealized losses as of March 31, 2024, and December 31, 2023. The unrealized losses are aggregated by major security type and the length of time that individual securities have been in a continuous unrealized loss position.


March 31, 2024
	Less Than 12 Months				12 Months or More				Total
(In millions)	Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses








MBS – GSEs – multifamily	$	367	$	1	$	3,368	$	15	$	3,735	$	16



PLRMBS	103		6		244		20		347		26

Total	$	470	$	7	$	3,612	$	35	$	4,082	$	42

Table of Contents

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

At September 30, 2023, the amortized cost of the Bank’s MBS classified as AFS included premiums of $58 million, discounts of $180 million, and previous credit losses related to the prior methodology of evaluating credit losses of $320 million for PLRMBS. At December 31, 2022, the amortized cost of the Bank’s MBS classified as AFS included premiums of $52 million, discounts of $113 million, and previous credit losses related to the prior methodology of evaluating credit losses of $351 million for PLRMBS.

The following tables summarize the AFS securities with unrealized losses as of September 30, 2023, and December 31, 2022. The unrealized losses are aggregated by major security type and the length of time that individual securities have been in a continuous unrealized loss position.

September 30, 2023
Less Than 12 Months 12 Months or More Total
(In millions) Estimated
Fair Value Gross Unrealized
Losses Estimated
Fair Value Gross Unrealized
Losses Estimated
Fair Value Gross Unrealized
Losses
MBS – GSEs – multifamily $ 5,684 $ 27 $ 3,361 $ 38 $ 9,045 $ 65
PLRMBS 62 2 285 23 347 25
Total $ 5,746 $ 29 $ 3,646 $ 61 $ 9,392 $ 90


December 31, 2022
		Less Than 12 Months				12 Months or More				Total
December 31, 2023
		Less Than 12 Months
		Less Than 12 Months
		Less Than 12 Months
		Less Than 12 Months
		Less Than 12 Months
		Less Than 12 Months
		Less Than 12 Months
		Less Than 12 Months
		Less Than 12 Months															12 Months or More			Total
(In millions)	(In millions)	Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses		(In millions)	Estimated Fair Value	Gross Unrealized Losses		Estimated Fair Value	Gross Unrealized Losses		Estimated Fair Value	Gross Unrealized Losses

MBS – GSEs – multifamily
MBS – GSEs – multifamily
MBS – GSEs – multifamily	MBS – GSEs – multifamily	$	6,635	$	57	$	—	$	—	$	6,635	$	57
PLRMBS	PLRMBS	292		17		68		8		360		25

Total	Total	$	6,927	$	74	$	68	$	8	$	6,995	$	82

Total

Total

Redemption Terms – The amortized cost and estimated fair value of U.S. Treasury securities classified as AFS by contractual maturity (based on contractual final principal payment) and of MBS classified as AFS as of ~~September 30, 2023,~~March 31, 2024, and December 31, ~~2022,~~2023, are shown below. Expected maturities of MBS classified as AFS will differ from contractual maturities because borrowers may have the right to call or prepay the underlying obligations with or without call or prepayment fees.

September 30, 2023

March 31, 2024

(In millions)

Year of Contractual Maturity

Amortized
Cost

Estimated
Fair Value

Year of Contractual Maturity

Amortized
Cost

Estimated
Fair Value

U.S. Treasury obligations:

Due in 1 year or less

Due after 1 year through 5 years

Total U.S. Treasury obligations

U.S. Treasury obligations – Due after 1 year through 5 years

4,034

4,044

Total U.S. Treasury obligations

MBS

12,318

12,235

Total

16,352

16,279

December 31, 2022

December 31, 2023

(In millions)

Year of Contractual Maturity

Amortized
Cost

Estimated
Fair Value

Year of Contractual Maturity

Amortized
Cost

Estimated
Fair Value

U.S. Treasury obligations:

Due in 1 year or less

Due after 1 year through 5 years

U.S. Treasury obligations – Due after 1 year through 5 years

4,012

4,024

Total U.S. Treasury obligations

MBS

8,745

8,689

Total

12,757

12,713

Held-to-Maturity Securities. The Bank classifies the following securities as HTM because the Bank has the positive intent and ability to hold these securities to maturity:

Table of Contents

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)


September 30, 2023
March 31, 2024
March 31, 2024
March 31, 2024
(In millions)
(In millions)
(In millions)	(In millions)	Amortized Cost(1)		Gross Unrecognized Holding Gains(2)		Gross Unrecognized Holding Losses(2)		Estimated Fair Value		Amortized Cost(1)	Gross Unrecognized Holding Gains(2)	Gross Unrecognized Holding Losses(2)	Estimated Fair Value

MBS – Other U.S. obligations – single-family

MBS – Other U.S. obligations – single-family

MBS – Other U.S. obligations – single-family	MBS – Other U.S. obligations – single-family	$	54	$	—	$	(2)	$	52
MBS – GSEs:	MBS – GSEs:

MBS – GSEs – single-family	MBS – GSEs – single-family	637		1		(28)		610

MBS – GSEs – single-family

MBS – GSEs – single-family

MBS – GSEs – multifamily

MBS – GSEs – multifamily

MBS – GSEs – multifamily	MBS – GSEs – multifamily	1,074		—		(5)		1,069
Subtotal MBS – GSEs	Subtotal MBS – GSEs	1,711		1		(33)		1,679

PLRMBS	PLRMBS	130		—		(9)		121

PLRMBS

PLRMBS

Total	Total	$	1,895	$	1	$	(44)	$	1,852
Total
Total


December 31, 2022
December 31, 2023
December 31, 2023
December 31, 2023
(In millions)
(In millions)
(In millions)	(In millions)	Amortized Cost(1)		Gross Unrecognized Holding Gains(2)		Gross Unrecognized Holding Losses(2)		Estimated Fair Value		Amortized Cost(1)	Gross Unrecognized Holding Gains(2)	Gross Unrecognized Holding Losses(2)	Estimated Fair Value

MBS – Other U.S. obligations – single-family

MBS – Other U.S. obligations – single-family

MBS – Other U.S. obligations – single-family	MBS – Other U.S. obligations – single-family	$	72	$	—	$	(2)	$	70
MBS – GSEs:	MBS – GSEs:

MBS – GSEs – single-family	MBS – GSEs – single-family	745		1		(22)		724

MBS – GSEs – single-family

MBS – GSEs – single-family

MBS – GSEs – multifamily

MBS – GSEs – multifamily

MBS – GSEs – multifamily	MBS – GSEs – multifamily	1,209		—		(10)		1,199
Subtotal MBS – GSEs	Subtotal MBS – GSEs	1,954		1		(32)		1,923

PLRMBS	PLRMBS	155		—		(12)		143

PLRMBS

PLRMBS

Total	Total	$	2,181	$	1	$	(46)	$	2,136
Total
Total

(1) Amortized cost includes unpaid principal balance, unamortized premiums and discounts, and net charge-offs, and excludes accrued interest receivable of $6 million ~~and $5 million~~ at ~~September 30, 2023,~~March 31, 2024, and December 31, ~~2022, respectively.~~2023.

(2) Gross unrecognized holding gains/(losses) represent the difference between estimated fair value and net carrying value.

Expected maturities of MBS classified as HTM will differ from contractual maturities because borrowers may have the right to call or prepay the underlying obligations with or without call or prepayment fees.

At ~~September 30,~~March 31, 2024, and December 31, 2023, the amortized cost of the Bank’s MBS classified as HTM included premiums of $2 million and discounts of $3 million, and no previous credit losses related to the prior methodology of evaluating credit losses for PLRMBS. At December 31, 2022, the amortized cost of the Bank’s MBS classified as HTM included premiums of $3 million, discounts of $4 million, and no previous credit losses related to the prior methodology of evaluating credit losses for PLRMBS.million.

Allowance for Credit Losses on AFS and HTM Securities. The following table presents a rollforward of the allowance for credit losses on ~~investment securities associated with~~ PLRMBS classified as AFS for the three ~~and nine~~ months ended ~~September 30, 2023~~March 31, 2024 and ~~2022.~~2023. The Bank recorded no allowance for credit losses associated with HTM securities during the three ~~and nine~~ months ended ~~September 30, 2023~~March 31, 2024 and ~~2022.~~2023.


		Three Months Ended				Nine Months Ended
				Three Months Ended
				Three Months Ended
				Three Months Ended
(In millions)	(In millions)	September 30, 2023		September 30, 2022		September 30, 2023		September 30, 2022
Balance, beginning of the period	Balance, beginning of the period	$	28	$	17	$	30	$	17
Balance, beginning of the period
Balance, beginning of the period
(Charge-offs)/recoveries
(Charge-offs)/recoveries
(Charge-offs)/recoveries	(Charge-offs)/recoveries	(1)		(1)		(3)		(1)
Provision for/(reversal of) credit losses	Provision for/(reversal of) credit losses	7		9		7		9
Provision for/(reversal of) credit losses
Provision for/(reversal of) credit losses
Balance, end of the period	Balance, end of the period	$	34	$	25	$	34	$	25
Balance, end of the period
Balance, end of the period

To evaluate investment securities for expected credit loss at ~~September 30, 2023,~~March 31, 2024, and December 31, ~~2022,~~2023, the Bank employed the following methodologies, based on the type of security.

~~Table of Contents~~

~~Federal Home Loan Bank of San Francisco~~

~~Notes to Financial Statements (continued)~~

AFS and HTM Securities (Excluding PLRMBS) – The Bank’s AFS and HTM securities are principally U.S. obligations and MBS issued by Ginnie Mae, Freddie Mac, and Fannie Mae that are backed by single-family or

Table of Contents

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

multifamily mortgage loans. The Bank only purchases securities considered investment quality. Excluding PLRMBS investments, at ~~September 30, 2023,~~March 31, 2024, and December 31, ~~2022,~~2023, substantially all of AFS securities and HTM securities, based on amortized cost, were rated A, or above, by ~~an NRSRO,~~a Nationally Recognized Statistical Rating Organization (NRSRO), based on the lowest long-term credit rating for each security. These may differ from any internal ratings of the securities by the Bank, if applicable.

At ~~September 30, 2023,~~March 31, 2024, and December 31, ~~2022,~~2023, certain of the Bank’s AFS and HTM securities were in an unrealized loss position. These losses are considered temporary as the Bank expects to recover the entire amortized cost basis on these ~~AFS~~ investment securities and neither intends to sell these securities nor considers it more likely than not that it will be required to sell these securities before its anticipated recovery of each security's remaining amortized cost basis. Further, the Bank has not experienced any payment defaults on the instruments and substantially all of these securities are highly rated. In the case of U.S. obligations, they carry an explicit government guarantee. In the case of GSE securities, they are purchased under an assumption that the issuers’ obligation to pay principal and interest on those securities will be honored, taking into account their status as GSEs. As a result, no allowance for credit losses was recorded on these AFS securities at September 30, 2023, and December 31, 2022.

~~As of September 30, 2023, and December 31, 2022, the Bank had not established an allowance for credit losses on any of its HTM securities because the~~ securities: (i) were all highly rated or had short remaining terms to ~~maturity and~~maturity; (ii) had not experienced, nor did the Bank expect, any payment default on the instruments, and (iii) in the case of U.S. Treasury, GSE, or other agency obligations, carry an implicit or explicit government guarantee such that the Bank considers the risk of nonpayment to be zero.

As a result, no allowance for credit losses was recorded on these AFS or HTM securities at March 31, 2024, and December 31, 2023.

Private-Label Residential Mortgage-Backed Securities – The Bank also holds investments in PLRMBS. The Bank has not purchased any PLRMBS since the first quarter of 2008. ~~However, many~~Many of these securities have subsequently experienced significant credit deterioration. As of ~~September 30, 2023,~~March 31, 2024, and December 31, ~~2022,~~2023, approximately ~~3% and~~ 4%~~, respectively,~~ of PLRMBS (AFS and HTM combined, based on amortized cost) were rated A, or above, by an NRSRO; and the remaining securities were either rated less than A, or were unrated. To determine whether an allowance for credit loss is necessary on these securities, the Bank uses cash flow analyses.

At each quarter end, the Bank compares the present value of the cash flows expected to be collected on its PLRMBS, using the effective interest rate, to the amortized cost basis of the securities to determine whether a credit loss exists. The expected credit losses are measured using:

•expected housing price changes;

•expected interest rate assumptions;

•the remaining payment terms for the security;

•expected default rates based on underlying loan-level borrower and loan characteristics;

•loss severities on the collateral supporting each unique PLRMBS based on underlying loan-level borrower and loan characteristics; and

•prepayment speeds based on underlying loan-level borrower and loan characteristics.

The ~~projected~~expected cash flows are based on a number of assumptions and expectations, and the results of these models can vary significantly with changes in these assumptions and expectations. The cash flows determined reflect management’s expectations and include a base case housing price forecast for near- and long-term horizons.

For all the PLRMBS in its AFS and HTM portfolios, the Bank does not intend to sell any security and it is not more likely than not that the Bank will be required to sell any security before its anticipated recovery of the remaining amortized cost basis.

For PLRMBS with previous credit losses related to the prior methodology of evaluating credit losses (securities for which the Bank determined that it does not expect to recover the entire amortized cost basis), measurement of the

~~Table of Contents~~

~~Federal Home Loan Bank of San Francisco~~

~~Notes to Financial Statements (continued)~~

credit loss amount for PLRMBS classified as Level 3 as of ~~September 30, 2023,~~March 31, 2024, uses significant inputs and assumptions that include, based on unpaid principal balance, the weighted average percentage of prepayment rates of ~~10.9%~~10.3%; default rates of ~~10.0%~~7.2%; and loss severities of ~~46.4%~~52.3%. The weighted average percentage of the related current credit enhancement for these securities, based on unpaid principal balance, was 8.6% as of ~~September 30, 2023.~~March 31, 2024. Credit enhancement is defined as the percentage of subordinated tranches, excess spread, and over-collateralization, if any, in a security structure that will generally absorb losses before the Bank will experience a loss on the security.

Table of Contents

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

In general, the Bank elects to transfer any PLRMBS that incurred a credit loss during the applicable period from the Bank’s HTM portfolio to its AFS portfolio at their fair values. There were no transfers of PLRMBS from the Bank’s HTM portfolio to its AFS portfolio during the three months ended ~~September 30,~~March 31, 2024 and 2023. The Bank transferred PLRMBS from its HTM portfolio to its AFS portfolio with an amortized cost and fair value at the time of the transfer of $2 million during the nine months ended September 30, 2023.The fair value of the transferred PLRMBS was lower than their amortized cost by a de minimis amount. The Bank transferred PLRMBS from its HTM portfolio to its AFS portfolio with an amortized cost and fair value at the time of the transfer of $1 million during the three months ended September 30, 2022. The fair value of the transferred PLRMBS was lower than their amortized cost by a de minimis amount. The Bank transferred PLRMBS from its HTM portfolio to its AFS portfolio with an amortized cost of $17 million and fair value of $20 million at the time of the transfer during the nine months ended September 30, 2022.

For the Bank’s PLRMBS, the Bank recorded a ~~provision for~~reversal of credit losses of $7$4 million and $1 million during the three ~~and nine~~ months ended ~~September 30, 2023. The Bank recorded~~March 31, 2024 and 2023, respectively, largely as a ~~provision for credit losses~~result of ~~$9 million during the three and nine months ended September 30, 2022. The provisions were recorded largely because of declines~~improvements in the fair values ~~the present value of expected cash flows of certain PLRMBS, and decreased expectations~~ of the ~~performance of loan~~underlying collateral ~~underlying these~~on certain securities.

The total net accretion recognized in interest income associated with PLRMBS with previous credit losses related to the prior methodology of evaluating credit losses totaled ~~$8 million~~a de minimis amount and ~~$14~~$11 million for the three months ended ~~September 30,~~March 31, 2024 and 2023, ~~and 2022, respectively, and $27 million and $43 million for the nine months ended September 30, 2023 and 2022,~~ respectively. Accretion of yield adjustments resulting from improvement of expected cash flows that are recognized over the remaining life of the securities totaled $5 million and $9 million for the three months ended September 30, 2023 and 2022, respectively, and $17 million and $27 million for the nine months ended September 30, 2023 and 2022, respectively.

Note 4 — Advances

The Bank offers a wide range of fixed and adjustable rate advance products with different maturities, interest rates, payment characteristics, and option features. Fixed rate advances generally have maturities ranging from one day to 30 years. Adjustable rate advances generally have maturities ranging from one day to 10 years, with the interest rates resetting periodically at a fixed spread to a specified index.

Redemption Terms. The following table presents advances outstanding by redemption term and weighted-average interest rate at ~~September 30, 2023,~~March 31, 2024, and December 31, ~~2022.~~2023.

~~Table of Contents~~

~~Federal Home Loan Bank of San Francisco~~

~~Notes to Financial Statements (continued)~~


(Dollars in millions)	(Dollars in millions)	September 30, 2023				December 31, 2022				(Dollars in millions)	March 31, 2024						December 31, 2023
Redemption Term	Redemption Term	Amount Outstanding(1)		Weighted Average Interest Rate		Amount Outstanding(1)		Weighted Average Interest Rate		Redemption Term	Amount Outstanding(1)			Weighted Average Interest Rate				Amount Outstanding(1)				Weighted Average Interest Rate
Overdrawn demand and overnight deposit accounts	Overdrawn demand and overnight deposit accounts	$	20	5.15	%	$	2	4.15	%	Overdrawn demand and overnight deposit accounts	$	91	5.15		5.15	%			$	2	5.15		5.15	%
Within 1 year(2)	Within 1 year(2)	32,217		4.98		71,050		4.34
After 1 year through 2 years	After 1 year through 2 years	17,839		3.90		7,634		3.30
After 2 years through 3 years	After 2 years through 3 years	6,438		2.99		4,036		2.22
After 3 years through 4 years	After 3 years through 4 years	2,262		3.47		3,391		2.05
After 4 years through 5 years	After 4 years through 5 years	4,436		4.00		2,815		3.24
After 5 years	After 5 years	1,345		3.70		1,189		3.50
Total par value	Total par value	64,557		4.34	%	90,117		4.03	%	Total par value	57,443		3.86		3.86	%			61,710		4.38		4.38	%
Valuation adjustments for hedging activities	Valuation adjustments for hedging activities	(921)				(670)
Valuation adjustments under fair value option	Valuation adjustments under fair value option	(52)				(47)
Valuation adjustments under fair value option
Valuation adjustments under fair value option

Total	Total	$	63,584			$	89,400

Total

Total

(1)Carrying amounts exclude accrued interest receivable of ~~$104~~$84 million and ~~$241~~$85 million at ~~September 30, 2023,~~March��31, 2024, and December 31, ~~2022,~~2023, respectively.

(2)Advances outstanding with redemption terms within three months totaled ~~$15.7~~$14.2 billion and ~~$46.3~~$16.8 billion at ~~September 30, 2023,~~March 31, 2024, and December 31, ~~2022,~~2023, respectively.

~~Many~~All of the Bank’s advances are prepayable at the borrower’s option. However, when advances are prepaid, the borrower is charged a prepayment fee intended to make the Bank financially indifferent to the borrower’s decision to repay the advance prior to its maturity date, which is required by the Finance ~~Agency~~Agency’s regulations. In addition, for certain advances with full or partial prepayment symmetry, the Bank may charge the borrower a prepayment fee or pay the borrower a prepayment credit depending on certain circumstances, such as movements in interest rates, when the advance is prepaid. In November 2018, the Bank discontinued offering advances with partial prepayment symmetry. The Bank had advances with full prepayment symmetry outstanding totaling ~~$40.5~~$38.2 billion at ~~September 30, 2023,~~March 31, 2024, and ~~$19.2~~$39.8 billion at December 31, ~~2022.~~2023. The Bank had advances with partial prepayment symmetry outstanding totaling ~~$0.5 billion~~$182 million at ~~September 30, 2023,~~March 31, 2024, and ~~$1.0 billion~~$209 million at December 31, ~~2022.~~2023. Some advances may be repaid on specified call dates without prepayment fees (callable advances). The Bank had callable advances outstanding totaling ~~$4.6 billion~~$840 million at ~~September 30, 2023,~~March 31, 2024, and ~~$9.8~~$3.3 billion at December 31, ~~2022.~~2023.

Table of Contents

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

The Bank had putable advances totaling ~~$1.5~~$2.0 billion at ~~September 30, 2023,~~March 31, 2024, and ~~$0.8~~$1.4 billion at December 31, ~~2022.~~2023. At the Bank’s discretion, the Bank may terminate these advances on predetermined exercise dates and offer replacement funding at prevailing market rates, subject to certain conditions. The Bank would typically exercise such termination rights when interest rates increase relative to contractual rates.

The following table summarizes advances at ~~September 30, 2023,~~March 31, 2024, and December 31, ~~2022,~~2023, by the earlier of the year of redemption term or next call date for callable advances and by the earlier of the year of redemption term or next put date for putable advances.


		Earlier of Redemption Term or Next Call Date				Earlier of Redemption Term or Next Put Date
	Earlier of Redemption Term or Next Call Date												Earlier of Redemption Term or Next Call Date		Earlier of Redemption Term or Next Put Date
(In millions)	(In millions)	September 30, 2023		December 31, 2022		September 30, 2023		December 31, 2022		(In millions)	March 31, 2024	December 31, 2023		March 31, 2024		December 31, 2023
Overdrawn demand and overnight deposit accounts	Overdrawn demand and overnight deposit accounts	$	20	$	2	$	20	$	2
Within 1 year	Within 1 year	32,537		71,370		33,198		71,850
After 1 year through 2 years	After 1 year through 2 years	17,849		7,634		18,349		7,634
After 2 years through 3 years	After 2 years through 3 years	6,438		4,046		6,182		3,836
After 3 years through 4 years	After 3 years through 4 years	2,272		3,391		2,262		3,391
After 4 years through 5 years	After 4 years through 5 years	4,436		2,825		3,501		2,215
After 5 years	After 5 years	1,005		849		1,045		1,189
Total par value	Total par value	$	64,557	$	90,117	$	64,557	$	90,117

Concentration Risk. The following tables present the concentration in advances to the top 10 borrowers and their affiliates at March 31, 2024 and 2023. The tables also present the interest income from these advances before the impact of interest rate exchange agreements hedging these advances for the three months ended March 31, 2024 and 2023.



	March 31, 2024				Three Months Ended March 31, 2024

(Dollars in millions) Name of Borrower	Advances Outstanding		Percentage of Total Advances Outstanding			Interest Income from Advances(1)		Percentage of Total Interest Income from Advances
JPMorgan Chase, National Association(2)	$	21,319	37	%		$	239	40	%
Western Alliance Bank	5,750		10			44		7
East West Bank	3,500		6			7		1
First Technology Federal Credit Union(3)	2,114		4			15		3
MUFG Union Bank, National Association(4)	2,050		4			12		2
SchoolsFirst Federal Credit Union	1,823		3			20		3
Bank of America California, National Association	1,450		3			19		3
First Foundation Bank	1,350		2			13		2
Washington Federal Bank(5)	1,143		2			9		2
Wescom Central Credit Union	930		2			10		2
Subtotal	41,429		73			388		65
Others	16,014		27			211		35
Total par value	$	57,443	100	%		$	599	100	%

Table of Contents

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

~~Concentration Risk.~~ The following tables present the concentration in advances to the top 10 borrowers and their affiliates at September 30, 2023 and 2022. The tables also present the interest income from these advances before the impact of interest rate exchange agreements hedging these advances for the three and nine months ended September 30, 2023 and 2022.

September 30, 2023
(Dollars in millions) September 30, 2023 Three Months Ended
September 30, 2023 Nine Months Ended
September 30, 2023
Name of Borrower Advances
Outstanding Percentage of
Total
Advances
Outstanding
Interest
Income from
Advances(1)
Percentage of
Total Interest
Income from
Advances
Interest
Income from
Advances(1)
Percentage of
Total Interest
Income from
Advances
JPMorgan Chase, National Association(2)
$ 26,409 41 % $ 286 41 % $ 751 28 %
Western Alliance Bank 4,700 7 23 3 155 6
City National Bank 4,250 7 95 13 316 12
First Technology Federal Credit Union(3)
3,300 5 34 5 108 4
MUFG Union Bank, National Association(5)
2,050 3 12 2 142 5
SchoolsFirst Federal Credit Union 1,523 2 13 2 29 1
Bank of America California, National Association 1,450 2 15 2 44 2
Luther Burbank Savings(3)(4)
1,427 2 12 2 34 1
Wells Fargo National Bank West 1,000 2 14 2 64 2
Logix Federal Credit Union(3)
930 1 10 1 33 1
Subtotal 47,039 72 514 73 1,676 62
Others 17,518 28 190 27 1,006 38
Total par value $ 64,557 100 % $ 704 100 % $ 2,682 100 %


September 30, 2022
(Dollars in millions)		September 30, 2022				Three Months Ended September 30, 2022				Nine Months Ended September 30, 2022

Name of Borrower		Advances Outstanding		Percentage of Total Advances Outstanding		Interest Income from Advances(1)		Percentage of Total Interest Income from Advances		Interest Income from Advances(1)		Percentage of Total Interest Income from Advances
Silicon Valley Bank(6)		$	13,500	20	%	$	18	5	%	$	20	4	%
First Republic Bank (subsequently acquired by JPMorgan Chase, National Association)(2)		11,000		17		65		20		94		18
MUFG Union Bank, National Association(5)		7,950		12		46		14		81		15




															March 31, 2023							Three Months Ended March 31, 2023

(Dollars in millions) Name of Borrower
(Dollars in millions) Name of Borrower
(Dollars in millions) Name of Borrower															Advances Outstanding			Percentage of Total Advances Outstanding					Interest Income from Advances(1)				Percentage of Total Interest Income from Advances
First Republic Bank(2)														First Republic Bank(2)	$	28,100		28		%			$	176			18	%
MUFG Union Bank, National Association(4)
Western Alliance Bank	Western Alliance Bank	4,000		6		19		6		25		5
City National Bank
Pacific Western Bank(6)
First Technology Federal Credit Union(3)	First Technology Federal Credit Union(3)	3,737		6		22		7		41		8
Bank of the West(7)	Bank of the West(7)	2,500		4		1		—		1		—
City National Bank		2,050		3		7		2		7		1
Wells Fargo National Bank West	Wells Fargo National Bank West	2,000		3		2		1		2		—
Pacific Western Bank(8)		1,370		2		1		—		4		1
Luther Burbank Savings(3)(4)		1,202		2		5		2		12		2
First Foundation Bank
Luther Burbank Savings Bank(5)(8)
Subtotal	Subtotal	49,309		75		186		57		287		54
Others	Others	17,089		25		147		43		248		46
Total par value	Total par value	$	66,398	100	%	$	333	100	%	$	535	100	%	Total par value	$	102,019	100		100		%			$	971	100		100	%

(1) Interest income amounts exclude the interest effect of interest rate exchange agreements with derivative counterparties; as a result, the total interest income amounts will not agree to the Statements of Income. The amount of interest income from advances can vary depending on the amount outstanding, terms to maturity, interest rates, and repricing characteristics.

~~Table of Contents~~

~~Federal Home Loan Bank of San Francisco~~

~~Notes to Financial Statements (continued)~~

(2) On May 1, 2023, the California Department of Financial Protection and Innovation (DFPI) closed First Republic Bank and appointed the FDIC as receiver. On the same date, the FDIC transferred all of the deposits and substantially all of the assets of First Republic Bank, including $28.1 billion in advances outstanding from the Bank, to JPMorgan Chase, National Association, a nonmember. These advances outstanding are fully collateralized and are not expected to result in any credit loss to the Bank.

(3) An officer or director of the member iswas a Bank ~~director.~~director during 2024 and 2023.

(4) On November 14, 2022, Luther Burbank Savings and Washington Federal, Inc. (a nonmember bank) announced the signing of a definitive merger agreement pursuant to which Washington Federal, Inc. will acquire Luther Burbank Savings, subject to receipt of regulatory and shareholder approval. On May 5, 2023, it was announced that merger approval was received from shareholders of both banks.

~~(5)~~ On December 1, 2022, U.S. Bancorp, a nonmember, announced that it completed its acquisition of MUFG Union Bank, National Association.

~~(6)~~(5) On ~~March 10, 2023, Silicon Valley~~February 29, 2024, Washington Federal Bank ~~was closed by~~(a nonmember bank) announced that it completed its acquisition of Luther Burbank Savings. On the ~~California DFPI and the FDIC was named as receiver. The FDIC created Silicon Valley Bridge~~same date, Washington Federal Bank ~~N.A., whereby~~assumed all of the ~~deposits~~assets and ~~substantially all assets~~liabilities of ~~Silicon Valley Bank were transferred~~Luther Burbank Savings, including $1.2 billion in advances outstanding from the Bank. These advances outstanding are fully collateralized and are not expected to result in any credit loss to the ~~bridge bank. As~~Bank.

(6) On December 1, 2023, Banc of ~~March 31, 2023, Silicon Valley Bridge Bank,~~California, N.A., announced that it had ~~prepaid all outstanding advances to the Bank. On March 26, 2023, the FDIC entered into a purchase and assumption agreement for all the deposits and loans~~completed its acquisition of ~~Silicon Valley Bridge Bank, N.A., with First Citizens Bank and Trust Company. Silicon Valley Bank is no longer a member of the~~Pacific Western Bank.

(7) On February 1, 2023, BMO Harris, a nonmember, announced that it completed its acquisition of Bank of the West.

(8) ~~On July 25, 2023, Pacific Western Bank and Banc of California, N.A., announced the signing of a definitive agreement to combine in a merger transaction. Under the terms~~An officer or director of the agreement, PacWest Bancorp will merge into Banc of California, Inc., and Banc of California, N.A., will merge into Pacific Western Bank. The merger transaction is subject to regulatory and shareholder approval. On October 19, 2023, itmember was announced that the merger approval was received from the regulatory agencies. At September 30, 2023, total advances outstanding to Banc of California, N.A., were $811 million. There were no advances outstanding to Pacific Westerna Bank ~~at September 30,~~director during 2023. ~~At September 30, 2022, there were $1.4 billion and $731 million of advances outstanding to Pacific Western Bank and Banc of California, N.A., respectively.~~

Credit Risk Exposure and Security Terms. The Bank manages its credit exposure related to advances through an integrated approach that provides for a credit limit to be established for each borrower, includes an ongoing review of each borrower’s financial condition, and is coupled with conservative collateral and lending policies to limit the risk of loss.

In addition, the Bank lends to member financial institutions that have their principal place of business in Arizona, California, or Nevada, in accordance with federal law and the Finance ~~Agency~~Agency’s regulations. Specifically, the Bank is required to obtain sufficient collateral to fully secure credit products up to the member’s total credit limit. Borrowers may pledge the following eligible assets to secure advances:

•one-to-four-family first lien residential mortgage loans;

•securities issued, insured, or guaranteed by the U.S. government or any of its agencies, including without limitation MBS backed by Fannie Mae, Freddie Mac, or Ginnie Mae;

•cash or deposits in the Bank;

•certain other real estate-related collateral, such as certain privately issued MBS, multifamily loans, commercial real estate loans, and second lien residential mortgage loans or home equity loans; and

•small business, small farm, and small agribusiness loans that are fully secured by collateral (such as real estate, equipment and vehicles, accounts receivable, and inventory) from members that are community financial institutions.

Table of Contents

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

The Bank has advances outstanding to former members and member successors, which are subject to the security terms above. The Bank requires each borrowing member to execute a written Advances and Security Agreement, which describes the lending relationship between the Bank and the borrower. At ~~September 30, 2023,~~March 31, 2024, and December 31, ~~2022,~~2023, the Bank had a perfected security interest in collateral pledged by each borrowing member, or by the member's affiliate on behalf of the member, and by each nonmember borrower, with an estimated value in excess of the outstanding credit products for that borrower. Based on the financial condition of the borrower, the Bank may either (i) allow the borrower or the pledging affiliate to retain physical possession of loan collateral pledged to the Bank, provided that the borrower or the pledging affiliate agrees to hold the collateral for the benefit of the Bank, or (ii) require the borrower or the pledging affiliate to deliver physical possession of loan collateral to the Bank or its custodial agent. All securities collateral is required to be delivered to the Bank’s custodial agent. All loan collateral pledged to the Bank is subject to a Uniform Commercial Code-1 financing statement.

Section 10(e) of the FHLBank Act affords any security interest granted to the Bank by a member or any affiliate of the member or any nonmember borrower priority over claims or rights of any other party, except claims or rights that (i) would be entitled to priority under otherwise applicable law and (ii) are held by bona fide purchasers for value or secured parties with perfected security interests.

~~Table of Contents~~

~~Federal Home Loan Bank of San Francisco~~

~~Notes to Financial Statements (continued)~~

At ~~September 30, 2023,~~March 31, 2024, and December 31, ~~2022,~~2023, none of the Bank’s credit products were past due or on nonaccrual status. There were no modifications to credit products related to borrowers experiencing financial difficulty during the three ~~and nine~~ months ended ~~September 30, 2023.~~March 31, 2024.

Based on the collateral pledged as security for advances, the Bank’s credit analyses of borrowers’ financial condition, repayment history on advances, and the Bank’s credit extension and collateral policies as of ~~September 30,~~March 31, 2024, and December 31, 2023, the Bank expects to collect all amounts due according to the contractual terms. Therefore, no allowance for credit losses on advances was deemed necessary by the Bank as of ~~September 30, 2023,~~March 31, 2024, and December 31, ~~2022.~~2023.

Interest Rate Payment Terms. Interest rate payment terms for advances at ~~September 30, 2023,~~March 31, 2024, and December 31, ~~2022,~~2023, are detailed below:

(In millions)

September 30, 2023

December 31, 2022

(In millions)

March 31, 2024

December 31, 2023

Par value of advances:

Fixed rate:

Due within 1 year

18,779

47,621

Due after 1 year

32,320

18,050

Total fixed rate

51,099

65,671

Adjustable rate:

Due within 1 year

13,458

23,431

Due within 1 year

Due after 1 year

—

1,015

Total adjustable rate

13,458

24,446

Total par value

64,557

90,117

Note 5 — Mortgage Loans Held for Portfolio

Mortgage loans held for portfolio consist of single-family mortgage loans purchased from participating financial

institutions under the Mortgage Partnership Finance® (MPF®) Program (“Mortgage Partnership Finance” and “MPF” are registered trademarks of the FHLBank of Chicago). The following table presents information as of ~~September 30, 2023,~~March 31, 2024, and December 31, ~~2022,~~2023, on mortgage loans held for portfolio, all of which are secured by one- to four-unit residential properties and single-unit homes.

(In millions) September 30, 2023 December 31, 2022
Fixed rate medium-term mortgage loans $ 13 $ 14
Fixed rate long-term mortgage loans 718 761
Subtotal 731 775
Unamortized premiums 42 43
Unamortized discounts (2) (2)
Mortgage loans held for portfolio(1)
771 816
Less: Allowance for credit losses (1) (1)
Total mortgage loans held for portfolio, net $ 770 $ 815

Table of Contents

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)


(In millions)	March 31, 2024		December 31, 2023
Fixed rate medium-term mortgage loans(1)	$	11	$	12
Fixed rate long-term mortgage loans(1)	693		704
Subtotal	704		716
Unamortized premiums	40		41
Unamortized discounts	(1)		(2)
Mortgage loans held for portfolio(2)	743		755
Less: Allowance for credit losses	(1)		(1)
Total mortgage loans held for portfolio, net	$	742	$	754

(1)~~Excludes accrued interest receivable of $5 million at both September 30, 2023, and December 31, 2022.~~

Medium-term loans have original contractual terms of 15 years or less, and long-term loans have contractual terms of more than 15 years.

(2)Excludes accrued interest receivable of $5 million at March 31, 2024, and December 31, 2023.

Payment Status of Mortgage Loans. Payment status is the key credit quality indicator for conventional mortgage loans and allows the Bank to monitor the migration of past due loans. A past due loan is one where the borrower has failed to make a scheduled 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. The following ~~tables present~~table presents the payment

~~Table of Contents~~

~~Federal Home Loan Bank of San Francisco~~

~~Notes to Financial Statements (continued)~~

status for mortgage loans and other delinquency statistics for the Bank’s mortgage loans at ~~September 30, 2023,~~March 31, 2024, and December 31, ~~2022.~~2023.

September 30, 2023
(Dollars in millions) Origination Year
Payment Status 2019 to 2023 Prior to 2019
Amortized Cost(1)
30 – 59 days delinquent $ 1 $ 5 $ 6
60 – 89 days delinquent 1 2 3
90 days or more delinquent 4 12 16
Total past due 6 19 25
Total current loans 347 399 746
Total mortgage loans held for portfolio $ 353 $ 418 $ 771
In process of foreclosure, included above(2)
$ 3
Nonaccrual loans(3)
$ 16
Serious delinquencies as a percentage of total mortgage loans outstanding(4)
2.13 %


December 31, 2022
(Dollars in millions)	(Dollars in millions)	Origination Year
Payment Status		2018 to 2022		Prior to 2018		Amortized Cost(1)
(Dollars in millions)
(Dollars in millions)
Payment Status, at Amortized Cost(1)
Payment Status, at Amortized Cost(1)
Payment Status, at Amortized Cost(1)									March 31, 2024		December 31, 2023
30 – 59 days delinquent	30 – 59 days delinquent	$	4	$	5	$	9
60 – 89 days delinquent	60 – 89 days delinquent	2		1		3
90 days or more delinquent	90 days or more delinquent	11		8		19
Total past due	Total past due	17		14		31
Total current loans	Total current loans	449		336		785
Total mortgage loans held for portfolio	Total mortgage loans held for portfolio	$	466	$	350	$	816
In process of foreclosure, included above(2)	In process of foreclosure, included above(2)					$	3
Nonaccrual loans(3)	Nonaccrual loans(3)					$	19

Serious delinquencies as a percentage of total mortgage loans outstanding(4)	Serious delinquencies as a percentage of total mortgage loans outstanding(4)					2.30		%
Serious delinquencies as a percentage of total mortgage loans outstanding(4)
Serious delinquencies as a percentage of total mortgage loans outstanding(4)									2.23	%	2.17	%

(1) The amortized cost in a loan is the unpaid principal balance of the loan, adjusted for net deferred loan fees or costs, unamortized premiums or discounts, and direct write-downs.

(2) Includes loans for which the servicer has reported a decision to foreclose or to pursue a similar alternative, such as deed-in-lieu. Loans in process of foreclosure are included in past due or current loans depending on their delinquency status.

(3) At ~~September 30, 2023,~~March 31, 2024, and December 31, ~~2022,~~2023, $5 million ~~and $7 million, respectively,~~ of mortgage loans on nonaccrual status did not have an associated allowance for credit losses because these loans were either previously charged off to the expected recoverable value or the fair value of the underlying collateral, including any credit enhancements, is greater than the amortized cost of the loans.

(4) Represents loans that are 90 days or more past due or in the process of foreclosure as a percentage of the recorded investment of total mortgage loans outstanding.

Allowance for Credit Losses on Mortgage Loans Held for Portfolio. Mortgage loans held for portfolio are evaluated on a loan-level basis for expected credit losses, factoring in the credit enhancement structure at the master commitment level. The Bank determines its allowance for credit losses on mortgage loans held for portfolio through analyses that include consideration of various loan portfolio and collateral related characteristics, such as past performance, current conditions, and reasonable and supportable forecasts of expected economic conditions. The Bank uses models that employ a variety of methods, such as projected cash flows, to estimate expected credit losses over the life of the loans. These models rely on a number of inputs, such as current and forecasted property values and interest rates as well as historical borrower behavior experience. At ~~September 30, 2023,~~March 31, 2024, the Bank’s reasonable and supportable forecast of housing prices expects, on average, for prices to appreciate ~~2.7%~~1.5% over a one-year forecast horizon before reverting to long-term housing price appreciation rates of 4.0% after five additional years in the forecast based on historical averages. At December 31, 2022, the Bank’s reasonable and supportable forecast of housing prices expected, on average, for prices to depreciate 0.7% over a one-year forecast horizon before reverting to long-term housing price appreciation rates of 4.0% after five additional years in the forecast based on historical

1817

Table of Contents

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

forecast based on historical averages. At December 31, 2023, the Bank’s reasonable and supportable forecast of housing prices expected, on average, for prices to appreciate 1.3% over a one-year forecast horizon before reverting to long-term housing price appreciation rates of 4.0% after five additional years in the forecast based on historical averages. The Bank also incorporates associated credit enhancements, if any, to determine its estimate of expected credit losses.

Certain mortgage loans held for portfolio may be evaluated for credit losses by the Bank using the practical expedient for collateral-dependent assets. 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 Bank may estimate the fair value of this collateral by applying an appropriate loss severity rate or using third-party estimates or property valuation models. 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. The Bank will either reserve for these estimated losses or record 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 loss.

At both ~~September 30,~~March 31, 2024 and 2023, ~~and 2022,~~ the allowance for credit losses on the mortgage loan portfolio was $1 million. The amount of charge-offs and recoveries ofrelated to the allowance for credit losses on the mortgage loan portfolio were de minimis for the three ~~and nine~~ months ended ~~September 30, 2023~~March 31, 2024 and ~~2022.~~2023.

For more information related to the Bank’s accounting policies for mortgage loans held for portfolio, see “Item 8. Financial Statements and Supplementary Data – Note 1 – Summary of Significant Accounting Policies” in the Bank’s ~~2022~~2023 Form 10-K.

Note 6 — Deposits

The Bank maintains demand deposit accounts that are directly related to the extension of credit to members and offers short-term deposit programs to members and qualifying nonmembers. In addition, a member that services mortgage loans held for portfolio may deposit in the Bank funds collected in connection with the mortgage loans, pending disbursement of these funds to the owners of the mortgage loans. The Bank classifies these types of deposits as non-interest-bearing deposits. Deposits classified as demand, overnight, and other pay interest based on a daily interest rate. Term deposits pay interest based on a fixed rate determined at the issuance of the deposit.

Deposits and interest rate payment terms for deposits as of ~~September 30, 2023,~~March 31, 2024, and December 31, ~~2022,~~2023, were as follows:

September 30, 2023 December 31, 2022
(Dollars in millions) Amount
Outstanding Amount
Outstanding
Interest-bearing deposits:
Adjustable rate $ 758 $ 983
Fixed rate 5 —
Total interest-bearing deposits 763 983
Non-interest-bearing deposits 5 6
Total $ 768 $ 989


	March 31, 2024				December 31, 2023
(Dollars in millions)	Amount Outstanding		Weighted Average Interest Rate		Amount Outstanding		Weighted Average Interest Rate

Interest-bearing deposits (adjustable rate)	$	912	5.15	%	$	957	5.15	%


Non-interest-bearing deposits	5				5
Total	$	917			$	962

Note 7 — Consolidated Obligations

Consolidated obligations, consisting of bonds and discount notes, are jointly issued by the Federal Home Loan Banks (FHLBanks) through the Office of Finance, which serves as the FHLBanks’ agent. As provided by the Federal Home Loan Bank Act of 1932, as amended (FHLBank Act) or by regulations governing the operations of the FHLBanks, all FHLBanks have joint and several liability for all FHLBank consolidated obligations. For a discussion of the joint and several liability regulation, see “Item 8. Financial Statements and Supplementary Data – Note 15 – Commitments and Contingencies” in the Bank’s 2023 Form 10-K. In connection with each issuance of

1918

Table of Contents

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

~~Note 16 – Commitments and Contingencies” in the Bank’s 2022 Form 10-K. In connection with each issuance of~~ consolidated obligations, each FHLBank specifies the type, term, and amount of debt it requests to have issued on its behalf. The Office of Finance tracks the amount of debt issued on behalf of each FHLBank. In addition, the Bank separately tracks and records as a liability its specific portion of the consolidated obligations issued and is the primary obligor for that portion of the consolidated obligations issued. The Finance Agency and the U.S. Secretary of the Treasury have oversight over the issuance of FHLBank debt through the Office of Finance.

Redemption Terms. The following is a summary of the Bank’s participation in consolidated obligation bonds at ~~September 30, 2023,~~March 31, 2024, and December 31, ~~2022.~~2023.


(Dollars in millions)	(Dollars in millions)	September 30, 2023				December 31, 2022				(Dollars in millions)	March 31, 2024						December 31, 2023
Contractual Maturity	Contractual Maturity	Amount Outstanding		Weighted Average Interest Rate		Amount Outstanding		Weighted Average Interest Rate		Contractual Maturity	Amount Outstanding			Weighted Average Interest Rate				Amount Outstanding				Weighted Average Interest Rate
Within 1 year	Within 1 year	$	51,360	5.03	%	$	58,301	4.05	%	Within 1 year	$	44,160	4.87		4.87	%			$	42,821	4.84		4.84	%
After 1 year through 2 years	After 1 year through 2 years	11,120		3.63		8,268		2.30
After 2 years through 3 years	After 2 years through 3 years	6,003		1.54		2,317		1.26
After 3 years through 4 years	After 3 years through 4 years	1,760		1.33		5,473		0.99
After 4 years through 5 years	After 4 years through 5 years	822		2.45		1,255		1.47
After 5 years	After 5 years	856		2.25		1,293		1.73
Total par value	Total par value	71,921		4.37	%	76,907		3.47	%	Total par value	65,102		4.41		4.41	%			64,977		4.37		4.37	%
Unamortized premiums		—				1

Unamortized discounts
Unamortized discounts
Unamortized discounts	Unamortized discounts	(7)				(5)
Valuation adjustments for hedging activities	Valuation adjustments for hedging activities	(964)				(1,083)
Valuation adjustments for hedging activities
Valuation adjustments for hedging activities
Fair value option valuation adjustments
Fair value option valuation adjustments
Fair value option valuation adjustments	Fair value option valuation adjustments	(43)				(52)
Total	Total	$	70,907			$	75,768
Total
Total

The Bank’s participation in consolidated obligation bonds outstanding includes callable bonds. When a callable bond for which the Bank is the primary obligor is issued, the Bank may simultaneously enter into an interest rate swap (wherein the Bank pays a variable rate and receives a fixed rate) with a call feature that mirrors the call option embedded in the bond (a sold callable option in a swap). The combined callable swaps and callable bonds enable the Bank to meet its funding needs at lower costs relative to similar tenor non-callable debt, while effectively converting the Bank’s net payment to an adjustable rate.

The Bank’s participation in consolidated obligation bonds at ~~September 30, 2023,~~March 31, 2024, and December 31, ~~2022,~~2023, was as follows:

(In millions)

September 30, 2023

December 31, 2022

(In millions)

March 31, 2024

December 31, 2023

Par value of consolidated obligation bonds:

Non-callable

44,814

57,164

Non-callable

Callable

27,107

19,743

Total par value

71,921

76,907

The following is a summary of the Bank’s participation in consolidated obligation bonds outstanding at ~~September 30, 2023,~~March 31, 2024, and December 31, ~~2022,~~2023, by the earlier of the year of contractual maturity or next call date.

2019

Table of Contents

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)


(In millions)	(In millions)
Earlier of Contractual Maturity or Next Call Date
Earlier of Contractual Maturity or Next Call Date
Earlier of Contractual Maturity or Next Call Date	Earlier of Contractual Maturity or Next Call Date	September 30, 2023		December 31, 2022		March 31, 2024	December 31, 2023
Within 1 year	Within 1 year	$	66,665	$	73,049
After 1 year through 2 years	After 1 year through 2 years	4,770		3,310
After 2 years through 3 years	After 2 years through 3 years	268		187
After 3 years through 4 years	After 3 years through 4 years	170		313
After 4 years through 5 years	After 4 years through 5 years	12		—
After 5 years	After 5 years	36		48
Total par value	Total par value	$	71,921	$	76,907

~~Consolidated obligation discount notes are consolidated obligations issued to raise short-term funds. These notes are issued at less than their face value and redeemed at par value when they mature.~~ The Bank’s participation in consolidated obligation discount notes, all of which are due within one year, was as follows:


		September 30, 2023				December 31, 2022					March 31, 2024						December 31, 2023
(Dollars in millions)	(Dollars in millions)	Amount Outstanding		Weighted Average Interest Rate (1)		Amount Outstanding		Weighted Average Interest Rate (1)		(Dollars in millions)	Amount Outstanding			Weighted Average Interest Rate (1)				Amount Outstanding				Weighted Average Interest Rate (1)
Par value	Par value	$	14,406	5.18	%	$	36,159	4.13	%	Par value	$	14,468	5.20		5.20	%			$	19,321	5.23		5.23	%
Unamortized discounts	Unamortized discounts	(113)				(230)
Total	Total	$	14,293			$	35,929
Total
Total

(1)Represents yield to maturity excluding concession fees.

Interest Rate Payment Terms. Interest rate payment terms for consolidated obligation bonds at ~~September 30, 2023,~~March 31, 2024, and December 31, ~~2022,~~2023, are detailed in the following table. For information on the general terms and types of consolidated obligation bonds outstanding, see “Item 8. Financial Statements and Supplementary Data – Note 8 – Consolidated Obligations” in the Bank’s ~~2022~~2023 Form 10-K.

(In millions)

September 30, 2023

December 31, 2022

(In millions)

March 31, 2024

December 31, 2023

Par value of consolidated obligation bonds:

Fixed rate

37,598

25,632

Adjustable rate

33,675

48,997

Step-up

648

2,278

Total consolidated obligation bonds, par value

71,921

76,907

Total consolidated obligation bonds, par value

2120

Table of Contents

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

Note 8 — Accumulated Other Comprehensive Income/(Loss)

The following table summarizes the changes in Accumulated Other Comprehensive ~~Income~~Income/(Loss) (AOCI) for the three months ended ~~September 30, 2023~~March 31, 2024 and ~~2022:~~2023:

(In millions) Net Unrealized Gain/(Loss) on AFS Securities Pension and Postretirement Benefits Total
AOCI
Balance, June 30, 2022 $ 111 $ (11) $ 100
Other comprehensive income/(loss):
Net change in fair value (88) (88)
Net current period other comprehensive income/(loss) (88) — (88)
Balance, September 30, 2022 $ 23 $ (11) $ 12
Balance, June 30, 2023 $ (4) $ (15) $ (19)
Other comprehensive income/(loss):
Net change in pension and postretirement benefits (1) (1)
Net change in fair value (35) (35)
Net current period other comprehensive income/(loss) (35) (1) (36)
Balance, September 30, 2023 $ (39) $ (16) $ (55)

~~The following table summarizes the changes in AOCI for the nine months ended September 30, 2023 and 2022:~~

(In millions) Net Unrealized Gain/(Loss) on AFS Securities Pension and Postretirement Benefits Total
AOCI
Balance, December 31, 2021 $ 340 $ (9) $ 331
Other comprehensive income/(loss):
Net change in pension and postretirement benefits (2) (2)
Net change in fair value (317) (317)
Net current period other comprehensive income/(loss) (317) (2) (319)
Balance, September 30, 2022 $ 23 $ (11) $ 12
Balance, December 31, 2022 $ (14) $ (15) $ (29)
Other comprehensive income/(loss):
Net change in pension and postretirement benefits (1) (1)
Net change in fair value (25) (25)
Net current period other comprehensive income/(loss) (25) (1) (26)
Balance, September 30, 2023 $ (39) $ (16) $ (55)


(In millions)	Net Unrealized Gain/(Loss) on AFS Securities		Pension and Postretirement Benefits		Total AOCI
Balance, December 31, 2022	$	(14)	$	(15)	$	(29)
Other comprehensive income/(loss):


Net change in fair value	(32)				(32)




Net current period other comprehensive income/(loss)	(32)		—		(32)
Balance, March 31, 2023	$	(46)	$	(15)	$	(61)

Balance, December 31, 2023	$	(61)	$	(11)	$	(72)
Other comprehensive income/(loss):


Net change in fair value	99				99




Net current period other comprehensive income/(loss)	99		—		99
Balance, March 31, 2024	$	38	$	(11)	$	27

Note 9 — Capital

Capital Requirements. The FHLBank Act and regulations governing the operations of the FHLBanks require that the Bank’s minimum capital stock requirement for shareholders must be sufficient to enable the Bank to meet its regulatory requirements for total regulatory capital, leverage capital, and risk-based capital. ~~For further information related to the Bank’s capital requirements, see “Item 8. Financial Statements and Supplementary Data – Note 11 – Capital” in the Bank’s 2022 Form 10-K.~~

As of ~~September 30, 2023,~~March 31, 2024, and December 31, ~~2022,~~2023, the Bank complied with these capital rules and requirements as shown in the following table.

~~Table of Contents~~

~~Federal Home Loan Bank of San Francisco~~

~~Notes to Financial Statements (continued)~~


		September 30, 2023						December 31, 2022
	March 31, 2024																	March 31, 2024			December 31, 2023
(Dollars in millions)	(Dollars in millions)	Required			Actual			Required			Actual			(Dollars in millions)	Required		Actual		Required			Actual
Risk-based capital	Risk-based capital	$	1,255		$	7,483		$	898		$	7,757
Total regulatory capital	Total regulatory capital	$	3,801		$	7,483		$	4,842		$	7,757
Total regulatory capital ratio	Total regulatory capital ratio	4.00		%	7.87		%	4.00		%	6.41		%	Total regulatory capital ratio	4.00	%	8.43	%	4.00	%		8.02	%
Leverage capital	Leverage capital	$	4,751		$	11,224		$	6,053		$	11,636
Leverage ratio	Leverage ratio	5.00		%	11.81		%	5.00		%	9.61		%	Leverage ratio	5.00	%	12.64	%	5.00	%		12.03	%

The Bank’s capital plan requires each ~~member~~shareholder to own capital stock in an amount equal to the greater of its membership capital stock requirement or its activity-based capital stock requirement. The Bank may adjust these requirements from time to time within ranges established in the capital plan. Any changes to the capital plan must be approved by the Bank’s board of directors (Board) and the Finance Agency.

~~For information on the Bank’s membership capital stock requirement and activity-based capital stock requirement, see “Item 8.~~

Table of Contents

Federal Home Loan Bank of San Francisco

Notes to Financial Statements ~~and Supplementary Data – Note 11 – Capital – Capital Requirements” in the Bank’s 2022 Form 10-K.~~(continued)

Mandatorily Redeemable Capital Stock. The Bank had mandatorily redeemable capital stock totaling ~~$776~~$666 million outstanding to seven institutions at March 31, 2024, and $706 million outstanding to six institutions at ~~September 30, 2023, and $5 million outstanding to three institutions at~~ December 31, ~~2022.~~2023. These amounts have been classified as a liability on the Bank’s Statements of Condition. The changes in mandatorily redeemable capital stock for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2024 and 2023 ~~and 2022~~ were as follows:


		Three Months Ended				Nine Months Ended
				Three Months Ended
				Three Months Ended
				Three Months Ended
(In millions)	(In millions)	September 30, 2023		September 30, 2022		September 30, 2023		September 30, 2022
Balance at the beginning of the period	Balance at the beginning of the period	$	843	$	5	$	5	$	3
Balance at the beginning of the period
Balance at the beginning of the period
Reclassified from/(to) capital during the period
Reclassified from/(to) capital during the period
Reclassified from/(to) capital during the period	Reclassified from/(to) capital during the period	1		4		1,252		36
Repurchase/redemption of mandatorily redeemable capital stock	Repurchase/redemption of mandatorily redeemable capital stock	(68)		(5)		(481)		(35)
Repurchase/redemption of mandatorily redeemable capital stock
Repurchase/redemption of mandatorily redeemable capital stock
Balance at the end of the period	Balance at the end of the period	$	776	$	4	$	776	$	4
Balance at the end of the period
Balance at the end of the period

Cash dividends on mandatorily redeemable capital stock were recorded as interest expense of ~~$13~~$16 million and ~~$15 million~~a de minimis amount for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2024 and 2023, respectively. ~~Cash dividends on mandatorily redeemable capital stock were recorded as interest expense of de minimis amounts for the three and nine months ended September 30, 2022.~~

The following table presents mandatorily redeemable capital stock amounts by contractual year of redemption at ~~September 30, 2023,~~March 31, 2024, and December 31, ~~2022.~~2023.

(In millions)

Contractual Year of Redemption

September 30, 2023

December 31, 2022

Contractual Year of Redemption

March 31, 2024

December 31, 2023

Year 3

—

Year 4

Year 5

772

Past contractual redemption date because of remaining activity(1)

Total

776

(1) Represents mandatorily redeemable capital stock that is past the end of the contractual redemption period because there is activity outstanding to which the mandatorily redeemable capital stock relates.

~~Table of Contents~~

~~Federal Home Loan Bank of San Francisco~~

~~Notes to Financial Statements (continued)~~

If activity-based stock becomes excess stock as a result of an activity no longer remaining outstanding, the Bank may repurchase those shares, at its sole discretion, subject to the statutory and regulatory restrictions on excess stock redemption. ~~The Bank’s mandatorily redeemable capital stock is discussed more fully in “Item 8. Financial Statements and Supplementary Data – Note 11 – Capital” in the Bank’s 2022 Form 10-K.~~

Excess Stock Repurchase, Retained Earnings, and Dividend Framework. The Bank’s Excess Stock Repurchase, Retained Earnings, and Dividend Framework (Framework) assesses the level and adequacy of retained earnings and establishes amounts to be retained in restricted retained earnings, which are not made available in the current dividend period, and maintains an amount of total retained earnings at least equal to its required retained earnings as described in the Framework. The methodology may be revised from time to time, and the required level of ~~required~~ retained earnings under the methodology may change due to updating data and assumptions used in the methodology. In ~~July 2023,~~January 2024, the required level of retained earnings was decreased from ~~$2.7~~$2.6 billion to ~~$2.6 billion.~~$1.6 billion attributable to lower non-MBS investments and projected advance balances. The Bank’s retained earnings requirement may be changed at any time. The Board periodically reviews the retained earnings methodology and analysis to determine whether any adjustments are appropriate.

In September 2023, the Board approved an updated Framework and dividend philosophy to reflect changes in the current interest rate environment and business conditions. The Framework includes a dividend philosophy to endeavor to pay a quarterly dividend rate that is equal to or greater than the current market rate for a highly rated investment (e.g., SOFR) and that is sustainable under current and projected earnings while maintaining appropriate levels of capital. The decision to declare any dividend and the dividend rate is at the discretion of the Bank’s Board, which may choose to follow or not follow the dividend philosophy as guidance in the dividend declaration. The Board may also revise or eliminate the dividend philosophy in the future. The Bank’s historical dividend rates and the dividend philosophy are not indicative of future dividend declarations.

The Bank satisfies its retained earnings requirement with both restricted retained earnings (i.e., amounts related to the Joint Capital Enhancement (JCE) Agreement) and unrestricted retained earnings. In accordance with the JCE Agreement, each FHLBank is required to reclassify an amount equal to 20% of its net income each quarter to a separate restricted retained earnings account until the balance of the account, calculated as of the last day of each calendar quarter, equals at least 1% of that FHLBank's average balance of outstanding consolidated obligations for the calendar quarter. Under the JCE Agreement, these restricted retained earnings will not be available to pay

Table of Contents

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

dividends. The JCE Agreement also provides that amounts in restricted retained earnings in excess of 150% of the Bank’s restricted retained earnings minimum may be released from restricted retained earnings.

~~For information on restricted retained earnings and the Bank’s Framework, see “Item 8. Financial Statements and Supplementary Data – Note 11 – Capital” in the Bank’s 2022 Form 10-K.~~

Dividend Payments – Finance Agency rules state that FHLBanks may declare and pay dividends only from previously retained earnings or current net earnings and may not declare or pay dividends based on projected or anticipated earnings. ~~For information on~~

The Framework includes a dividend ~~payments, see “Item 8. Financial Statements~~philosophy to endeavor to pay a quarterly dividend rate that is equal to or greater than the current market rate for highly rated investments and ~~Supplementary Data – Note 11 – Capital”~~that is sustainable under current and projected earnings while maintaining appropriate levels of capital. The decision to declare any dividend and the dividend rate is at the discretion of the Bank’s Board, which may choose to follow or not follow the dividend philosophy as guidance in the dividend declaration. The Board may also revise or eliminate the dividend philosophy in the future. The Bank’s ~~2022 Form 10-K.~~historical dividend rates and the dividend philosophy are not indicative of future dividend declarations.

In addition, Finance Agency rules do not permit the Bank to pay dividends in the form of capital stock if its excess stock exceeds 1% of its total assets. Excess stock is defined as the aggregate of the capital stock held by each shareholder in excess of its minimum capital stock requirement, as established by the Bank’s capital plan. Excess stock totaled ~~$118~~$88 million, or ~~0.12%~~0.10% of total assets as of ~~September 30, 2023.~~March 31, 2024. Excess stock totaled ~~$157~~$118 million, or 0.13% of total assets as of December 31, ~~2022.~~2023.

In the ~~third~~first quarter of 2024, the Bank paid dividends at an annualized rate of 8.75%, totaling $69 million, including $53 million in dividends on capital stock and $16 million in dividends on mandatorily redeemable capital stock. In the first quarter of 2023, the Bank paid dividends at an annualized rate of ~~7.75%~~7.00%, totaling ~~$76~~$63 million, including $63 million in dividends on capital stock and $13 million in dividends on mandatorily redeemable capital stock. In the third quarter of 2022, the Bank paid dividends at an annualized rate of 6.00%, totaling $40 million, including $40 million in dividends on capital stock and a de minimis amount in dividends on mandatorily redeemable capital stock.

~~Table of Contents~~

~~Federal Home Loan Bank of San Francisco~~

~~Notes to Financial Statements (continued)~~

In the first nine months of 2023, the Bank paid dividends at an annualized rate of 7.26%, totaling $206 million, including $191 million in dividends on capital stock and $15 million in dividends on mandatorily redeemable capital stock. In the first nine months of 2022, the Bank paid dividends at an annualized rate of 6.00%, totaling $108 million, including $108 million in dividends on capital stock and a de minimis amount in dividends on mandatorily redeemable capital stock.

For the periods referenced above, the Bank paid dividends in cash. Dividends on capital stock are recognized as dividends on the Statements of Capital Accounts, and dividends on mandatorily redeemable capital stock are recognized as interest expense on the Statements of Income.

On ~~October 26, 2023,~~April 25, 2024, the Bank’s board of directors declared a quarterly cash dividend on the capital stock outstanding during the ~~third~~first quarter of ~~2023~~2024 at an annualized rate of ~~8.25%~~8.75%, totaling ~~$68~~$66 million. The Bank recorded the dividend on ~~October 26, 2023,~~April 25, 2024, and expects to pay the dividend on ~~November~~May 9, ~~2023.~~2024.

Excess Stock – The Bank’s capital plan provides that the Bank may repurchase some or all of a shareholder’s excess stock at the Bank’s discretion, subject to certain statutory and regulatory requirements. The Bank may also repurchase all of a member’s excess stock at a member’s request, at the Bank’s discretion, subject to certain statutory and regulatory requirements. ~~For information on excess stock, see “Item 8. Financial Statements and Supplementary Data – Note 11 – Capital” in the Bank’s 2022 Form 10-K.~~

The Bank is required to redeem any mandatorily redeemable capital stock that is in excess of a former member’s minimum stock requirement on or after the expiration of the five-year redemption date. During the ~~third~~first quarter of ~~2023~~2024 and ~~2022,~~2023, the Bank redeemed a de minimis amount in mandatorily redeemable capital stock, for which the five-year redemption period had expired, at its $100 par value per share. The stock was redeemed on the scheduled redemption dates or, for stock that was not excess stock on its scheduled redemption date because of outstanding activity with the Bank, on the first available repurchase date after the stock was no longer required to support outstanding activity with the Bank.

For more information on the Bank’s membership capital stock requirement and activity-based capital stock requirement, mandatorily redeemable capital stock, excess stock repurchase, retained earnings, and dividend framework, see “Item 8. Financial Statements and Supplementary Data – Note 11 – Capital” in the Bank’s 2023 Form 10-K.

Table of Contents

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

Concentration. The following table presents the concentration in capital stock held by institutions whose capital stock ownership represented 10% or more of the Bank’s outstanding capital stock, including mandatorily redeemable capital stock, as of ~~September 30, 2023,~~March 31, 2024, or December 31, ~~2022:~~2023:

September 30, 2023 December 31, 2022
(Dollars in millions) Capital Stock Outstanding Percentage of Total Capital Stock Outstanding Capital Stock Outstanding Percentage of Total Capital Stock Outstanding
JPMorgan Chase, National Association(1)
$ 713 22 % $ — — %
First Republic Bank(1)
— — 379 10
Silicon Valley Bank(2)
— — 418 11
Subtotal 713 22 797 21
Others 2,548 78 2,966 79
Total $ 3,261 100 % $ 3,763 100 %


	March 31, 2024				December 31, 2023
(Dollars in millions)	Capital Stock Outstanding		Percentage of Total Capital Stock Outstanding		Capital Stock Outstanding		Percentage of Total Capital Stock Outstanding
JPMorgan Chase, National Association/First Republic Bank(1)	$	575	19	%	$	643	20	%

(1) On May 1, 2023, the California DFPI closed First Republic Bank and appointed the FDIC as receiver. On the same date, the FDIC transferred all of the deposits and substantially all of the assets of First Republic Bank, including the advances outstanding from the Bank, to JPMorgan Chase, National Association, a nonmember. Upon assumption of the advances outstanding by JPMorgan Chase, National Association, the Bank transferred $759 million of capital stock of the Bank, held by First Republic Bank, to JPMorgan Chase, National Association, and reclassified that capital stock to mandatorily redeemable as a liability in the Bank’s Statements of Condition.

(2) On March 10, 2023, the FDIC was appointed as receiver for Silicon Valley Bank. On March 14, 2023, the FDIC transferred all of the deposits and substantially all of the assets of Silicon Valley Bank to Silicon Valley Bridge Bank, National Association. The FDIC created Silicon Valley Bridge Bank, N.A., whereby all of the deposits and substantially all assets of Silicon Valley Bank were transferred to the bridge bank. As of March 31, 2023, Silicon Valley Bridge Bank, N.A., had prepaid all outstanding advances to the Bank. On March 26, 2023, the FDIC entered into a purchase and assumption agreement for all the deposits and loans of Silicon Valley Bridge Bank, N.A., with First Citizens Bank and Trust Company. Silicon Valley Bank is no longer a member of the Bank.

~~Table of Contents~~

~~Federal Home Loan Bank of San Francisco~~

~~Notes to Financial Statements (continued)~~

Note 10 ~~— Segment Information~~

~~For more information on these operating segments, see “Item 8. Financial Statements and Supplementary Data – Note 10 – Segment Information” in the Bank’s 2022 Form 10-K.~~

The following table presents the Bank’s adjusted net interest income by operating segment and reconciles total adjusted net interest income to income/(loss) before the AHP assessment for the three and nine months ended September 30, 2023 and 2022.

(In millions) Advances-
Related
Business
Mortgage-
Related
Business(1)
Adjusted
Net
Interest
Income
Amortization of Basis
Adjustments and (Gain)/Loss on Fair Value Hedges(2)

Income/(Expense)
on Economic
Hedges(3)
Interest
Expense on
Mandatorily
Redeemable
Capital
Stock(4)
Net
Interest
Income After Provision for/(Reversal of) Credit Losses Other
Income/
(Loss) Other
Expense Income/(Loss)
Before AHP
Assessment
Three Months Ended:
September 30, 2023 $ 128 $ 44 $ 172 $ (8) $ 3 $ 13 $ 164 $ 7 $ 55 $ 116
September 30, 2022 86 48 134 10 (24) — 148 (18) 41 89
Nine Months Ended:
September 30, 2023 $ 495 $ 143 $ 638 $ (9) $ 2 $ 15 $ 630 $ (15) $ 148 $ 467
September 30, 2022 172 184 356 (4) (17) — 377 (31) 117 229

(1) The mortgage-related business includes total accretion or amortization associated with other-than-temporarily impaired PLRMBS, which are recognized in interest income, totaling $8 million and $14 million for the three months ended September 30, 2023 and 2022, respectively, and $27 million and $43 million for the nine months ended September 30, 2023 and 2022, respectively. The mortgage-related business includes a provision for/(reversal of) credit losses that totaled $7 million and $9 million for the three months ended September 30, 2023 and 2022, respectively, and $7 million and $9 million for the nine months ended September 30, 2023 and 2022.

(2) Represents amortization of amounts deferred for adjusted net interest income purposes only and changes in fair value of the derivative hedging instrument and the hedged item attributable to the hedged risk for designated fair value hedges recorded in net interest income.

(3) The Bank includes income and expense associated with net settlements from economic hedges in adjusted net interest income in its analysis of financial performance for its two operating segments. For financial reporting purposes, the Bank does not include these amounts in net interest income in the Statements of Income, but instead records them in other income/(loss) in “Net gain/(loss) on derivatives.”

~~(4) The Bank excludes interest expense on mandatorily redeemable capital stock from adjusted net interest income in its analysis of financial performance for its two operating segments.~~

~~The following table presents total assets by operating segment at September 30, 2023, and December 31, 2022.~~

(In millions) Advances-
Related Business Mortgage-
Related Business Total
Assets
September 30, 2023 $ 80,065 $ 14,956 $ 95,021
December 31, 2022 109,330 11,726 121,056

~~Table of Contents~~

~~Federal Home Loan Bank of San Francisco~~

~~Notes to Financial Statements (continued)~~

~~Note 11~~ — Derivatives and Hedging Activities

General. The Bank may enter into interest rate swaps (including callable, putable, and basis swaps) and cap and floor agreements (collectively, interest rate exchange agreements or derivatives). The Bank transacts most of its derivatives with large banks and major broker-dealers.

When the Bank issues consolidated obligation discount notes, it may also simultaneously enter into an interest rate exchange agreement to convert the fixed rate discount note to an adjustable rate discount note. The Bank began treating certain of these hedges as fair value hedges in the first quarter of 2024.

For more information related to the Bank’s accounting policies for derivatives, see “Item 8. Financial Statements and Supplementary Data – Note 1413 – Derivatives and Hedging Activities” and “Item 8. Financial Statements and Supplementary Data – Note 1 – Summary of Significant Accounting Policies” in the Bank’s ~~2022~~2023 Form 10-K.

The following table summarizes the notional amount and fair value of derivative instruments, including the effect of netting adjustments and cash collateral as of ~~September 30, 2023,~~March 31, 2024, and December 31, ~~2022.~~2023. For purposes of this disclosure, the derivative values include the fair value of derivatives and related accrued interest.


		September 30, 2023						December 31, 2022							March 31, 2024			December 31, 2023
(In millions)	(In millions)	Notional Amount of Derivatives		Derivative Assets		Derivative Liabilities		Notional Amount of Derivatives		Derivative Assets		Derivative Liabilities		(In millions)	Notional Amount of Derivatives	Derivative Assets	Derivative Liabilities		Notional Amount of Derivatives	Derivative Assets	Derivative Liabilities
Derivatives designated as hedging instruments:	Derivatives designated as hedging instruments:
Interest rate swaps	Interest rate swaps	$	91,782	$	981	$	995	$	69,204	$	799	$	1,062
Interest rate swaps
Interest rate swaps
Derivatives not designated as hedging instruments:	Derivatives not designated as hedging instruments:
Interest rate swaps
Interest rate swaps
Interest rate swaps	Interest rate swaps	25,229		63		109		47,589		50		133

Total derivatives before netting and collateral adjustments	Total derivatives before netting and collateral adjustments	$	117,011	1,044		1,104		$	116,793	849		1,195

Total derivatives before netting and collateral adjustments

Total derivatives before netting and collateral adjustments
Netting adjustments and cash collateral(1)	Netting adjustments and cash collateral(1)			(1,038)		(1,090)				(823)		(1,193)
Total derivative assets and total derivative liabilities	Total derivative assets and total derivative liabilities			$	6	$	14			$	26	$	2

(1) Amounts represent the application of the netting requirements that allow the Bank to settle positive and negative positions, and also cash collateral, including accrued interest, held or placed with the same clearing agents or counterparty. Cash collateral posted, including accrued interest, was ~~$472~~$337 million and ~~$694~~$353 million at ~~September 30, 2023,~~March 31, 2024, and December 31, ~~2022,~~2023, respectively. Cash collateral received, including accrued interest, was ~~$420~~$438 million and ~~$324~~$378 million at ~~September 30, 2023,~~March 31, 2024, and December 31, ~~2022,~~2023, respectively.

Table of Contents

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

The following tables present, by type of hedged item, the gains and losses on fair value hedging relationships and the impact of those derivatives on the Bank’s Statements of Income for the three ~~and nine~~ months ended ~~September 30, 2023~~March 31, 2024 and ~~2022.~~2023.


		Three Months Ended September 30, 2023
		Interest Income/(Expense)
	Three Months Ended March 31, 2024										Three Months Ended March 31, 2024
	Interest Income/(Expense)										Interest Income/(Expense)
(In millions)	(In millions)	Advances		AFS Securities		Consolidated Obligation Bonds		(In millions)	Advances	AFS Securities		Consolidated Obligation Bonds
Total interest income/(expense) presented in the Statements of Income	Total interest income/(expense) presented in the Statements of Income	$	867	$	246	$	(963)
Gain/(loss) on fair value hedging relationships	Gain/(loss) on fair value hedging relationships
Derivatives(1)
Derivatives(1)
Derivatives(1)	Derivatives(1)	$	237	$	450	$	(106)
Hedged items	Hedged items	(74)		(357)		(46)
Net gain/(loss) on derivatives and hedging activities recorded in net interest income	Net gain/(loss) on derivatives and hedging activities recorded in net interest income	163		93		(152)

~~Table of Contents~~

~~Federal Home Loan Bank of San Francisco~~

~~Notes to Financial Statements (continued)~~

Three Months Ended September 30, 2022
Interest Income/(Expense)
(In millions) Advances AFS Securities Consolidated Obligation Bonds
Total interest income/(expense) presented in the Statements of Income $ 345 $ 109 $ (143)
Gain/(loss) on fair value hedging relationships
Derivatives(1)
$ 314 $ 507 $ (391)
Hedged items (301) (515) 354
Net gain/(loss) on derivatives and hedging activities recorded in net interest income 13 (8) (37)

Nine Months Ended September 30, 2023
Interest Income/(Expense)
(In millions) Advances AFS Securities Consolidated Obligation Bonds
Total interest income/(expense) presented in the Statements of Income $ 3,184 $ 645 $ (3,008)
Gain/(loss) on fair value hedging relationships
Derivatives(1)
$ 484 $ 657 $ (310)
Hedged items (297) (434) (119)
Net gain/(loss) on derivatives and hedging activities recorded in net interest income 187 223 (429)


		Nine Months Ended September 30, 2022
		Interest Income/(Expense)
	Three Months Ended March 31, 2023										Three Months Ended March 31, 2023
	Interest Income/(Expense)										Interest Income/(Expense)
(In millions)	(In millions)	Advances		AFS Securities		Consolidated Obligation Bonds		(In millions)	Advances	AFS Securities		Consolidated Obligation Bonds
Total interest income/(expense) presented in the Statements of Income	Total interest income/(expense) presented in the Statements of Income	$	501	$	247	$	(205)
Gain/(loss) on fair value hedging relationships	Gain/(loss) on fair value hedging relationships
Derivatives(1)
Derivatives(1)
Derivatives(1)	Derivatives(1)	$	771	$	1,216	$	(989)
Hedged items	Hedged items	(802)		(1,290)		987
Net gain/(loss) on derivatives and hedging activities recorded in net interest income	Net gain/(loss) on derivatives and hedging activities recorded in net interest income	(31)		(74)		(2)

(1)Includes net interest settlements.

The net gain/(loss) of consolidated obligation discount notes in fair value hedging relationships and the impact of those derivatives on the Bank’s Statements of Income was de minimis for the three months ended March 31, 2024. There were no fair value hedging relationships on consolidated obligation discount notes during three months ended March 31, 2023.

The following table presents the cumulative basis adjustments on hedged items designated as fair value hedges and the related amortized cost of the hedged items as of ~~September 30, 2023,~~March 31, 2024, and December 31, ~~2022.~~2023.

September 30, 2023 December 31, 2022
(In millions) Advances AFS Securities Consolidated Obligation Bonds Advances AFS Securities Consolidated Obligation Bonds
Amortized cost of hedged asset/(liability)(1)
$ 40,460 $ 15,252 $ (34,134) $ 34,535 $ 11,574 $ (21,976)
Fair value hedging basis adjustments:
Active hedging relationships included in amortized cost $ (982) $ (1,747) $ 964 $ (740) $ (1,410) $ 1,083
Discontinued hedging relationships included in amortized cost 61 649 — 70 740 —
Total amount of fair value hedging basis adjustments $ (921) $ (1,098) $ 964 $ (670) $ (670) $ 1,083

~~(1)Includes only the portion of amortized cost representing the hedged items in fair value hedging relationships.~~


	March 31, 2024
(In millions)	Advances		AFS Securities		Consolidated Obligation Bonds		Consolidated Obligation Discount Notes
Amortized cost of hedged asset/(liability)(1)	$	35,318	$	16,944	$	(27,669)	$	(5,071)
Fair value hedging basis adjustments:
Active hedging relationships included in amortized cost	$	(565)	$	(1,317)	$	667	$	—
Discontinued hedging relationships included in amortized cost	50		593		—		—
Total amount of fair value hedging basis adjustments	$	(515)	$	(724)	$	667	$	—

2825

Table of Contents

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)


	December 31, 2023
(In millions)	Advances		AFS Securities		Consolidated Obligation Bonds
Amortized cost of hedged asset/(liability)(1)	$	38,338	$	17,029	$	(34,121)
Fair value hedging basis adjustments:
Active hedging relationships included in amortized cost	$	(427)	$	(1,053)	$	645
Discontinued hedging relationships included in amortized cost	56		621		—
Total amount of fair value hedging basis adjustments	$	(371)	$	(432)	$	645

(1)Includes only the portion of amortized cost representing the hedged items in fair value hedging relationships.

The following table presents the components of net gain/(loss) on derivatives as presented in the Statements of Income for the three ~~and nine~~ months ended ~~September 30, 2023~~March 31, 2024 and ~~2022.~~2023.

Three Months Ended

Nine Months Ended

Three Months Ended

(In millions)

September 30, 2023

September 30, 2022

September 30, 2023

September 30, 2022

Derivatives not designated as hedging instruments

Gain/(Loss)

Economic hedges:

Interest rate swaps

(5)

Net interest settlements

(24)

(17)

Net interest settlements

Total net gain/(loss) related to derivatives not designated as hedging instruments

(1)

(3)

(13)

Price alignment amount(1)

(1)

—

(3)

—

Price alignment amount(1)

Net gain/(loss) on derivatives

(1)

(6)

(13)

Net gain/(loss) on derivatives

(1) This amount relates to derivatives for which variation margin on cleared derivatives is characterized as a daily settled contract.

Credit Risk. The Bank is subject to credit risk from potential nonperformance by counterparties to the interest rate exchange agreements. All of the Bank’s agreements governing uncleared derivative transactions contain master netting provisions to help mitigate the credit risk exposure to each counterparty. The Bank manages counterparty credit risk through credit analyses and collateral requirements and by following the requirements of the Bank’s risk management policies, credit guidelines, and the Finance Agency and other regulations. The Bank also requires credit support agreements on all uncleared derivatives.

For cleared derivatives, the clearing house is the Bank’s counterparty. The requirement that the Bank post initial margin and settle variation margin through a clearing agent to the clearing house exposes the Bank to institutional credit risk if its futures commission merchant, or clearing agent, fails to meet its obligations. The use of a clearing house, or central counterparty, lowers overall credit risk exposure because it employs standard valuation and initial and variation margin processes and is specifically designed to withstand remote but plausible futures commission merchant default credit events. Variation margin is settled for changes in the value of the portfolio, and initial margin is posted for changes in risk profile of the portfolio. ~~The Bank analyzed~~Additional information related to the enforceability of offsetting rights applicable to ~~its~~the Bank’s cleared derivative transactions is included in “Item 8. Financial Statements and ~~determined that the exercise of those offsetting rights by a non-defaulting party under these transactions should be upheld under applicable bankruptcy law~~Supplementary Data – Note 13 – Derivatives and ~~Commodity Futures Trading Commission rules~~Hedging Activities” in the event of a clearing house or clearing agent insolvency and under applicable clearing house rules upon a non-insolvency-based event of default of the clearing house or clearing agent. Based on this analysis, the Bank presents a net derivative receivable or payable for all of its transactions through a particular clearing agent with a particular clearing house.Bank’s 2023 Form 10-K.

Based on the Bank’s credit analyses and the collateral requirements, the Bank does not expect to incur any credit losses on its derivative transactions.

The Bank’s agreements for uncleared derivative transactions contain provisions that link the Bank’s credit rating from Moody’s Investors Service and S&P Global Ratings to various rights and obligations. Certain of these derivative agreements provide that, if the Bank’s long-term debt rating falls below a specified rating (ranging from A3/A- to Baa3/BBB-), the Bank’s counterparty would have the right, but not the obligation, to terminate all of its outstanding derivative transactions with the Bank; the Bank’s agreements with its clearing agents for cleared

Table of Contents

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

derivative transactions have similar provisions with respect to the debt rating of FHLBank System consolidated bonds. If this occurs, the Bank may choose to enter into replacement hedges, either by transferring the existing transactions to another counterparty or entering into new replacement transactions, based on prevailing market rates. The aggregate fair value of all uncleared derivative instruments with credit risk-related contingent features that were in a net derivative liability position (before cash collateral and related accrued interest) at ~~September 30, 2023,~~March 31, 2024, was ~~$454~~$348 million, for which the Bank posted cash collateral of ~~$454~~$323 million in the ordinary course of business.

~~Table of Contents~~

~~Federal Home Loan Bank of San Francisco~~

~~Notes to Financial Statements (continued)~~

Additional information related to uncleared margin rules for uncleared derivative transactions ~~are~~is included in “Item 8. Financial Statements and Supplementary Data -– Note ~~14 -~~13 – Derivatives and Hedging Activities” in the Bank’s ~~2022~~2023 Form 10-K.

The Bank may present derivative instruments, related cash collateral received or pledged, and associated accrued interest by clearing agent or by counterparty on a net basis when the netting requirements have been met.

The following table presents separately the fair value of derivative assets and derivative liabilities that have met the netting requirements, including the related collateral received from or pledged to counterparties as of ~~September 30, 2023,~~March 31, 2024, and December 31, ~~2022.~~2023.


		March 31, 2024
		March 31, 2024
		March 31, 2024
(In millions)
(In millions)
(In millions)
Derivative instruments meeting netting requirements
Derivative instruments meeting netting requirements
Derivative instruments meeting netting requirements
Gross recognized amount
Gross recognized amount
Gross recognized amount
Uncleared
Uncleared
Uncleared
Cleared
Cleared
Cleared
Total gross recognized amount
Total gross recognized amount
Total gross recognized amount
Gross amount of netting adjustments and cash collateral
Gross amount of netting adjustments and cash collateral
Gross amount of netting adjustments and cash collateral
Uncleared
Uncleared
Uncleared
Cleared
Cleared
Cleared
Total gross amounts of netting adjustments and cash collateral
Total gross amounts of netting adjustments and cash collateral
Total gross amounts of netting adjustments and cash collateral
Total derivative assets and total derivative liabilities
Total derivative assets and total derivative liabilities
Total derivative assets and total derivative liabilities

		September 30, 2023				December 31, 2022
(In millions)		Derivative Assets		Derivative Liabilities		Derivative Assets		Derivative Liabilities
Derivative instruments meeting netting requirements
Gross recognized amount
Uncleared		$	1,035	$	1,073	$	834	$	1,188
Cleared		9		31		15		7
Total gross recognized amount		1,044		1,104		849		1,195
Gross amount of netting adjustments and cash collateral
Uncleared		(1,029)		(1,065)		(829)		(1,186)
Cleared		(9)		(25)		6		(7)
Total gross amounts of netting adjustments and cash collateral		(1,038)		(1,090)		(823)		(1,193)
Total derivative assets and total derivative liabilities		$	6	$	14	$	26	$	2

Non-cash collateral received or pledged that can be sold or repledged

Cleared		—		6		(435)		—
Total net amount of non-cash collateral received or pledged		$	—	$	6	$	(435)	$	—

Net amount(1)

Net amount(1)

Net amount(1)	Net amount(1)
Uncleared	Uncleared	$	6	$	8	$	5	$	2
Uncleared
Uncleared
Cleared
Cleared
Cleared	Cleared	—		—		456		—
Total net amount	Total net amount	$	6	$	8	$	461	$	2
Total net amount
Total net amount

(1) Any over-collateralization at the Bank’s individual clearing agent and/or counterparty level is not included in the determination of the net amount. At ~~September 30,~~March 31, 2024, and December 31, 2023, the Bank had additional net credit exposure of ~~$793~~$638 million and $771 million, respectively, due to instances where non-cash collateral to a counterparty exceeded the Bank’s net derivative position. ~~There was no such additional net credit exposure at December 31, 2022.~~

Note 1211 — Fair Value

The following fair value amounts have been determined by the Bank using available market information and the Bank’s best judgment of appropriate valuation methods. These estimates are based on pertinent information available to the Bank at ~~September 30, 2023,~~March 31, 2024, and December 31, ~~2022.~~2023. Although the Bank uses its best judgment in estimating the fair value of these financial instruments, there are inherent limitations in any estimation technique or valuation methodology. For example, because an active secondary market does not exist for a portion of the Bank’s financial instruments, in certain cases fair values cannot be precisely quantified or verified and may change as economic and market factors and evaluation of those factors change. The Bank continues to refine its valuation methodologies as markets and products develop and the pricing for certain products becomes more or less ~~transparent. While the Bank believes that its valuation methodologies are appropriate and consistent with those of~~

3027

Table of Contents

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

transparent. While the Bank believes that its valuation methodologies are appropriate and consistent with those of other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a materially different estimate of fair value as of the reporting date. U.S. GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., an exit price). Therefore, the fair values are not necessarily indicative of the amounts that would be realized in current market transactions, although they do reflect the Bank’s judgment as to how a market participant would estimate the fair values. The fair value summary table does not represent an estimate of the overall market value of the Bank as a going concern, which would take into account future business opportunities and the net profitability of total assets and liabilities.

The following tables present the net carrying value or carrying value, as applicable, the estimated fair value, and the fair value hierarchy level of the Bank’s financial instruments at ~~September 30, 2023,~~March 31, 2024, and December 31, ~~2022.~~2023. The Bank records trading securities, AFS securities, derivative assets, derivative liabilities, certain advances, certain consolidated obligations, and certain other assets at fair value on a recurring basis, and on occasion certain mortgage loans held for portfolio and certain other assets at fair value on a nonrecurring basis. The Bank records all other financial assets and liabilities at amortized cost. Refer to the following tables for further details about the financial assets and liabilities held at fair value on either a recurring or non-recurring basis.


		September 30, 2023
	March 31, 2024																		March 31, 2024
(In millions)	(In millions)	Carrying Value(1)		Estimated Fair Value		Level 1		Level 2		Level 3		Netting Adjustments and Cash Collateral(2)		(In millions)	Carrying Value(1)	Estimated Fair Value	Level 1	Level 2		Level 3	Netting Adjustments and Cash Collateral(2)
Assets	Assets
Cash and due from banks
Cash and due from banks
Cash and due from banks	Cash and due from banks	$	10	$	10	$	10	$	—	$	—	$	—
Interest-bearing deposits	Interest-bearing deposits	3,777		3,777		3,777		—		—		—
Securities purchased under agreements to resell	Securities purchased under agreements to resell	2,750		2,750		—		2,750		—		—
Federal funds sold	Federal funds sold	5,533		5,533		—		5,533		—		—
Trading securities		1		1		—		1		—		—

AFS securities
AFS securities
AFS securities	AFS securities	16,279		16,279		—		15,204		1,075		—
HTM securities	HTM securities	1,895		1,852		—		1,731		121		—
Advances	Advances	63,584		63,407		—		63,407		—		—
Mortgage loans held for portfolio	Mortgage loans held for portfolio	770		633		—		633		—		—

Accrued interest receivable	Accrued interest receivable	192		192		—		192		—		—
Accrued interest receivable
Accrued interest receivable
Derivative assets, net(2)	Derivative assets, net(2)	6		6		—		1,044		—		(1,038)
Other assets(3)	Other assets(3)	16		16		16		—		—		—
Liabilities	Liabilities
Deposits	Deposits	768		768		—		768		—		—
Deposits
Deposits
Consolidated obligations:	Consolidated obligations:
Bonds
Bonds
Bonds	Bonds	70,907		70,584		—		70,584		—		—
Discount notes	Discount notes	14,293		14,286		—		14,286		—		—
Total consolidated obligations	Total consolidated obligations	85,200		84,870		—		84,870		—		—
Mandatorily redeemable capital stock	Mandatorily redeemable capital stock	776		776		776		—		—		—
Borrowings from other FHLBanks		300		300		—		300		—		—

Accrued interest payable
Accrued interest payable
Accrued interest payable	Accrued interest payable	510		510		—		510		—		—
Derivative liabilities, net(2)	Derivative liabilities, net(2)	14		14		—		1,104		—		(1,090)

3128

Table of Contents

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)


		December 31, 2022
		Carrying Value(1)		Estimated Fair Value		Level 1		Level 2		Level 3		Netting Adjustments and Cash Collateral(2)
	December 31, 2023																	December 31, 2023
	Carrying Value(1)													Carrying Value(1)	Estimated Fair Value	Level 1	Level 2		Level 3	Netting Adjustments and Cash Collateral(2)
Assets	Assets
Cash and due from banks
Cash and due from banks
Cash and due from banks	Cash and due from banks	$	9	$	9	$	9	$	—	$	—	$	—
Interest-bearing deposits	Interest-bearing deposits	3,677		3,677		3,677		—		—		—
Securities purchased under agreements to resell	Securities purchased under agreements to resell	7,000		7,000		—		7,000		—		—
Federal funds sold	Federal funds sold	4,719		4,719		—		4,719		—		—
Trading securities		1		1		—		1		—		—

AFS securities
AFS securities
AFS securities	AFS securities	12,713		12,713		—		11,531		1,182		—
HTM securities	HTM securities	2,181		2,136		—		1,993		143		—
Advances	Advances	89,400		89,183		—		89,183		—		—
Mortgage loans held for portfolio	Mortgage loans held for portfolio	815		695		—		695		—		—
Accrued interest receivable	Accrued interest receivable	313		313		—		313		—		—
Derivative assets, net(2)	Derivative assets, net(2)	26		26		—		849		—		(823)
Other assets(3)	Other assets(3)	15		15		15		—		—		—
Liabilities	Liabilities
Deposits	Deposits	989		989		—		989		—		—
Deposits
Deposits
Consolidated obligations:	Consolidated obligations:
Bonds
Bonds
Bonds	Bonds	75,768		75,396		—		75,396		—		—
Discount notes	Discount notes	35,929		35,916		—		35,916		—		—
Total consolidated obligations	Total consolidated obligations	111,697		111,312		—		111,312		—		—
Mandatorily redeemable capital stock	Mandatorily redeemable capital stock	5		5		5		—		—		—

Accrued interest payable	Accrued interest payable	326		326		—		326		—		—
Accrued interest payable
Accrued interest payable
Derivative liabilities, net(2)	Derivative liabilities, net(2)	2		2		—		1,195		—		(1,193)

(1) For certain financial instruments, the amounts represent net carrying value, which includes an allowance for credit losses.

(2) Amounts represent the application of the netting requirements that allow the Bank to settle positive and negative positions, and also cash collateral and related accrued interest held or placed with the same clearing agents or counterparty.

(3) Represents publicly traded mutual funds held in a grantor trust.

Fair Value Hierarchy. The fair value hierarchy is used to prioritize the fair value methodologies and valuation techniques as well as the inputs to the valuation techniques used to measure fair value for assets and liabilities carried at fair value on the Statements of Condition. The inputs are evaluated and an overall level for the fair value measurement is determined. This overall level is an indication of market observability of the fair value measurement for the asset or liability. The fair value hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). An entity must disclose the level within the fair value hierarchy in which the measurements are classified for all financial assets and liabilities measured on a recurring or non-recurring basis.

The application of the fair value hierarchy to the Bank’s financial assets and financial liabilities that are carried at fair value either on a recurring or non-recurring basis is as follows:

•Level 1 – Quoted prices (unadjusted) for identical assets or liabilities in an active market that the reporting entity can access on the measurement date. An active market for the asset or liability is a market in which the transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.

•Level 2 – Inputs other than quoted prices within Level 1 that are observable inputs for the asset or liability, either directly or indirectly. If the asset or liability has a specified (contractual) term, a Level 2 input must be observable for substantially the full term of the asset or liability. Level 2 inputs include the following: (1) quoted prices for similar assets or liabilities in active markets; (2) quoted prices for identical or similar

3229

Table of Contents

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

~~(1) quoted prices for similar assets or liabilities in active markets; (2) quoted prices for identical or similar~~ assets or liabilities in markets that are not active; (3) inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates and yield curves that are observable at commonly quoted intervals, and implied volatilities); and (4) inputs that are derived principally from or corroborated by observable market data by correlation or other means.

•Level 3 – Unobservable inputs for the asset or liability. Valuations are derived from techniques that use significant assumptions not observable in the market, which include pricing models, discounted cash flow models, or similar techniques.

A financial instrument’s categorization within the valuation hierarchy is based on the lowest level of input that is significant to the fair value measurement.

The following assets and liabilities, including those for which the Bank has elected the fair value option, are carried at fair value on the Statements of Condition as of ~~September 30, 2023:~~March 31, 2024:

•Trading securities

•AFS securities

•Certain advances

•Derivative assets and liabilities

•Certain consolidated obligation bonds

•Certain other assets

For instruments carried at fair value, the Bank reviews the fair value hierarchy classifications on a quarterly basis. Changes in the observability of the valuation inputs may result in a reclassification of certain assets or liabilities. For the periods presented, the Bank did not have any reclassifications for transfers in or out of level 3 of the fair value hierarchy.

Summary of Valuation Methodologies and Primary Inputs. For more information related to the valuation methodologies and primary inputs used to develop the measurement of fair value for assets and liabilities that are measured at fair value on a recurring or nonrecurring basis in the Statements of Condition, see “Item 8. Financial Statements and Supplementary Data – Note 1514 – Fair Value” in the Bank’s ~~2022~~2023 Form 10-K. There have been no significant changes in these valuation methodologies and primary inputs during the three ~~and nine~~ months ended ~~September 30, 2023.~~March 31, 2024.

Subjectivity of Estimates Related to Fair Values of Financial Instruments. Estimates of the fair value of financial assets and liabilities using the methodologies described above are subjective and require judgments regarding significant matters, such as the amount and timing of future cash flows, prepayment speed assumptions, expected interest rate volatility, methods to determine possible distributions of future interest rates used to value options, and the selection of discount rates that appropriately reflect market and credit risks. Changes in these judgments may have a material effect on the fair value estimates.

Fair Value Measurements. The following tables present the fair value of assets and liabilities, which are recorded on a recurring or nonrecurring basis at ~~September 30, 2023,~~March 31, 2024, and December 31, ~~2022,~~2023, by level within the fair value hierarchy.

3330

Table of Contents

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)


September 30, 2023
		Fair Value Measurement Using:						Netting Adjustments and Cash Collateral(1)
March 31, 2024
		Fair Value Measurement Using:
		Fair Value Measurement Using:
		Fair Value Measurement Using:
(In millions)
(In millions)
(In millions)	(In millions)	Level 1		Level 2		Level 3				Netting Adjustments and Cash Collateral(1)			Total		Level 1	Level 2	Level 3	Total
Recurring fair value measurements – Assets:	Recurring fair value measurements – Assets:
Trading securities:

MBS – Other U.S. obligations		$	—	$	1	$	—	$	—				$	1

AFS securities:

AFS securities:

AFS securities:	AFS securities:
U.S. Treasury obligations	U.S. Treasury obligations	—		4,044		—		—			4,044
U.S. Treasury obligations
U.S. Treasury obligations
MBS:	MBS:
GSEs – multifamily
GSEs – multifamily
GSEs – multifamily	GSEs – multifamily	—		11,160		—		—			11,160
PLRMBS	PLRMBS	—		—		1,075		—			1,075
Subtotal AFS MBS	Subtotal AFS MBS	—		11,160		1,075		—			12,235
Total AFS securities	Total AFS securities	—		15,204		1,075		—			16,279
Advances(2)	Advances(2)	—		2,302		—		—			2,302
Derivative assets, net: interest rate-related	Derivative assets, net: interest rate-related	—		1,044		—		(1,038)			6

Other assets	Other assets	16		—		—		—			16
Other assets
Other assets
Total recurring fair value measurements – Assets	Total recurring fair value measurements – Assets	$	16	$	18,551	$	1,075	$	(1,038)		$	18,604
Recurring fair value measurements – Liabilities:	Recurring fair value measurements – Liabilities:
Consolidated obligation bonds(3)
Consolidated obligation bonds(3)
Consolidated obligation bonds(3)	Consolidated obligation bonds(3)	$	—	$	605	$	—	$	—		$	605
Derivative liabilities, net: interest rate-related	Derivative liabilities, net: interest rate-related	—		1,104		—		(1,090)			14
Total recurring fair value measurements – Liabilities	Total recurring fair value measurements – Liabilities	$	—	$	1,709	$	—	$	(1,090)		$	619
Nonrecurring fair value measurements – Assets:(4)	Nonrecurring fair value measurements – Assets:(4)

Impaired mortgage loans held for portfolio	Impaired mortgage loans held for portfolio	$	—	$	—	$	20	$	—		$	20

Impaired mortgage loans held for portfolio

Impaired mortgage loans held for portfolio
Total nonrecurring fair value measurements – Assets	Total nonrecurring fair value measurements – Assets	$	—	$	—	$	20	$	—		$	20

3431

Table of Contents

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)


December 31, 2022
		Fair Value Measurement Using:						Netting Adjustments and Cash Collateral(1)
December 31, 2023
		Fair Value Measurement Using:
		Fair Value Measurement Using:
		Fair Value Measurement Using:
(In millions)
(In millions)
(In millions)	(In millions)	Level 1		Level 2		Level 3				Netting Adjustments and Cash Collateral(1)			Total		Level 1	Level 2	Level 3	Total
Recurring fair value measurements – Assets:	Recurring fair value measurements – Assets:
Trading securities:

MBS – Other U.S. obligations		$	—	$	1	$	—	$	—				$	1

AFS securities:

AFS securities:

AFS securities:	AFS securities:
U.S. Treasury obligations	U.S. Treasury obligations	—		4,024		—		—			4,024
U.S. Treasury obligations
U.S. Treasury obligations
MBS:	MBS:
GSEs – multifamily
GSEs – multifamily
GSEs – multifamily	GSEs – multifamily	—		7,507		—		—			7,507
PLRMBS	PLRMBS	—		—		1,182		—			1,182
Subtotal AFS MBS	Subtotal AFS MBS	—		7,507		1,182		—			8,689
Total AFS securities	Total AFS securities	—		11,531		1,182		—			12,713
Advances(2)	Advances(2)	—		2,059		—		—			2,059
Derivative assets, net: interest rate-related	Derivative assets, net: interest rate-related	—		849		—		(823)			26
Other assets	Other assets	15		—		—		—			15
Total recurring fair value measurements – Assets	Total recurring fair value measurements – Assets	$	15	$	14,440	$	1,182	$	(823)		$	14,814
Recurring fair value measurements – Liabilities:	Recurring fair value measurements – Liabilities:
Consolidated obligation bonds(3)	Consolidated obligation bonds(3)	$	—	$	2,226	$	—	$	—		$	2,226
Consolidated obligation bonds(3)
Consolidated obligation bonds(3)
Derivative liabilities, net: interest rate-related	Derivative liabilities, net: interest rate-related	—		1,195		—		(1,193)			2
Total recurring fair value measurements – Liabilities	Total recurring fair value measurements – Liabilities	$	—	$	3,421	$	—	$	(1,193)		$	2,228
Nonrecurring fair value measurements – Assets:(4)	Nonrecurring fair value measurements – Assets:(4)

Impaired mortgage loans held for portfolio	Impaired mortgage loans held for portfolio	$	—	$	—	$	20	$	—		$	20

Impaired mortgage loans held for portfolio

Impaired mortgage loans held for portfolio
Total nonrecurring fair value measurements – Assets	Total nonrecurring fair value measurements – Assets	$	—	$	—	$	20	$	—		$	20

(1)Amounts represent the application of the netting requirements that allow the Bank to settle positive and negative positions, and also cash collateral and related accrued interest held or placed by the Bank, with the same clearing agents or counterparty.

(2)Represents advances recorded under the fair value option at ~~September 30, 2023,~~March 31, 2024, and December 31, ~~2022.~~2023.

(3)Represents consolidated obligation bonds recorded under the fair value option at ~~September 30, 2023,~~March 31, 2024, and December 31, ~~2022.~~2023.

(4)The fair value information presented is as of the date the fair value adjustment was recorded during the ~~nine~~three months ended ~~September 30, 2023,~~March 31, 2024, and the year ended December 31, ~~2022.~~2023.

The following table presents a reconciliation of the Bank’s AFS PLRMBS that are measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three ~~and nine~~ months ended ~~September 30, 2023~~March 31, 2024 and ~~2022.~~2023.


	Three Months Ended
(In millions)	March 31, 2024		March 31, 2023
Balance, beginning of the period	$	1,059	$	1,182
Total gain/(loss) realized and unrealized included in:
Interest income	(2)		11
(Provision for)/reversal of credit losses	4		1

Unrealized gain/(loss) included in AOCI	(3)		(11)
Settlements	(30)		(33)

Balance, end of the period	$	1,028	$	1,150
Total amount of unrealized gain/(loss) for the period included in AOCI relating to instruments held at the end of the period	$	(3)	$	(11)
Total amount of gain/(loss) for the period included in earnings attributable to the change in unrealized gains/losses relating to assets and liabilities still held at the end of the period	$	2	$	12

3532

Table of Contents

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

Three Months Ended
September 30, 2023 September 30, 2022
Balance, beginning of the period $ 1,119 $ 1,327
Total gain/(loss) realized and unrealized included in:
Interest income 8 14
(Provision for)/reversal of credit losses (7) (9)
Unrealized gain/(loss) included in AOCI (9) (39)
Settlements (36) (56)
Transfers of HTM securities to AFS securities — 1
Balance, end of the period $ 1,075 $ 1,238
Total amount of unrealized gain/(loss) for the period included in AOCI relating to instruments held at the end of the period $ (9) $ (39)
Total amount of gain/(loss) for the period included in earnings attributable to the change in unrealized gains/losses relating to assets and liabilities still held at the end of the period $ 1 $ 5

Nine Months Ended
(In millions) September 30, 2023 September 30, 2022
Balance, beginning of the period $ 1,182 $ 1,608
Total gain/(loss) realized and unrealized included in:
Interest income 27 43
(Provision for)/reversal of credit losses (7) (9)
Other income/(loss) — 28
Unrealized gain/(loss) included in AOCI (20) (124)
Settlements (109) (325)
Transfers of HTM securities to AFS securities 2 17
Balance, end of the period $ 1,075 $ 1,238
Total amount of unrealized gain/(loss) for the period included in AOCI relating to assets held at the end of the period $ (20) $ (124)
Total amount of gain/(loss) for the period included in earnings attributable to the change in unrealized gains/losses relating to assets held at the end of the period $ 19 $ 34

Fair Value Option. The fair value option provides an entity with an irrevocable option to elect fair value as an alternative measurement for selected financial assets, financial liabilities, unrecognized firm commitments, and written loan commitments not previously carried at fair value. It requires an entity to display the fair value of those assets and liabilities for which the entity has chosen to use fair value on the face of the Statements of Condition. Fair value is used for both the initial and subsequent measurement of the designated assets, liabilities, and commitments, with the changes in fair value recognized in net income. Interest income and interest expense on advances and consolidated obligation bonds carried at fair value are recognized solely on the contractual amount of interest due or unpaid. Any consolidated obligation bond underwriting fees or concessions will be immediately recognized in other income/(loss) or other expense.

For more information on the Bank’s election of the fair value option, see “Item 8. Financial Statements and Supplementary Data – Note 1514 – Fair Value” in the Bank’s ~~2022~~2023 Form 10-K.

The Bank has elected the fair value option for certain financial instruments to assist in mitigating potential earnings volatility that can arise from economic hedging relationships in which the carrying value of the hedged item is not adjusted for changes in fair value. The potential earnings volatility associated with recording fair value changes of only the hedging derivative is the Bank’s primary reason for electing the fair value option for financial assets and

~~Table of Contents~~

~~Federal Home Loan Bank of San Francisco~~

~~Notes to Financial Statements (continued)~~

liabilities that do not qualify for hedge accounting or that have not previously met or may be at risk for not meeting the hedge effectiveness requirements.

The following table presents the net gain/(loss) recognized in earnings on advances and consolidated obligation bonds held under fair value option for the three ~~and nine~~ months ended ~~September 30, 2023~~March 31, 2024 and ~~2022:~~2023:


		Three Months Ended				Nine Months Ended
				Three Months Ended
				Three Months Ended
				Three Months Ended
(In millions)	(In millions)	September 30, 2023		September 30, 2022		September 30, 2023		September 30, 2022		(In millions)	March 31, 2024	March 31, 2023
Advances	Advances	$	(10)	$	(42)	$	(11)	$	(117)
Consolidated obligation bonds	Consolidated obligation bonds	(2)		22		(16)		64
Total	Total	$	(12)	$	(20)	$	(27)	$	(53)

For instruments for which the fair value option has been elected, the related contractual interest income and contractual interest expense are recorded as part of net interest income on the Statements of Income. The remaining changes in fair value for instruments for which the fair value option has been elected are recorded as net gains/ (losses) on financial instruments held under the fair value option in the Statements of Income. For advances and consolidated obligations recorded under the fair value option, the Bank determined that none of the remaining changes in fair value were related to instrument-specific credit risk for the three ~~and nine~~ months ended ~~September 30, 2023~~March 31, 2024 and ~~2022.~~2023. In determining that there has been no change in instrument-specific credit risk period to period, the Bank primarily considered the following factors:

•The Bank is a federally chartered GSE, and as a result of this status, the consolidated obligations have historically received the same credit ratings as the government bond credit rating of the United States, even though they are not obligations of the United States and are not guaranteed by the United States.

•The Bank is jointly and severally liable with the other FHLBanks for the payment of principal and interest on all consolidated obligations of each of the FHLBanks.

The following table presents the difference between the aggregate remaining contractual principal balance outstanding and aggregate fair value of advances and consolidated obligation bonds for which the Bank elected the fair value option at ~~September 30, 2023,~~March 31, 2024, and December 31, ~~2022:~~2023:

September 30, 2023 December 31, 2022
(In millions) Principal Balance Fair Value Fair Value
Over/(Under)
Principal Balance Principal Balance Fair Value Fair Value
Over/(Under)
Principal Balance
Advances(1)
$ 2,354 $ 2,302 $ (52) $ 2,106 $ 2,059 $ (47)
Consolidated obligation bonds 648 605 (43) 2,278 2,226 (52)

Table of Contents

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)


	March 31, 2024						December 31, 2023
(In millions)	Principal Balance		Fair Value		Fair Value Over/(Under) Principal Balance		Principal Balance		Fair Value		Fair Value Over/(Under) Principal Balance
Advances(1)	$	2,551	$	2,535	$	(16)	$	1,902	$	1,898	$	(4)
Consolidated obligation bonds	618		590		(28)		633		604		(29)

(1) At ~~September 30, 2023,~~March 31, 2024, and December 31, ~~2022,~~2023, none of these advances were 90 days or more past due or had been placed on nonaccrual status.

Note 1312 — Commitments and Contingencies

As provided by the FHLBank Act or regulations governing the operations of the FHLBanks, all FHLBanks have joint and several liability for all FHLBank consolidated obligations, which are backed only by the financial resources of the FHLBanks. The joint and several liability regulation authorizes the Finance Agency to require any FHLBank to repay all or a portion of the principal or interest on consolidated obligations for which another FHLBank is the primary obligor. The regulations provide a general framework for addressing the possibility that an FHLBank may be unable to repay the consolidated obligations for which it is the primary obligor. The Bank has never been asked or required to repay the principal or interest on any consolidated obligation on behalf of another FHLBank, and as of ~~September 30, 2023,~~March 31, 2024, and through the filing date of this report, does not believe that it is probable that it will be asked to do so. The par value of the outstanding consolidated obligations of the FHLBanks

~~Table of Contents~~

~~Federal Home Loan Bank of San Francisco~~

~~Notes to Financial Statements (continued)~~

was $1.2 trillion at ~~September 30, 2023,~~March 31, 2024, and December 31, ~~2022.~~2023. The par value of the Bank’s participation in consolidated obligations was ~~$86.3~~$79.6 billion at ~~September 30, 2023,~~March 31, 2024, and ~~$113.1~~$84.3 billion at December 31, ~~2022.~~2023.

For more information on the joint and several liability regulation, see “Item 8. Financial Statements and Supplementary Data – Note 1615 – Commitments and Contingencies” in the Bank’s ~~2022~~2023 Form 10-K.

Off-balance sheet commitments as of ~~September 30, 2023,~~March 31, 2024, and December 31, ~~2022,~~2023, were as follows:


		September 30, 2023						December 31, 2022
	March 31, 2024																March 31, 2024				December 31, 2023
(In millions)	(In millions)	Expire Within One Year		Expire After One Year		Total		Expire Within One Year		Expire After One Year		Total		(In millions)	Expire Within One Year	Expire After One Year		Total	Expire Within One Year	Expire After One Year		Total
Standby letters of credit outstanding	Standby letters of credit outstanding	$	9,870	$	8,447	$	18,317	$	16,591	$	6,049	$	22,640

Commitments to fund additional advances(1)
Commitments to issue consolidated obligation discount notes, par	Commitments to issue consolidated obligation discount notes, par	—		—		—		300		—		300
Commitments to issue consolidated obligation bonds, par	Commitments to issue consolidated obligation bonds, par	229		—		229		2,385		—		2,385

(1) Advances funded under advance commitments are fully collateralized at the time of funding.

Standby letters of credit are generally issued for a fee on behalf of members to support their obligations to third parties. If the Bank is required to make a payment for a beneficiary’s drawing under a letter of credit, the amount is immediately due and payable by the member to the Bank and is charged to the member’s demand deposit account with the Bank. The Bank monitors the creditworthiness of members that have standby letters of credit. The value of the Bank’s obligations related to standby letters of credit is recorded in other liabilities and amounted to $56 million and ~~$34~~$57 million at ~~September 30, 2023,~~March 31, 2024, and December 31, ~~2022,~~2023, respectively. Standby letters of credit are fully collateralized at the time of issuance. Based on the Bank’s credit analyses of members’ financial condition and collateral requirements, the Bank deemed it unnecessary to record any additional liability for credit losses on the letters of credit outstanding or other off-balance sheet commitments as of ~~September 30, 2023,~~March 31, 2024, and December 31, ~~2022.~~

~~There were no commitments to fund advances at September 30, 2023, and December 31, 2022. Advances funded under advance commitments are fully collateralized at the time of funding.~~2023.

The Bank has pledged securities as collateral related to its cleared and uncleared derivatives. See Note 1110 – Derivatives and Hedging Activities for additional information about the Bank’s pledged collateral and other credit

Table of Contents

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

risk-related contingent features. As of ~~September 30, 2023,~~March 31, 2024, the Bank had pledged total collateral of ~~$1.3 billion,~~$975 million, including securities with a carrying value of ~~$799~~$638 million, all of which may be repledged, and cash collateral, including accrued interest, of ~~$472~~$337 million to counterparties and the clearing house that had market risk exposure to the Bank related to derivatives. As of December 31, ~~2022,~~2023, the Bank had pledged total collateral of $1.1 billion, including securities with a carrying value of ~~$435~~$771 million, all of which may be repledged, and cash collateral, including accrued interest, of ~~$694~~$353 million to counterparties and the clearing house that had market risk exposure to the Bank related to derivatives.

The Bank may be subject to various pending legal proceedings that may arise in the ordinary course of business. After consultation with legal counsel, the Bank does not anticipate that the ultimate liability, if any, arising out of these matters will have a material effect on its financial condition or results of operations.

Note 1413 — Transactions with Certain Members, Certain Nonmembers, and Other FHLBanks

Transactions with Members and Nonmembers. The following tables set forth information at the dates and for the periods indicated with respect to transactions with members that have an officer or director serving on the Bank’s board of directors.

~~Table of Contents~~


(In millions)	March 31, 2024		December 31, 2023
Assets:
Advances	$	5,312	$	5,762
Mortgage loans held for portfolio	73		74
Accrued interest receivable	6		5
Liabilities:
Deposits	$	18	$	34
Capital:
Capital Stock	$	162	$	191

~~Federal Home Loan Bank of San Francisco~~

~~Notes to Financial Statements (continued)~~

(In millions) September 30, 2023 December 31, 2022
Assets:
Advances $ 6,519 $ 7,269
Mortgage loans held for portfolio 76 80
Accrued interest receivable 9 9
Liabilities:
Deposits $ 17 $ 11
Capital:
Capital Stock $ 228 $ 215

Three Months Ended

Nine Months Ended

Three Months Ended

(In millions)

September 30, 2023

September 30, 2022

September 30, 2023

September 30, 2022

(In millions)

Interest Income:

Advances

214

Advances

Mortgage loans held for portfolio

All transactions with members, nonmembers, and their affiliates are entered into in the ordinary course of business. As of ~~September 30, 2023,~~March 31, 2024, and December 31, ~~2022,~~2023, no shareholder owned more than 10% of the total voting interests in the Bank because of the statutory limit on members' voting rights. For more information on transactions with members and nonmembers, see “Item 8. Financial Statements and Supplementary Data – Note 1716 – Transactions with Certain Members, Certain Nonmembers, and Other FHLBanks” in the Bank’s ~~2022~~2023 Form 10-K.

Transactions with Other FHLBanks. The Bank may occasionally enter into transactions with other FHLBanks. These transactions are summarized below.

Overnight Funds. The Bank may borrow or lend unsecured overnight funds from or to other FHLBanks. All such transactions are at current market rates. Interest income and interest expense related to these transactions with other FHLBanks are included in interest income and interest expense in the Statements of Income. Balances outstanding at period end with other FHLBanks, if any, are identified in the Bank’s financial statements. During the ~~nine~~three months ended ~~September 30,~~March 31, 2024 and 2023, ~~and 2022,~~ the Bank extended overnight loans to other FHLBanks for ~~$2.6 billion~~$10 million and ~~$2.4~~$1.3 billion, respectively. ~~The amount of interest income for these advances was de minimis for~~During the ~~nine~~three months ended ~~September 30,~~March 31, 2024 and 2023, ~~and 2022. During the nine months ended September 30, 2023 and 2022,~~ the Bank borrowed ~~$5.5 billion~~$20 million and ~~$10.1~~$3.6 billion, respectively, from other FHLBanks. ~~Interest expense related to these borrowings was $2 million for the nine months ended September 30, 2023 and was de minimis for the nine months ended September 30, 2022.~~

3935

Table of Contents

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Statements contained in this quarterly report on Form 10-Q, including statements describing the objectives, projections, estimates, or predictions of the future of the Federal Home Loan Bank of San Francisco (Bank) or the Federal Home Loan Bank System (FHLBank System), are “forward-looking statements.” These statements may use forward-looking terms, such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “likely,” “may,” “probable,” “plan,” “project,” “should,” “will,” “would,” “possible,” or their negatives or other variations on these terms, and include statements related to, among others, gains and losses on derivatives, plans to pay dividends and redeem or repurchase excess stock, future credit losses, future classification of securities, and reform legislation. The Bank cautions that by their nature, forward-looking statements involve risk or uncertainty that could cause actual results to differ materially from those expressed or implied in these forward-looking statements or could affect the extent to which a particular objective, projection, estimate, or prediction is realized. These risks and uncertainties include, among others, the following:

•changes in economic and market conditions, including inflation and rising interest rates, changes in the credit ratings of the United States, including any effects of ~~Fitch Ratings’ recent downgrade~~downgrades in the sovereign credit rating of the United States, and conditions in the mortgage, housing, and capital markets;

•the volatility of market prices, rates, and indices;

•the timing and volume of market activity;

•natural disasters, pandemics or other widespread public health emergencies, terrorist attacks, civil unrest, geopolitical instability or conflicts (including the ongoing hostilities in Eastern Europe and the Middle East), trade disruptions, economic or other sanctions, or other unanticipated or catastrophic events;

•political events, including legislative, regulatory, judicial, or other developments that affect the Bank, its members, counterparties, or investors in the consolidated obligations of the Federal Home Loan Banks (FHLBanks), such as ~~the impact of~~ any government-sponsored ~~enterprises~~enterprise (GSE) ~~legislative~~ reforms, any changes resulting from the Federal Housing Finance Agency’s (Finance Agency) review and analysis of the FHLBank System, including recommendations published in its “FHLBank System at 100: Focusing on the Future” report, changes in the Federal Home Loan Bank Act of 1932, as amended (FHLBank Act), changes in applicable sections of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992, or changes in other statutes or regulations applicable to the FHLBanks;

•changes in the Bank’s capital structure and composition;

•changes in the Bank’s capital stock requirements;

•the ability of the Bank to pay dividends or redeem or repurchase capital stock;

•membership changes, including changes resulting from mergers or changes in the principal place of business of Bank members;

•the withdrawal, merger, dissolution, or receivership of one or more large members;

•the soundness of other financial institutions, including Bank members, nonmember borrowers, other counterparties, and the other FHLBanks;

•changes in Bank members’ demand for Bank advances;

•changes in the value or liquidity of collateral underlying advances to Bank members or nonmember borrowers or collateral pledged by the Bank’s derivative counterparties;

•changes in the fair value and economic value of, impairments of, and risks associated with the Bank’s investments in mortgage loans and mortgage-backed securities (MBS) ~~or other assets~~ and the related credit enhancement protections;

•changes in the Bank’s ability or intent to hold MBS and mortgage loans to maturity;

•competitive forces, including the availability of other sources of funding for Bank members;

•the willingness of the Bank’s members to do business with the Bank;

•changes in investor demand for consolidated obligations (including the terms of consolidated obligations) or the terms of interest rate exchange or similar agreements;

•the impact of any changes and developments in FHLBank System-wide debt issuance and governance practices;

•the ability of each of the other FHLBanks to repay the principal and interest on consolidated obligations for which it is the primary obligor and with respect to which the Bank has joint and several liability;

•~~changes in key Bank personnel;~~

4036

Table of Contents

•changes in key Bank personnel;

•technology changes and enhancements, and the Bank’s ability to develop and support technology and information systems sufficient to manage the risks of the Bank’s business effectively (including cyber-security risks); and

•changes in the FHLBanks’ long-term credit ratings.

Readers of this report should not rely solely on the forward-looking statements and should consider all risks and uncertainties addressed throughout this report, as well as those discussed under “Item 1A. Risk Factors” in the Bank’s Annual Report on Form 10-K for the year ended December 31, ~~2022 (2022~~2023 (2023 Form 10-K).

~~Table of Contents~~

Quarterly Overview

Net income for the ~~third~~first quarter of ~~2023~~2024 was ~~$103~~$124 million, ~~an increase~~a decrease of ~~$23~~$71 million compared with net income of ~~$80~~$195 million for the ~~third~~first quarter of ~~2022. The $23 million increase in net~~2023. Net income for the ~~third~~first quarter of 2023 included $43 million of net income resulting from higher advance prepayments relative to the first quarter of 2024, which is not expected to occur at similar levels in the future, net of third-party payments to unwind interest rate swaps at fair value.

The $137 million decrease in net interest income was primarily attributable to $93 million in net advance prepayment fees in the prior-year period, which were significantly lower in the first quarter of 2024. The decrease in net interest income compared to the prior-year period was ~~primarily~~also attributable to ~~an increase~~lower average balances of ~~$25~~interest-earning assets and higher costs of interest-bearing liabilities, partially offset by higher yields on interest-earning assets and lower average balances of interest-bearing liabilities.

The $62 million improvement in other income/(loss) ~~and an increase of $14~~was primarily driven by $45 million in net ~~interest income. These increases~~realized losses recognized in the prior-year period from derivatives economically hedging prepaid advances, along with $30 million of income ~~were partially offset by an increase~~recognized in the first quarter of ~~$14 million~~2024 in ~~other expense.~~

~~The $25 million change~~connection with the termination of a long-term funding arrangement entered into with a member borrower in other income/(loss) primarily resulted from an increase of $16 million in net fair value gains on interest rate swaps classified as economic hedges and a decrease of $8 million in fair value losses on financial instruments carried at fair value. The $14 million increase in net interest income reflected higher yields on higher average balances of advances and investments, partially offset by higher interest costs on greater funding levels and higher dividends paid on mandatorily redeemable capital stock classified as interest expense.

The $14 million increase in other expense primarily reflected an increase of $8 million in charitable contributions to fund downpayment assistance grants to middle-income homebuyers, delivered by participating member financial institutions.2017.

At ~~September 30, 2023,~~March 31, 2024, total assets were ~~$95.0~~$88.0 billion, a decrease of ~~$26.1~~$4.8 billion from ~~$121.1~~$92.8 billion at December 31, ~~2022, primarily attributable~~2023. Advances decreased by $4.4 billion to ~~a decrease of $25.8 billion in advances to $63.6~~$56.9 billion at ~~September 30, 2023,~~March 31, 2024, from ~~$89.4~~$61.3 billion at December 31, ~~2022. The~~2023. Investments at March 31, 2024, were $29.9 billion, a net decrease of ~~$0.1~~$398 million from $30.3 billion ~~in total investments since~~at December 31, ~~2022,~~2023, attributable to ~~$30.2 billion at September 30, 2023, primarily resulted from a decrease~~decreases of ~~$4.3 billion~~$293 million in ~~securities purchased under agreements to resell, largely offset by an increase of $3.3 billion~~short-term investments and $105 million in mortgage-backed ~~securities and a $0.8 billion increase in Federal funds sold.~~securities.

As of ~~September 30, 2023,~~March 31, 2024, the Bank exceeded all regulatory capital requirements. The Bank exceeded its 4.0% regulatory requirement with a regulatory capital ratio of ~~7.9%~~8.4% at ~~September 30, 2023.~~March 31, 2024. The increase in the regulatory capital ratio from ~~6.4%~~8.0% at December 31, ~~2022,~~2023, mainly resulted from the decrease in total assets during ~~2023.~~the first quarter of 2024. The Bank also exceeded its risk-based capital requirement of ~~$1.3~~$1.1 billion with ~~$7.5~~$7.4 billion in permanent capital. Total retained earnings increased to ~~$4.2 billion as of September 30, 2023, from $4.0~~$4.4 billion at ~~yearend 2022.~~March 31, 2024, from $4.3 billion at December 31, 2023.

On ~~October 26, 2023,~~April 25, 2024, the Bank’s board of directors declared a quarterly cash dividend on the average capital stock outstanding during the ~~third~~first quarter of ~~2023~~2024 at an annualized rate of ~~8.25%, an increase from~~8.75%. The quarterly dividend rate is consistent with the ~~7.75% rate paid for the prior quarter. In addition, the Board approved an updated framework and~~Bank's dividend philosophy ~~to reflect changes in the current interest rate environment and business conditions. Under this approach, the Bank will endeavor~~of endeavoring to pay a quarterly dividend rate that is equal to or greater than the current market rate for a highly rated ~~investment (e.g., SOFR)~~investments and that is sustainable under current and projected earnings while maintaining appropriate levels of capital. The ~~third quarter of 2023~~quarterly dividend is~~$68~~will total $66 million,, and the Bank expects to pay the dividend on ~~November~~May 9, ~~2023.~~

Events affecting the financial services industry during 2023 resulted in significant changes in the liquidity of some of the largest regional financial institutions, some of which experienced significant deposit outflows and financial difficulties, resulting in the liquidation or receivership of three of the Bank’s larger borrowers.

On March 8, 2023, Silvergate Capital Corporation, the parent company of Silvergate Bank, announced its intent to wind down the operations of and voluntarily liquidate Silvergate Bank, and on June 1, 2023, the Federal Reserve Board announced a consent order against Silvergate Capital Corporation and Silvergate Bank to facilitate that voluntary self-liquidation. As of March 1, 2023, Silvergate Bank had no advances outstanding from the Bank, a reduction of $4.3 billion from yearend 2022.

On March 10, 2023, Silicon Valley Bank was closed by the California Department of Financial Protection and Innovation (DFPI) and the Federal Deposit Insurance Corporation (FDIC) was appointed as receiver. The FDIC created Silicon Valley Bridge Bank, N.A., whereby all of the deposits and substantially all assets of Silicon Valley Bank were transferred to the bridge bank. As of March 31, 2023, Silicon Valley Bridge Bank, N.A., had prepaid all outstanding advances to the Bank. On March 26, 2023, the FDIC entered into a purchase and assumption agreement for all the deposits and loans of Silicon Valley Bridge Bank, N.A., with First Citizens Bank and Trust Company. Silicon Valley Bank is no longer a member of the Bank.2024.

~~Table of Contents~~

On May 1, 2023, the California DFPI closed First Republic Bank and appointed the FDIC as receiver, and the FDIC and JPMorgan Chase, National Association (“JPMorgan”), a nonmember, entered into a purchase and assumption agreement for all the deposits and substantially all of the assets of First Republic Bank, including $28.1 billion in advances outstanding from the Bank. At September 30, 2023, JPMorgan, had $26.4 billion of advances outstanding from the Bank, assumed from First Republic Bank, that represented approximately 41% of the Bank's total advances outstanding. At December 31, 2022, First Republic Bank had $14.0 billion of advances outstanding from the Bank. Additionally, at September 30, 2023, JPMorgan had $179 million in letters of credit outstanding from the Bank, assumed from First Republic Bank. At December 31, 2022, First Republic Bank had $670 million in letters of credit outstanding. Upon assumption of the advances outstanding by JPMorgan, the Bank transferred $759 million of capital stock of the Bank, held by First Republic Bank, to JPMorgan and reclassified that capital stock as mandatorily redeemable as a liability in the Bank’s Statements of Condition. At October 31, 2023, JPMorgan had $25.1 billion in advances outstanding from the Bank, had $179 million in letters of credit outstanding, and held $677 million of the Bank’s capital stock. These advances outstanding and letters of credit are fully collateralized and are not expected to result in any credit loss to the Bank. JPMorgan was the Bank’s largest borrower and shareholder as of September 30, 2023.

Because recent events have changed the ownership structure of the Bank’s largest borrowers, the Bank may experience a reduction in total assets, capital, and net income if advances outstanding to those borrowers are prepaid or repaid and not replaced with business from members. As of September 30, 2023, advances outstanding from non-members totaled $28.6 billion. The loss of Bank members, especially its largest borrowers, may also have the effect of reducing the Bank’s opportunity to grow advances and may impact the Bank’s long-term strategic plan and corporate goals. The timing and magnitude of the impact of a decrease in the amount of advances on the Bank would depend on a number of factors, including, but not limited to: the amount and the period over which the advances are prepaid or repaid; the amount and timing of any corresponding decreases in the activity-based capital stock requirement; the profitability of the advances; the extent to which consolidated obligations mature as the advances are prepaid or repaid; and the Bank’s ability to extinguish consolidated obligations or transfer them, with associated costs, to other FHLBanks. A decrease in advances could also affect the rate of dividends paid to the Bank’s shareholders. See “Item 1. Financial Statements - Note 4 - Advances” for more information on the Bank’s largest members.

4337

Table of Contents

Financial Highlights

The following table presents a summary of certain financial information for the Bank for the periods indicated.

Financial Highlights

(Unaudited)


(Dollars in millions)	(Dollars in millions)	September 30, 2023			June 30, 2023			March 31, 2023			December 31, 2022			September 30, 2022			(Dollars in millions)	March 31, 2024		December 31, 2023		September 30, 2023		June 30, 2023		March 31, 2023
Selected Balance Sheet Items at Quarter End	Selected Balance Sheet Items at Quarter End
Total Assets
Total Assets
Total Assets	Total Assets	$	95,021		$	114,877		$	142,493		$	121,056		$	108,507
Advances	Advances	63,584			70,537			101,541			89,400			65,658
Mortgage Loans Held for Portfolio, Net	Mortgage Loans Held for Portfolio, Net	770			785			801			815			834
Investments(1)	Investments(1)	30,235			43,139			39,712			30,291			41,661
Consolidated Obligations:(2)	Consolidated Obligations:(2)
Bonds	Bonds	70,907			79,855			95,034			75,768			35,446
Bonds
Bonds
Discount Notes	Discount Notes	14,293			24,795			37,356			35,929			62,046
Mandatorily Redeemable Capital Stock	Mandatorily Redeemable Capital Stock	776			843			95			5			5
Capital Stock —Class B —Putable	Capital Stock —Class B —Putable	2,485			2,600			4,007			3,758			3,322
Unrestricted Retained Earnings	Unrestricted Retained Earnings	3,406			3,387			3,356			3,262			3,222
Restricted Retained Earnings	Restricted Retained Earnings	816			795			770			732			708
Accumulated Other Comprehensive Income/(Loss) (AOCI)		(55)			(19)			(61)			(29)			12
Accumulated Other Comprehensive Income/(Loss)
Total Capital	Total Capital	6,652			6,763			8,072			7,723			7,264
Selected Operating Results for the Quarter	Selected Operating Results for the Quarter
Net Interest Income
Net Interest Income
Net Interest Income	Net Interest Income	$	171		$	179		$	287		$	181		$	157
Provision for/(Reversal of) Credit Losses	Provision for/(Reversal of) Credit Losses	7			1			(1)			6			9
Other Income/(Loss)	Other Income/(Loss)	7			4			(26)			—			(18)
Other Expense	Other Expense	55			48			45			45			41
Affordable Housing Program Assessment	Affordable Housing Program Assessment	13			13			22			13			9
Net Income/(Loss)	Net Income/(Loss)	$	103		$	121		$	195		$	117		$	80
Selected Other Data for the Quarter	Selected Other Data for the Quarter
Net Interest Margin(3)	Net Interest Margin(3)	0.68		%	0.55		%	0.88		%	0.62		%	0.63		%
Net Interest Margin(3)
Net Interest Margin(3)																		0.69	%	0.72	%	0.68	%	0.55	%	0.88	%

Return on Average Assets
Return on Average Assets
Return on Average Assets	Return on Average Assets	0.41			0.36			0.60			0.40			0.32
Return on Average Equity	Return on Average Equity	6.17			6.52			10.14			6.24			4.52
Annualized Dividend Rate	Annualized Dividend Rate	7.75			7.00			7.00			7.00			6.00
Dividend Payout Ratio(4)	Dividend Payout Ratio(4)	62.12			53.53			32.00			45.97			49.98
Average Equity to Average Assets Ratio	Average Equity to Average Assets Ratio	6.63			5.57			5.93			6.47			7.16
Selected Other Data at Quarter End	Selected Other Data at Quarter End
Regulatory Capital Ratio(5)	Regulatory Capital Ratio(5)	7.87			6.64			5.77			6.41			6.69
Regulatory Capital Ratio(5)
Regulatory Capital Ratio(5)
Duration Gap (in months)	Duration Gap (in months)	1.2			1.1			0.9			0.9			1.0

(1)Investments consist of interest-bearing deposits, securities purchased under agreements to resell, ~~Federal~~federal funds sold, trading securities, available-for-sale securities, and held-to-maturity securities.

4438

Table of Contents

(2)As provided by the FHLBank Act or regulations governing the operations of the FHLBanks, all of the FHLBanks have joint and several liability for FHLBank consolidated obligations, which are backed only by the financial resources of the FHLBanks. The joint and several liability regulation authorizes the Finance Agency to require any FHLBank to repay all or a portion of the principal or interest on consolidated obligations for which another FHLBank is the primary obligor. The Bank has never been asked or required to repay the principal or interest on any consolidated obligation on behalf of another FHLBank, and as of ~~September 30, 2023,~~March 31, 2024, and through the filing date of this report, does not believe that it is probable that it will be asked to do so. The par value of the outstanding consolidated obligations of all FHLBanks at the dates indicated was as follows:


	Par Value (In millions)
March 31, 2024	$	1,172,424
December 31, 2023	1,204,316
September 30, 2023	$		1,229,875
June 30, 2023	1,340,166
March 31, 2023	1,477,668
~~December 31, 2022~~	~~1,181,743~~
~~September 30, 2022~~	~~1,031,910~~

(3)Net interest margin is calculated as net interest income (annualized) divided by average interest-earning assets.

(4)This ratio is calculated as dividends per share declared, recorded, and paid during the period divided by net income per share.

(5)This ratio is calculated as regulatory capital divided by total assets. Regulatory capital includes retained earnings, Class B capital stock, and mandatorily redeemable capital stock (which is classified as a liability) but excludes AOCI.

Results of Operations

Net Interest Income. The primary source of the Bank’s earnings is net interest income, which is the interest earned on advances, mortgage loans, and investments, less interest paid on consolidated obligations, deposits, mandatorily redeemable capital stock, and other borrowings. The tables that follow present the average balances of interest-earning asset categories and the sources that funded those interest-earning assets (liabilities and capital) for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2024 and 2023, ~~and 2022,~~ together with the related interest income and expense. These tables also present the average rates on total interest-earning assets and the average costs of total funding sources.

4539

Table of Contents

~~Third~~First Quarter of ~~2023~~2024 Compared to ~~Third~~First Quarter of ~~2022~~2023


Average Balance Sheets	Average Balance Sheets															Average Balance Sheets

		Three Months Ended
		Three Months Ended
		Three Months Ended
		Three Months Ended
		September 30, 2023							September 30, 2022									March 31, 2024												March 31, 2023
(Dollars in millions)	(Dollars in millions)	Average Balance			Interest Income/ Expense		Average Rate		Average Balance			Interest Income/ Expense		Average Rate		(Dollars in millions)		Average Balance					Interest Income/ Expense				Average Rate						Average Balance				Interest Income/ Expense			Average Rate
Assets	Assets
Interest-earning assets:	Interest-earning assets:
Interest-earning assets:
Interest-earning assets:
Interest-bearing deposits
Interest-bearing deposits
Interest-bearing deposits	Interest-bearing deposits	$	4,497		$	61	5.38	%	$	2,299		$	14	2.28	%	$	3,934			$	$	53			5.45	5.45		%				$	4,383		$	$	50		4.60	4.60	%
Securities purchased under agreements to resell	Securities purchased under agreements to resell	3,742			50		5.27		8,937			51		2.28
Federal funds sold	Federal funds sold	9,209			123		5.30		12,901			72		2.22
Trading securities:
Mortgage-backed securities (MBS)		1			—		3.12		1			—		2.10

Available-for-sale (AFS) securities:(1)	Available-for-sale (AFS) securities:(1)
MBS(2)(3)(4)		10,803			189		6.91		8,372			88		4.17
Other investments(3)		4,030			57		5.61		3,730			21		2.29

Available-for-sale (AFS) securities:(1)

Available-for-sale (AFS) securities:(1)
MBS(2)(3)
MBS(2)(3)
MBS(2)(3)
Other investments(2)
Held-to-maturity (HTM) securities:	Held-to-maturity (HTM) securities:
MBS	MBS	1,937			25		5.22		2,526			17		2.56
MBS
MBS

Mortgage loans held for portfolio(5)		778			9		4.26		850			8		4.10
Advances(3)(6)		64,221			867		5.36		58,513			345		2.34
Mortgage loans held for portfolio(4)
Mortgage loans held for portfolio(4)
Mortgage loans held for portfolio(4)
Advances(2)(5)
Loans to other FHLBanks	Loans to other FHLBanks	14			—		5.30		16			—		2.36
Total interest-earning assets	Total interest-earning assets	99,232			1,381		5.52		98,145			616		2.49
Other assets(7)		978			—				387			—
Other assets(6)
Total Assets
Total Assets
Total Assets	Total Assets	$	100,210		$	1,381			$	98,532		$	616
Liabilities and Capital	Liabilities and Capital
Liabilities and Capital
Liabilities and Capital
Interest-bearing liabilities:
Interest-bearing liabilities:
Interest-bearing liabilities:	Interest-bearing liabilities:
Consolidated obligations:	Consolidated obligations:
Bonds(3)		$	73,093		$	963	5.23	%	$	28,402		$	143	2.01	%
Discount notes		16,711			218		5.17		61,417			310		2.00
Consolidated obligations:
Consolidated obligations:
Bonds(2)
Bonds(2)
Bonds(2)																		$	64,207				$	850			5.33		%				$	83,204			$	920		4.48	%
Discount notes(2)
Deposits and other borrowings	Deposits and other borrowings	1,267			16		5.33		921			5		2.15
Mandatorily redeemable capital stock	Mandatorily redeemable capital stock	803			13		6.24		5			—		5.79
Borrowings from other FHLBanks	Borrowings from other FHLBanks	22			—		5.20		65			1		2.74
Total interest-bearing liabilities	Total interest-bearing liabilities	91,896			1,210		5.23		90,810			459		2.01
Other liabilities(7)		1,668			—				668			—
Other liabilities(6)
Total Liabilities
Total Liabilities
Total Liabilities	Total Liabilities	93,564			1,210				91,478			459
Total Capital	Total Capital	6,646			—				7,054			—
Total Capital
Total Capital
Total Liabilities and Capital
Total Liabilities and Capital
Total Liabilities and Capital	Total Liabilities and Capital	$	100,210		$	1,210			$	98,532		$	459
Net Interest Income	Net Interest Income				$	171						$	157
Net Interest Spread(8)							0.29	%						0.48	%
Net Interest Margin(9)							0.68	%						0.63	%
Net Interest Income
Net Interest Income
Net Interest Spread(7)
Net Interest Spread(7)
Net Interest Spread(7)																															0.25	%										0.60	%
Net Interest Margin(8)																Net Interest Margin(8)															0.69	%										0.88	%
Interest-earning Assets/Interest-bearing Liabilities	Interest-earning Assets/Interest-bearing Liabilities	107.98		%					108.08		%

(1)The average balances of AFS securities are reflected at amortized cost. As a result, the average rates do not reflect changes in fair value.

(2)Interest income on AFS securities includes accretion of yield adjustments on certain PLRMBS (resulting from improvement in expected cash flows) with previous credit losses related to the prior methodology of evaluating credit losses, totaling $5 million and $9 million for the three months ended September��30, 2023 and 2022, respectively.

~~Table of Contents~~

~~(3)Interest~~ income/expense and average rates include the effect of associated interest rate exchange agreements, as ~~follows:~~

Three Months Ended
September 30, 2023
(In millions) Advances AFS Securities Consolidated Obligation Bonds Total
(Amortization)/accretion of hedging activities $ (6) $ (25) $ — $ (31)
Net gain/(loss) on derivatives and hedged items 16 18 1 35
Net interest settlements on derivatives 153 100 (153) 100
Total effect on net interest income $ 163 $ 93 $ (152) $ 104

Three Months Ended
September 30, 2022
(In millions) Advances AFS Securities Consolidated Obligation Bonds Total
(Amortization)/accretion of hedging activities $ (8) $ (26) $ — $ (34)
Net gain/(loss) on derivatives and hedged items (6) (4) — (10)
Net interest settlements on derivatives 27 22 (37) 12
Total effect on net interest income $ 13 $ (8) $ (37) $ (32)

~~(4)There were no prepayment fees~~follows. The effect on ~~AFS MBS included in~~ interest ~~income during~~expense and average rates from interest rate exchange agreements associated with discount notes was de minimis for the three months ended ~~September 30,~~March 31, 2024. There were no interest rate exchange agreements associated with discount notes during three months ended March 31, 2023.


	Three Months Ended
	March 31, 2024
(In millions)	Advances		AFS Securities		Consolidated Obligation Bonds		Total
(Amortization)/accretion of hedging activities	$	(6)	$	(25)	$	—	$	(31)
Net gain/(loss) on derivatives and hedged items	2		1		—		3
Net interest settlements on derivatives	172		136		(138)		170
Price alignment amount(9)	(10)		(8)		(1)		(19)
Total effect on net interest income	$	158	$	104	$	(139)	$	123

Table of Contents


	Three Months Ended
	March 31, 2023
(In millions)	Advances		AFS Securities		Consolidated Obligation Bonds		Total
(Amortization)/accretion of hedging activities	$	(8)	$	(25)	$	—	$	(33)
Net gain/(loss) on derivatives and hedged items	(208)		1		(5)		(212)
Net interest settlements on derivatives	105		89		(125)		69
Price alignment amount(9)	(9)		(7)		—		(16)
Total effect on net interest income	$	(120)	$	58	$	(130)	$	(192)

(3)Interest income included net prepayment fees on AFS MBS of $3$1 million and $4 million for the three months ended ~~September 30, 2022.~~March 31, 2024 and 2023, respectively.

~~(5)~~(4)Nonperforming mortgage loans are included in average balances used to determine average rate. Interest income from retrospective adjustment of the effective yields was $3 million and $3 million for the three months ended September 30, 2023 and 2022, respectively. Interest income includes amortization of upfront loan costs and delivery commitments of $(2) million and $(2) million for the three months ended September 30, 2023 and 2022, respectively.

~~(6)~~(5)Interest income includes net prepayment fees on advances of ~~a de minimis amount~~$2 million and ~~$(2)~~$95 million for the three months ended ~~September 30, 2023~~March 31, 2024 and ~~2022.~~2023.

~~(7)~~(6)Includes forward settling transactions and valuation adjustments for certain cash items received/(paid).

~~(8)~~(7)Net interest spread is calculated as the difference between the average rate earned on interest-earning assets and the average rate paid on interest-bearing liabilities.

~~(9)~~(8)Net interest margin is calculated as net interest income (annualized) divided by average interest-earning assets.

(9)This amount relates to derivatives for which variation margin on cleared derivatives is characterized as a daily settled contract.

Net interest income in the ~~third~~first quarter of ~~2023~~2024 was ~~$171~~$150 million, a ~~9% increase~~48% decrease from ~~$157~~$287 million in the ~~third~~first quarter of ~~2022.~~2023. The following table details the changes in interest income and interest expense for the ~~third~~first quarter of ~~2023~~2024 compared to the ~~third~~first quarter of ~~2022.~~2023. Changes in both volume and interest rates influence changes in net interest income, net interest spread, and net interest margin.

~~Table of Contents~~

								Change in Net Interest Income: Rate/Volume Analysis Three Months Ended September 30, 2023, Compared to Three Months Ended September 30, 2022
Change in Net Interest Income: Rate/Volume Analysis Three Months Ended March 31, 2024, Compared to Three Months Ended March 31, 2023								Change in Net Interest Income: Rate/Volume Analysis Three Months Ended March 31, 2024, Compared to Three Months Ended March 31, 2023



		Increase/ (Decrease)		Attributable to Changes in(1)				Increase/ (Decrease)		Attributable to Changes in(1)
(In millions)	(In millions)			Average Volume		Average Rate			(In millions)		Average Volume	Average Rate
Interest-earning assets:
Interest income:
Interest-bearing deposits
Interest-bearing deposits
Interest-bearing deposits	Interest-bearing deposits	$	47	$	20	$	27
Securities purchased under agreements to resell	Securities purchased under agreements to resell	(1)		(42)		41
Federal funds sold	Federal funds sold	51		(26)		77

AFS securities:	AFS securities:
AFS securities:
AFS securities:
MBS(2)
MBS(2)
MBS(2)	MBS(2)	101		31		70
Other investments(2)	Other investments(2)	36		2		34

HTM securities: MBS	HTM securities: MBS	8		(5)		13
HTM securities: MBS
HTM securities: MBS

Mortgage loans held for portfolio	Mortgage loans held for portfolio	1		—		1
Mortgage loans held for portfolio
Mortgage loans held for portfolio
Advances(2)	Advances(2)	522		37		485
Total interest-earning assets		765		17		748
Interest-bearing liabilities:
Total interest income
Interest expense:
Consolidated obligations:	Consolidated obligations:
Consolidated obligations:
Consolidated obligations:
Bonds(2)
Bonds(2)
Bonds(2)	Bonds(2)	820		406		414
Discount notes	Discount notes	(92)		(338)		246
Deposits and other borrowings	Deposits and other borrowings	11		1		10
Borrowings from other FHLBanks	Borrowings from other FHLBanks	(1)		(1)		—
Mandatorily redeemable capital stock	Mandatorily redeemable capital stock	13		13		—
Total interest-bearing liabilities		751		81		670
Total interest expense
Net interest income	Net interest income	$	14	$	(64)	$	78

(1)Combined rate/volume variances, a third element of the calculation, are allocated to the rate and volume variances based on their relative sizes.

(2)Interest income/expense and average rates include the interest effect of associated interest rate exchange agreements.

The net interest margin was 6869 basis points for the ~~third~~first quarter of ~~2023, 5~~2024, 19 basis points ~~higher~~lower than the net interest margin for the ~~third~~first quarter of ~~2022,~~2023, which was 6388 basis points. The ~~increase~~decrease in net interest margin is primarily attributable to $93 million in net advance prepayment fees in the prior-year period, which were significantly lower

Table of Contents

in the first quarter of 2024. The decrease in net interest margin was also the result of a decrease in the average balances of interest-earning assets for the three months ended March 31, 2024, compared to the prior-year period and an increase in the average rate paid on ~~interest-earning assets~~interest-bearing liabilities to ~~5.52%~~5.37% for the three months ended ~~September 30, 2023,~~March 31, 2024, compared to ~~2.49%~~4.51% for the three months ended ~~September 30, 2022. Although higher interest rates were the primary cause for the interest income increase, the higher average balances of advances and investments were also a contributing factor.~~March 31, 2023. These effects were partially offset by a decrease in the average balances of interest-bearing liabilities for the three months ended March 31, 2024, compared to the prior-year period and an increase in ~~costs of interest-bearing liabilities from higher funding levels. The net interest spread was 29 basis points for~~ the third quarter of 2023, 19 basis points lower than the net interest spread for the third quarter of 2022, which was 48 basis points. The decrease in net interest spread was primarily a result of an increase in costs of interest-bearing liabilities from higher funding levels, which were partially offset by higher yieldsaverage rate earned on interest-earning assets ~~that primarily resulted from higher interest rates on growing advance balances.~~to 5.62% for the three months ended March 31, 2024, compared to 5.11% for the three months ended March 31, 2023.

For ~~PLRMBS~~private-label residential mortgage-backed securities (PLRMBS) with previous credit losses related to the prior methodology of evaluating credit losses, the Bank updates its estimate of ~~future estimated~~expected cash flows on a regular basis. If there is no ~~additional~~allowance for credit ~~loss~~losses on the security, the yield of the security is adjusted on a prospective basis and accreted into interest income based on the expected cash flows. ~~As a result of improvements in the estimated cash flows of these securities, the net accretion of income may continue to be a positive source of net interest income in future periods.~~

Member demand for wholesale funding from the Bank can vary greatly depending on a number of factors, including economic and market conditions, competition from other wholesale funding sources, member deposit inflows and outflows, the activity level of the primary and secondary mortgage markets, and strategic decisions made by individual member institutions. In addition, events affecting the financial services industry ~~during the first two quarters of 2023 resulted in~~contributed to the liquidation or receivership of some of the Bank’s ~~largest borrowers.~~larger borrowers during 2023. The loss of Bank members, especially its largest borrowers, may also have the effect of reducing member demand for wholesale funding. As a result, Bank asset levels and operating results may vary significantly from period to period. See “Item

~~Table of Contents~~

1. Financial ~~Statements -~~Statements– Note 4 -– Advances” for more information on the Bank’s largest members and “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Quarterly Overview” for more information on the loss of the Bank’s largest borrowers and its potential effect on the Bank’s opportunity to grow advances.

Other Income/(Loss). The following table presents the components of “Other Income/(Loss)” for the three months ended ~~September 30, 2023~~March 31, 2024 and ~~2022.~~2023.

Other Income/(Loss)

Three Months Ended

(In millions)

September 30, 2023

September 30, 2022

(In millions)

March 31, 2024

March 31, 2023

Other Income/(Loss):

Net gain/(loss) on advances and consolidated obligation bonds held under fair value option

(12)

(20)

Net gain/(loss) on derivatives

(1)

Standby letters of credit fees

Other, net

—

(1)

Standby letters of credit fees

Other, net(1)

Total Other Income/(Loss)

(18)

(1)Other, net includes $30 million of income the Bank recognized in the first quarter of 2024 in connection with the termination of a long-term funding arrangement entered into with a member borrower in 2017.

Net Gain/(Loss) on Advances and Consolidated Obligation Bonds Held Under Fair Value Option – The following table presents the net gain/(loss) recognized in earnings on advances and consolidated obligation bonds held under fair value option for the three months ended ~~September 30, 2023~~March 31, 2024 and ~~2022.~~2023.

Net Gain/(Loss) on Advances and Consolidated Obligations Bonds Held Under Fair Value Option

Three Months Ended

(In millions)

September 30, 2023

September 30, 2022

(In millions)

March 31, 2024

March 31, 2023

Advances

(10)

(42)

Consolidated obligation bonds

(2)

Total

(12)

(20)

Under the fair value option, the Bank has elected to carry certain assets and liabilities at fair value. In general, transactions elected for the fair value option are in economic hedge relationships. Gains or losses on these transactions are generally offset by losses or gains on the derivatives that economically hedge these instruments.

Table of Contents

The net gains/(losses) on advances and consolidated obligation bonds held under the fair value option were primarily driven by the effects of changes in market interest rates, interest rate spreads, interest rate volatility, and other market factors relative to the actual terms onand volume of the advances and consolidated obligation bonds during the period.

Additional information about advances and consolidated obligation bonds held under the fair value option is provided in “Item 1. Financial Statements – Note 1211 – Fair Value.”

Net Gain/(Loss) on Derivatives – ~~Under~~Accounting guidance requires the ~~accounting guidance for derivative instruments and hedging activities, the~~ Bank ~~is required~~ to carry all of its derivative instruments on the Statements of Condition at fair value. Certain derivatives are associated with assets or liabilities but do not qualify as fair value ~~hedges under the accounting guidance for derivative instruments and hedging activities.~~hedges. These economic hedges are recorded on the Statements of Condition at fair value with the unrealized gain or loss recorded in earnings without any offsetting unrealized gain or loss from the associated asset or liability.

The following table shows the accounting classification of economic hedges and the categories of hedged items that contributed to the gains and losses on derivatives that were recorded in “Net gain/(loss) on derivatives” in the ~~third~~first quarter of ~~2023~~2024 and ~~2022.~~2023.

~~Table of Contents~~

														Sources of Gains/(Losses) Recorded in Net Gain/(Loss) on Derivatives Three Months Ended September 30, 2023, Compared to Three Months Ended September 30, 2022
Sources of Gains/(Losses) Recorded in Net Gain/(Loss) on Derivatives Three Months Ended March 31, 2024, Compared to Three Months Ended March 31, 2023														Sources of Gains/(Losses) Recorded in Net Gain/(Loss) on Derivatives Three Months Ended March 31, 2024, Compared to Three Months Ended March 31, 2023

		Three Months Ended
		Three Months Ended
		Three Months Ended
		Three Months Ended
(In millions)	(In millions)	September 30, 2023						September 30, 2022						(In millions)	March 31, 2024			March 31, 2023
Hedged Item	Hedged Item	Gain/(Loss) on Economic Hedges		Income/ (Expense) on Economic Hedges		Total		Gain/(Loss) on Economic Hedges		Income/ (Expense) on Economic Hedges		Total		Hedged Item	Gain/(Loss) on Economic Hedges	Income/ (Expense) on Economic Hedges	Total		Gain/(Loss) on Economic Hedges	Income/ (Expense) on Economic Hedges	Total
Advances:	Advances:
Elected for fair value option	Elected for fair value option	$	7	$	14	$	21	$	35	$	(3)	$	32
Elected for fair value option
Elected for fair value option
Not elected for fair value option	Not elected for fair value option	(3)		9		6		22		1		23
Consolidated obligation bonds:	Consolidated obligation bonds:
Elected for fair value option
Elected for fair value option
Elected for fair value option	Elected for fair value option	2		(7)		(5)		(19)		(6)		(25)
Not elected for fair value option	Not elected for fair value option	2		(9)		(7)		(20)		(3)		(23)
Consolidated obligation discount notes:	Consolidated obligation discount notes:
Not elected for fair value option	Not elected for fair value option	5		(4)		1		2		(13)		(11)
MBS:
Not elected for fair value option	Not elected for fair value option	—		—		—		3		—		3
Not elected for fair value option

Price alignment amount(1)

Price alignment amount(1)

Price alignment amount(1)	Price alignment amount(1)	(1)		—		(1)		—		—		—
Total	Total	$	12	$	3	$	15	$	23	$	(24)	$	(1)

(1)This amount relates to derivatives for which variation margin on cleared derivatives is characterized as a daily settled contract.

During the ~~third~~first quarter of ~~2023,~~2024, net gains on derivatives totaled $15 million compared to net losses of $1$34 million in the ~~third~~first quarter of ~~2022.~~2023. These amounts included interest income of $3$5 million and interest expense of ~~$24~~$5 million resulting from net settlements on derivative instruments used in economic hedges in the ~~third~~first quarter of ~~2023~~2024 and ~~2022,~~2023, respectively. Excluding the impact of interest income or expense from net settlements on derivative instruments used in economic hedges, the ~~net~~ gains or losses on economic hedges were primarily associated with the effects of changes in market interest rates, interest rate spreads, interest rate volatility, and other market factors during the period.

The ongoing impact of these valuation adjustments on the Bank cannot be predicted and the effects of these valuation adjustments may lead to significant volatility in future earnings, including earnings available for dividends.

Additional information about derivatives and hedging activities is provided in “Item 1. Financial Statements – Note 1110 – Derivatives and Hedging Activities.”

Termination of Long-Term Funding Arrangement – In connection with certain litigation involving its PLRMBS, the Bank entered into a long-term funding arrangement in 2017 with a member, under which the member agreed to

Table of Contents

obtain or maintain certain advances from the Bank. During the quarter ended March 31, 2024, the Bank terminated the long-term funding arrangement, and in accordance with its terms, recognized $30 million of other income.

Other Expense. During the ~~third~~first quarter of ~~2023,~~2024, other expenses totaled ~~$55~~$50 million, compared to ~~$41~~$45 million in the ~~third~~first quarter of ~~2022.~~2023. The increase ~~primarily reflected~~was attributable to a $4 million voluntary allocation for the Affordable Housing Program, which was in addition to the statutory Affordable Housing Program assessment discussed below. Other expense also included an increase in compensation and benefits.

Affordable Housing Program. The FHLBank Act requires each FHLBank to establish and fund an affordable housing program (AHP). Each FHLBank’s AHP provides subsidies to members, who use the funds to assist in the purchase, construction, or rehabilitation of $8housing for households earning up to 80% of the median income for the area in which they live. Subsidies may be in the form of direct grants or below-market interest rate advances.

To fund the AHP, the FHLBanks must set aside at least, in the aggregate, the greater of $100 million ~~in charitable contributions~~or 10% of the current year's net earnings (income before interest expense related to ~~fund downpayment assistance grants~~dividends paid on mandatorily redeemable capital stock and the assessment for the AHP). To the extent that the aggregate 10% calculation is less than $100 million, the FHLBank Act requires that each FHLBank contribute such prorated sums as may be required to ~~middle-income homebuyers, delivered by participating member financial institutions.~~ensure that the aggregate contribution of the FHLBanks equals at least $100 million. The proration would be made on the basis of the income of the FHLBanks for the previous year.

The Bank’s total AHP assessments equaled $16 million and $22 million for the three months ended March 31, 2024 and 2023, respectively.

Return on Average Equity. Return on average equity (ROE) was ~~6.17%~~7.49% (annualized) for the ~~third~~first quarter of ~~2023,~~2024, compared to ~~4.52%~~10.14% (annualized) for the ~~third~~first quarter of ~~2022.~~2023. The ~~increase~~decrease reflected ~~higher~~lower net income for the ~~third~~first quarter of 2024, which decreased 36%, from $195 million in the first quarter of 2023 ~~which increased 29%, from $80~~to $124 million in the ~~third~~first quarter of ~~2022 to $103 million in the third quarter of 2023,~~2024, partially offset by a decrease in average equity from ~~$7.1~~$7.8 billion in the ~~third~~first quarter of ~~2022~~2023 to $6.6 billion in the ~~third~~first quarter of ~~2023.~~2024.

~~Table of Contents~~

Dividends and Retained Earnings. In the ~~third~~first quarter of 2024, the Bank paid dividends at an annualized rate of 8.75%, totaling $69 million, including $53 million in dividends on capital stock and $16 million in dividends on mandatorily redeemable capital stock. In the first quarter of 2023, the Bank paid dividends at an annualized rate of ~~7.75%~~7.00%, totaling ~~$76~~$63 million, including $63 million in dividends on capital stock and $13 million in dividends on mandatorily redeemable capital stock. In the third quarter of 2022, the Bank paid dividends at an annualized rate of 6.00%, totaling $40 million, including $40 million in dividends on capital stock and a de minimis amount in dividends on mandatorily redeemable capital stock.

The Bank paid these dividends in cash. Dividends on capital stock are recognized as dividends on the Statements of Capital Accounts, and dividends on mandatorily redeemable capital stock are recognized as interest expense on the Statements of Income.

The Bank’s Excess Stock Repurchase, Retained Earnings, and Dividend Framework (Framework) assesses the level and adequacy of retained earnings and establishes amounts to be retained in restricted retained earnings, which are not made available in the current dividend period, and maintains an amount of total retained earnings at least equal to its required retained earnings as described in the Framework. ~~During the third quarter of 2023, the Board approved an updated Framework and dividend philosophy to reflect changes in the current interest rate environment and business conditions.~~ Under this approach, the Bank will endeavor to pay a quarterly dividend rate that is equal to or greater than the current market rate for a highly rated ~~investment (e.g., SOFR)~~investments and that is sustainable under current and projected earnings while maintaining appropriate levels of capital. The decision to declare any dividend and the dividend rate is at the discretion of the Bank’s board of directors, which may choose to follow the dividend philosophy as guidance in the dividend declaration. The Board may also revise or eliminate the dividend philosophy in the future. The Bank’s historical dividend rates and the dividend philosophy are not indicative of future dividend declarations.

For more information, see “Item 1. Financial Statements – Note 9 – Capital” in this report and see “Item 1. Business – Dividends and Retained Earnings,” “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Risk Management – Liquidity Risk,” and “Item 8. Financial Statements and Supplementary Data – Note 11 – Capital – Excess Stock Repurchase, Retained Earnings, and Dividend Framework” in the Bank’s ~~2022~~2023 Form 10-K.

5144

Table of Contents

~~Nine Months Ended September 30, 2023, Compared to Nine Months Ended September 30, 2022~~

Average Balance Sheets
Nine Months Ended
September 30, 2023 September 30, 2022
(Dollars in millions) Average
Balance Interest
Income/
Expense Average
Rate Average
Balance Interest
Income/
Expense Average
Rate
Assets
Interest-earning assets:
Interest-bearing deposits $ 4,438 $ 167 5.03 % $ 1,748 $ 17 1.29 %
Securities purchased under agreements to resell 6,819 252 4.94 5,747 65 1.51
Federal funds sold 11,147 414 4.96 10,883 96 1.18
Trading securities:
MBS 1 — 2.93 1 — 1.92
Other investments — — — 16 — 2.04
AFS securities:(1)
MBS(2)(3)(4)
9,770 484 6.62 8,715 220 3.38
Other investments(3)
4,035 161 5.31 2,064 27 1.74
HTM securities:
MBS 2,038 74 4.87 2,751 34 1.64
Mortgage loans held for portfolio(5)
794 21 3.46 892 38 5.74
Advances(3)(6)
81,951 3,184 5.20 43,101 501 1.55
Loans to other FHLBanks 11 — 4.90 12 — 1.48
Total interest-earning assets 121,004 4,757 5.26 75,930 998 1.76
Other assets(7)
606 — 518 —
Total Assets $ 121,610 $ 4,757 $ 76,448 $ 998
Liabilities and Capital
Interest-bearing liabilities:
Consolidated obligations:
Bonds(3)
$ 82,240 $ 3,008 4.89 % $ 26,549 $ 205 1.03 %
Discount notes 29,101 1,050 4.82 41,428 399 1.29
Deposits and other borrowings 1,205 45 5.07 1,107 7 0.90
Mandatorily redeemable capital stock 526 15 3.78 5 — 6.18
Borrowings from other FHLBanks 51 2 4.79 57 1 1.67
Total interest-bearing liabilities 113,123 4,120 4.87 69,146 612 1.18
Other liabilities(7)
1,200 — 564 —
Total Liabilities 114,323 4,120 69,710 612
Total Capital 7,287 — 6,738 —
Total Liabilities and Capital $ 121,610 $ 4,120 $ 76,448 $ 612
Net Interest Income $ 637 $ 386
Net Interest Spread(8)
0.39 % 0.57 %
Net Interest Margin(9)
0.70 % 0.68 %
Interest-earning Assets/Interest-bearing Liabilities 106.97 % 109.81 %

~~(1)The average balances of AFS securities are reflected at amortized cost. As a result, the average rates do not reflect changes in fair value.~~

~~(2)~~Interest income on AFS securities includes accretion of yield adjustments on certain PLRMBS (resulting from improvement in expected cash flows) with previous credit losses related to the prior methodology of evaluating credit losses, totaling $17 million and $27 million for the nine months ended September 30, 2023 and 2022, respectively.

~~Table of Contents~~

~~(3)Interest income/expense and average rates include the effect of associated interest rate exchange agreements, as follows:~~

Nine Months Ended
September 30, 2023
(In millions) Advances AFS Securities Consolidated Obligation Bonds Total
(Amortization)/accretion of hedging activities $ (19) $ (76) $ — $ (95)
Net gain/(loss) on derivatives and hedged items (210) 2 (5) (213)
Net interest settlements on derivatives 416 297 (424) 289
Total effect on net interest income
$ 187 $ 223 $ (429) $ (19)

Nine Months Ended
September 30, 2022
(In millions) Advances AFS Securities Consolidated Obligation Bonds Total
(Amortization)/accretion of hedging activities $ (22) $ (80) $ — $ (102)
Net gain/(loss) on derivatives and hedged items (5) 4 — (1)
Net interest settlements on derivatives (4) 2 (2) (4)
Total effect on net interest income $ (31) $ (74) $ (2) $ (107)

~~(4)Interest income includes net prepayment fees received on AFS MBS of $6 million and $20 million for the nine months ended September 30, 2023 and 2022, respectively.~~

~~(5)~~Nonperforming mortgage loans are included in average balances used to determine average rate. Interest income from retrospective adjustment of the effective yields was $3 million and $21 million for the nine months ended September 30, 2023 and 2022, respectively. Interest income includes amortization of upfront loan costs and delivery commitments of $(3) million and $(7) million for the nine months ended September 30, 2023 and 2022, respectively.

~~(6)Interest income includes net prepayment fees on advances of $99 million and $(4) million for the nine months ended September 30, 2023 and 2022, respectively.~~

~~(7)Includes forward settling transactions and valuation adjustments for certain cash items received/(paid).~~

~~(8)Net interest spread is calculated as the difference between the average rate earned on interest-earning assets and the average rate paid on interest-bearing liabilities.~~

~~(9)Net interest margin is calculated as net interest income (annualized) divided by average interest-earning assets.~~

Net interest income for the first nine months of 2023 was $637 million, a 65% increase from $386 million for the first nine months of 2022. The following table details the changes in interest income and interest expense for 2023 compared to 2022. Changes in both volume and interest rates influence changes in net interest income, net interest spread, and net interest margin.

~~Table of Contents~~

Change in Net Interest Income: Rate/Volume Analysis
Nine Months Ended September 30, 2023 Compared to Nine Months Ended September 30, 2022
Increase/
(Decrease)
Attributable to Changes in(1)
(In millions) Average Volume Average Rate
Interest-earning assets:
Interest-bearing deposits $ 150 $ 52 $ 98
Securities purchased under agreements to resell 187 14 173
Federal funds sold 318 2 316
AFS securities:
MBS(2)
264 30 234
Other investments(2)
134 42 92
HTM securities: MBS 40 (11) 51
Mortgage loans held for portfolio (17) (4) (13)
Advances(2)
2,683 745 1,938
Total interest-earning assets 3,759 870 2,889
Interest-bearing liabilities:
Consolidated obligations:
Bonds(2)
2,803 1,008 1,795
Discount notes 651 (151) 802
Deposits and other borrowings 38 1 37
Borrowings from other FHLBanks 1 — 1
Mandatorily redeemable capital stock 15 15 —
Total interest-bearing liabilities 3,508 873 2,635
Net interest income $ 251 $ (3) $ 254

~~(1)Combined rate/volume variances, a third element of the calculation, are allocated to the rate and volume variances based on their relative sizes.~~

~~(2)Interest income/expense and average rates include the interest effect of associated interest rate exchange agreements.~~

The net interest margin was 70 basis points for the first nine months of 2023, 2 basis point higher than the net interest margin for the first nine months of 2022, which was 68 basis points. The increase in net interest margin is primarily the result of an increase in the average rate paid on interest-earning assets to 5.26% for the nine months ended September 30, 2023 compared to 1.76% for the nine months ended September 30, 2022. Although higher interest rates were the primary cause for the interest income increase, the higher average balances of advances and investments were also a contributing factor. These effects were partially offset by an increase in costs of interest-bearing liabilities from higher funding levels. The net interest spread was 39 basis points for the first nine months of 2023, 18 basis points lower than the net interest spread for the first nine months of 2022, which was 57 basis points. The decrease in net interest spread was primarily a result of an increase in costs of interest-bearing liabilities from higher funding levels, which were partially offset by higher yields on interest-earning assets that primarily resulted from higher interest rates on growing advance balances.

For PLRMBS with previous credit losses related to the prior methodology of evaluating credit losses, the Bank updates its estimate of future estimated cash flows on a regular basis. If there is no additional credit loss on the security, the yield of the security is adjusted on a prospective basis and accreted into interest income based on the expected cash flows. As a result of improvements in the estimated cash flows of these securities, the net accretion of income is likely to continue to be a positive source of net interest income in future periods.

Member demand for wholesale funding from the Bank can vary greatly depending on a number of factors, including economic and market conditions, competition from other wholesale funding sources, member deposit inflows and outflows, the activity level of the primary and secondary mortgage markets, and strategic decisions made by individual member institutions. In addition, events affecting the financial services industry during the first two quarters of 2023 resulted in the liquidation or receivership of some of the Bank’s largest borrowers. The loss of Bank members, especially its largest borrowers, may also have the effect of reducing member demand for wholesale funding. As a result, Bank asset levels and operating results may vary significantly from period to period. See “Item

~~Table of Contents~~

1. Financial Statements - Note 4 - Advances” for more information on the Bank’s largest members and “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Quarterly Overview” for information on the loss of the Bank’s largest borrowers and its potential effect on the Bank’s opportunity to grow advances.

~~Other Income/(Loss).~~ ~~The following table presents the components of “Other Income/(Loss)” for the nine months ended September 30, 2023 and 2022.~~

Other Income/(Loss)
Nine Months Ended
(In millions) September 30, 2023 September 30, 2022
Other Income/(Loss):
Net gain/(loss) on advances and consolidated obligation bonds held under fair value option $ (27) $ (53)
Net gain/(loss) on derivatives (6) (13)
Private-label residential mortgage-backed securities trust settlement — 28
Standby letters of credit fees 15 11
Other, net 3 (4)
Total Other Income/(Loss) $ (15) $ (31)

~~Net Gain/(Loss) on Advances and Consolidated Obligation Bonds Held Under Fair Value Option –~~ ~~The following table presents the net gain/(loss) on advances and consolidated obligation bonds held under fair value option for the nine months ended September 30, 2023 and 2022.~~

Net Gain/(Loss) on Advances and Consolidated Obligation Bonds Held Under Fair Value Option
Nine Months Ended
(In millions) September 30, 2023 September 30, 2022
Advances $ (11) $ (117)
Consolidated obligation bonds (16) 64
Total $ (27) $ (53)

The net gains/(losses) on advances and consolidated obligation bonds held under the fair value option were primarily driven by the effects of changes in market interest rates, interest rate spreads, interest rate volatility, and other market factors relative to the actual terms on the advances and consolidated obligation bonds during the period.

Additional information about advances and consolidated obligation bonds held under the fair value option is provided in “Item 8. Financial Statements and Supplementary Data – Note 12 – Fair Value.”

~~Net Gain/(Loss) on Derivatives –~~ Under the accounting guidance for derivative instruments and hedging activities, the Bank is required to carry all of its derivative instruments on the Statements of Condition at fair value. Certain derivatives are associated with assets or liabilities but do not qualify as fair value hedges under the accounting guidance for derivative instruments and hedging activities. These economic hedges are recorded on the Statements of Condition at fair value with the unrealized gain or loss recorded in earnings without any offsetting unrealized gain or loss from the associated asset or liability.

~~Table of Contents~~

The following table shows the accounting classification of economic hedges and the categories of hedged items that contributed to the gains and losses on derivatives that were recorded in “Net gain/(loss) on derivatives” for the nine months ended~~September 30, 2023 and 2022.~~

Sources of Gains/(Losses) Recorded in Net Gain/(Loss) on Derivatives
2023 Compared to 2022
Nine Months Ended
(In millions) September 30, 2023 September 30, 2022
Hedged Item Gain/(Loss) on Economic
Hedges Income/
(Expense) on Economic
Hedges Total Gain/(Loss) on Economic
Hedges Income/
(Expense) on Economic
Hedges Total
Advances:
Elected for fair value option $ 8 $ 36 $ 44 $ 102 $ (18) $ 84
Not elected for fair value option (36) 28 (8) 43 10 53
Consolidated obligation bonds:
Elected for fair value option 14 (28) (14) (58) (4) (62)
Not elected for fair value option 9 (27) (18) (62) (2) (64)
Consolidated obligation discount notes:
Not elected for fair value option — (7) (7) (25) (3) (28)
MBS:
Not elected for fair value option — — — 4 — 4
Price alignment amount(1)
(3) — (3) — — —
Total $ (8) $ 2 $ (6) $ 4 $ (17) $ (13)

~~(1) This amount relates to derivatives for which variation margin on cleared derivatives is characterized as a daily settled contract.~~

During the first nine months of 2023, net losses on derivatives totaled $6 million compared to net losses of $13 million in the first nine months of 2022. These amounts included income of $2 million and expense of $17 million resulting from net settlements on derivative instruments used in economic hedges in the first nine months of 2023 and 2022, respectively. Excluding the impact of income or expense from net settlements on derivative instruments used in economic hedges, the net gains or losses on economic hedges were primarily associated with the effects of changes in market interest rates, interest rate spreads, interest rate volatility, and other market factors during the period.

The Bank cannot predict the ongoing impact of these valuation adjustments and the effects of these valuation adjustments may lead to significant volatility in future earnings, including earnings available for dividends.

~~Additional information about derivatives and hedging activities is provided in “Item 8. Financial Statements and Supplementary Data – Note 11 – Derivatives and Hedging Activities.”~~

~~PLRMBS Trust Settlement –~~ One of the Bank’s PLRMBS investments is held within a trust that has been the subject of litigation by the trustee since 2012. Upon final resolution of the litigation, to which the Bank was not a party, the trustee was required to transmit settlement proceeds to the trust. In the first quarter of 2022, as a result of the distribution of the settlement proceeds to the beneficial owners of the securities in the trust, including the Bank, the Bank recorded settlement proceeds of $28 million as income during the nine months ended September 30, 2022. There was no similar activity during the nine months ended September 30, 2023.

~~Other Expense.~~ During the first nine months of 2023, other expenses totaled $148 million, compared to $117 million in the first nine months of 2022. The increase was attributable to an increase in compensation and benefits throughout the Bank’s workforce as a result of a comprehensive compensation study in order to retain talent and an increase in charitable contributions to fund downpayment assistance grants to middle-income homebuyers, delivered by participating member financial institutions.

~~Table of Contents~~

~~Return on Average Equity.~~ ROE was 7.69% for the first nine months of 2023, compared to 4.09% for the first nine months of 2022. The increase reflected higher net income for the first nine months of 2023, which increased 103% to $419 million in the first nine months of 2023 from $206 million in the first nine months of 2022, which was partially offset by an increase in average equity to $7.3 billion in the first nine months of 2023 from $6.7 billion in the first nine months of 2022.

~~Dividends and Retained Earnings.~~ In the first nine months of 2023, the Bank paid dividends at an annualized rate of 7.26%, totaling $206 million, including $191 million in dividends on capital stock and $15 million in dividends on mandatorily redeemable capital stock. In the first nine months of 2022, the Bank paid dividends at an annualized rate of 6.00%, totaling $108 million, including $108 million in dividends on capital stock and a de minimis amount in dividends on mandatorily redeemable capital stock.

For more information, see “Item 1. Business – Dividends and Retained Earnings,” “Management��s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources – Capital,” and “Item 8. Financial Statements and Supplementary Data – Note 11 – Capital – Excess Stock Repurchase, Retained Earnings, and Dividend Framework.”

Financial Condition

Total assets were ~~$95.0~~$88.0 billion at ~~September 30, 2023,~~March 31, 2024, compared to ~~$121.1~~$92.8 billion at December 31, ~~2022.~~2023. Advances decreased by ~~$25.8~~$4.4 billion, or ~~29%~~7%, to ~~$63.6~~$56.9 billion at ~~September 30, 2023,~~March 31, 2024, from ~~$89.4~~$61.3 billion at December 31, ~~2022.~~2023. Average advances were ~~$64.2 billion for the third quarter of 2023, a 10% increase from $58.5 billion for the third quarter of 2022. Average advances were $82.0~~$55.8 billion for the first ~~nine months~~quarter of ~~2023,~~2024, a ~~90% increase~~39% decrease from ~~$43.1~~$91.7 billion for the first ~~nine months~~quarter of ~~2022.~~2023. Average MBS investments were ~~$12.7 billion for the third quarter of 2023, a 17% increase from $10.9 billion for the third quarter of 2022. Average MBS investments were $11.8~~$15.2 billion for the first ~~nine months~~quarter of ~~2023, an 3%~~2024, a 39% increase from ~~$11.5~~$11.0 billion for the first ~~nine months~~quarter of ~~2022.~~2023.

Advances outstanding at ~~September 30, 2023,~~March 31, 2024, included net unrealized losses of ~~$973~~$531 million, of which ~~$921~~$515 million represented unrealized losses on hedged advances ~~hedged in accordance with the accounting for derivative instruments~~ and ~~hedging activities and $52~~$16 million represented unrealized losses on economically hedged advances that are carried at fair value in accordance with the fair value option. Advances outstanding at December 31, ~~2022,~~2023, included net unrealized losses of ~~$717~~$375 million, of which ~~$670~~$371 million represented unrealized losses on hedged advances ~~hedged in accordance with the accounting for derivative instruments~~ and ~~hedging activities and $47~~$4 million represented unrealized losses on economically hedged advances that are carried at fair value in accordance with the fair value option. The change in the net unrealized losses on ~~the hedged~~ advances ~~and advances carried at fair value~~ from December 31, ~~2022,~~2023, to ~~September 30, 2023,~~March 31, 2024, was primarily attributable to the effects of changes in market interest rates, interest rate spreads, interest rate volatility, and other market factors relative to the actual terms onand volume of the ~~Bank’s~~ advances during the period.

The Bank invests in interest-bearing deposits, securities purchased under agreements to resell, and ~~Federal~~federal funds sold. These investments are funded with longer tenor debt to create liquidity.

Total liabilities were ~~$88.4~~$81.2 billion at ~~September 30, 2023,~~March 31, 2024, a decrease of ~~$24.9~~$5.0 billion from ~~$113.3~~$86.2 billion at December 31, ~~2022,~~2023, primarily reflecting a ~~$26.5~~$4.7 billion decrease in consolidated obligations outstanding to ~~$85.2~~$78.8 billion at ~~September 30, 2023,~~March 31, 2024, from ~~$111.7~~$83.5 billion at December 31, ~~2022.~~2023. Average consolidated obligations were ~~$89.8 billion for the third quarter of 2023 and $89.8 billion for the third quarter of 2022. Average consolidated obligations were $111.3~~$78.7 billion for the first ~~nine months~~quarter of ~~2023~~2024 and ~~$68.0~~$121.9 billion for the first ~~nine months~~quarter of ~~2022.~~

~~Table of Contents~~

For further information and discussion of the Bank’s joint and several liability for FHLBank consolidated obligations, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Financial Condition” and “Item 1. Financial Statements – Note 13 – Commitments and Contingencies.

Accumulated other comprehensive income/(loss) was $(55) million at September 30, 2023, compared to $(29) million at December 31, 2022. The change in accumulated other comprehensive income/(loss) was mainly attributable to a decrease in the fair values of investment securities classified as AFS, which primarily reflected higher interest rate spreads during the first nine months of 2023, mostly impacting the Bank’s agency MBS portfolio.

2023.

Consolidated obligations outstanding at ~~September 30, 2023,~~March 31, 2024, included net unrealized gains of ~~$964~~$667 million on hedged consolidated obligation bonds ~~hedged in accordance with the accounting for derivative instruments and hedging activities~~ and unrealized gains of ~~$43~~$28 million on economically hedged consolidated obligation bonds that are carried at fair value in accordance with the fair value option. Consolidated obligations outstanding at December 31, ~~2022,~~2023, included net unrealized gains of ~~$1.1 billion~~$645 million on hedged consolidated obligation bonds ~~hedged in accordance with the accounting for derivative instruments and hedging activities~~ and unrealized gains of ~~$52~~$29 million on economically hedged consolidated obligation bonds that are carried at fair value in accordance with the fair value option. The change in the net unrealized gains on the ~~hedged~~ consolidated obligation bonds ~~and on the consolidated obligation bonds carried at fair value~~ from December 31, ~~2022,~~2023, to ~~September 30, 2023,~~March 31, 2024, were primarily attributable to the effects of changes in market interest rates, interest rate spreads, interest rate volatility, and other market factors relative to ~~the actual terms on the Bank’s~~ consolidated obligation ~~bonds~~bond terms and volumes during the period.

As provided by the FHLBank Act or regulations governing the operations of the FHLBanks, all FHLBanks have joint and several liability for all FHLBank consolidated obligations. The joint and several liability regulation authorizes the Finance Agency to require any FHLBank to repay all or a portion of the principal or interest on consolidated obligations for which another FHLBank is the primary obligor. The Bank has never been asked or required to repay the principal or interest on any consolidated obligation on behalf of another FHLBank, and as of ~~September 30, 2023,~~March 31, 2024, and through the filing date of this report, does not believe that it is probable that it will be asked to do so. The par value of the outstanding consolidated obligations of the FHLBanks was $1.2 trillion at ~~September 30, 2023,~~March 31, 2024, and December 31, ~~2022.~~2023.

~~LIBOR Transition.~~ Following the cessation of representative USD LIBOR on June 30, 2023, the Bank’s investments with future rate resets originally indexed to LIBOR have been transitioned to alternative fallback rates indexed to SOFR. The Bank recognizes that the discontinuation of LIBOR presents risksFor further information and challenges that could have an impact on the Bank’s business. The Bank’s Asset and Liability Management Committee has the primary responsibility for driving the transition from LIBOR to SOFR and managing and mitigating the associated risks. For information about the risks to the Bank from the discontinuation of LIBOR, see “Item 1A. Risk Factors” in the Bank’s 2022 Form 10-K.

~~Segment Information~~

The Bank uses an analysis of financial results based on the financial components and adjusted net interest income of two operating segments, the advances-related business and the mortgage-related business, as well as other financial information, to review and assess financial performance and determine financial management strategies related to the operations of these two business segments. For purposes of segment reporting, adjusted net interest income includes income and expense associated with net settlements from economic hedges that are recorded in “Net gain/(loss) on derivatives” in other income/(loss), excludes interest income and expense associated with changes in fair value of the derivative hedging instrument and the hedged item attributable to the hedged risk for designated fair value hedges that are recorded in net interest income, and excludes interest expense that is recorded in “Mandatorily redeemable capital stock.” Affordable Housing Program (AHP) assessments are not included in the segment reporting analysis but are incorporated into the Bank’s overall assessment of financial performance. For a reconciliationdiscussion of the Bank’s ~~operating segment adjusted net interest income to the Bank’s total net interest income,~~joint and several liability for FHLBank consolidated obligations, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Financial Condition” and “Item 8.1. Financial Statements – Note 1012 – ~~Segment Information.”~~Commitments and Contingencies.

5845

Table of Contents

The average balances of interest-bearing demand and overnight deposits were $819 million and $810 million, and the weighted average interest rates paid on interest-bearing demand and overnight deposits were 5.21% and 4.66% in the first quarter of 2024 and 2023, respectively. There were no term deposits outstanding during the first quarter of 2024. The average balance of term deposits was $26 million and the weighted average interest rate paid on term deposits was 4.40% in the first quarter of 2023. All Bank deposits are uninsured.

Accumulated other comprehensive income was $27 million at March 31, 2024, an increase of $99 million compared to accumulated other comprehensive loss of $72 million at December 31, 2023, mainly attributable to an improvement in the fair values of investment securities classified as AFS, which primarily reflected higher interest rate spreads during the first quarter of 2024, mostly impacting the Bank’s agency MBS portfolio.

Credit Ratings. On July 31, 2023, S&P Global Ratings (S&P) affirmed the long-term issuer credit ratings on all of the FHLBanks at AA+. On January 24, 2024, Moody’s Investors Service (Moody’s) affirmed the Aaa long-term ratings of the FHLBank System.

Changes in the long-term credit ratings of individual FHLBanks do not necessarily affect the credit rating of the consolidated obligations issued on behalf of the FHLBanks. Rating agencies may change or withdraw a rating from time to time because of various factors, including operating results or actions taken, business developments, or changes in their opinion regarding, among other factors, the general outlook for a particular industry or the economy.

Advances-Related ~~Business.~~Products. The advances-related ~~business consists~~products consist of advances and other credit ~~products, related financing and hedging instruments, liquidity and other non-MBS investments associated with the Bank’s role as a liquidity provider, and capital.~~products.

Adjusted net interest income for this segment is derived primarily from the difference, or spread, between the yield on advances and non-MBS investments and the cost of the consolidated obligations funding these assets, including the net settlements from associated interest rate exchange agreements, and from earnings attributed to the Bank’s capital stock and retained earnings.

Adjusted net interest income for this segment was $128 million in the third quarter of 2023, an increase of $42 million, or 49%, compared to $86 million in the third quarter of 2022. This quarterly increase was primarily a result of an improvement in spreads on advances-related assets and higher balances of advances and other credit products.

The following table presents the advances portfolio by product type at ~~September 30, 2023,~~March 31, 2024, and December 31, ~~2022.~~2023.

										Advances Portfolio by Product Type
		September 30, 2023				December 31, 2022
	March 31, 2024															March 31, 2024						December 31, 2023
(Dollars in millions)	(Dollars in millions)	Par Value		Percentage of Total Par Value		Par Value		Percentage of Total Par Value		(Dollars in millions)	Par Value			Percentage of Total Par Value				Par Value					Percentage of Total Par Value

Adjustable – SOFR	Adjustable – SOFR	$	2,165	2	%	2,690		3	%

Adjustable – SOFR

Adjustable – SOFR											$	4,685		8		%		2,055					2	%
Adjustable – SOFR, callable at borrower’s option	Adjustable – SOFR, callable at borrower’s option	4,250		7		9,500		11

Subtotal adjustable rate advances

Subtotal adjustable rate advances

Subtotal adjustable rate advances	Subtotal adjustable rate advances	6,415		9		12,190		14
Fixed	Fixed	10,019		16		45,471		50
Fixed – amortizing	Fixed – amortizing	60		—		60		—
Fixed – with PPS(1)	Fixed – with PPS(1)	523		1		965		1
Fixed – with FPS(1)	Fixed – with FPS(1)	38,666		60		18,035		20

Fixed – callable at borrower’s option with FPS(1)	Fixed – callable at borrower’s option with FPS(1)	340		1		340		—

Fixed – callable at borrower’s option with FPS(1)

Fixed – callable at borrower’s option with FPS(1)

Fixed – putable at Bank’s option with FPS(1)

Fixed – putable at Bank’s option with FPS(1)

Fixed – putable at Bank’s option with FPS(1)	Fixed – putable at Bank’s option with FPS(1)	1,491		2		800		1

Subtotal fixed rate advances	Subtotal fixed rate advances	51,099		80		65,671		72
Subtotal fixed rate advances
Subtotal fixed rate advances
Daily variable rate	Daily variable rate	7,043		11		12,256		14
Total par value	Total par value	$	64,557	100	%	$	90,117	100	%	Total par value	$	57,443	100		100		%		$	61,710	100			100	%

(1)Partial prepayment symmetry (PPS) and full prepayment symmetry (FPS) are product features under which the Bank may charge the borrower a prepayment fee or pay the borrower a prepayment credit, depending on certain circumstances, such as movements in interest rates, when the advance is prepaid. In November 2018, the Bank discontinued offering advances with PPS, and any prepayment credit on an advance with PPS would be limited to the lesser of 10% of the par value of the advance or the gain recognized on the termination of the associated interest rate swap, which may also include a similar contractual gain limitation.

Mortgage-Related ~~Business.~~Products. The mortgage-related ~~business consists~~products consist of MBS investments and mortgage loans acquired through the Mortgage Partnership ~~Finance® (MPF®~~Finance® (MPF®) Program ~~and the related financing and hedging instruments.~~ (“Mortgage Partnership Finance” and “MPF” are registered trademarks of the FHLBank of Chicago.) Adjusted net interest income for this segment is derived primarily from the difference, or spread, between the yield on the MBS investments and mortgage loans and the cost of the consolidated obligations funding those assets, including the net settlements from associated interest rate exchange agreements.Chicago).

Adjusted net interest income for this segment was $44 million in the third quarter of 2023, a decrease of $4 million, or 8%, from $48 million in the third quarter of 2022. This quarterly decrease was primarily a result of lower earnings on mortgage-related products and lower accretion-related income, partially offset by higher MBS balances.

MBS Investments – The Bank’s MBS portfolio was ~~$14.1~~$15.2 billion at ~~September 30, 2023,~~March 31, 2024, compared with ~~$10.9~~$15.3 billion at December 31, ~~2022.~~2023. During the first ~~nine~~three months of ~~2023,~~2024, the Bank’s MBS portfolio ~~increased primarily~~decreased as a result of ~~$4.2 billion~~a $244 million decrease in ~~purchases,~~basis adjustments and $167 million in principal repayments, partially offset by ~~$493 million in principal repayments. Average MBS investments were $12.7 billion in the third quarter of 2023, an increase of $1.8 billion from $10.9 billion in the third~~$307

5946

Table of Contents

~~quarter of 2022.~~million in purchases. Average MBS investments were ~~$11.8~~$15.2 billion ~~for~~in the first ~~nine months~~quarter of ~~2023,~~2024, an increase of ~~$0.3~~$4.2 billion from ~~$11.5~~$11.0 billion ~~for~~in the first ~~nine months~~quarter of ~~2022.~~2023.

Mortgage Loans – Mortgage loan balances were ~~$770~~$742 million at ~~September 30, 2023,~~March 31, 2024, a decrease of ~~$45~~$12 million from ~~$815~~$754 million at December 31, ~~2022.~~2023. Average mortgage loans were ~~$778 million in the third quarter of 2023, a decrease of $72 million from $850 million in the third quarter of 2022. Average mortgage loans were $794~~$749 million in the first ~~nine months~~quarter of ~~2023,~~2024, a decrease of ~~$98~~$60 million from ~~$892~~$809 million in the first ~~nine months~~quarter of ~~2022.~~2023.

For more information on the Bank’s management of interest rate risk and market risk related to ~~the~~ mortgage-related ~~business,~~products, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Risk Management – Market Risk.”

Liquidity and Capital Resources

The Bank’s financial strategies are designed to enable the Bank to expand and contract its ~~assets, liabilities, and capital~~balance sheet as membership composition and member credit needs change. The Bank’s liquidity and capital resources are designed to support its financial strategies. The Bank’s primary source of liquidity is its access to the debt capital markets through consolidated obligation ~~issuance.~~issuance which is described in “Item 1. Business – Funding Sources” in the Bank’s 2023 Form 10-K. The Bank’s status as a GSE is critical to maintaining its access to the capital markets. Although consolidated obligations are backed only by the financial resources of the FHLBanks and are not guaranteed by the U.S. government, the capital markets have traditionally treated the FHLBanks’ consolidated obligations as comparable to federal agency debt, providing the FHLBanks with access to funding at relatively favorable rates. The maintenance of the Bank’s capital resources is governed by its capital plan.

Liquidity

The Bank ~~seeks~~strives to maintain the liquidity necessary to repay maturing consolidated obligations for which it is the primary obligor, meet other obligations and commitments, ~~and~~ meet expected and unexpected member credit ~~demands.~~demands, and avail of investment opportunities. The Bank monitors its financial position ~~to maintain ready access to available funds~~in order to meet ~~normal transaction requirements, take advantage of appropriate investment opportunities, and manage unforeseen liquidity demands.~~these objectives.

The Bank generally manages operational, contingent, and refinancing risks using a portfolio of cash and short-term investments and access to the debt capital markets. In addition, the Bank maintains alternate sources of funds, detailed in its contingent ~~liquidity~~funding plan, which also includes an explanation of how sources of funds may be allocated under stressed market conditions, such as short-term operational disruptions at the Bank or the Office of Finance or short-term disruptions in the debt capital markets. The Bank maintains cash deposits, short-term and high-quality money market investments, and government securities in amounts to satisfy these requirements and objectives.

The Bank has a regulatory contingent liquidity requirement to maintain at least 5 business days of liquidity to enable it to meet its obligations without issuance of new consolidated obligations. In addition, the Finance Agency has established base case liquidity guidelines, which may be amended from time to time, that each FHLBank maintain sufficient liquidity at least equal to its anticipated cash outflows, assuming no new consolidated obligation issuance, renewal of all maturing advances, a specified percentage drawdown on letters of credit balances, and certain U.S. Treasury investments as a source of funds. The Finance Agency’s guidance provides that base case liquidity should generally be maintained for 10 to 30 days. The Bank actively monitors and manages refinancing risk. Finance ~~Agency~~Agency’s guidance specifies tolerance levels related to the size of each FHLBank’s funding gaps to measure refinancing risk as the difference between assets and liabilities that are scheduled to mature during a specified period, expressed as a percentage of total assets. The guidance limits three-month and one-year funding gaps generally between the range of –10% to –20% and –25% to –35%, respectively. Funding gaps are measured at monthend, using the average ratio for the three most recent month ends. ~~The Bank is also required to perform an annual liquidity stress test and report the results to the Finance Agency.~~

~~In addition to the Finance Agency’s guidelines on contingent~~The Bank’s liquidity ~~the Bank models its cash commitments and expected cash flows on a daily basis to determine its projected liquidity position. If~~management plans also describe meeting obligations in a market or operational disruption ~~occurred~~scenario that ~~prevented~~may prevent the issuance of new consolidated obligations ~~the Bank could meet its obligations by:~~by, for example, (i) allowing short-term liquid investments to mature, (ii) using eligible securities as collateral for repurchase agreement borrowings, ~~and~~ (iii) ~~if necessary, allowing advances to mature without renewal. In addition, the Bank may be able to borrow~~

Table of Contents

borrowing on a short-term unsecured basis from other financial institutions ~~(Federal~~(federal funds purchased) or other FHLBanks (inter-FHLBank borrowings).

~~Table of Contents~~

, and if necessary, (iv) allowing advances to mature without renewal.

As of ~~September 30, 2023,~~March 31, 2024, and December 31, ~~2022,~~2023, the Bank held total sources of funds in an amount that would have allowed the Bank to meet its liquidity needs without issuing new consolidated obligations for over 10 days, in accordance with the Finance ~~Agency~~Agency’s guidance. The Bank met all expected and unexpected member demand using its liquidity in a safe and sound manner. In addition, the Bank’s funding gap positions as of ~~September 30, 2023,~~March 31, 2024, and December 31, ~~2022,~~2023, were within the tolerance levels provided by the Finance ~~Agency~~Agency’s guidance. At ~~September 30, 2023,~~March 31, 2024, the Bank had ~~$0.2~~$2.4 billion in commitments to issue consolidated obligations. The Bank had ~~committed~~no commitments to ~~the issuance of $2.7 billion in~~issue consolidated obligations at December 31, ~~2022.~~2023.

For more information, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources – Liquidity” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Risk Management – Liquidity Risk” in the Bank’s ~~2022~~2023 Form 10-K.

In addition, in the ordinary course of business, the Bank engages in financial transactions that, in accordance with ~~U.S. GAAP,~~accounting principles generally accepted in the United States of America (U.S. GAAP), are not recorded on the Bank’s Statements of Condition or may be recorded on the Bank’s Statements of Condition in amounts that are different from the full contract or notional amount of the transactions. For example, the Bank routinely enters into commitments to extend advances and issues standby letters of credit. These commitments and standby letters of credit may represent future cash requirements of the Bank, although the standby letters of credit usually expire without being drawn upon. Standby letters of credit are subject to the same underwriting and collateral requirements as advances made by the Bank. At ~~September 30, 2023,~~March 31, 2024, the Bank had no$7 million in advance commitments and ~~$18.3~~$18.9 billion in standby letters of credit outstanding. At December 31, ~~2022,~~2023, the Bank had no advance commitments and ~~$22.6~~$19.4 billion in standby letters of credit outstanding.

For additional information, see “Item 8. Financial Statements and Supplementary Data – Note 1612 – Commitments and Contingencies.”

Capital

On July 29, 2022, the Bank’s board of directors approved proposed amendments to the Bank’s capital plan, ~~remain subject~~which were submitted to review and approval by the Finance Agency. In connection with the Finance Agency’s review, the proposed amendments are subject to change and there can be no assurance that any amendments will be adopted. If the amendments are approved by the Finance Agency ~~as proposed, a revised plan will become effective at a future date~~for approval in August 2022. On April 11, 2024, the Bank withdrew the application it submitted to ~~be determined by the Bank. Because these proposed amendments were still under review at~~ the Finance Agency in ~~April 2023,~~August of 2022 that requested approval of the ~~Bank used the existing membership stock calculation methodology based on membership asset value as outlined in~~proposed amendments to its capital plan. In March 2024, the Bank’s ~~Capital Plan.~~board of directors approved changes to the Bank's capital plan which would primarily provide for the option to establish two subclasses of stock for the potential purpose of enabling the declaration of different dividend rates on Membership and Activity stock. Such a change would require further action from the board of directors. This plan was submitted to the Finance Agency for approval in April 2024.

The Bank’s capital requirements and proposed amendments are discussed in more detail in “Item 1. Financial Statements – Note 9 – Capital” in this report, ~~and~~ “Item ~~7. – Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources – Capital” and~~

~~“Item~~ 7. – Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources – Capital” and “Item 8. Financial Statements and Supplementary Data – Note 11 – Capital” in the Bank’s ~~2022~~2023 Form 10-K.

Table of Contents

Risk Management

The Bank has an integrated corporate governance and internal control framework designed to support effective management of the Bank’s business activities and the risks inherent in these activities. As part of this framework, the Bank’s board of directors has adopted a Risk Governance Policy that outlines the key roles and responsibilities of the board of directors and management and sets forth how the Bank is organized to achieve its risk management objectives, including the implementation of the Bank’s strategic objectives, risk management strategies, corporate governance and ~~corporate governance.~~standards of conduct. The policy also establishes an independent risk oversight function to identify, assess, measure, monitor, and report on the enterprise risk profile in relation to its risk appetite and risk management capabilities of the Bank. For more information, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Risk Management” in the Bank’s ~~2022~~2023 Form 10-K.

~~Table of Contents~~

Advances. The Bank manages the credit risk of advances and other credit products by setting the credit and collateral terms available to individual members and housing associates based on their creditworthiness and on the quality and value of the assets they pledge as collateral. Pursuant to the Bank’s lending agreements with its borrowers, the Bank limits extensions of credit to individual borrowers to a percentage of the market value or unpaid principal balance of the borrower’s pledged collateral, known as the borrowing capacity, which the Bank can change from time to time. The borrowing capacity percentage varies according to several factors, including the charter type of the institution, the collateral type, the value assigned to the collateral, the results of the Bank’s collateral field review of the borrower’s collateral, the pledging method used for loan collateral (specific identification or blanket lien), the amount of loan data provided (detailed or summary reporting), the data reporting frequency (monthly or quarterly), the borrower’s financial strength and condition, and any institution-specific collateral risks. Under the terms of the Bank’s lending agreements, the aggregate borrowing capacity of a borrower’s pledged eligible collateral must meet or exceed the total amount of the borrower’s outstanding advances, other extensions of credit, and certain other borrower obligations and liabilities.

For more information on the Bank’s management of credit risk on its advances, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Risk Management – Credit Risk – Advances” in the Bank’s ~~2022~~2023 Form 10-K.

The Bank has a high concentration of advances ~~and capital stock~~ with certain institutions and their affiliates. ~~Advances~~The percentage of the Bank’s advances outstanding to ~~the Bank’s~~its top 10 borrowers and their affiliates ~~decreased by $16.9~~increased to 73%, or $41.4 billion, at March 31, 2024, compared to ~~$47.0~~71%, or $43.8 billion, ~~or 73% of total advances outstanding at September 30, 2023, from $63.9 billion, or 71% of total advances outstanding~~ at December 31, ~~2022. (See “Item 1. Financial Statements – Note 4 - Advances – Concentration Risk” for further information.)~~2023.

Several of the Bank’s top 10 advance borrowers and their affiliates at yearend 2022 ~~have recently been~~were involved in voluntary liquidation, or Federal Deposit Insurance Corporation (FDIC) receivership during 2023, or have been acquired by nonmember institutions. ~~The loss of advances outstanding to these members is likely to have an adverse impact on the Bank’s advance balances, and, over time, its financial performance.~~

On March 8, 2023, Silvergate Capital Corporation, the parent company of Silvergate Bank, announced its intent to wind down the operations of and voluntarily liquidate Silvergate Bank, and on June 1, 2023, the Federal Reserve Board announced a consent order against Silvergate Capital Corporation and Silvergate Bank to facilitate that voluntary self-liquidation. At September 30, 2023, Silvergate Bank had no advances outstanding from the Bank, a reduction of $4.3 billion from yearend 2022.

On March 10, 2023, Silicon Valley Bank was closed by the California DFPI and FDIC was named as receiver. The FDIC created Silicon Valley Bridge Bank, N.A., whereby all of the deposits and substantially all assets of Silicon Valley Bank were transferred to the bridge bank. As of March 31, ~~2023, Silicon Valley Bridge~~2024, nonmembers accounted for $24.6 billion, or 43%, of total advances outstanding, and for the three months ended March 31, 2024, nonmembers accounted for $260 million, or 43%, of the Bank’s interest income from advances. Because these borrowers are nonmembers, when these advances either mature or are prepaid they cannot be replaced by these borrowers, which will adversely affect the Bank’s level of advance balances and total interest income from advances in the future. As a result of the inability of nonmembers to seek new advances, the level of advances and their associated net interest income in the future will be determined by member business, which will be subject to a number of factors including, but not limited to, a member’s ability to generate new business to seek new advances, consolidation within the banking industry, and the economy in general. For further information, see “Item 1. Financial Statements – Note 4 – Advances – Concentration Risk”.

In connection with certain litigation involving the Bank’s PLRMBS, the Bank ~~N.A., had prepaid all outstanding advances to the Bank. On March 26, 2023, the FDIC~~ entered into a ~~purchase and assumption agreement for all the deposits and loans of Silicon Valley Bridge Bank, N.A.,~~long-term funding arrangement in 2017 with ~~First Citizens Bank and Trust Company. Silicon Valley Bank is no longer~~ a member, ofunder which the member agreed to obtain or maintain certain advances from the Bank. During the quarter ended March 31, 2024, the Bank terminated the long-term funding arrangement, and in accordance with its terms, recognized $30 million of other income.

6249

Table of Contents

On May 1, 2023, the California DFPI closed First Republic Bank and appointed the FDIC as receiver, and the FDIC and JPMorgan, a nonmember, entered into a purchase and assumption agreement for all the deposits and substantially all of the assets of First Republic Bank, including $28.1 billion in advances outstanding from the Bank. At September 30, 2023, JPMorgan had $26.4 billion of advances outstanding from the Bank, assumed from First Republic Bank, that represented approximately 41% of the Bank's total advances outstanding. At December 31, 2022, First Republic Bank had $14.0 billion of advances outstanding from the Bank, that represented approximately 16% of the Bank’s total advances outstanding. Additionally, at September 30, 2023, JPMorgan had $179 million in letters of credit outstanding from the Bank, assumed from First Republic Bank. At December 31, 2022, First Republic Bank had $670 million in letters of credit outstanding. Upon assumption of the First Republic Bank advances outstanding by JPMorgan, the Bank transferred $759 million of capital stock of the Bank, held by First Republic Bank, to JPMorgan and reclassified that capital stock as mandatorily redeemable as a liability in the Bank’s Statements of Condition. At September 30, 2023, JPMorgan held $713 million of the Bank’s capital stock. JPMorgan was the Bank’s largest borrower and shareholder as of September 30, 2023.

The Bank has a significant long-term funding arrangement with a borrower that had advances outstanding as of September 30, 2023, and December 31, 2022, and the borrower may further contribute to the level of outstanding advances in the future.

The following tables present a summary of the status of the credit outstanding and overall collateral borrowing capacity of the Bank’s member and nonmember borrowers as of ~~September 30, 2023,~~March 31, 2024, and December 31, ~~2022.~~2023.

										Member and Nonmember Credit Outstanding and Collateral Borrowing Capacity by Credit Quality Rating
Credit Outstanding and Collateral Borrowing Capacity by Credit Quality Rating										Credit Outstanding and Collateral Borrowing Capacity by Credit Quality Rating

September 30, 2023
March 31, 2024

March 31, 2024

March 31, 2024


		All Members and Nonmembers	Members and Nonmembers with Credit Outstanding							All Borrowers			Borrowers with Credit Outstanding
(Dollars in millions)	(Dollars in millions)					Collateral Borrowing Capacity(3)				(Dollars in millions)														Collateral Borrowing Capacity(3)
Member or Nonmember Credit Quality Rating(1)		Number	Number	Credit Outstanding(2)		Total		Used
Borrower Credit Quality Rating(1)										Borrower Credit Quality Rating(1)	Number			Number			Credit Outstanding(2)				Total					Used
1-3	1-3	245	159	$	68,512	$	178,505	38	%	1-3	230	140			140	$		$	61,516	$		$	161,573		38		38	%
4-6	4-6	75	46	14,219		48,824		29
7-10	7-10	9	3	51		192		27
Subtotal	Subtotal	329	208	82,782		227,521		36
Community development financial institutions (CDFIs)		8	6	111		166		67
Community development financial institutions (CDFIs):

B

B

B
C
D

Subtotal
Subtotal
Subtotal
Housing associates	Housing associates	2	—	—		—		—
Total	Total	339	214	$	82,893	$	227,687	36	%	Total	344	209			209	$		$	76,389	$		$	217,359		35		35	%

~~Table of Contents~~


December 31, 2022
December 31, 2023


		All Members and Nonmembers	Members and Nonmembers with Credit Outstanding							All Borrowers			Borrowers with Credit Outstanding
(Dollars in millions)	(Dollars in millions)					Collateral Borrowing Capacity(3)				(Dollars in millions)													Collateral Borrowing Capacity(3)
Member or Nonmember Credit Quality Rating(1)			Number	Credit Outstanding(2)		Total		Used
Borrower Credit Quality Rating(1)										Borrower Credit Quality Rating(1)					Number				Credit Outstanding(2)				Total			Used
1-3	1-3	257	172	$	98,702	$	323,212	31	%	1-3	222	143		143		$	$	61,418		$	$	164,916		37	37		%
4-6	4-6	65	33	13,891		31,536		44
7-10	7-10	4	3	8		51		16
Subtotal	Subtotal	326	208	112,601		354,799		32
CDFIs		7	6	100		151		66
CDFIs:

B

B

B
C
D

Subtotal
Subtotal
Subtotal
Housing associates	Housing associates	2	1	95		102		93
Total	Total	335	215	$	112,796	$	355,052	32	%	Total	344	218		218		$	$	81,168		$	$	223,070		36	36		%

(1)A description of the Bank’s credit quality rating system is included in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Credit Risk” in the Bank’s ~~2022~~2023 Form 10-K.

(2)Includes advances, letters of credit, the market value of swaps, estimated prepayment fees for certain borrowers, and the credit enhancement obligation on MPF loans.

(3)Collateral borrowing capacity does not represent any commitment to lend on the part of the Bank.

Member and Nonmember Credit Outstanding and Collateral Borrowing Capacity
by Unused Borrowing Capacity
September 30, 2023
(Dollars in millions)
Unused Borrowing Capacity
Number of Members and Nonmembers with
Credit Outstanding
Credit
Outstanding(1)
Collateral
Borrowing
Capacity(2)
0% – 10% 7 $ 27,265 $ 27,556
11% – 25% 6 2,566 2,947
26% – 50% 26 15,512 27,060
More than 50% 175 37,550 170,124
Total 214 $ 82,893 $ 227,687

Table of Contents


December 31, 2022
Borrower Credit Outstanding and Collateral Borrowing Capacity by Unused Borrowing Capacity							Borrower Credit Outstanding and Collateral Borrowing Capacity by Unused Borrowing Capacity

March 31, 2024

March 31, 2024

March 31, 2024
(Dollars in millions) Unused Borrowing Capacity
(Dollars in millions) Unused Borrowing Capacity
(Dollars in millions) Unused Borrowing Capacity	(Dollars in millions) Unused Borrowing Capacity	Number of Members and Nonmembers with Credit Outstanding	Credit Outstanding(1)		Collateral Borrowing Capacity(2)		Number of Borrowers with Credit Outstanding	Credit Outstanding(1)	Collateral Borrowing Capacity(2)
0% – 10%	0% – 10%	11	$	6,637	$	7,319
11% – 25%	11% – 25%	11	5,644		7,380
26% – 50%	26% – 50%	22	15,509		24,465
More than 50%	More than 50%	171	85,006		315,888
Total	Total	215	$	112,796	$	355,052


December 31, 2023
(Dollars in millions) Unused Borrowing Capacity	Number of Borrowers with Credit Outstanding	Credit Outstanding(1)		Collateral Borrowing Capacity(2)
0% – 10%	6	$	28,055	$	29,699
11% – 25%	8	3,565		4,203
26% – 50%	24	14,557		25,969
More than 50%	180	34,991		163,199
Total	218	$	81,168	$	223,070

(1)Includes advances, letters of credit, the market value of swaps, estimated prepayment fees for certain borrowers, and the credit enhancement obligation on MPF loans.

(2)Collateral borrowing capacity does not represent any commitment to lend on the part of the Bank.

Based on the ~~collateral pledged as security for advances, the~~ Bank’s credit ~~analyses~~and collateral policies, its credit analysis of borrowers’ financial condition and the ~~Bank’s credit extension and~~ collateral ~~policies,~~pledged as security for advances, the Bank expects to collect all amounts due according to the contractual terms of the advances. Therefore, no allowance for credit losses on advances is deemed necessary by the ~~Bank.~~Bank as of March 31, 2024. The Bank has never experienced any credit losses on advances.

Securities pledged as collateral are assigned borrowing capacities that reflect the securities’ market valuations and market liquidation risks. The securities collateral pledged ~~by all members and nonmembers with credit outstanding~~ largely consists of agency pools and collateralized mortgage obligations, agency debt, and U.S. Treasury securities.

Most ~~borrowers~~institutions may choose to pledge loan collateral by specific identification or under a blanket lien. Insurance companies, CDFIs, and housing associates are required to pledge loan collateral by specific identification with

~~Table of Contents~~

monthly reporting. All other borrowers pledging by specific identification must provide a detailed listing of all the loans pledged to the Bank on a monthly basis.

The Bank may require certain ~~borrowers~~de novo institutions (chartered within the last three years), insurance companies, CDFIs and housing associates to deliver pledged loan collateral to the ~~Bank if the borrower is a de novo institution (chartered within the last three years), an insurance company, a CDFI, or a housing associate.~~Bank. Other considerations for delivery of pledged collateral may include the ~~borrower’s~~institution’s creditworthiness, satisfactory maintenance of its collateral, and the status of the Bank’s priority of security interest.

As of ~~September 30, 2023,~~March 31, 2024, of the loan collateral pledged to the Bank, ~~26%~~24% was pledged by 21 institutions by specific identification, ~~41%~~42% was pledged by ~~112~~114 institutions under a blanket lien with detailed reporting, and ~~33%~~34% was pledged by ~~139~~143 institutions under a blanket lien with summary reporting. For each ~~borrower~~institution that pledges loan collateral, the Bank conducts loan collateral field reviews once every six months or every one, two, or three years, depending on the risk profile of the ~~borrower~~institution and the types of collateral ~~pledged by the borrower.~~pledged.

As of ~~September 30, 2023,~~March 31, 2024, the Bank’s maximum borrowing capacities as a percentage of the assigned market value of mortgage loan collateral pledged under a blanket lien with detailed reporting were as follows: 84% for first lien residential mortgage loans, 81% for multifamily mortgage loans, 81% for commercial mortgage loans, and 69% for second lien residential mortgage loans. The maximum borrowing capacity for small business, small agribusiness,

Table of Contents

and small farm loans was 50% of the unpaid principal balance, although most of these loans are pledged under blanket lien with summary reporting, with a maximum borrowing capacity of 25%. The highest borrowing capacities are available to ~~borrowers~~institutions that pledge under a blanket lien with detailed reporting because the detailed loan information allows the Bank to assess the value of the collateral more precisely and because additional collateral is pledged under the blanket lien that may not receive borrowing capacity but may be liquidated to repay advances in the event of default. The Bank may review and change the maximum borrowing capacity for any type of loan collateral at any time.

The following table presents the mortgage loan collateral pledged at ~~September 30, 2023,~~March 31, 2024, and December 31, ~~2022.~~2023.

										Composition of Loan Collateral Pledged
(In millions)
(In millions)
(In millions)	(In millions)	September 30, 2023				December 31, 2022				March 31, 2024			December 31, 2023
Loan Type	Loan Type	Unpaid Principal Balance		Borrowing Capacity		Unpaid Principal Balance		Borrowing Capacity		Loan Type	Unpaid Principal Balance	Borrowing Capacity		Unpaid Principal Balance	Borrowing Capacity
First lien residential mortgage loans	First lien residential mortgage loans	$	167,951	$	112,586	$	265,972	$	180,564
Second lien residential mortgage loans and home equity lines of credit	Second lien residential mortgage loans and home equity lines of credit	13,861		6,484		15,423		7,381
Multifamily mortgage loans	Multifamily mortgage loans	51,331		32,041		60,989		36,809
Commercial mortgage loans	Commercial mortgage loans	81,391		50,589		92,413		54,341
Loan participations(1)	Loan participations(1)	1,287		480		871		306
Small business, small farm, and small agribusiness loans	Small business, small farm, and small agribusiness loans	1,579		403		2,180		523
Other		—		—		2		—

Total	Total	$	317,400	$	202,583	$	437,850	$	279,924
Total
Total

(1)The unpaid principal balance for loan participations is 100% of the outstanding loan amount. The borrowing capacity for loan participations is based on the participated amount pledged to the Bank.

The Bank holds a security interest in subprime residential mortgage loans pledged as collateral by members and by nonmembers. Subprime loans are defined as loans with a borrower FICO score of ~~660~~less than or ~~less~~equal to 660 at origination, or if the original FICO score is not available, as loans with a current borrower FICO score of ~~660~~less than or ~~less.~~equal to 660. At ~~September 30, 2023,~~March 31, 2024, and December 31, ~~2022,~~2023, the unpaid principal balance of these loans totaled ~~$4.5~~$4.4 billion and ~~$5.2~~$3.7 billion, respectively. The Bank reviews and assigns borrowing capacities to subprime mortgage loans as it does for all other types of loan collateral, taking into account the known credit attributes in the pricing of the loans. All advances, including those made to borrowers pledging subprime mortgage loans, are required to be fully collateralized. The Bank limits the amount of borrowing capacity that may be supported by subprime collateral.

~~Table~~ At March 31, 2024, and December 31, 2023, the borrowing capacity of ~~Contents~~

these loans totaled $2.8 billion and $2.1 billion, respectively.

Investments. The Bank has adopted credit policies and exposure limits for investments that promote risk limitation, diversification, and liquidity. These policies determine eligible counterparties and restrict the amounts and terms of the Bank’s investments with any given counterparty according to the Bank’s own capital position as well as the capital and creditworthiness of the counterparty.

For more information on the Bank’s management of credit risk on its investments, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Risk Management – Credit Risk – Investments” in the Bank’s ~~2022~~2023 Form 10-K.

Table of Contents

The following table presents the Bank’s investment credit exposure at ~~September 30, 2023,~~March 31, 2024, based on the lowest of the long-term credit ratings provided by Moody’s, S&P, or Fitch Ratings (Fitch) ratings.

Investment Credit Exposure
(In millions)
September 30, 2023
Carrying Value

Credit Rating(1)
Investment Type AAA AA A BBB Below Investment Grade Unrated Total
U.S. obligations – Treasury securities $ — $ 4,044 $ — $ — $ — $ — $ 4,044
MBS:
Other U.S. obligations – single-family — 55 — — — — 55
MBS – GSEs:
GSEs – single-family(2)
4 629 2 — 2 — 637
GSEs – multifamily — 12,234 — — — — 12,234
Total MBS – GSEs 4 12,863 2 — 2 — 12,871
PLRMBS — 17 25 49 597 517 1,205
Total MBS 4 12,935 27 49 599 517 14,131
Total securities 4 16,979 27 49 599 517 18,175
Interest-bearing deposits — — 3,777 — — — 3,777
Securities purchased under agreements to resell(3)
— 1,000 — — — 1,750 2,750
Federal funds sold(4)
— 1,363 4,095 — — 75 5,533
Total investments $ 4 $ 19,342 $ 7,899 $ 49 $ 599 $ 2,342 $ 30,235

~~Table of Contents~~






	Carrying Value
	Credit Rating(1)
Investment Type	AAA		AA		A		BBB		Below Investment Grade		Unrated		Total




U.S. obligations – Treasury securities	$	—	$	4,534	$	—	$	—	$	—	$	—	$	4,534



MBS:

Other U.S. obligations – single-family	—		44		—		—		—		—		44
MBS – GSEs:
GSEs – single-family(2)	4		570		2		—		1		—		577
GSEs – multifamily	—		13,455		—		—		—		—		13,455
Total MBS – GSEs	4		14,025		2		—		1		—		14,032
PLRMBS	1		16		28		40		563		498		1,146
Total MBS	5		14,085		30		40		564		498		15,222
Total securities	5		18,619		30		40		564		498		19,756
Interest-bearing deposits	—		—		3,745		—		—		—		3,745
Securities purchased under agreements to resell(3)	—		—		—		—		—		1,750		1,750
Federal funds sold(4)	—		1,950		2,695		—		—		—		4,645
Total investments	$	5	$	20,569	$	6,470	$	40	$	564	$	2,248	$	29,896

(1)Credit ratings grades of BB and lower are considered below investment grade.

(2)The Bank has one security guaranteed by Fannie Mae but rated BBbelow investment grade at ~~September 30, 2023, by S&P~~March 31, 2024, because of extraordinary expenses incurred during bankruptcy of the security's ~~sponsor.~~sponsor in 2008.

(3)Unrated counterparties for these investments were broker-dealers, qualifying for limited trading programs authorized by the Bank.

(4)Includes unsecured investment credit exposure to a member.

The following table presents the unsecured credit exposure with counterparties by investment type at ~~September 30, 2023,~~March 31, 2024, and December 31, ~~2022.~~2023.

Unsecured Investment Credit Exposure by Investment Type

Carrying Value(1)

(In millions)

September 30, 2023

December 31, 2022

Interest-bearing deposits

3,777

3,677

Interest-bearing deposits

Federal funds sold

5,533

4,719

Total

9,310

8,396

Total

(1)Excludes unsecured investment credit exposure to U.S. government agencies and instrumentalities, government-sponsored enterprises, and supranational entities and does not include related accrued interest as of ~~September 30, 2023,~~March 31, 2024, and December 31, ~~2022.~~2023.

The following table presents the credit ratings of the unsecured investment credit exposures presented by the domicile of the counterparty or the domicile of the counterparty’s parent for U.S. branches and agency offices of foreign commercial banks, based on the lowest of the credit ratings provided by Moody’s, S&P, or Fitch ratings. This table does not reflect the foreign sovereign government’s credit rating. At ~~September 30, 2023, 59%~~March 31, 2024, 55% of the Bank’s total unsecured investments were to U.S. branches and agency offices of foreign commercial banks. At ~~September 30, 2023,~~March 31, 2024, all of the unsecured investments held by the Bank had overnight maturities.

6753

Table of Contents

										Ratings of Unsecured Investment Credit Exposure by Domicile of Counterparty
(In millions)
September 30, 2023
		Carrying Value(1)
		Credit Rating(2)

		Carrying Value(1)

		Carrying Value(1)

		Carrying Value(1)
(In millions)
Domicile of Counterparty
Domicile of Counterparty
Domicile of Counterparty	Domicile of Counterparty	AA		A		Unrated (3)		Total		AA	A	Total
Domestic	Domestic	$	—	$	3,427	$	75	$	3,502
U.S. subsidiaries of foreign commercial banks	U.S. subsidiaries of foreign commercial banks	—		350		—		350
Total domestic and U.S. subsidiaries of foreign commercial banks	Total domestic and U.S. subsidiaries of foreign commercial banks	—		3,777		75		3,852
U.S. branches and agency offices of foreign commercial banks:	U.S. branches and agency offices of foreign commercial banks:
Australia	Australia	—		995		—		995
Australia
Australia

Canada
Canada
Canada	Canada	—		100		—		100
Finland	Finland	863		—		—		863
France	France	—		150		—		150
Germany	Germany	—		700		—		700

Netherlands	Netherlands	—		1,250		—		1,250
Norway		500		—		—		500
Netherlands
Netherlands

United Kingdom		—		900		—		900

Total U.S. branches and agency offices of foreign commercial banks

Total U.S. branches and agency offices of foreign commercial banks

Total U.S. branches and agency offices of foreign commercial banks	Total U.S. branches and agency offices of foreign commercial banks	1,363		4,095		—		5,458
Total unsecured credit exposure	Total unsecured credit exposure	$	1,363	$	7,872	$	75	$	9,310

(2)Does not reflect changes in ratings, outlook, or watch status occurring after ~~September 30, 2023.~~March 31, 2024. These ratings represent the lowest rating available for each unsecured investment owned by the Bank, based on the ratings provided by Fitch, Moody’s, or S&P. The Bank’s internal rating may differ from this rating.

~~(3)Includes unsecured investment credit exposure to a member.~~

The Bank’s MBS investments include PLRMBS, all of which were AAA-rated at the time of purchase, and agency residential MBS, which are backed by Fannie Mae, Freddie Mac, or Ginnie Mae. Some of the PLRMBS were issued by or purchased from members, former members, or their affiliates. The Bank has investment credit limits and terms for these investments that do not differ for members and nonmembers. Regulatory policy limits total MBS investments, to three times the Bank’s regulatory capital at the time of purchase. At ~~September 30, 2023,~~March 31, 2024, the Bank’s MBS portfolio was ~~202%~~213% of Bank regulatory capital (as determined in accordance with regulations governing the operations of the FHLBanks).

The Bank executes all MBS investments without preference to the status of the counterparty or the issuer of the investment as a nonmember, member, or affiliate of a member.

At September 30, 2023, PLRMBS representing 7% of the amortized cost of the Bank’s MBS portfolio were labeled Alt-A by the issuer. These PLRMBS are generally collateralized by mortgage loans that are considered less risky than subprime loans but more risky than prime loans. These loans are generally made to borrowers with credit scores that are high enough to qualify for a prime mortgage loan, but the loans may not meet standard underwriting guidelines for documentation requirements, property type, or loan-to-value ratios.

As of ~~September 30, 2023,~~March 31, 2024, the Bank’s investment in MBS had gross unrealized losses totaling ~~$134~~$70 million, ~~$34~~$33 million of which were related to PLRMBS. These gross unrealized losses related to PLRMBS were primarily ~~due~~attributable to ~~illiquidity in the MBS market and~~ market expectations of the credit performance of loan collateral underlying these securities, which caused these assets to be valued at discounts to their amortized cost.

For its agency MBS, the Bank expects to recover the entire amortized cost basis of these securities because the Bank determined that the strength of the issuers’ guarantees through direct obligations or support from the U.S.

~~Table of Contents~~

government is sufficient to protect the Bank from losses. As a result, the Bank determined that, as of ~~September 30, 2023,~~March 31, 2024, all of the gross unrealized losses on its agency MBS are temporary.

If conditions in the housing and mortgage markets and general business and economic conditions deteriorate, the fair value of MBS may decline further, and the Bank may experience additional credit losses on PLRMBS in future periods. Additional credit losses could adversely affect the Bank’s earnings and retained earnings and its ability to pay dividends and repurchase capital stock. The Bank cannot predict whether it will be required to record an allowance for credit losses on its PLRMBS in the future.

Derivative Counterparties. The Bank has adopted credit policies and exposure limits for uncleared derivatives counterparty credit exposure. Interest rate exchange agreements may be either uncleared or cleared at a clearing house.

Uncleared Derivatives – The Bank’s uncleared derivatives activity is subject to uncleared derivatives regulatory requirements mandating the ~~daily~~ exchange of variation margin and in initial margin if exposure to a counterparty exceeds

Table of Contents

certain ~~cases, initial margin.~~specified thresholds. The Bank selects only highly rated derivative dealers and major banks (derivative dealer counterparties) that meet the Bank’s eligibility criteria to act as counterparties for its uncleared derivative activities. In addition, for all uncleared derivative transactions, the Bank has entered into master netting agreements and credit support agreements with all its derivative dealer counterparties that provide for delivery of margin to limit the Bank’s net unsecured credit exposure to these counterparties. Under these policies and agreements, the amount of unsecured credit exposure to an individual derivative dealer counterparty is set at zero (subject to a minimum transfer amount).

Additional information related to uncleared margin rules for uncleared derivative transactions are included in “Item 8. Financial Statements and Supplementary Data -– Note ~~14 -~~13 – Derivatives and Hedging Activities” in the Bank’s ~~2022~~2023 Form 10-K.

The Bank is subject to the risk of potential nonperformance by its counterparty in a derivative transaction. A counterparty must deliver or return variation margin to the Bank if the total unsecured exposure to that counterparty exceeds the minimum transfer amount. In addition, if an initial margin threshold is exceeded, the Bank will post and collect initial margin to further protect against potential counterparty nonperformance.

As a result of these risk mitigation initiatives, the Bank does not anticipate any credit losses on its uncleared derivative transactions with counterparties as of ~~September 30, 2023.~~March 31, 2024.

Cleared Derivatives – In a cleared derivatives transaction, the Bank is subject to nonperformance by the clearing house and its futures commission merchant or clearing agent. The requirement that the Bank post initial margin and settle variation margin through a clearing agent to the clearing house exposes the Bank to institutional credit risk if its futures commission merchant, or clearing agent, fails to meet its obligations. The use of a clearing house, or central counterparty, lowers overall credit risk exposure because it employs standard valuation and initial and variation margin processes and is specifically designed to withstand remote but plausible futures commission merchant default credit events. Variation margin is settled for changes in the value of the portfolio, and initial margin is posted for changes in risk profile of the portfolio. The Bank does not anticipate any credit losses on its cleared derivatives as of ~~September 30, 2023.~~March 31, 2024.

The increase or decrease in the credit exposure net of cash collateral, from one period to the next, may be affected by changes in several variables, such as interest rates, the size and composition of the portfolio, market values of derivatives, and accrued interest. Based on the master netting arrangements, its credit analyses, and the collateral requirements in place with each counterparty, the Bank does not expect to incur any credit losses on its derivative agreements.

Table of Contents

The following tables present the Bank’s credit exposure to its derivative dealer counterparties at the dates indicated.

~~Table of Contents~~





March 31, 2024
(In millions) Counterparty Credit Rating(1)	Notional Amount		Net Fair Value of Derivatives Before Collateral		Cash Collateral Pledged to/ (from) Counterparty		Non-cash Collateral Pledged to/ (from) Counterparty		Net Credit Exposure to Counterparties
Asset positions with credit exposure:
Uncleared derivatives
AA	$	81	$	14	$	(14)	$	—	$	—
A	736		29		(29)		—		—

Cleared derivatives(2)	72,243		5		12		638		655
Liability positions with credit exposure:
Uncleared derivatives


BBB	8,020		(189)		192		—		3

Total derivative positions with credit exposure to nonmember counterparties	81,080		$	(141)	$	161	$	638	$	658


Derivative positions without credit exposure	20,887
Total notional	$	101,967

Credit Exposure to Derivative Dealer Counterparties
(In millions)
September 30, 2023
Counterparty Credit Rating(1)
Notional Amount Net Fair Value of Derivatives Before Collateral Cash Collateral Pledged
to/ (from) Counterparty Noncash Collateral Pledged
to/ (from) Counterparty Net Credit
Exposure to Counterparties
Asset positions with credit exposure:
Uncleared derivatives
A $ 3,921 $ 65 $ (63) $ — $ 2
Liability positions with credit exposure:
Uncleared derivatives
A 8,419 (201) 202 — 1
BBB 9,791 (242) 245 — 3
Cleared derivatives(2)
81,853 (22) 16 799 793
Total derivative positions with credit exposure to nonmember counterparties 103,984 $ (400) $ 400 $ 799 $ 799
Derivative positions without credit exposure 13,027
Total notional $ 117,011

December 31, 2022

December 31, 2023

(In millions)

Counterparty Credit Rating(1)

(In millions)

Counterparty Credit Rating(1)

(In millions)

Counterparty Credit Rating(1)

(In millions)

Counterparty Credit Rating(1)

Notional Amount

Net Fair Value of Derivatives Before Collateral

Cash Collateral Pledged
to/ (from) Counterparty

Non-cash Collateral Pledged
to/ (from) Counterparty

Net Credit
Exposure to Counterparties

Notional Amount

Net Fair Value of Derivatives Before Collateral

Cash Collateral Pledged
to/ (from) Counterparty

Non-cash Collateral Pledged

to/ (from) Counterparty

Net Credit
Exposure to Counterparties

Asset positions with credit exposure:

Uncleared derivatives

Liability positions with credit exposure:

Uncleared derivatives

6,115

(35)

—

Cleared derivatives(2)

89,148

435

456

Liability positions with credit exposure:

Uncleared derivatives

11,246

(356)

358

—

BBB

Cleared derivatives(2)

Total derivative positions with credit exposure to nonmember counterparties

106,509

(311)

337

435

461

Derivative positions without credit exposure

10,284

Derivative positions without credit exposure

Total notional

116,793

Total notional

(1)The credit ratings grades used by the Bank are based on the lower of Moody's or S&P ratings.

(2)Represents derivative transactions cleared with LCH Ltd, the Bank’s clearing house, which was rated AA- with a stable outlook by S&P at ~~September 30, 2023,~~March 31, 2024, and December 31, ~~2022.~~2023.

The Bank primarily executes overnight index swap derivatives based on SOFR to manage interest rate risk. The following table presents the notional amount of interest rate swaps by interest rate index broken out by the pay or receive leg at September 30, 2023, and December 31, 2022.

~~Table of Contents~~

Notional Amount of Interest Rate Swaps by Interest Rate Index
(In millions) September 30, 2023 December 31, 2022
Interest Rate Index Pay Leg Receive Leg Pay Leg Receive Leg
Fixed(1)
$ 65,487 $ 51,524 $ 58,910 $ 57,883
LIBOR — — 55 504
SOFR 51,514 64,710 57,577 57,523
Overnight Index Swap – Effective Federal Funds Rate 10 777 251 883
Total notional amount $ 117,011 $ 117,011 $ 116,793 $ 116,793

~~(1) Includes derivatives indexed to LIBOR that had their last reset dates prior to June 30, 2023.~~

Critical Accounting Policies and Estimates

The preparation of financial statements in accordance with ~~accounting principles generally accepted in the United States of America (U.S. GAAP)~~U.S. GAAP requires management to make a number of judgments, estimates, and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, if applicable, and the reported amounts of income, expenses, gains, and losses during the reporting period. Changes in these judgments, estimates, and assumptions could potentially affect the Bank’s financial position and results of operations significantly. Although the Bank believes these judgments, estimates, and assumptions to be reasonably accurate, actual results may differ.

In the Bank’s ~~2022~~2023 Form 10-K, the following accounting policies and estimates were identified as critical because they require the Bank to make subjective or complex judgments about matters that are inherently uncertain and because of the likelihood that materially different amounts would be reported under different conditions or using

Table of Contents

different assumptions. These policies and estimates are: accounting for derivatives; and estimating fair values of investments classified as trading and AFS, derivatives and associated hedged items carried at fair value in accordance with the accounting for derivative instruments and associated hedging activities, and financial instruments carried at fair value under the fair value option; and estimating the prepayment speeds on MBS and mortgage loans for the accounting of amortization of premiums and accretion of discounts and credit losses previously recorded before the adoption of accounting guidance related to the measurement of credit losses on MBS and mortgage loans.option.

There have been no significant changes in the judgments and assumptions made during the first ~~nine~~three months of ~~2023~~2024 in applying the Bank’s critical accounting policies. These policies and the judgments, estimates, and assumptions are also described in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates” and “Item 8. Financial Statements and Supplementary Data – Note 1 – Summary of Significant Accounting Policies” in the Bank’s ~~2022~~2023 Form 10-K and in “Item 8. Financial Statements and Supplementary Data – Note 1211 – Fair Value.”

Recently Issued Accounting Guidance and Interpretations

See “Item 1. Financial Statements – Note 2 – Recently Issued and Adopted Accounting Guidance” for a discussion of recently issued accounting standards and interpretations.

~~Recent~~Legislative and Regulatory Developments

~~Allocation of Net Income to Fund Discretionary Community Investment Programs.~~ Each year, the Bank is required by the FHLBank Act to dedicate a minimum of 10% of the previous year’s net income to its Affordable Housing Program (AHP). In 2023, the board of directors of the Bank voted to voluntarily allocate up to an additional 5% (15% total) of its annual net income to funding economic development and homeownership grant programs and special purpose credit programs that enrich people’s lives and revitalize communities. In 2023, the Bank announced funding commitments of $10 million to the newly-created Middle-Income Downpayment assistance matching grant pilot program, an additional $2 million to the Empowering Black Homeownership matching grant program, and an increase of $2.5 million to its annual Access to Housing and Economic Assistance

~~Table of Contents~~

for Development (AHEAD) economic development grant program, which will enable AHEAD to award a total of $4 million in grants for the 2023 program. The Bank continues to evaluate funding other programs meeting community needs for affordable housing, funding for businesses, and community development.

~~Annual Designation of Member Director and Independent Director Positions.~~ On June 5, 2023, the Finance Agency designated one member director position for Arizona, six for California, and one for Nevada, effective January 1, 2024, the same allocation of positions as for 2023. In addition, the Finance Agency designated seven independent director positions for the Bank for 2024, the same number of positions as for 2023. One of the California member director positions, the Nevada member director position, and two of the independent director positions (neither of which is designated as a public interest director position), all with current terms ending on December 31, 2023, will be filled through an election of the members located in California (for the California member director position), an election of the members located in Nevada (for the Nevada member director position) and an election of all members of the Bank (for the two independent director positions). The elections will be held in the fourth quarter of 2023. The California member director position, the Nevada member director position, and the two independent director positions will each have a four-year term that begins on January 1, 2024.

Finance Agency’s Review and Analysis of the Federal Home Loan Bank ~~System~~System. On November 7, 2023, the Finance Agency issued a written report titled “FHLBank System at 100: Focusing on the ~~Future.~~Future,” ~~Beginning in the fall of 2022, the Finance Agency undertook a~~ presenting its review and analysis of the FHLBank System ~~through~~and the actions and recommendations that it plans to pursue in service of its vision for the future of the FHLBank System. The report focused on four broad themes: (1) the mission of the FHLBank System; (2) the FHLBank System as a ~~series~~stable and reliable source of public listening sessions, regional roundtable discussions, and receipt of comments from stakeholders. This review covered such areas as the FHLBanks’ mission and purpose in a changing marketplace; their organization, operational efficiency, and effectiveness; their role in promoting affordable, sustainable, equitable, and resilientliquidity; (3) housing and community ~~investment; their role in addressing the unique needs of rural~~development; and ~~financially vulnerable communities; member products, services, collateral requirements;~~(4) FHLBank System operational efficiency, structure, and ~~membership eligibility and requirements.~~governance. The Finance Agency expects to continue a multi-year, collaborative effort with the FHLBanks, their member institutions, and other stakeholders to address the recommended actions in the report and has stated that ~~its review and analysis will culminate in a written~~it can implement some of the recommendations from the report ~~expected to (i) summarize the feedback received; (ii) identify actions~~through ongoing supervision, guidance, or rulemaking, as well as through statutory changes by proposing specific requests for Congressional action.

In April 2024, the Finance Agency ~~plans~~provided an update on its plan to ~~take;~~implement the report’s recommendations and ~~(iii) outline any recommendations~~announced key priorities for ~~consideration by Congress. To~~2024. Among others, these priorities include (1) clarifying the ~~extent~~FHLBank System mission; (2) aligning eligibility requirements for different types of FHLBank members; (3) streamlining requirements related to the Affordable Housing Program; and (4) strengthening FHLBank evaluation of member creditworthiness. The Finance Agency stated that it would maintain transparency and continue robust stakeholder engagement during the implementation process, including seeking input on FHLBank mission achievement and members’ connection to housing and community development.

The Bank continues to monitor the Finance Agency’s efforts to implement the recommendations from the report, and we are not able to predict what actions will ultimately result, the timing or extent of any actions or ~~recommendations result in~~ changes, ~~to supervisory expectations, stakeholder perceptions~~ or the ~~Bank’s business model that impact the Bank’s ability to execute~~ultimate effect on the ~~Bank’s mission of providing liquidity~~Bank or the FHLBank System in the future. We plan to continue to engage with the ~~Bank’s~~Finance Agency and other stakeholders in an effort to ensure that the FHLBank System remains well positioned to serve our members and ~~support for affordable housing and community development, the Bank’s business, results of operations, reputation, and the value of membership in the Bank may be negatively impacted.~~their communities. For a further discussion of the report and related risks, see, ~~“Item 1A.~~respectively, Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Legislative and Regulatory Developments and Part I. Item 1A – Risk ~~Factors”~~Factors of the Bank’s 2023 Form 10-K.

Finance Agency Final Rule on Fair Lending, Fair Housing, and Equitable Housing Finance Plans. On April 29, 2024, the Finance Agency released its final rule that specifies requirements related to the FHLBanks’ compliance with fair housing and fair lending laws and related regulations, including the Fair Housing Act and the Equal Credit Opportunity Act, and prohibitions on unfair or deceptive acts or practices under the Federal Trade Commission Act. The final rule (i) addresses the enforcement authority of the Finance Agency; (ii) articulates standards related to the board of directors’ oversight of fair housing, fair lending, and principles of equitable housing; and (iii) requires each FHLBank to annually report actions it voluntarily takes to address barriers to sustainable housing opportunities for underserved communities (“Equitable Housing Report Requirements”). The final rule will become effective 60 days after the date it is published in the ~~Bank’s 2022 Form 10-K.~~Federal Register, except that the Equitable Housing Report Requirements will

Table of Contents

become effective on February 15, 2026. The Bank is continuing its review of the final rule and evaluating the impact it may have on the Bank and its operations.

SEC Final Rule on the Enhancement and Standardization of Climate-Related Disclosures for Investors. On March 6, 2024, the SEC adopted a final rule that will require registrants to disclose certain climate-related information in their annual reports (Final Rules). Following several petitions seeking judicial review of the Final Rules, on April 4, 2024, the SEC has determined to exercise its discretion to stay the Final Rules pending the completion of judicial review to avoid regulatory uncertainty for registrants subject to the Final Rules’ requirements during the pendency of the challenges to their validity. As issued, the Final Rules will require disclosure of, among other things: material climate-related risks; activities to mitigate or adapt to such risks; information about a registrant’s board of directors’ oversight of climate-related risks and management’s role in managing such risks; and information on any climate-related targets or goals that are material to the registrant’s business, results of operations, or financial condition. In addition, certain disclosures related to severe weather events and other natural conditions will be required in a registrant’s audited financial statements. The Bank will be subject to the requirements of the Final Rules applicable to the Bank beginning for its annual report for fiscal year 2027. The Bank continues to review the Final Rules and their impact on the Bank’s financial condition and results of operations, including the possible effect on costs and complexities associated with its SEC reporting.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk

Market risk is defined as the risk to the Bank’s market value of capital and future earnings (excluding the impact of any cumulative net gains or losses on derivatives and associated hedged items and on financial instruments carried at fair value) as a result of movements in market interest rates, interest rate spreads, interest rate volatility, and other market factors (market rate factors). This profile reflects the Bank’s objective of maintaining a conservative asset-liability mix and its commitment to providing value to its members through products and dividends without subjecting their investments in Bank capital stock to significant market risk.

The Bank’s Risk Appetite Framework includes a market risk management objective aimed at maintaining a relatively low adverse exposure of the market value of capital and future earnings (excluding the impact of any cumulative net gains or losses on derivatives and associated hedged items and on financial instruments carried at fair value) to changes in market rate factors. ~~See “Total Bank Market Risk” below.~~

Market risk identification and measurement are primarily accomplished through market value of capital sensitivity analyses and projected earnings and adjusted net interest income as a percent of the capital sensitivity analyses. The Risk Appetite Framework approved by the Bank’s board of directors establishes market risk limits and market risk measurement standards at the ~~total Bank level as well as at the line of business~~product level. Additional guidelines approved by the Bank’s Enterprise Risk Committee apply to the Bank’s ~~two lines of business, the~~ advances-related ~~business~~products and ~~the~~ mortgage-related ~~business.~~products. These guidelines provide limits that are ~~monitored~~monitored at the ~~line of~~

~~Table of Contents~~

~~business~~product level and are consistent with the Bank’s Risk Appetite Framework. Market risk is managed for each ~~business segment on a daily basis, as discussed below in “Total Bank Market Risk.”~~product regularly. Compliance with Bank limits and guidelines is reviewed by the Bank’s board of directors on a regular basis, along with a corrective action plan if applicable.

~~Total Bank Market Risk~~

Market Value of Capital Sensitivity – The Bank uses ~~market~~market value of capital sensitivity (the interest rate sensitivity of the net fair value of all assets, liabilities, and interest rate exchange agreements) as an important measure of the Bank’s exposure to changes in interest rates.

The Bank’s market value of capital sensitivity risk limits for the potential adverse impact of an instantaneous parallel shift of a plus or minus 100-basis-point change in interest rates from current rates (base case) is no worse than a 3.0% change in the estimated market value of capital. In addition, the risk limits for the potential adverse impact of an instantaneous plus or minus 100-basis-point change in interest rates measured from interest rates that are 200 basis points above or below the base case is no worse than 4.0% of the estimated market value of capital. In the case where a market risk sensitivity compliance metric cannot be estimated with a parallel shift in interest rates

Table of Contents

because of prevailing low interest rates, the sensitivity metric is not reported. The Bank’s measured market value of capital sensitivity was within the limits as of ~~September 30, 2023.~~March 31, 2024.

To determine the Bank’s estimated risk sensitivities to interest rates for the market value of capital sensitivity, the Bank uses a third-party proprietary asset and liability system to calculate estimated market values under alternative interest rate scenarios. The system analyzes all of the Bank’s financial instruments, including derivatives, on a transaction-level basis using sophisticated valuation models with consistent and appropriate behavioral assumptions and current position data. The system also includes a third-party mortgage prepayment model.

At least annually, the Bank reexamines the major assumptions and methodologies used in the model, including ~~interest rate~~valuation methods, discounting curves, ~~spreads for discounting,~~ and mortgage prepayment assumptions. The Bank also compares the mortgage prepayment assumptions in the third-party model to other sources, including actual mortgage prepayment history.

The following table presents the sensitivity of the market value of capital (the market value of all of the Bank’s assets, liabilities, and associated interest rate exchange agreements, with mortgage assets valued using market spreads implied by current market prices) to changes in interest rates. The table presents the estimated percentage change in the Bank’s market value of capital that would be expected to result from changes in interest rates under different interest rate scenarios, using market spread assumptions as of ~~September 30, 2023,~~March 31, 2024, and December 31, ~~2022.~~2023.

Market Value of Capital Sensitivity
Estimated Percentage Change in Market Value of Bank Capital
for Various Changes in Interest Rates
Interest Rate Scenario(1)
September 30, 2023 December 31, 2022
+200 basis-point change above current rates –2.8 % –2.8 %
+100 basis-point change above current rates –1.4 –1.4
–100 basis-point change below current rates(2)
+1.3 +1.3
–200 basis-point change below current rates(2)
+2.4 +2.3

Market Value of Capital Sensitivity
Estimated Percentage Change in Market Value of Bank Capital
for Various Changes in Interest Rates

Interest Rate Scenario(1)

March 31, 2024

December 31, 2023

+200 basis-point change

–2.5

–2.3

+100 basis-point change

–1.3

–1.1

–100 basis-point change(2)

+1.2

+1.0

–200 basis-point change(2)

+2.2

+1.8

(1)Instantaneous change from actual rates at dates indicated.

(2)Interest rates for each maturity are limited to non-negative rates.

The Bank’s estimates of the sensitivity of the market value of capital to changes in interest rates as of ~~September 30, 2023,~~March 31, 2024, are comparable with the estimates as of December 31, ~~2022.~~2023. Compared to yearend 2023, interest rates as of ~~September 30, 2023~~March 31, 2024, have ~~increased 141~~decreased 3 basis points for the one-month Treasury bill, increased 6424 basis points for the five-year Treasury note, and increased 7434 basis ~~point~~points for the 10-year Treasury note.

~~Table of Contents~~

The Bank’s Risk Management Policy provides guidelines for the payment of dividends and the repurchase of excess stock based on the ratio of the Bank’s estimated market value of total capital to par value of capital stock. If this ratio at the end of any quarter is: (i) less than 100% but greater than or equal to 90%, any dividend would be limited to an annualized rate no greater than the daily average of the ~~Federal~~federal funds effective rate for the applicable quarter (subject to certain conditions), and any excess stock repurchases would not exceed $500 million (subject to certain conditions); (ii) less than 90% but greater than or equal to 70%, any dividend and any excess stock repurchases would be subject to the same limitations and conditions as in (i) above, except that any excess stock repurchases would not exceed 4% of the Bank’s outstanding capital stock as of the repurchase date; and (iii) less than 70%, the Bank would not pay a dividend, not repurchase excess stock (but continue to redeem excess stock as provided in the Bank’s capital plan), limit the acquisition of certain assets, and review the Bank’s risk policies. A decision by the board of directors to declare or not declare any dividend or repurchase any excess stock is a discretionary matter and is subject to the requirements and restrictions of the FHLBank Act and applicable requirements under the regulations governing the operations of the FHLBanks. The ratio of the Bank’s estimated market value of total capital to par value of capital stock was ~~227%~~244% as of ~~September 30, 2023.~~March 31, 2024.

Net Interest Income as a Percent of Capital – The adjusted net interest income as a percent of capital is a non-GAAP measure used by the Bank to assess the impact of interest rate changes on the Bank’s projected economic

Table of Contents

earnings. The measurement is based on current period economic earnings that exclude the effects of unrealized net gains or losses resulting from the Bank’s derivatives and associated hedged items and from financial instruments carried at fair value, which will generally reverse through changes in future valuations and settlements of contractual interest cash flows over the remaining contractual terms to maturity or by the call or put date of the assets and liabilities held under the fair value option, hedged assets and liabilities, and derivatives. Economic earnings also exclude the interest expense on mandatorily redeemable capital stock.

The Bank’s Risk Appetite Framework incorporates a limit on the adverse sensitivity of projected net interest income as a percent of capital. The Bank’s net interest income on capital sensitivity limit to the potential adverse impact of an instantaneous parallel shift of a plus or minus 200 basis-point change in interest rates from current rates (base case) to no worse than a -210 basis-points change from the base-case projected net interest income on capital. With the indicated interest rate shifts, the net interest income on capital for the 12-month horizon is projected to remain within the limit of -210 basis-points.

Duration Gap – Duration gap is the difference between the estimated durations (market value sensitivity) of assets and liabilities (including the impact of interest rate exchange agreements) ~~and~~and reflects the extent to which estimated maturity and repricing cash flows for assets and liabilities are matched. The Bank monitors the duration gap analysis ~~at the total Bank level~~ and does not have a risk limit. At March 31, 2024, and December 31, 2023, the Bank’s assets durations exceeded its liabilities durations, as shown in the following table.

								Total Bank Duration Gap Analysis
Duration Gap Analysis								Duration Gap Analysis

		September 30, 2023			December 31, 2022
(Dollars in millions)		Amount (In millions)		Duration Gap(1) (In months)	Amount (In millions)		Duration Gap(1) (In months)

									March 31, 2024			December 31, 2023
	Amount (In millions)									Amount (In millions)	Duration Gap(1) (In months)		Amount (In millions)	Duration Gap(1) (In months)
Assets	Assets	$	95,021	2.0	$	121,056	1.8
Liabilities	Liabilities	88,369		0.8	113,333		0.9
Net	Net	$	6,652	1.2	$	7,723	0.9

(1)Duration gap values include the impact of interest rate exchange agreements.

The ~~financial performance~~Bank manages the performance and interest rate risks of the ~~total Bank are managed~~advances-related products and mortgage-related products within prescribed guidelines and policy limits.

Advances-Related ~~Business~~Products – Interest rate risk arises from ~~the~~ advances-related ~~business~~products primarily through the use of shareholder-contributed capital and retained earnings to fund fixed rate investments of targeted amounts and maturities. In general, advances result in very little net interest rate risk for the Bank because most fixed rate advances with original maturities greater than three months and all advances with embedded options are simultaneously hedged with an interest rate swap ~~or option~~ with terms to offset the advance. The interest rate swap

~~Table of Contents~~

~~or option~~ generally is maintained as a hedge for the life of the advance. These hedged advances effectively create a pool of variable rate assets, which, in combination with the strategy of raising debt swapped to variable rate liabilities, creates an advances portfolio with low net interest rate risk.

Money market investments used for liquidity management generally have maturities of one month or less. In addition, to increase the Bank’s liquidity position, the Bank invests in Treasury securities, generally with terms up to four years. These fixed rate investments are swapped to variable rate investments.

Table of Contents

The interest rate risk in advances-related products is primarily associated with the Bank’s strategy for investing capital. The Bank’s strategy is generally to invest 50% of capital in short-term (maturities of three months or less) and 50% intermediate-term (laddered maturities of up to four years). However, this strategy may be altered from time to time depending on market conditions. The strategy to invest 50% of capital in short-term assets is intended to mitigate the market value of capital risks associated with the potential repurchase or redemption of excess stock. Excess stock usually results from a decline in a borrower’s outstanding advances or by a membership termination. Under the Bank’s capital plan, capital stock, when repurchased or redeemed, is required to be repurchased or redeemed at its par value of $100 per share, subject to certain regulatory and statutory limits. The strategy to invest 50% of capital in short to intermediate maturities is intended to take advantage of the higher earnings available from a generally positively sloped yield curve, when intermediate-term investments generally have higher yields than short-term investments.

The Bank updates the repricing and maturity gaps for actual asset, liability, and derivative transactions that occur in the advances-related products regularly. The Bank regularly compares the targeted repricing and maturity gaps to the actual repricing and maturity gaps to identify rebalancing needs for the targeted gaps. Periodically, the Bank evaluates the projected impact of expected maturities and scheduled repricing of assets, liabilities, and interest rate exchange agreements on the interest rate risk of the advances-related products. These analyses are used to measure and manage potential reinvestment risk (when the remaining term of advances is shorter than the remaining term of the financing) and potential refinancing risk (when the remaining term of advances is longer than the remaining term of the financing).

Because of the short-term and variable rate nature of the assets, liabilities, and derivatives of the advances-related products, the Bank’s interest rate risk guidelines address the amounts of net assets that are expected to mature or reprice in a given period. The market value sensitivity analyses and net interest income simulations are also used to identify and measure risk and variances to the target interest rate risk exposure in the advances-related products.

Mortgage-Related ~~Business~~Products – The Bank’s mortgage assets include MBS, most of which are classified as HTM or AFS, ~~with a small amount classified as trading,~~ and mortgage loans held for portfolio purchased under the MPF Program. The Bank is exposed to interest rate risk from ~~the~~ mortgage-related ~~business~~products because the principal cash flows of the mortgage assets and the liabilities that fund them are not exactly matched through time and across all possible interest rate scenarios, given the effect of mortgage ~~prepayments and the existence of interest rate caps on certain adjustable rate MBS.~~prepayments.

The Bank manages the interest rate risk and market risk of the mortgage-related ~~business~~products through selected funding and hedging strategies. The total carrying value of MBS and mortgage loans at ~~September 30, 2023,~~March 31, 2024, was ~~$14.9~~$16.0 billion, including ~~$14.1~~$15.2 billion in MBS and ~~$771~~$743 million in mortgage loans. The total carrying value of MBS and mortgage loans at December 31, ~~2022,~~2023, was ~~$11.7~~$16.1 billion, including ~~$10.9~~$15.3 billion in MBS and ~~$816~~$755 million in mortgage loans. Floating rate securities, and fixed rate multifamily securities that have been converted to floating rate through the use of interest rate swaps, were ~~$14.1~~$14.8 billion, or ~~95%~~93%, of MBS and mortgage loans at ~~September 30, 2023,~~March 31, 2024, and ~~$10.3~~$14.9 billion, or ~~88%~~92%, of MBS and mortgage loans at December 31, ~~2022.~~2023. Intermediate and long-term fixed rate assets, whose interest rate and market risks have been partially offset through the use of fixed rate callable debt, fixed rate non-callable debt, and certain interest rate swaps, were ~~$771 million,~~$1.2 billion, or 5%7%, of MBS and mortgage loans, at ~~September 30, 2023,~~March 31, 2024, and ~~$1.4~~$1.2 billion, or ~~12%~~8%, of MBS and mortgage loans at December 31, ~~2022.~~2023.

The estimated market risk of mortgage-related products are managed both at the time an asset is purchased and on an ongoing basis for the total portfolio. At the time of purchase (for all significant mortgage asset acquisitions), the Bank analyzes the estimated earnings sensitivity and estimated market value sensitivity, taking into consideration the estimated mortgage prepayment sensitivity of the mortgage assets and anticipated funding and hedging activities under various interest rate scenarios. The related funding and hedging transactions are executed at or close to the time of purchase of a mortgage asset.

At least monthly, the Bank reviews the estimated market risk profile of the entire portfolio of mortgage assets and related funding and hedging transactions. The Bank then considers rebalancing strategies to modify the estimated mortgage portfolio market risk profile. Periodically, the Bank performs more in-depth analyses, which include an analysis of the impacts of non-parallel shifts in the yield curve and assessments of the impacts of unanticipated mortgage prepayment behavior. Based on these analyses, the Bank may take actions to rebalance the mortgage

Table of Contents

portfolio’s market risk profile. These rebalancing strategies may include entering into new funding and hedging transactions, forgoing or modifying certain funding or hedging transactions normally executed with new mortgage purchases, or terminating certain funding and hedging transactions for the mortgage asset portfolio.

The Bank manages the estimated interest rate risk associated with mortgage assets, including mortgage prepayment risk, through a combination of debt issuance and derivatives. The Bank may obtain funding through callable and non-callable FHLBank consolidated obligations and may execute derivative transactions to achieve principal cash flow patterns and market value sensitivities for the liabilities and derivatives that provide a significant offset to the interest rate and mortgage prepayment risks associated with the mortgage assets. Debt issued to finance mortgage assets may be fixed rate debt, callable fixed rate debt, adjustable rate debt, or callable adjustable rate debt. Derivatives may be used as temporary hedges of anticipated debt issuance or long-term hedges of debt used to finance the mortgage assets. The derivatives used to hedge the interest rate risk of fixed rate mortgage assets generally may be callable and non-callable pay-fixed interest rate swaps.

As discussed above in ~~“Total Bank Market~~“Market Risk – Market Value of Capital Sensitivity,” the Bank uses market value of capital sensitivity as a primary market value metric for measuring the Bank’s exposure to interest rates. The Bank’s interest rate risk limits and guidelines for ~~the~~ mortgage-related ~~business~~products address the market value of capital sensitivity of the assets, liabilities, and derivatives of ~~the~~ mortgage-related ~~business.~~products.

The following table presents results of the estimated market value of capital sensitivity analysis attributable to the mortgage-related ~~business~~products as of ~~September 30, 2023,~~March 31, 2024, and December 31, ~~2022.~~2023.

Market Value of Capital Sensitivity
Estimated Percentage Change in Market Value of Bank Capital
Attributable to the Mortgage-Related Business for Various Changes in Interest Rates

Market Value of Capital Sensitivity

Estimated Percentage Change in Market Value of Bank Capital

Attributable to the Mortgage-Related Products for Various Changes in Interest Rates

Market Value of Capital Sensitivity

Estimated Percentage Change in Market Value of Bank Capital

Attributable to the Mortgage-Related Products for Various Changes in Interest Rates

Interest Rate Scenario(1)

September 30, 2023

December 31, 2022

Interest Rate Scenario(1)

+200 basis-point change

–0.5

–0.6

–0.3

+100 basis-point change

–0.2

–100 basis-point change(2)

+0.2

+0.1

–100 basis-point change(2)

–200 basis-point change(2)

+0.2

+0.1

–200 basis-point change(2)

(1)Instantaneous change from actual rates at dates indicated.

(2)Interest rates for each maturity are limited to non-negative rates.

The mortgage portfolio’s estimates of the sensitivity of the market value of capital to changes in interest rates as of ~~September 30, 2023,~~March 31, 2024, are comparable with the estimates as of December 31, ~~2022.~~2023.

For more information on quantitative and qualitative disclosures about the Bank’s market risk, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Risk Management – Market Risk” in the Bank’s ~~2022~~2023 Form 10-K.

7562

Table of Contents

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

The senior management of the Federal Home Loan Bank of San Francisco (Bank) is responsible for establishing and maintaining a system of disclosure controls and procedures designed to ensure that information required to be disclosed by the Bank in the reports filed or submitted under the Securities Exchange Act of 1934 (1934 Act) is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. The Bank’s disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Bank in the reports that it files or submits under the 1934 Act is accumulated and communicated to the Bank’s management, including its 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. In designing and evaluating the Bank’s disclosure controls and procedures, the Bank’s 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, and the Bank’s management necessarily is required to apply its judgment in evaluating the cost-benefit relationship of controls and procedures.

Management of the Bank has evaluated the effectiveness of the design and operation of its disclosure controls and procedures with the participation of the president and chief executive officer and executive vice president and chief financial officer as of the end of the period covered by this report. Based on that evaluation, the Bank’s president and chief executive officer and executive vice president and chief financial officer have concluded that the Bank’s disclosure controls and procedures were effective at a reasonable assurance level as of the end of the period covered by this report.

Internal Control Over Financial Reporting

During the three months ended ~~September 30, 2023,~~March 31, 2024, there were no changes in the Bank’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Bank’s internal control over financial reporting.

Consolidated Obligations

The Bank’s disclosure controls and procedures include controls and procedures for accumulating and communicating information in compliance with the Bank’s disclosure and financial reporting requirements relating to the joint and several liability for the consolidated obligations of the Federal Home Loan Banks (FHLBanks). Because the FHLBanks are independently managed and operated, the Bank’s management relies on information that is provided or disseminated by the Federal Housing Finance Agency (Finance Agency), the Office of Finance, and the other FHLBanks, as well as on published FHLBank credit ratings, in determining whether the joint and several liability regulation is reasonably likely to result in a direct obligation for the Bank or whether it is reasonably possible that the Bank will accrue a direct liability.

The Bank’s management also relies on the operation of the joint and several liability regulation. The joint and several liability regulation requires that each FHLBank file with the Finance Agency a quarterly certification that it will remain capable of making full and timely payment of all of its current obligations, including direct obligations, coming due during the next quarter. In addition, if an FHLBank cannot make such a certification or if it projects that it may be unable to meet its current obligations during the next quarter on a timely basis, it must file a notice with the Finance Agency. Under the joint and several liability regulation, the Finance Agency may order any FHLBank to make principal and interest payments on any consolidated obligations of any other FHLBank, or allocate the outstanding liability of an FHLBank among all remaining FHLBanks on a pro rata basis in proportion to each FHLBank’s participation in all consolidated obligations outstanding or on any other basis.

7663

Table of Contents

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Federal Home Loan Bank of San Francisco (Bank) may be subject to various legal proceedings arising in the normal course of business.

After consultation with legal counsel, the Bank is not aware of any legal proceedings that are expected to have a material effect on its financial condition or results of operations or that are otherwise material to the Bank.

ITEM 1A. RISK FACTORS

The Bank is subject to a number of risks as set forth in “Part I. Item 1A. Risk Factors” in the Bank’s ~~2022~~2023 Form ~~10-K and in “Part II. Item 1A. Risk Factors” in the Bank’s Form 10-Q for the quarter ending March 31, 2023.~~10-K. Reference is made to “Quarterly Overview”, as well as other sections, of Item 2. Management Discussion and Analysis of Financial Condition and Results of Operations of this Form 10-Q regarding other potential risks and uncertainties facing the Bank.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Not applicable.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

On October 30, 2023, the Federal Home Loan Bank of San Francisco (Bank) and Joseph Amato entered into an amendment to his employment agreement (Amendment No. 3) to mutually extend the term of his employment to September 30, 2024 (Third Term), with an automatic extension until March 31, 2025, unless a non-renewal notice is provided by either the Bank or Mr. Amato at least one month prior to the end of the Third Term or any automatic extension thereof. Amendment No. 3 also amended Mr. Amato’s base annual salary to $540,000, effective January 1, 2024. The Bank received a non-objection letter from the Federal Housing Finance Agency regarding the material terms of Amendment No. 3 on October 24, 2023. As previously disclosed, Mr. Amato entered into amendments to his employment agreement with the Bank dated July 7, 2021 (Amendment No. 1) and October 19, 2022 (Amendment No. 2) which, among other things, extended his term until March 31, 2023 (Second Term) and mutually elected the option to further extend his term of employment following his Second Term for another year until March 31, 2024.

The foregoing description of the amendments to Mr. Amato’s employment agreement does not purport to be complete and is qualified in its entirety by reference to Amendment No. 3 to his employment agreement, which is incorporated herein by reference as Exhibit 10.1.None.

7764

Table of Contents

ITEM 6. EXHIBITS


Exhibit No.						Description

1 ~~0.1~~						~~Employment Agreement by and among the Federal Home Loan Bank of San Francisco and Joseph E. Amato,~~ ~~dated October 7, 2020, as amended~~

31.1						Certification of the President and Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2						Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1						Certification of the President and Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2						Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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						Inline XBRL Taxonomy Extension Schema Document

101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB						Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document

104						Cover Page Interactive Data File - The cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

7865

Table of Contents

SIGNATURES

Pursuant to the requirements 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, on ~~November~~May 3, ~~2023.~~2024.


			Federal Home Loan Bank of San Francisco

			/S/ TERESA B. BAZEMORE
			Teresa B. Bazemore President and Chief Executive Officer (Principal executive officer)

			/S/ JOSEPH E. AMATO
			Joseph E. Amato Executive Vice President and Chief Financial Officer (Principal financial officer)

			/S/ KITTY PAYNE
			Kitty Payne Senior Vice President and Controller (Principal accounting officer)

7966


(In millions)	Advances- Related Business		Mortgage- Related Business(1)		Adjusted Net Interest Income		Amortization of Basis Adjustments and (Gain)/Loss on Fair Value Hedges(2)		Income/(Expense) on Economic Hedges(3)		Interest Expense on Mandatorily Redeemable Capital Stock(4)		Net Interest Income After Provision for/(Reversal of) Credit Losses		Other Income/ (Loss)		Other Expense		Income/(Loss) Before AHP Assessment
Three Months Ended:
September 30, 2023	$	128	$	44	$	172	$	(8)	$	3	$	13	$	164	$	7	$	55	$	116
September 30, 2022	86		48		134		10		(24)		—		148		(18)		41		89
Nine Months Ended:
September 30, 2023	$	495	$	143	$	638	$	(9)	$	2	$	15	$	630	$	(15)	$	148	$	467
September 30, 2022	172		184		356		(4)		(17)		—		377		(31)		117		229


(In millions)	Advances- Related Business		Mortgage- Related Business		Total Assets
September 30, 2023	$	80,065	$	14,956	$	95,021
December 31, 2022	109,330		11,726		121,056


	Three Months Ended September 30, 2022
	Interest Income/(Expense)
(In millions)	Advances		AFS Securities		Consolidated Obligation Bonds
Total interest income/(expense) presented in the Statements of Income	$	345	$	109	$	(143)
Gain/(loss) on fair value hedging relationships
Derivatives(1)	$	314	$	507	$	(391)
Hedged items	(301)		(515)		354
Net gain/(loss) on derivatives and hedging activities recorded in net interest income	13		(8)		(37)



	Nine Months Ended September 30, 2023
	Interest Income/(Expense)
(In millions)	Advances		AFS Securities		Consolidated Obligation Bonds
Total interest income/(expense) presented in the Statements of Income	$	3,184	$	645	$	(3,008)
Gain/(loss) on fair value hedging relationships
Derivatives(1)	$	484	$	657	$	(310)
Hedged items	(297)		(434)		(119)
Net gain/(loss) on derivatives and hedging activities recorded in net interest income	187		223		(429)


Investment Credit Exposure

(In millions)
September 30, 2023
	Carrying Value
	Credit Rating(1)
Investment Type	AAA		AA		A		BBB		Below Investment Grade		Unrated		Total




U.S. obligations – Treasury securities	$	—	$	4,044	$	—	$	—	$	—	$	—	$	4,044



MBS:

Other U.S. obligations – single-family	—		55		—		—		—		—		55
MBS – GSEs:


GSEs – single-family(2)	4		629		2		—		2		—		637



GSEs – multifamily	—		12,234		—		—		—		—		12,234
Total MBS – GSEs	4		12,863		2		—		2		—		12,871



PLRMBS	—		17		25		49		597		517		1,205
Total MBS	4		12,935		27		49		599		517		14,131
Total securities	4		16,979		27		49		599		517		18,175
Interest-bearing deposits	—		—		3,777		—		—		—		3,777
Securities purchased under agreements to resell(3)	—		1,000		—		—		—		1,750		2,750
Federal funds sold(4)	—		1,363		4,095		—		—		75		5,533
Total investments	$	4	$	19,342	$	7,899	$	49	$	599	$	2,342	$	30,235