Federal Home Loan Bank of Des Moines 10-Q 2023 Q1 Quarterly report

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 March 31, 2023

OR

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

Commission File Number: 000-51999

FEDERAL HOME LOAN BANK OF DES MOINES

(Exact name of registrant as specified in its charter)

Federally chartered corporation of the United States	42-6000149
(State or other jurisdiction of incorporation or organization)	(I.R.S. employer identification number)

909 Locust Street

Des Moines, IA

(Address of principal executive offices)

50309

(Zip code)

Registrant’s telephone number, including area code: (515) 412-2100

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

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 requirements 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 (section 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 the 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 April 30, 2023
Class B Stock, par value $100	67,044,292

Table of Contents
Part I - Financial Information
Item 1.	Financial Statements (Unaudited)	3
	Statements of Condition	3
	Statements of Income	4
	Statements of Comprehensive Income	5
	Statements of Capital	6
	Statements of Cash Flows	7
	Condensed Notes to the Unaudited Financial Statements	9
	Background Information	9
	Note 1 - Basis of Presentation	9
	Note 2 - Recently Adopted and Issued Accounting Guidance	10
	Note 3 - Investments	10
	Note 4 - Advances	16
	Note 5 - Mortgage Loans Held for Portfolio	18
	Note 6 - Derivatives and Hedging Activities	21
	Note 7 - Consolidated Obligations	27
	Note 8 - Capital	29
	Note 9 - Fair Value	31
	Note 10 - Commitments and Contingencies	39
	Note 11 - Activities with Stockholders	40
	Note 12 - Activities with Other FHLBanks	41
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	42
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	71
Item 4.	Controls and Procedures	71
Part II - Other Information
Item 1.	Legal Proceedings	71
Item 1A.	Risk Factors	71
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	71
Item 3.	Defaults Upon Senior Securities	71
Item 4.	Mine Safety Disclosures	71
Item 5.	Other Information	72
Item 6.	Exhibits	73
Signatures		74

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

FEDERAL HOME LOAN BANK OF DES MOINES

STATEMENTS OF CONDITION

(dollars and shares in millions, except capital stock par value)

(Unaudited)

	March 31, 2023		December 31, 2022
ASSETS
Cash and due from banks	$	71	$	89
Interest-bearing deposits (Note 3)	2,801		2,031
Securities purchased under agreements to resell (Note 3)	22,900		12,590
Federal funds sold (Note 3)	9,830		9,415
Investment securities (Note 3)
Trading securities	2,598		2,817
Available-for-sale securities (amortized cost of $18,646 and $15,677)	18,465		15,563
Held-to-maturity securities (fair value of $937 and $959)	936		965
Total investment securities	21,999		19,345
Advances (Note 4)	119,027		111,202
Mortgage loans held for portfolio, net of allowance for credit losses of $5 and $5 (Note 5)	8,473		8,348
Accrued interest receivable	408		389
Derivative assets, net (Note 6)	785		643
Other assets, net	123		117
TOTAL ASSETS	$	186,417	$	164,169
LIABILITIES
Deposits
Interest-bearing	$	1,238	$	1,006
Non-interest-bearing	78		70
Total deposits	1,316		1,076
Consolidated obligations (Note 7)
Discount notes (includes $39,447 and $44,531 at fair value held under fair value option)	72,642		69,170
Bonds	100,883		84,337
Total consolidated obligations	173,525		153,507
Borrowings from other FHLBanks	250		—
Mandatorily redeemable capital stock (Note 8)	14		15
Accrued interest payable	619		436
Affordable Housing Program payable	141		135
Derivative liabilities, net (Note 6)	11		4
Other liabilities	1,419		245
TOTAL LIABILITIES	177,295		155,418
Commitments and contingencies (Note 10)
CAPITAL (Note 8)
Capital stock - Class B putable ($100 par value); 66 and 63 issued and outstanding shares	6,592		6,250
Retained earnings
Unrestricted	1,972		1,915
Restricted	741		703
Total retained earnings	2,713		2,618
Accumulated other comprehensive income (loss)	(183)		(117)
TOTAL CAPITAL	9,122		8,751
TOTAL LIABILITIES AND CAPITAL	$	186,417	$	164,169

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

3

FEDERAL HOME LOAN BANK OF DES MOINES

STATEMENTS OF INCOME

(dollars in millions)

(Unaudited)

	For the Three Months Ended
	March 31,
		2023		2022
INTEREST INCOME
Advances		$	1,394	$	111
Interest-bearing deposits		39		1
Securities purchased under agreements to resell		93		1
Federal funds sold		171		3
Trading securities		9		7
Available-for-sale securities		224		30
Held-to-maturity securities		11		6
Mortgage loans held for portfolio		69		53
Total interest income		2,010		212
INTEREST EXPENSE
Consolidated obligations - Discount notes		735		14
Consolidated obligations - Bonds		983		99
Deposits		10		—
Total interest expense		1,728		113
NET INTEREST INCOME		282		99
Provision (reversal) for credit losses on mortgage loans		—		2
NET INTEREST INCOME AFTER PROVISION (REVERSAL) FOR CREDIT LOSSES		282		97
OTHER INCOME (LOSS)
Net gains (losses) on trading securities		33		(41)
Net gains (losses) on financial instruments held under fair value option		(65)		22
Net gains (losses) on derivatives		10		16
Standby letter of credit fees		2		2
Net gains (losses) on extinguishment of debt		2		—
Other, net		3		1
Total other income (loss)		(15)		—
OTHER EXPENSE
Compensation and benefits		20		18
Contractual services		6		5
Professional fees		3		3
Other operating expenses		5		4
Federal Housing Finance Agency		2		3
Office of Finance		3		2
Other, net		16		2
Total other expense		55		37
NET INCOME BEFORE ASSESSMENTS		212		60
Affordable Housing Program assessments		21		6
NET INCOME		$	191	$	54

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

4

FEDERAL HOME LOAN BANK OF DES MOINES

STATEMENTS OF COMPREHENSIVE INCOME

(dollars in millions)

(Unaudited)

	For the Three Months Ended
	March 31,
	2023		2022
Net income	$	191	$	54
Other comprehensive income (loss)
Net unrealized gains (losses) on available-for-sale securities	(67)		(61)
Pension and postretirement benefits	1		(2)
Total other comprehensive income (loss)	(66)		(63)
TOTAL COMPREHENSIVE INCOME (LOSS)	$	125	$	(9)

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

5

FEDERAL HOME LOAN BANK OF DES MOINES

STATEMENTS OF CAPITAL

(dollars and shares in millions)

(Unaudited)

	Capital Stock Class B (putable)			Retained Earnings						Accumulated Other Comprehensive Income (Loss)		Total Capital
	Shares	Par Value		Unrestricted		Restricted		Total
BALANCE, DECEMBER 31, 2021	34	$	3,364	$	1,773	$	617	$	2,390	$	84	$	5,838
Comprehensive income (loss)	—	—		43		11		54		(63)		(9)
Proceeds from issuance of capital stock	10	987		—		—		—		—		987
Repurchases/redemptions of capital stock	(8)	(827)		—		—		—		—		(827)
Net shares reclassified (to) from mandatorily redeemable capital stock	—	(1)		—		—		—		—		(1)
Cash dividends on capital stock	—	—		(43)		—		(43)		—		(43)
BALANCE, MARCH 31, 2022	36	$	3,523	$	1,773	$	628	$	2,401	$	21	$	5,945
BALANCE, DECEMBER 31, 2022	63	$	6,250	$	1,915	$	703	$	2,618	$	(117)	$	8,751
Comprehensive income (loss)	—	—		153		38		191		(66)		125
Proceeds from issuance of capital stock	36	3,634		—		—		—		—		3,634
Repurchases/redemptions of capital stock	(33)	(3,292)		—		—		—		—		(3,292)
Cash dividends on capital stock	—	—		(96)		—		(96)		—		(96)
BALANCE, MARCH 31, 2023	66	$	6,592	$	1,972	$	741	$	2,713	$	(183)	$	9,122

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

6

FEDERAL HOME LOAN BANK OF DES MOINES

STATEMENTS OF CASH FLOWS

(dollars in millions)

(Unaudited)

	For the Three Months Ended
	March 31,
	2023		2022
OPERATING ACTIVITIES
Net income	$	191	$	54
Adjustments to reconcile net income to net cash provided by (used in) operating activities
Depreciation and amortization/(accretion)	188		9
Net (gains) losses on trading securities	(33)		41
Net (gains) losses on financial instruments held under fair value option	65		(22)
Net change in derivatives and hedging activities	(332)		667
Net (gains) losses on extinguishment of debt	(2)		—
Other adjustments, net	1		2
Net change in:
Accrued interest receivable	(61)		(18)
Other assets	(4)		2
Accrued interest payable	182		—
Other liabilities	11		(13)
Total adjustments	15		668
Net cash provided by (used in) operating activities	206		722
INVESTING ACTIVITIES
Net change in:
Interest-bearing deposits	(965)		(674)
Securities purchased under agreements to resell	(10,310)		1,700
Federal funds sold	(415)		(1,510)
Trading securities
Proceeds from sales	248		—
Proceeds from maturities and paydowns	4		91
Purchases	—		(1,298)
Available-for-sale securities
Proceeds from maturities and paydowns	859		899
Purchases	(2,354)		(791)
Held-to-maturity securities
Proceeds from maturities and paydowns	27		71
Advances
Repaid	213,381		34,229
Originated	(220,949)		(35,437)
Mortgage loans held for portfolio
Principal collected	164		330
Purchased	(292)		(467)
Other investing activities, net	(4)		(4)
Net cash provided by (used in) investing activities	(20,606)		(2,861)

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

7

FEDERAL HOME LOAN BANK OF DES MOINES

STATEMENTS OF CASH FLOWS (continued from previous page)

(dollars in millions)

(Unaudited)

	For the Three Months Ended
	March 31,
	2023		2022
FINANCING ACTIVITIES
Net change in deposits	238		7
Borrowings from other FHLBanks	250		—
Net proceeds from issuance of consolidated obligations
Discount notes	423,414		83,926
Bonds	42,834		8,734
Payments for maturing and retiring consolidated obligations
Discount notes	(420,212)		(69,521)
Bonds	(26,387)		(21,336)
Proceeds from issuance of capital stock	3,634		987
Payments for repurchases/redemptions of capital stock	(3,292)		(827)
Net payments for repurchases/redemptions of mandatorily redeemable capital stock	(1)		(12)
Cash dividends paid	(96)		(43)
Net cash provided by (used in) financing activities	20,382		1,915
Net increase (decrease) in cash and due from banks	(18)		(224)
Cash and due from banks at beginning of the period	89		295
Cash and due from banks at end of the period	$	71	$	71
SUPPLEMENTAL DISCLOSURES
Cash Transactions:
Interest paid	$	1,383	$	116
Affordable Housing Program payments	15		11
Non-Cash Transactions:
Capitalized interest on reverse mortgage investment securities	46		4
Traded but not settled investment security purchases	1,351		473

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

8

FEDERAL HOME LOAN BANK OF DES MOINES

CONDENSED NOTES TO THE UNAUDITED FINANCIAL STATEMENTS

Background Information

The Federal Home Loan Bank of Des Moines (the Bank) is a federally chartered corporation that is exempt from all federal, state, and local taxation (except real property taxes and certain employer payroll taxes) and is one of 11 district Federal Home Loan Banks (FHLBanks). The FHLBanks are government-sponsored enterprises (GSEs) and were created under the authority of the Federal Home Loan Bank Act of 1932 (FHLBank Act) in order to serve the public by enhancing the availability of funds for residential mortgages and targeted community development. The Bank is regulated by the Federal Housing Finance Agency (Finance Agency).

The Bank is a cooperative, meaning it is owned by its customers, whom the Bank calls members. As a condition of membership in the Bank, all members must purchase and maintain capital stock to support business activities with the Bank. In return, the Bank provides a readily available source of funding and liquidity to its member institutions and eligible housing associates in Alaska, Hawaii, Idaho, Iowa, Minnesota, Missouri, Montana, North Dakota, Oregon, South Dakota, Utah, Washington, Wyoming, and the U.S. Pacific territories of American Samoa, Guam, and the Commonwealth of the Northern Mariana Islands. Commercial banks, savings institutions, credit unions, insurance companies, and community development financial institutions (CDFIs) may apply for membership. State and local housing associates that meet certain statutory criteria may also borrow from the Bank; while eligible to borrow, housing associates are not members of the Bank and, as such, are not permitted to hold capital stock. All stockholders, including current and former members, may receive dividends on their capital stock investment to the extent declared by the Bank’s Board of Directors.

Note 1 — Basis of Presentation

The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information. Accordingly, they do not include all of the disclosures required by GAAP for annual financial statements and should be read in conjunction with the audited financial statements for the year ended December 31, 2022, which are contained in the Bank’s 2022 Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC) on March 8, 2023 (2022 Form 10-K).

In the opinion of management, the unaudited financial information is complete and reflects all adjustments, consisting of normal recurring adjustments, necessary for a fair statement of results for the interim periods. The preparation of financial statements in accordance with GAAP requires management to make assumptions and estimates that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from these estimates. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year ending December 31, 2023.

SIGNIFICANT ACCOUNTING POLICIES

There have been no material changes to the Bank’s significant accounting policies during the three months ended March 31, 2023. Descriptions of all significant accounting policies are included in “Note 1 — Summary of Significant Accounting Policies” in the 2022 Form 10-K.

9

Note 2 — Recently Adopted and Issued Accounting Guidance

Troubled Debt Restructurings and Vintage Disclosures (ASU 2022-02)

On March 31, 2022, the Financial Accounting Standards Board (FASB) issued guidance eliminating the accounting requirements for TDRs by creditors that have adopted the current expected credit losses methodology, while enhancing the 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. This guidance became effective for the Bank for the interim and annual periods beginning on January 1, 2023, and was adopted on a prospective basis. The adoption of this guidance did not have a material effect on the Bank’s financial condition, results of operations, or cash flows.

Fair Value Hedging – Portfolio Layer Method (ASU 2022-01)

On March 28, 2022, the FASB issued guidance expanding the current last-of-layer method to apply fair value hedging by allowing multiple hedged layers of a single closed portfolio under the method. To reflect that expansion, the last-of-layer method is renamed “the portfolio layer method”. Among other things, this guidance (i) expands the scope of the portfolio layer method to include non-prepayable assets, (ii) specifies eligible hedging instruments in a single-layer hedge, (iii) provides additional guidance on the accounting for and disclosure of hedge basis adjustments under the portfolio layer method, and (iv) specifies how hedge basis adjustments should be considered when determining credit losses for the assets included in the closed portfolio. This guidance became effective for the interim and annual periods beginning on January 1, 2023. The Bank does not currently utilize the last-of-layer hedging method and therefore this guidance did not have any impact on the Bank’s financial condition, results of operations, or cash flows.

Reference Rate Reform (ASU 2020-04)

On March 12, 2020, the FASB issued temporary guidance to ease the potential burden in accounting for reference rate reform related to the transition from LIBOR. The guidance provides optional expedients and exceptions for applying GAAP to transactions affected by reference rate reform, if certain criteria are met. These transactions include contract modifications, hedging relationships, and the sale/transfer of held-to-maturity (HTM) debt securities. This guidance became effective immediately and remains in effect until December 31, 2024. The Bank began electing the contractual modification and hedging relationship optional expedients in the first quarter of 2023. The election of the expedients has not had a material effect on the Bank’s financial condition, results of operations, or cash flows.

Note 3 — Investments

The Bank makes short-term investments in interest-bearing deposits, securities purchased under agreements to resell, and federal funds sold, and makes other investments in debt securities, which are classified as either trading, available-for-sale (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 funds sold to provide short-term liquidity. These investments are generally transacted with counterparties that have received a credit rating of triple-B or greater (investment grade) by a nationally recognized statistical rating organization (NRSRO). At March 31, 2023 and December 31, 2022, none of these investments were with counterparties rated below triple-B; however, as of March 31, 2023 and December 31, 2022, approximately six percent and nine percent were secured securities purchased under agreements to resell with unrated counterparties. These NRSRO ratings may differ from any internal ratings of the investments by the Bank.

Federal funds sold are unsecured loans that are generally transacted on an overnight term. Finance Agency regulations include a limit on the amount of unsecured credit the Bank may extend to a counterparty. At March 31, 2023 and December 31, 2022, no allowance for credit losses was recorded for interest-bearing deposits and federal funds sold, as all assets were repaid or expected to be repaid according to their contractual terms. The carrying values of interest-bearing deposits and federal funds sold exclude accrued interest receivable of $13 million and $11 million at March 31, 2023 and December 31, 2022.

10

Securities purchased under agreements to resell are secured, short-term, and are structured such that they are evaluated regularly to determine if the market value of the underlying securities decreases below the market value required as collateral (i.e. subject to collateral maintenance provisions). If so, the counterparty must place an equivalent amount of additional securities as collateral or remit an equivalent amount of cash, generally by the next business day. 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 March 31, 2023 and December 31, 2022. The carrying value of securities purchased under agreements to resell excludes accrued interest receivable of $3 million at both March 31, 2023 and December 31, 2022.

DEBT SECURITIES

The Bank invests in debt securities, which are classified as either trading, AFS, or HTM. 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. A security is considered to be investment quality if it has adequate financial backing so that full and timely payment of principal and interest is expected and there is minimal risk that the timely payment of principal and interest would not occur because of adverse changes in economic and financial conditions during the projected life of the security. Exceptions are allowed for certain investments targeted at low-income persons or communities, and instruments that experience credit deterioration after their purchase by the Bank.

Trading Securities

Trading securities by major security type were as follows (dollars in millions):

	March 31, 2023		December 31, 2022
Non-mortgage-backed securities
U.S. Treasury obligations1	$	2,282	$	2,501
Other U.S. obligations1	74		76
GSE and Tennessee Valley Authority obligations	49		49
Other2	148		146
Total non-mortgage-backed securities	2,553		2,772
Mortgage-backed securities
GSE multifamily	45		45
Total fair value	$	2,598	$	2,817

1    Represents investment securities backed by the full faith and credit of the U.S. Government.

2    Consists of taxable municipal bonds.

Net Gains (Losses) on Trading Securities

The following table summarizes the components of “Net gains (losses) on trading securities” as presented on the Statements of Income (dollars in millions):

	For the Three Months Ended
	March 31,
	2023		2022
Net unrealized gains (losses) on trading securities held at period-end	$	33	$	(40)
Net gains (losses) on trading securities no longer held at period-end	—		(1)
Net gains (losses) on trading securities	$	33	$	(41)

11

AFS Securities

AFS securities by major security type were as follows (dollars in millions):

	March 31, 2023
	Amortized Cost1		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Non-mortgage-backed securities
Other U.S. obligations2	$	660	$	1	$	(2)	$	659
GSE and Tennessee Valley Authority obligations	454		11		(2)		463
State or local housing agency obligations	453		—		(4)		449
Other3	237		6		—		243
Total non-mortgage-backed securities	1,804		18		(8)		1,814
Mortgage-backed securities
U.S. obligations single-family2	3,761		3		(11)		3,753
GSE single-family	205		—		(2)		203
GSE multifamily	12,876		4		(185)		12,695
Total mortgage-backed securities	16,842		7		(198)		16,651
Total	$	18,646	$	25	$	(206)	$	18,465

	December 31, 2022
	Amortized Cost1		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Non-mortgage-backed securities
Other U.S. obligations2	$	759	$	1	$	(2)	$	758
GSE and Tennessee Valley Authority obligations	459		12		(1)		470
State or local housing agency obligations	454		—		(5)		449
Other3	234		6		—		240
Total non-mortgage-backed securities	1,906		19		(8)		1,917
Mortgage-backed securities
U.S. obligations single-family2	3,693		1		(18)		3,676
GSE single-family	212		1		(3)		210
GSE multifamily	9,866		10		(116)		9,760
Total mortgage-backed securities	13,771		12		(137)		13,646
Total	$	15,677	$	31	$	(145)	$	15,563

1    Amortized cost includes adjustments made to the cost basis of an investment for accretion, amortization, and/or fair value hedge accounting adjustments, and excludes accrued interest receivable of $57 million and $49 million at March 31, 2023 and December 31, 2022.

2    Represents investment securities backed by the full faith and credit of the U.S. Government.

3    Consists primarily of taxable municipal bonds.

12

Unrealized Losses

The following tables summarize AFS securities with gross unrealized losses by major security type and length of time that individual securities have been in a continuous unrealized loss position (dollars in millions). In cases where the gross unrealized losses for an investment category are less than $1 million, the losses are not reported.

	March 31, 2023
	Less than 12 Months				12 Months or More				Total
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
Non-mortgage-backed securities
Other U.S. obligations1	$	319	$	(1)	$	77	$	(1)	$	396	$	(2)
GSE and Tennessee Valley Authority obligations	86		(2)		—		—		86		(2)
State or local housing agency obligations	33		—		404		(4)		437		(4)
Total non-mortgage-backed securities	438		(3)		481		(5)		919		(8)
Mortgage-backed securities
U.S. obligations single-family1	2,500		(8)		427		(3)		2,927		(11)
GSE single-family	118		(2)		7		—		125		(2)
GSE multifamily	8,586		(121)		2,992		(64)		11,578		(185)
Total mortgage-backed securities	11,204		(131)		3,426		(67)		14,630		(198)
Total	$	11,642	$	(134)	$	3,907	$	(72)	$	15,549	$	(206)

	December 31, 2022
	Less than 12 Months				12 Months or More				Total
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
Non-mortgage-backed securities
Other U.S. obligations1	$	428	$	(1)	$	63	$	(1)	$	491	$	(2)
GSE and Tennessee Valley Authority obligations	84		(1)		—		—		84		(1)
State or local housing agency obligations	35		(1)		403		(4)		438		(5)
Total non-mortgage-backed securities	547		(3)		466		(5)		1,013		(8)
Mortgage-backed securities
U.S. obligations single-family1	3,094		(17)		122		(1)		3,216		(18)
GSE single-family	138		(3)		—		—		138		(3)
GSE multifamily	5,471		(97)		2,012		(19)		7,483		(116)
Total mortgage-backed securities	8,703		(117)		2,134		(20)		10,837		(137)
Total	$	9,250	$	(120)	$	2,600	$	(25)	$	11,850	$	(145)

1    Represents investment securities backed by the full faith and credit of the U.S. Government.

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Contractual Maturity

The following table summarizes AFS securities by contractual maturity. Expected maturities of some securities may differ from contractual maturities as borrowers may have the right to call or prepay obligations with or without call or prepayment fees (dollars in millions):

	March 31, 2023				December 31, 2022
Year of Contractual Maturity	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Non-mortgage-backed securities
Due in one year or less	$	364	$	365	$	293	$	295
Due after one year through five years	670		672		832		833
Due after five years through ten years	310		313		330		333
Due after ten years	460		464		451		456
Total non-mortgage-backed securities	1,804		1,814		1,906		1,917
Mortgage-backed securities	16,842		16,651		13,771		13,646
Total	$	18,646	$	18,465	$	15,677	$	15,563

HTM Securities

HTM securities by major security type were as follows (dollars in millions):

	March 31, 2023
	Amortized Cost1		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Non-mortgage-backed securities
GSE and Tennessee Valley Authority obligations	$	368	$	14	$	(3)	$	379
State or local housing agency obligations	32		—		—		32
Total non-mortgage-backed securities	400		14		(3)		411
Mortgage-backed securities
U.S. obligations single-family2	2		—		—		2
GSE single-family	531		—		(10)		521
Private-label	3		—		—		3
Total mortgage-backed securities	536		—		(10)		526
Total	$	936	$	14	$	(13)	$	937

	December 31, 2022
	Amortized Cost1		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Non-mortgage-backed securities
GSE and Tennessee Valley Authority obligations	$	369	$	10	$	(4)	$	375
State or local housing agency obligations	33		—		—		33
Total non-mortgage-backed securities	402		10		(4)		408
Mortgage-backed securities
U.S. obligations single-family2	2		—		—		2
GSE single-family	557		—		(12)		545
Private-label	4		—		—		4
Total mortgage-backed securities	563		—		(12)		551
Total	$	965	$	10	$	(16)	$	959

1    Amortized cost includes adjustments made to the cost basis of an investment for accretion or amortization and excludes accrued interest receivable of $10 million and $5 million at March 31, 2023 and December 31, 2022.

2    Represents investment securities backed by the full faith and credit of the U.S. Government.

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Contractual Maturity

The following table summarizes HTM securities by contractual maturity. Expected maturities of some securities may differ from contractual maturities as borrowers may have the right to call or prepay obligations with or without call or prepayment fees (dollars in millions):

	March 31, 2023				December 31, 2022
Year of Contractual Maturity	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Non-mortgage-backed securities
Due after one year through five years	$	252	$	254	$	254	$	254
Due after five years through ten years	71		74		71		73
Due after ten years	77		83		77		81
Total non-mortgage-backed securities	400		411		402		408
Mortgage-backed securities	536		526		563		551
Total	$	936	$	937	$	965	$	959

ALLOWANCE FOR CREDIT LOSSES ON AFS AND HTM SECURITIES

The Bank evaluates AFS and HTM investment securities for credit losses on a quarterly basis. The Bank’s AFS and HTM securities may include, but are not limited to, certificates of deposit, commercial paper, U.S. obligations, GSE and Tennessee Valley Authority (TVA) obligations, state or local housing agency obligations, taxable municipal bonds, and mortgage-backed securities (MBS). The Bank only purchases securities considered investment quality. At both March 31, 2023 and December 31, 2022, over 99 percent of the Bank’s AFS and HTM securities, based on amortized cost, were rated single-A, or above, by an NRSRO, based on the lowest long-term credit rating for each security. These NRSRO ratings may differ from any internal ratings of the securities by the Bank.

The Bank evaluates its individual AFS securities for impairment by comparing the security’s fair value to its amortized cost. Impairment may exist when the fair value of the investment is less than its amortized cost (i.e. in an unrealized loss position). At March 31, 2023 and December 31, 2022, certain AFS securities held by the Bank 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. In addition, substantially all of these securities are high-quality GSE securities or 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 March 31, 2023 and December 31, 2022.

The Bank evaluates its HTM securities for impairment on a collective, or pooled, basis unless an individual assessment is deemed necessary because the securities do not possess similar risk characteristics. At March 31, 2023 and December 31, 2022, the Bank had no allowance for credit losses recorded on its HTM securities because the securities: (i) were all highly-rated, (ii) had not experienced, nor did the Bank expect, any payment default on the instruments, (iii) in the case of U.S. obligations, carry an explicit government guarantee, and (iv) 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.

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Note 4 — Advances

REDEMPTION TERM

The following table summarizes the Bank’s advances outstanding by redemption term (dollars in millions):

	March 31, 2023				December 31, 2022
Redemption Term	Amount1		Weighted Average Interest Rate		Amount1		Weighted Average Interest Rate
Overdrawn demand deposit accounts	$	2	6.55	%	$	1	6.10	%
Due in one year or less	66,770		4.86		$	61,578	4.26
Due after one year through two years	21,703		4.33		23,026		4.25
Due after two years through three years	9,947		4.17		10,790		3.47
Due after three years through four years	8,892		3.39		7,149		3.03
Due after four years through five years	8,783		4.13		6,047		3.89
Thereafter	3,845		3.20		3,783		3.03
Total par value	119,942		4.49	%	112,374		4.04	%
Premiums	8				11
Fair value hedging adjustments	(923)				(1,183)
Total	$	119,027			$	111,202

1    Excludes accrued interest receivable of $272 million and $271 million at March 31, 2023 and December 31, 2022.

The following table summarizes advances by year of redemption term or next call date for callable advances, and by year of redemption term or next put date for putable advances (dollars in millions):

	Redemption Term or Next Call Date				Redemption Term or Next Put Date
	March 31, 2023		December 31, 2022		March 31, 2023		December 31, 2022
Overdrawn demand deposit accounts	$	2	$	1	$	2	$	1
Due in one year or less	77,737		73,765		66,914		61,745
Due after one year through two years	19,511		20,883		21,566		22,890
Due after two years through three years	6,613		6,218		9,948		10,767
Due after three years through four years	5,814		4,468		8,892		7,149
Due after four years through five years	6,471		3,228		8,783		6,047
Thereafter	3,794		3,811		3,837		3,775
Total par value	$	119,942	$	112,374	$	119,942	$	112,374

The Bank offers advances to members and eligible housing associates that may be prepaid on predetermined dates (call dates) prior to maturity without incurring prepayment fees (callable advances). Other advances may require a prepayment fee or credit that makes the Bank financially indifferent to the prepayment of the advance. At March 31, 2023 and December 31, 2022, the Bank had callable advances outstanding totaling $19.3 billion and $23.4 billion.

The Bank also holds putable advances. With a putable advance, the Bank has the right to terminate the advance from the borrower on predetermined exercise dates. Generally, these put options are exercised when interest rates increase relative to contractual rates. At March 31, 2023 and December 31, 2022, the Bank had putable advances outstanding totaling $144 million and $168 million.

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PREPAYMENT FEES

The Bank generally charges a prepayment fee for advances that a borrower elects to terminate prior to the stated maturity or outside of a predetermined call or put date. The fees charged are priced to make the Bank financially indifferent to the prepayment of the advance. For certain advances with symmetrical prepayment features, 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. Prepayment fees and credits are recorded net of the hedged item fair value hedging adjustments, if applicable, in advance interest income on the Statements of Income.

ADVANCE CONCENTRATIONS

The Bank’s advances are primarily concentrated in commercial banks and insurance companies. At March 31, 2023 and December 31, 2022, the Bank had outstanding advances of $27.0 billion and $32.0 billion to Wells Fargo Bank, N.A., which represented 23 percent and 28 percent of the total principal amount of outstanding advances.

ALLOWANCE FOR CREDIT LOSSES

The Bank evaluates advances for credit losses on a quarterly basis and manages its credit exposure to advances through an approach that includes establishing a credit limit for each borrower. This approach includes an ongoing review of each borrower’s financial condition in conjunction with the Bank’s collateral and lending policies to limit risk of loss while balancing borrowers’ needs for a reliable source of funding. In addition, the Bank lends to eligible borrowers in accordance with the FHLBank Act, Finance Agency regulations, and other applicable laws.

The Bank is required by regulation to obtain sufficient collateral to fully secure its advances. The estimated value of the collateral required to secure each borrower’s advances is calculated by applying collateral discounts, or haircuts, to the unpaid principal balance or market value, as applicable, of the collateral. The Bank also has policies and procedures for validating the reasonableness of the Bank’s collateral valuations. In addition, collateral verifications and on-site reviews are performed by the Bank based on the risk profile of the borrower. Management believes that these policies effectively manage the Bank’s credit risk from advances.

Eligible collateral includes:

•fully disbursed whole first mortgages on improved residential real property or securities representing a whole interest in such mortgages;

•loans and securities issued, insured, or guaranteed by the U.S. Government or any agency thereof, including MBS issued or guaranteed by Federal National Mortgage Association, Federal Home Loan Mortgage Corporation, or Government National Mortgage Association;

•cash deposited with the Bank; and

•other real estate-related collateral acceptable to the Bank, such as second lien mortgages, home equity lines of credit, municipal securities, and commercial real estate mortgages, provided such collateral has a readily ascertainable value and the Bank can perfect a security interest in it.

Community financial institutions may also pledge collateral consisting of secured small business, small agri-business, or small farm loans. As additional security, the FHLBank Act provides that the Bank has a lien on each member’s capital stock investment; however, capital stock cannot be pledged as collateral to secure advances.

Collateral arrangements may vary depending upon borrower credit quality, financial condition and performance, borrowing capacity, and overall credit exposure to the borrower. The Bank can also require additional or substitute collateral to protect its security interest. The Bank periodically evaluates and makes changes to its collateral guidelines and collateral haircuts.

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Borrowers may pledge collateral to the Bank by executing a blanket pledge agreement, specifically assigning collateral, or placing physical possession of collateral with the Bank or its custodians. The Bank perfects its security interest in all pledged collateral by filing Uniform Commercial Code financing statements or by taking possession or control of the collateral. Under the FHLBank Act, any security interest granted to the Bank by its members, or any affiliates of its members, has priority over the claims and rights of any party (including any receiver, conservator, trustee, or similar party having rights of a lien creditor), unless those claims and rights would be entitled to priority under otherwise applicable law and are held by actual purchasers or by parties that have perfected security interests.

Under a blanket pledge agreement, the Bank is granted a security interest in all financial assets of the borrower to fully secure the borrower’s obligation. Other than securities and cash deposits, the Bank does not initially take delivery of collateral from blanket pledge agreement borrowers. In the event of a default or a deterioration in the financial condition of a blanket pledge agreement borrower, the Bank has the ability to require delivery of pledged collateral sufficient to secure the borrower’s obligation. With respect to non-blanket pledge agreement borrowers that are federally insured, the Bank generally requires collateral to be specifically assigned. With respect to non-blanket pledge agreement borrowers that are not federally insured (typically insurance companies, CDFIs, and housing associates), the Bank generally takes control of collateral through the delivery of cash, securities, or loans to the Bank or its custodians.

Using a risk-based approach and taking into consideration each borrower’s financial strength, the Bank considers the types and level of collateral to be the primary indicators of credit quality on its advances. At March 31, 2023 and December 31, 2022, the Bank had rights to collateral on a borrower-by-borrower basis with an unpaid principal balance or market value, as applicable, in excess of its outstanding advances.

At March 31, 2023 and December 31, 2022, none of the Bank’s advances were past due, on non-accrual status, or considered impaired. The Bank considers an advance past due if a default of contractual principal or interest exists for a period of 30 days or more. In addition, there were no modifications related to advances resulting from a borrower experiencing financial difficulties during the three months ended March 31, 2023 and 2022.

The Bank has never experienced a credit loss on its advances. Based upon the Bank’s collateral and lending policies, the collateral held as security, and the repayment history on advances, management has determined that there were no expected credit losses on its advances as of March 31, 2023 and December 31, 2022.

Note 5 — Mortgage Loans Held for Portfolio

Mortgage loans held for portfolio include conventional mortgage loans and government-guaranteed or -insured mortgage loans obtained primarily through the Mortgage Partnership Finance (MPF) program (Mortgage Partnership Finance and MPF are registered trademarks of the FHLBank of Chicago). The Bank’s mortgage loan program involves investment by the Bank in single-family mortgage loans held for portfolio that are purchased from participating financial institutions (PFIs). Mortgage loans may also be acquired through participations in pools of eligible mortgage loans purchased from other FHLBanks. The Bank’s PFIs generally originate, service, and credit enhance mortgage loans that are sold to the Bank. PFIs participating in the servicing release program do not service the loans owned by the Bank. The servicing on these loans is sold concurrently by the PFI to a designated mortgage service provider.

The following table presents information on the Bank’s mortgage loans held for portfolio (dollars in millions):

	March 31, 2023		December 31, 2022
Fixed rate, long-term single-family mortgage loans	$	7,401	$	7,244
Fixed rate, medium-term1 single-family mortgage loans	1,000		1,033
Total unpaid principal balance	8,401		8,277
Premiums	98		96
Discounts	(11)		(11)
Basis adjustments from mortgage loan purchase commitments	(10)		(9)
Total mortgage loans held for portfolio2	8,478		8,353
Allowance for credit losses	(5)		(5)
Total mortgage loans held for portfolio, net	$	8,473	$	8,348

1    Medium-term is defined as an original term of 15 years or less.

2    Excludes accrued interest receivable of $43 million and $42 million at March 31, 2023 and December 31, 2022.

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The following table presents the Bank’s mortgage loans held for portfolio by collateral or guarantee type (dollars in millions):

	March 31, 2023		December 31, 2022
Conventional mortgage loans	$	8,020	$	7,890
Government-insured mortgage loans	381		387
Total unpaid principal balance	$	8,401	$	8,277

PAYMENT STATUS OF MORTGAGE LOANS

Payment status is the key credit quality indicator for conventional mortgage loans and allows the Bank to monitor borrower performance. Past due loans are those where the borrower has failed to make contractual principal and/or interest payments for a period of 30 days or more. Other delinquency statistics include non-accrual loans and loans in process of foreclosure.

The following tables present the payment status for conventional mortgage loans (dollars in millions):

	March 31, 2023
	Origination Year
	Prior to 2019		2019 to 2023		Total
Past due 30 - 59 days	$	25	$	21	$	46
Past due 60 - 89 days	5		5		10
Past due 90 - 179 days	5		3		8
Past due 180 days or more	6		1		7
Total past due mortgage loans	41		30		71
Total current mortgage loans	1,940		6,079		8,019
Total amortized cost of mortgage loans1	$	1,981	$	6,109	$	8,090

	December 31, 2022
	Origination Year
	Prior to 2018		2018 to 2022		Total
Past due 30 - 59 days	$	21	$	22	$	43
Past due 60 - 89 days	5		6		11
Past due 90 - 179 days	3		2		5
Past due 180 days or more	7		2		9
Total past due mortgage loans	36		32		68
Total current mortgage loans	1,764		6,128		7,892
Total amortized cost of mortgage loans1	$	1,800	$	6,160	$	7,960

1    Amortized cost represents the unpaid principal balance adjusted for unamortized premiums, discounts, price adjustment fees, basis adjustments, and direct write-downs. Amortized cost excludes accrued interest receivable.

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The following tables present other delinquency statistics for mortgage loans (dollars in millions):

	March 31, 2023
Amortized Cost	Conventional			Government-Insured			Total
In process of foreclosure1	$	3		$	1		$	4
Serious delinquency rate2	—		%	2		%	—		%
Past due 90 days or more and still accruing interest3	$	—		$	7		$	7
Non-accrual mortgage loans4	$	39		$	—		$	39

	December 31, 2022
Amortized Cost	Conventional			Government- Insured			Total
In process of foreclosure1	$	4		$	1		$	5
Serious delinquency rate2	—		%	2		%	—		%
Past due 90 days or more and still accruing interest3	$	—		$	8		$	8
Non-accrual mortgage loans4	$	40		$	—		$	40

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

2    Represents mortgage loans that are 90 days or more past due or in the process of foreclosure expressed as a percentage of total mortgage loans. Serious delinquency rate on conventional loans was less than one percent at both March 31, 2023 and December 31, 2022.

3    Represents government-insured mortgage loans that are 90 days or more past due.

4    Represents conventional mortgage loans that are 90 days or more past due or for which the collection of interest or principal is doubtful. At March 31, 2023 and December 31, 2022, $27 million and $29 million of conventional mortgage loans on non-accrual status were evaluated individually and did not have a related allowance for credit losses because these loans were either previously charged off to the expected recoverable value and/or the fair value of the underlying collateral was greater than the amortized cost of the loans.

ALLOWANCE FOR CREDIT LOSSES

The Bank evaluates mortgage loans for credit losses on a quarterly basis.

Conventional Mortgage Loans

Conventional mortgage loans are evaluated collectively when similar risk characteristics exist. Conventional loans that do not share risk characteristics with other pools are evaluated for expected credit losses on an individual basis. The Bank determines its allowances for credit losses on conventional loans through analyses that include consideration of various loan portfolio and collateral-related characteristics, such as past performance, current conditions, and reasonable and supportable forecasts of expected economic conditions. The Bank's allowance for credit losses remained stable at $5 million at both March 31, 2023 and December 31, 2022.

For collectively evaluated loans, the Bank uses a projected cash flow model to estimate expected credit losses over the life of the loans. This model relies on a number of inputs, such as current and projected property values and interest rates, as well as historical borrower behavior experience. The Bank also incorporates associated credit enhancements when determining its estimate of expected credit losses. The Bank may incorporate a management adjustment in the allowance for credit losses for conventional mortgage loans due to changes in economic and business conditions or other factors that may not be fully captured in its model.

For individually evaluated loans, the Bank uses the practical expedient for collateral dependent assets. A mortgage loan is considered collateral dependent when repayment is expected to be provided solely by the sale of the underlying collateral. The Bank estimates the fair value of this collateral using a property valuation model. 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 and expected proceeds from primary mortgage insurance (PMI). The Bank records a direct charge-off of the loan balance if certain triggering criteria are met. Expected recoveries of prior charge-offs are included in the allowance for credit losses.

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Government-Insured Mortgage Loans

The Bank invests in government-insured fixed rate mortgage loans portfolios that are insured or guaranteed by the Federal Housing Administration, the Department of Veterans Affairs, Department of Housing and Urban Development, and/or the Rural Housing Service of the Department of Agriculture. The servicer or PFI obtains and maintains insurance or a guaranty from the applicable government agency. The servicer or PFI is responsible for compliance with all government agency requirements and for obtaining the benefit of the applicable guarantee or insurance with respect to defaulted government-insured mortgage loans. Any losses incurred on these loans that are not recovered from the insurer/guarantor are absorbed by the servicers. As such, the Bank only has credit risk for these loans if the servicer or PFI fails to pay for losses not covered by the guarantee or insurance, but in such instance, the Bank would have recourse against the servicer for such failure.

The Bank has never experienced a credit loss on its government-insured mortgage loans. At March 31, 2023 and December 31, 2022, the Bank assessed its servicers and determined there was no expectation that a servicer would fail to remit payments due until paid in full. As a result, the Bank did not establish an allowance for credit losses for its government-insured mortgage loans at March 31, 2023 and December 31, 2022. Furthermore, none of these mortgage loans have been placed on non-accrual status because of the U.S. Government guarantee or insurance on these loans and the contractual obligation of the loan servicer to repurchase the loans when certain criteria are met.

Note 6 — Derivatives and Hedging Activities

NATURE OF BUSINESS ACTIVITY

The Bank is exposed to interest rate risk primarily from the effect of interest rate changes on its interest-earning assets and its related funding sources. The goal of the Bank’s interest rate risk management strategy is not to eliminate interest rate risk, but to manage it within appropriate limits. To mitigate the risk of loss, the Bank has established policies and procedures, which include guidelines on the amount of exposure to interest rate changes it is willing to accept.

The Bank enters into derivative contracts to manage the interest rate risk exposures inherent in its otherwise unhedged assets and funding positions. Finance Agency regulations and the Bank’s risk management policies establish guidelines for derivatives, prohibit trading in or the speculative use of derivatives, and limit credit risk arising from derivatives.

Derivative financial instruments are used by the Bank to achieve its financial and risk management objectives. The Bank reevaluates its hedging strategies periodically and may change the hedging techniques it uses or may adopt new strategies. The most common ways in which the Bank uses derivatives are to:

•reduce the interest rate sensitivity and repricing gaps of assets and liabilities;

•preserve an interest rate spread between the yield of an asset and the cost of the related liability. Without the use of derivatives, this interest rate spread could be reduced or eliminated when a change in the interest rate on the asset does not match a change in the interest rate on the liability;

•mitigate the adverse earnings effects of the shortening or extension of certain assets and liabilities;

•manage embedded options in assets and liabilities; and

•reduce funding costs by combining a derivative with a consolidated obligation, as the cost of a combined funding structure can be lower than the cost of a comparable consolidated obligation.

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TYPES OF DERIVATIVES AND HEDGED ITEMS

The Bank may use the following derivative instruments:

•interest rate swaps;

•options;

•swaptions;

•interest rate caps and floors; and

•futures/forwards contracts.

The Bank may have the following types of hedged items:

•investment securities;

•advances;

•mortgage loans;

•consolidated obligations; and

•firm commitments.

For additional information on the Bank’s derivative and hedging accounting policies, see “Note 1 — Summary of Significant Accounting Policies” in the 2022 Form 10-K.

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FINANCIAL STATEMENT EFFECT AND ADDITIONAL FINANCIAL INFORMATION

The notional amount of derivatives serves as a factor in determining periodic interest payments and cash flows received and paid. However, the notional amount of derivatives represents neither the actual amounts exchanged nor the overall exposure of the Bank to credit and market risk. The risks of derivatives can be measured meaningfully on a portfolio basis that takes into account the counterparties, the types of derivatives, the items being hedged, and any offsets between the derivatives and the items being hedged.

The following table summarizes the Bank’s notional amount and fair value of derivative instruments and total derivative assets and liabilities. Total derivative assets and liabilities include the effect of netting adjustments and cash collateral. For purposes of this disclosure, the derivative values include the fair value of derivatives and the related accrued interest (dollars in millions):

	March 31, 2023						December 31, 2022
	Notional Amount		Derivative Assets		Derivative  Liabilities		Notional Amount		Derivative Assets		Derivative  Liabilities
Derivatives designated as hedging instruments (fair value hedges)
Interest rate swaps	$	73,454	$	168	$	209	$	53,136	$	226	$	205
Derivatives not designated as hedging instruments (economic hedges)
Interest rate swaps	42,813		7		10		48,347		11		13
Forward settlement agreements	152		—		1		46		—		—
Mortgage loan purchase commitments	153		1		—		46		—		—
Total derivatives not designated as hedging instruments	43,118		8		11		48,439		11		13
Total derivatives before netting and collateral adjustments	$	116,572	176		220		$	101,575	237		218
Netting adjustments and cash collateral1			609		(209)				406		(214)
Total derivative assets and derivative liabilities			$	785	$	11			$	643	$	4

1     Amounts represent the application of the netting requirements that allow the Bank to net settle positive and negative positions and also cash collateral, including accrued interest, held or placed with the same clearing agent and/or counterparty. At March 31, 2023 and December 31, 2022, cash collateral, including accrued interest, posted by the Bank was $934 million and $739 million. At March 31, 2023 and December 31, 2022, the Bank held cash collateral, including accrued interest, from clearing agents or counterparties of $116 million and $119 million.

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The following tables summarize the net gains (losses) on qualifying and discontinued fair value hedging relationships recorded in net interest income, including the net interest settlements on derivatives, as well as total income (expense) by hedged product recorded on the Statements of Income (dollars in millions):

	For the Three Months Ended March 31, 2023
	Interest Income (Expense)
	Advances		AFS Securities		Consolidated Obligation Bonds
Total interest income (expense) recorded on the Statements of Income1	$	1,394	$	224	$	(983)
Gains (losses) on fair value hedging relationships
Interest rate contracts
Derivatives2	$	(122)	$	(195)	$	46
Hedged items3	260		260		(110)
Net gains (losses) on fair value hedging relationships	$	138	$	65	$	(64)

	For the Three Months Ended March 31, 2022
	Interest Income (Expense)
	Advances		AFS Securities		Consolidated Obligation Bonds
Total interest income (expense) recorded on the Statements of Income1	$	111	$	30	$	(99)
Gains (losses) on fair value hedging relationships
Interest rate contracts
Derivatives2	$	506	$	250	$	(118)
Hedged items3	(545)		(271)		127
Net gains (losses) on fair value hedging relationships	$	(39)	$	(21)	$	9

1     Amounts shown to give context to the disclosure and include total interest income (expense) of the products indicated, including coupon, prepayment fees, amortization, and derivative net interest settlements. Interest income (expense) amounts also include gains and losses on derivatives and hedged items in fair value hedging relationships.

2     Includes changes in fair value and net interest settlements on derivatives.    

3    Includes changes in fair value and amortization/accretion of basis adjustments on closed hedge relationships.

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The following tables summarize cumulative fair value hedging adjustments and the related amortized cost of the hedged items (dollars in millions):

	March 31, 2023
	Advances		AFS Securities		Consolidated Obligation Bonds
Amortized cost of hedged asset/ liability1	$	30,615	$	11,062	$	27,805
Fair value hedging adjustments
Changes in fair value for active hedging relationships included in amortized cost	$	(852)	$	(405)	$	(152)
Basis adjustments for discontinued hedging relationships included in amortized cost	(71)		(7)		(5)
Total amount of fair value hedging adjustments	$	(923)	$	(412)	$	(157)

	December 31, 2022
	Advances		AFS Securities		Consolidated Obligation Bonds
Amortized cost of hedged asset/ liability1	$	21,832	$	8,606	$	22,205
Fair value hedging adjustments
Changes in fair value for active hedging relationships included in amortized cost	$	(1,109)	$	(671)	$	(297)
Basis adjustments for discontinued hedging relationships included in amortized cost	(74)		(1)		(1)
Total amount of fair value hedging adjustments	$	(1,183)	$	(672)	$	(298)

1    Represents the portion of amortized cost designated as a hedged item in an active or discontinued fair value hedging relationship.

The following table summarizes the components of “Net gains (losses) on derivatives” as presented on the Statements of Income (dollars in millions):

	For the Three Months Ended
	March 31,
		2023		2022
Derivatives not designated as hedging instruments (economic hedges)
Interest rate swaps		$	40	$	17
Forward settlement agreements		(1)		7
Mortgage loan purchase commitments		—		(7)
Net interest settlements		(22)		(1)
Total net gains (losses) related to derivatives not designated as hedging instruments		17		16
Price alignment amount1		(7)		—
Net gains (losses) on derivatives		$	10	$	16

1    This amount represents interest on variation margin, which is a component of the derivative fair value for cleared transactions, and reflects the price alignment amount on variation margin for daily settled derivative contracts not designated as hedging instruments. The price alignment amount on variation margin for daily settled derivative contracts designated as hedging instruments are recorded in the same line item as the earnings effect of the hedged item.

MANAGING CREDIT RISK ON DERIVATIVES

The Bank is subject to credit risk due to the risk of nonperformance by counterparties to its derivative contracts. The Bank manages credit risk through credit analyses, collateral requirements, and adherence to the requirements set forth in the Bank’s policies, U.S. Commodity Futures Trading Commission regulations, and Finance Agency regulations.

The Bank transacts most of its derivative transactions with large banks and major broker-dealers. Over-the-counter derivative transactions may be either executed directly with a counterparty, referred to as uncleared derivatives, or cleared through a clearing agent with a Clearinghouse, referred to as cleared derivatives. Once a derivative transaction has been accepted for clearing by a Clearinghouse, the derivative transaction is novated and the executing counterparty is replaced with the Clearinghouse. The Bank is not a derivative dealer and does not trade derivatives for short-term profit.

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For uncleared derivatives, the degree of credit risk is impacted by the extent to which master netting arrangements are included in the derivative contracts to mitigate the risk. The Bank requires collateral agreements on its uncleared derivatives.

Certain of the Bank’s uncleared derivative instruments contain provisions that require the Bank to post additional collateral with its counterparties if there is deterioration in the Bank’s credit rating. If the Bank’s credit rating is lowered by an NRSRO, the Bank may be required to deliver additional collateral on uncleared derivative instruments in net liability positions, unless the collateral delivery threshold is set to zero. The aggregate fair value of all uncleared derivative instruments with credit-risk-related contingent features that were in a net liability position (before cash collateral and related accrued interest) at March 31, 2023 was $1 million, and the Bank was not required to post collateral in the normal course of business. If the Bank’s credit rating had been lowered from its current rating to the next lower rating, the Bank would not have been required to deliver additional collateral to its uncleared derivative counterparties at March 31, 2023.

Uncleared derivative transactions executed on or after the dates specified in applicable regulations are subject to two-way initial margin requirements as mandated by the Wall Street Reform and Consumer Protection Act, or Dodd-Frank Act, if the Bank’s aggregate uncleared derivative transactions exposure to a counterparty exceeds a specified threshold. The initial margin is required to be held at a third-party custodian and does not change ownership. Rather, the party in respect of which the initial margin has been posted to the third-party custodian will have a security interest in the amount of initial margin required under the uncleared margin rules and can only take ownership upon the occurrence of certain events, including an event of default due to bankruptcy, insolvency, or similar proceeding. As of March 31, 2023, the Bank was not required to post initial margin on its uncleared derivative transactions in accordance with the noted regulations.

For all uncleared transactions entered into on or after March 1, 2017, the derivative agreements are fully collateralized with a zero unsecured threshold in accordance with variation margin requirements issued by the U.S. federal bank regulatory agencies and the Commodity Futures Trading Commission.

For cleared derivatives, the Clearinghouse is the Bank’s counterparty. The Bank utilizes two Clearinghouses, CME Clearing and London Clearing House (LCH) Ltd., for all cleared derivative transactions. CME Clearing and LCH Ltd. notify the clearing agent of the required initial margin and daily variation margin requirements, and the clearing agent in turn notifies the Bank.

Each Clearinghouse determines initial margin requirements which are considered cash collateral. Generally credit ratings are not factored into the initial margin. However, clearing agents may require additional initial margin to be posted based on credit considerations, including, but not limited to, credit rating downgrades. The Bank was not required to post additional initial margin by its clearing agent, based on credit considerations, at March 31, 2023. Variation margin requirements with each Clearinghouse are based on changes in the fair value of cleared derivatives and are legally characterized as daily settlement payments, rather than cash collateral.

The requirement that the Bank post initial and variation margin through the clearing agent, to the Clearinghouse, exposes the Bank to institutional credit risk if the clearing agent or the Clearinghouse fails to meet its obligations. The use of cleared derivatives is intended to mitigate credit risk exposure because a central counterparty is substituted for individual counterparties and collateral/payments for changes in the fair value of cleared derivatives is posted daily through a clearing agent.

OFFSETTING OF DERIVATIVE ASSETS AND DERIVATIVE LIABILITIES

The Bank presents derivative instruments, related cash collateral received or pledged, and associated accrued interest on a net basis by clearing agent and/or by counterparty when it has met the netting requirements. Additional information regarding these agreements is provided in “Note 1 — Summary of Significant Accounting Policies” in the 2022 Form 10-K.

The Bank has analyzed the enforceability of offsetting rights incorporated in its cleared derivative transactions and has determined that the exercise of those offsetting rights by a non-defaulting party under these transactions should be upheld under applicable law upon an event of default, including a bankruptcy, insolvency, or similar proceeding involving the Clearinghouse or the clearing agent, or both. 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 Clearinghouse.

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The following tables present the fair value of derivative instruments meeting or not meeting the netting requirements and the related collateral received from or pledged to counterparties (dollars in millions):

	March 31, 2023
	Derivative Instruments Meeting Netting Requirements
	Gross Amount Recognized1		Gross Amount of Netting Adjustments and Cash Collateral		Derivative Instruments Not Meeting Netting Requirements2		Total Derivative Assets and Total Derivative Liabilities
Derivative Assets
Uncleared derivatives	$	171	$	(171)	$	1	$	1
Cleared derivatives	4		780		—		784
Total	$	175	$	609	$	1	$	785
Derivative Liabilities
Uncleared derivatives	$	145	$	(134)	$	—	$	11
Cleared derivatives	75		(75)		—		—
Total	$	220	$	(209)	$	—	$	11

	December 31, 2022
	Derivative Instruments Meeting Netting Requirements
	Gross Amount Recognized1		Gross Amount of Netting Adjustments and Cash Collateral		Derivative Instruments Not Meeting Netting Requirements2		Total Derivative Assets and Total Derivative Liabilities
Derivative Assets
Uncleared derivatives	$	195	$	(194)	$	—	$	1
Cleared derivatives	42		600		—		642
Total	$	237	$	406	$	—	$	643
Derivative Liabilities
Uncleared derivatives	$	200	$	(196)	$	—	$	4
Cleared derivatives	18		(18)		—		—
Total	$	218	$	(214)	$	—	$	4

1    Represents derivative assets and derivative liabilities prior to netting adjustments and cash collateral, including accrued interest.

2    Represents mortgage loan purchase commitments not subject to enforceable master netting requirements.

Note 7 — Consolidated Obligations

    Consolidated obligations consist of bonds and discount notes. The FHLBanks issue consolidated obligations through the Office of Finance as their agent. Bonds are issued primarily to raise intermediate- and long-term funds for the Bank and are not subject to any statutory or regulatory limits on their maturity. Discount notes are issued primarily to raise short-term funds for the Bank and have original maturities of up to one year. Discount notes sell at or below their face amount and are redeemed at par value when they mature.

    Although the Bank is primarily liable for the portion of consolidated obligations issued on its behalf, it is also jointly and severally liable with the other FHLBanks for the payment of principal and interest on all FHLBank System consolidated obligations. The Finance Agency, at its discretion, may require any FHLBank to make principal and/or interest payments due on any consolidated obligation, whether or not the primary obligor FHLBank has defaulted on the payment of that consolidated obligation. The Finance Agency has never exercised this discretionary authority. At March 31, 2023 and December 31, 2022, the total par value of outstanding consolidated obligations of the FHLBanks was $1,477.7 billion and $1,181.7 billion.

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DISCOUNT NOTES

The following table summarizes the Bank’s discount notes (dollars in millions):

	March 31, 2023				December 31, 2022
	Amount		Weighted Average Interest Rate		Amount		Weighted Average Interest Rate
Par value	$	73,482	4.41	%	$	70,002	3.79	%
Discounts and concessions1	(798)				(725)
Fair value option adjustments	(42)				(107)
Total	$	72,642			$	69,170

1    Concessions represent fees paid to dealers in connections with the issuance of certain consolidated obligation discount notes.

BONDS

The following table summarizes the Bank’s bonds outstanding by contractual maturity (dollars in millions):

	March 31, 2023				December 31, 2022
Year of Contractual Maturity	Amount		Weighted Average Interest Rate		Amount		Weighted Average Interest Rate
Due in one year or less	$	71,749	4.71	%	$	55,421	4.01	%
Due after one year through two years	20,420		4.28		20,665		3.79
Due after two years through three years	1,435		2.87		1,175		2.23
Due after three years through four years	1,139		2.10		1,210		1.97
Due after four years through five years	1,113		2.83		865		2.42
Thereafter	5,129		2.62		5,236		2.61
Total par value	100,985		4.44	%	84,572		3.80	%
Premiums	82				86
Discounts and concessions1	(27)				(23)
Fair value hedging adjustments	(157)				(298)
Total	$	100,883			$	84,337

1    Concessions represent fees paid to dealers in connections with the issuance of certain consolidated obligation bonds.

The following table summarizes the Bank’s bonds outstanding by call features (dollars in millions):

	March 31, 2023		December 31, 2022
Non-callable or non-putable	$	89,133	$	73,578
Callable	11,852		10,994
Total par value	$	100,985	$	84,572

The following table summarizes the Bank’s bonds outstanding by year of contractual maturity or next call date (dollars in millions):

Year of Contractual Maturity or Next Call Date	March 31, 2023		December 31, 2022
Due in one year or less	$	81,560	$	62,033
Due after one year through two years	15,992		19,141
Due after two years through three years	865		850
Due after three years through four years	708		753
Due after four years through five years	461		324
Thereafter	1,399		1,471
Total par value	$	100,985	$	84,572

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Note 8 — Capital

CAPITAL STOCK

The Bank’s capital stock has a par value of $100 per share, and all shares are issued, redeemed, and repurchased only at the stated par value. The Bank issues a single class of capital stock (Class B capital stock) and has two subclasses of Class B capital stock: membership and activity-based. Each member must purchase and hold membership capital stock in an amount equal to 0.12 percent of its total assets as of the preceding December 31st, subject to a cap of $10 million and a floor of $10,000. Each member is also required to purchase activity-based capital stock equal to 4.00 percent of its advances and mortgage loans outstanding on the Bank’s Statements of Condition and 0.10 percent of its standby letters of credit. All capital stock issued is subject to a notice of redemption period of five years.

The capital stock requirements established in the Bank’s Capital Plan are designed so that the Bank can remain adequately capitalized as member activity changes. The Bank’s Board of Directors may make adjustments to the capital stock requirements within ranges established in the Capital Plan.

EXCESS STOCK

Capital stock owned by members in excess of their investment requirement is deemed excess capital stock. Under its Capital Plan, the Bank, at its discretion and upon 15 days written notice, may repurchase excess membership capital stock. The Bank, at its discretion, may also repurchase excess activity-based capital stock to the extent that (i) the excess capital stock balance exceeds an operational threshold set forth in the Capital Plan, which is currently set at zero, or (ii) a member submits a notice to redeem all or a portion of the excess activity-based capital stock. At March 31, 2023 and December 31, 2022, the Bank had no excess capital stock outstanding.

MANDATORILY REDEEMABLE CAPITAL STOCK

The Bank reclassifies capital stock subject to redemption from equity to a liability (mandatorily redeemable capital stock or MRCS) at the time shares meet the definition of a mandatorily redeemable financial instrument. This occurs after a member provides written notice of intention to withdraw from membership, becomes ineligible for continuing membership, or attains non-member status by merger or consolidation, charter termination, or other involuntary termination from membership. Dividends on MRCS are classified as interest expense on the Statements of Income.

The following table summarizes changes in MRCS (dollars in millions):

	For the Three Months Ended March 31,
	2023		2022
Balance, beginning of period	$	15	$	29
Capital stock reclassified to (from) MRCS, net	—		1
Net payments for repurchases/redemptions of MRCS	(1)		(12)
Balance, end of period	$	14	$	18

The following table summarizes the Bank’s MRCS by year of contractual redemption (dollars in millions):

Year of Contractual Redemption1	March 31, 2023		December 31, 2022
Due after two years through three years	$	7	$	—
Due after three years through four years	—		8
Past contractual redemption date due to outstanding activity with the Bank	7		7
Total	$	14	$	15

1    At the Bank’s election, MRCS may be redeemed prior to the expiration of the five year redemption period that commences on the date of the notice of redemption.

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RESTRICTED RETAINED EARNINGS

The Bank entered into a Joint Capital Enhancement Agreement (JCE Agreement) with all of the other FHLBanks in 2011. The JCE Agreement, as amended, is intended to enhance the capital position of the Bank over time. Under the JCE Agreement, each FHLBank is required to allocate 20 percent of its quarterly net income to a separate restricted retained earnings account until the balance of that account, calculated as of the last day of each calendar quarter, equals at least one percent of its average balance of outstanding consolidated obligations for the calendar quarter. The restricted retained earnings are not available to pay dividends. At March 31, 2023 and December 31, 2022, the Bank’s restricted retained earnings account totaled $741 million and $703 million.

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following table summarizes changes in accumulated other comprehensive income (loss) (AOCI) (dollars in millions):

	Net unrealized gains (losses) on AFS securities (Note 3)		Pension and postretirement benefits		Total AOCI
Balance, December 31, 2021	$	88	$	(4)	$	84
Other comprehensive income (loss) before reclassifications
Net unrealized gains (losses) on AFS securities	(61)		—		(61)
Net actuarial gains (losses)	—		(2)		(2)
Net current period other comprehensive income (loss)	(61)		(2)		(63)
Balance, March 31, 2022	$	27	$	(6)	$	21
Balance, December 31, 2022	$	(114)	$	(3)	$	(117)
Other comprehensive income (loss) before reclassifications
Net unrealized gains (losses) on AFS securities	(67)		—		(67)
Net actuarial gains (losses)	—		1		1
Net current period other comprehensive income (loss)	(67)		1		(66)
Balance, March 31, 2023	$	(181)	$	(2)	$	(183)

REGULATORY CAPITAL REQUIREMENTS

The Bank is subject to three regulatory capital requirements:

•Risk-based capital. The Bank must maintain at all times permanent capital greater than or equal to the sum of its credit, market, and operational risk capital requirements, all calculated in accordance with Finance Agency regulations. Only permanent capital, defined as the amounts paid-in for Class B capital stock (including MRCS), and retained earnings can satisfy this risk-based capital requirement.

•Regulatory capital. The Bank is required to maintain a minimum four percent capital-to-asset ratio, which is defined as total regulatory capital divided by total assets. Total regulatory capital includes Class B stock (including MRCS) and retained earnings.

•Leverage capital. The Bank is required to maintain a minimum five percent leverage ratio, which is defined as the sum of permanent capital weighted 1.5 times and nonpermanent capital weighted 1.0 times, divided by total assets. The Bank did not hold any nonpermanent capital at March 31, 2023 and December 31, 2022.

In addition to the requirements previously discussed, the Finance Agency Advisory Bulletin on capital stock (the Capital Stock AB) requires each FHLBank to maintain at all times a ratio of at least two percent of capital stock to total assets. For purposes of the Capital Stock AB, capital stock includes MRCS. The capital stock to total assets ratio is measured on a daily average basis at month end.

If the Bank’s capital falls below the required levels, the Finance Agency has authority to take actions necessary to return it to levels that it deems to be consistent with safe and sound business operations.

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The following table shows the Bank’s compliance with the Finance Agency’s regulatory capital requirements (dollars in millions):

	March 31, 2023						December 31, 2022
	Required			Actual			Required			Actual
Regulatory capital requirements
Risk-based capital	$	1,102		$	9,319		$	737		$	8,883
Regulatory capital	$	7,457		$	9,319		$	6,567		$	8,883
Leverage capital	$	9,321		$	13,979		$	8,208		$	13,323
Capital-to-assets ratio	4.00		%	5.00		%	4.00		%	5.41		%
Capital stock-to-assets ratio	2.00		%	3.68		%	2.00		%	3.73		%
Leverage ratio	5.00		%	7.50		%	5.00		%	8.12		%

Note 9 — Fair Value

Fair value amounts are determined by the Bank using available market information and reflect the Bank’s best judgment of appropriate valuation methods. 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., exit price). The fair value hierarchy requires an entity to maximize the use of significant observable inputs and minimize the use of significant unobservable inputs when measuring fair value. 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 prioritizes the inputs used to measure fair value into three broad levels:

•Level 1 Inputs. Quoted prices (unadjusted) for identical assets or liabilities in an active market that the Bank can access on the measurement date. An active market for an 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. 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: (i) quoted prices for similar assets or liabilities in active markets, (ii) quoted prices for identical or similar assets or liabilities in markets that are not active, (iii) 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 (iv) market-corroborated inputs.

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

The Bank reviews its 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. The Bank had no transfers of assets or liabilities into or out of Level 3 of the fair value hierarchy during the three months ended March 31, 2023 and 2022.

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The following table summarizes the carrying value, fair value, and fair value hierarchy of the Bank’s financial instruments (dollars in millions). The Bank records trading securities, AFS securities, derivative assets, derivative liabilities, financial instruments held under the fair value option, and certain other assets at fair value on a recurring basis, and on occasion certain impaired mortgage loans held for portfolio on a non-recurring basis. The Bank records all other financial assets and liabilities at amortized cost. The fair values do 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 assets and liabilities.

	March 31, 2023
			Fair Value
Financial Instruments	Carrying Value		Level 1		Level 2		Level 3		Netting Adjustments and Cash Collateral1		Total
Assets
Cash and due from banks	$	71	$	71	$	—	$	—	$	—	$	71
Interest-bearing deposits	2,801		—		2,801		—		—		2,801
Securities purchased under agreements to resell	22,900		—		22,900		—		—		22,900
Federal funds sold	9,830		—		9,830		—		—		9,830
Trading securities	2,598		—		2,598		—		—		2,598
Available-for-sale securities	18,465		—		18,465		—		—		18,465
Held-to-maturity securities	936		—		934		3		—		937
Advances	119,027		—		118,820		—		—		118,820
Mortgage loans held for portfolio, net	8,473		—		7,565		34		—		7,599
Accrued interest receivable	408		—		408		—		—		408
Derivative assets, net	785		—		176		—		609		785
Other assets	36		36		—		—		—		36
Liabilities
Deposits	(1,316)		—		(1,316)		—		—		(1,316)
Consolidated obligations
Discount notes	(72,642)		—		(72,640)		—		—		(72,640)
Bonds	(100,883)		—		(99,968)		—		—		(99,968)
Total consolidated obligations	(173,525)		—		(172,608)		—		—		(172,608)
Borrowings from other FHLBanks	(250)		—		(250)		—		—		(250)
MRCS	(14)		(14)		—		—		—		(14)
Accrued interest payable	(619)		—		(619)		—		—		(619)
Derivative liabilities, net	(11)		—		(220)		—		209		(11)

1    Amounts represent the application of the netting requirements that allow the Bank to net settle positive and negative positions and also cash collateral and the related accrued interest held or placed with the same clearing agent and/or counterparty.

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The following table summarizes the carrying value, fair value, and fair value hierarchy of the Bank’s financial instruments (dollars in millions):

	December 31, 2022
			Fair Value
Financial Instruments	Carrying Value		Level 1		Level 2		Level 3		Netting Adjustments and Cash Collateral1		Total
Assets
Cash and due from banks	$	89	$	89	$	—	$	—	$	—	$	89
Interest-bearing deposits	2,031		—		2,031		—		—		2,031
Securities purchased under agreements to resell	12,590		—		12,590		—		—		12,590
Federal funds sold	9,415		—		9,415		—		—		9,415
Trading securities	2,817		—		2,817		—		—		2,817
Available-for-sale securities	15,563		—		15,563		—		—		15,563
Held-to-maturity securities	965		—		955		4		—		959
Advances	111,202		—		110,909		—		—		110,909
Mortgage loans held for portfolio, net	8,348		—		7,316		36		—		7,352
Accrued interest receivable	389		—		389		—		—		389
Derivative assets, net	643		—		237		—		406		643
Other assets	35		35		—		—		—		35
Liabilities
Deposits	(1,076)		—		(1,076)		—		—		(1,076)
Consolidated obligations
Discount notes	(69,170)		—		(69,162)		—		—		(69,162)
Bonds	(84,337)		—		(83,238)		—		—		(83,238)
Total consolidated obligations	(153,507)		—		(152,400)		—		—		(152,400)
MRCS	(15)		(15)		—		—		—		(15)
Accrued interest payable	(436)		—		(436)		—		—		(436)
Derivative liabilities, net	(4)		—		(218)		—		214		(4)

1    Amounts represent the application of the netting requirements that allow the Bank to net settle positive and negative positions and also cash collateral and the related accrued interest held or placed with the same clearing agent and/or counterparty.

SUMMARY OF VALUATION TECHNIQUES AND PRIMARY INPUTS

The valuation techniques 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 non-recurring basis on the Statements of Condition are outlined below.

Trading and AFS Investment Securities. The Bank’s valuation technique incorporates prices from multiple designated third-party pricing vendors, when available. The pricing vendors generally use various proprietary models to price investment securities. The inputs to those models are derived from various sources including, but not limited to, benchmark securities and yields, reported trades, dealer estimates, issuer spreads, bids, offers, and other market-related data. Since many investment securities do not trade on a daily basis, the pricing vendors use available information, as applicable, such as benchmark curves, benchmarking of like securities, sector groupings, and matrix pricing to determine the prices for individual securities. Each pricing vendor has an established process in place to challenge investment valuations, which facilitates resolution of questionable prices identified by the Bank. Annually, the Bank conducts reviews of its pricing vendors to confirm and further augment its understanding of the vendors’ pricing processes, methodologies, and control procedures for investment securities.

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The Bank’s valuation technique for estimating the fair values of its investment securities first requires the establishment of a median price for each security. All prices that are within a specified tolerance threshold of the median price are included in the cluster of prices that are averaged to compute a default price. All prices that are outside the threshold (outliers) are subject to further analysis (including, but not limited to, comparison to prices provided by an additional third-party valuation service, prices for similar securities, and/or non-binding dealer estimates) to determine if an outlier is a better estimate of fair value. If an outlier (or some other price identified in the analysis) is determined to be a better estimate of fair value, then the outlier (or the other price as appropriate) is used as the final price rather than the default price. Alternatively, if the analysis confirms that an outlier (or outliers) is (are) in fact not representative of fair value and the default price is the best estimate, then the default price is used as the final price. In all cases, the final price is used to determine the fair value of the security. In limited instances, when no prices are available from one of the designated pricing services, the Bank obtains prices from dealers or uses the purchase price if the investment security is unsettled.

As of March 31, 2023 and December 31, 2022, multiple prices were received for the majority of the Bank’s trading and AFS investment securities. Based on the Bank’s review of the pricing methods and controls employed by the third-party pricing vendors and the relative lack of dispersion among the vendor prices, the Bank believes its final prices are representative of the prices that would have been received if the assets had been sold at the measurement date (i.e., exit prices) and further, that the fair value measurements are classified appropriately in the fair value hierarchy.

Impaired Mortgage Loans Held for Portfolio. The fair value of impaired mortgage loans held for portfolio is estimated by obtaining property values from an external pricing vendor. This vendor utilizes multiple pricing models that generally factor in market observable inputs, including actual sales transactions and home price indices. The Bank applies an adjustment to these values to capture certain limitations in the estimation process and takes into consideration estimated selling costs and expected PMI proceeds.  

Derivative Assets and Liabilities and the Related Hedged Items. The fair value of derivatives is generally estimated using standard valuation techniques such as a discounted cash flow analysis and comparisons to similar instruments, and includes variation margin payments for daily settled contracts. In limited instances, fair value estimates for interest-rate related derivatives may be obtained using an external pricing model that utilizes observable market data. The Bank is subject to credit risk in derivatives transactions due to the potential nonperformance of its derivatives counterparties. The use of cleared derivatives is intended to mitigate credit risk exposure because a central counterparty is substituted for individual counterparties and collateral/payments is posted daily, through a clearing agent, for changes in the fair value of cleared derivatives. To mitigate credit risk on uncleared derivatives, the Bank enters into master netting agreements with its counterparties as well as collateral agreements that have collateral delivery thresholds. The Bank has evaluated the potential for the fair value of its derivatives to be affected by counterparty credit risk and its own credit risk and has determined that no adjustments were significant to the overall fair value measurements.

The fair values of the Bank’s derivative assets and derivative liabilities include accrued interest receivable/payable and related cash collateral. The estimated fair values of the accrued interest receivable/payable and cash collateral approximate their carrying values due to their short-term nature. The fair values of derivatives are netted by clearing agent and/or counterparty if the netting requirements are met. If these netted amounts result in a receivable to the Bank, they are classified as an asset and, if classified as a payable to the clearing agent or counterparty, they are classified as a liability.

The Bank’s discounted cash flow model utilizes market-observable inputs (inputs that are actively quoted and can be validated to external sources). The Bank uses the following inputs for measuring the fair value of interest-related derivatives:

•Discount rate assumption. The Bank utilizes the federal funds overnight index swap (OIS) or Secured Overnight Financing Rate (SOFR) swap curve depending on the terms of the derivative agreement. 

•Forward interest rate assumption. The Bank utilizes the swap curve of the instrument’s index rate.

•Volatility assumption. Market-based expectations of future interest rate volatility implied from current market prices for similar options.

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For forward settlement agreements, the Bank utilizes to-be-announced (TBA) security prices that are determined by coupon class and expected term until settlement. For mortgage loan purchase commitments, the Bank utilizes TBA security prices adjusted for factors such as credit risk and servicing spreads.

For the related hedged items, the fair value is estimated using a discounted cash flow analysis which typically considers the following inputs:

•Discount rate assumption. The Bank utilizes the designated benchmark interest rate curve. 

•Volatility assumption. Market-based expectations of future interest rate volatility implied from current market prices for similar options.

Other Assets. These represent grantor trust assets, which are carried at estimated fair value based on quoted market prices as of the last business day of the reporting period.

Consolidated Obligation Discount Notes Recorded under the Fair Value Option. The fair value of consolidated obligation discount notes recorded under the fair value option is determined by calculating the present value of the expected future cash flows. The discount rates used in the present value calculations are for consolidated obligations with similar terms. The Bank uses the consolidated obligation curve for measuring the fair value of these consolidated obligations, which is a market-observable curve constructed by the Office of Finance. This curve is constructed using the U.S. Treasury curve as a base curve which is then adjusted by adding indicative spreads obtained largely from market-observable sources.

Subjectivity of Estimates. Estimates of the fair value of financial assets and liabilities using the methods previously described are highly subjective and require judgments regarding significant matters, such as the amount and timing of future cash flows, prepayment speed assumptions, expected interest rate volatility, possible distributions of future interest rates used to value options, and the selection of discount rates that appropriately reflect market and credit risks. The use of different assumptions could have a material effect on the fair value estimates.

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FAIR VALUE ON A RECURRING BASIS

The following table summarizes, for each hierarchy level, the Bank’s assets and liabilities that are measured at fair value on the Statements of Condition (dollars in millions):

	March 31, 2023
Recurring Fair Value Measurements	Level 1		Level 2		Level 3		Netting Adjustments and Cash Collateral1		Total
Assets
Trading securities
U.S. Treasury obligations	$	—	$	2,282	$	—	$	—	$	2,282
Other U.S. obligations	—		74		—		—		74
GSE and TVA obligations	—		49		—		—		49
Other non-MBS	—		148		—		—		148
GSE multifamily MBS	—		45		—		—		45
Total trading securities	—		2,598		—		—		2,598
Available-for-sale securities
Other U.S. obligations	—		659		—		—		659
GSE and TVA obligations	—		463		—		—		463
State or local housing agency obligations	—		449		—		—		449
Other non-MBS	—		243		—		—		243
U.S. obligations single-family MBS	—		3,753		—		—		3,753
GSE single-family MBS	—		203		—		—		203
GSE multifamily MBS	—		12,695		—		—		12,695
Total available-for-sale securities	—		18,465		—		—		18,465
Derivative assets, net
Interest-rate related	—		175		—		609		784
Mortgage loan purchase commitments	—		1		—		—		1
Total derivative assets, net	—		176		—		609		785
Other assets	36		—		—		—		36
Total recurring assets at fair value	$	36	$	21,239	$	—	$	609	$	21,884
Liabilities
Discount notes2	$	—	$	(39,447)	$	—	$	—	$	(39,447)
Derivative liabilities, net
Interest-rate related	—		(219)		—		209		(10)
Forward settlement agreements	—		(1)		—		—		(1)
Total derivative liabilities, net	—		(220)		—		209		(11)
Total recurring liabilities at fair value	$	—	$	(39,667)	$	—	$	209	$	(39,458)

1    Amounts represent the application of the netting requirements that allow the Bank to net settle positive and negative positions and also cash collateral and the related accrued interest held or placed with the same clearing agent and/or counterparty.

2    Represents financial instruments recorded under the fair value option.

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The following table summarizes, for each hierarchy level, the Bank’s assets and liabilities that are measured at fair value on the Statements of Condition (dollars in millions):

	December 31, 2022
Recurring Fair Value Measurements	Level 1		Level 2		Level 3		Netting Adjustments and Cash Collateral1		Total
Assets
Trading securities
U.S. Treasury obligations	$	—	$	2,501	$	—	$	—	$	2,501
Other U.S. obligations	—		76		—		—		76
GSE and TVA obligations	—		49		—		—		49
Other non-MBS	—		146		—		—		146
GSE multifamily MBS	—		45		—		—		45
Total trading securities	—		2,817		—		—		2,817
Available-for-sale securities
Other U.S. obligations	—		758		—		—		758
GSE and TVA obligations	—		470		—		—		470
State or local housing agency obligations	—		449		—		—		449
Other non-MBS	—		240		—		—		240
U.S. obligations single-family MBS	—		3,676		—		—		3,676
GSE single-family MBS	—		210		—		—		210
GSE multifamily MBS	—		9,760		—		—		9,760
Total available-for-sale securities	—		15,563		—		—		15,563
Derivative assets, net
Interest-rate related	—		237		—		406		643
Other assets	35		—		—		—		35
Total recurring assets at fair value	$	35	$	18,617	$	—	$	406	$	19,058
Liabilities
Discount notes2	$	—	$	(44,531)	$	—	$	—	$	(44,531)
Derivative liabilities, net
Interest-rate related	—		(218)		—		214		(4)
Total recurring liabilities at fair value	$	—	$	(44,749)	$	—	$	214	$	(44,535)

1    Amounts represent the application of the netting requirements that allow the Bank to net settle positive and negative positions and also cash collateral and the related accrued interest held or placed with the same clearing agent and/or counterparty.

2    Represents financial instruments recorded under the fair value option.

FAIR VALUE ON A NON-RECURRING BASIS

    The Bank measures certain impaired mortgage loans held for portfolio at Level 3 fair value on a non-recurring basis. These assets are subject to fair value adjustments in certain circumstances. At March 31, 2023 and December 31, 2022, impaired mortgage loans held for portfolio recorded at fair value as a result of a non-recurring change in fair value were less than $1 million and $1 million. These fair values were as of the date the fair value adjustment was recorded during the three months ended March 31, 2023 and year ended December 31, 2022.

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FAIR VALUE OPTION

The fair value option provides 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 entities to display the fair value of those assets and liabilities for which it 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.

The Bank elects the fair value option for certain financial instruments when a hedge relationship does not qualify for hedge accounting. These fair value elections are made primarily in an effort to mitigate the potential income statement volatility that can arise when an economic derivative is adjusted for changes in fair value but the related hedged item is not.

For financial instruments recorded under the fair value option, the related contractual interest income, interest expense, and the discount amortization on fair value option discount notes are recorded as part of net interest income on the Statements of Income. The remaining changes are recorded as “Net gains (losses) on financial instruments held under fair value option” on the Statements of Income.

For the three months ended March 31, 2023, net losses on financial instruments held under fair value option (i.e., discount notes) were $65 million compared to net gains of $22 million for the same period in 2022, and the Bank determined no credit risk adjustments for nonperformance were necessary. In determining that no credit risk adjustments were necessary, the Bank considered the following factors:

•The Bank is a federally chartered GSE, and as a result of this status, the Bank’s consolidated obligations have historically received the same credit rating 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 the FHLBanks.

The following tables summarize the difference between the unpaid principal balance and fair value of outstanding instruments for which the fair value option has been elected (dollars in millions):

	March 31, 2023
	Unpaid Principal Balance		Fair Value		Fair Value Over (Under) Unpaid Principal
Discount Notes	$	40,097	$	39,447	$	(650)

	December 31, 2022
	Unpaid Principal Balance		Fair Value		Fair Value Over (Under) Unpaid Principal
Discount Notes	$	45,244	$	44,531	$	(713)

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Note 10 — Commitments and Contingencies

Joint and Several Liability. The FHLBanks have joint and several liability for all consolidated obligations issued. Accordingly, if an FHLBank were unable to repay any consolidated obligation for which it is the primary obligor, each of the other FHLBanks could be called upon by the Finance Agency to repay all or part of such obligations. No FHLBank has ever been asked or required to repay the principal or interest on any consolidated obligation on behalf of another FHLBank. At March 31, 2023 and December 31, 2022, the total par value of outstanding consolidated obligations issued on behalf of other FHLBanks for which the Bank is jointly and severally liable was $1,303.2 billion and $1,027.1 billion.

The following table summarizes additional off-balance sheet commitments for the Bank (dollars in millions):

	March 31, 2023						December 31, 2022
	Expire within one year		Expire after one year		Total		Total
Standby letters of credit1,2	$	5,615	$	96	$	5,711	$	6,566
Standby bond purchase agreements2	111		609		720		736
Commitments to purchase mortgage loans	153		—		153		46
Commitment to issue bonds	4,525		—		4,525		3,200
Commitments to issue discount notes	14		—		14		202
Commitments to fund advances2	275		—		275		128

1    Excludes commitments to issue standby letters of credit, when applicable. At both March 31, 2023 and December 31, 2022, the Bank had no commitments to issue standby letters of credit.

2    The Bank has deemed it unnecessary to record any liability for credit losses on these agreements at March 31, 2023 and December 31, 2022.

Standby Letters of Credit. The Bank issues standby letters of credit on behalf of its members to support certain obligations of the members to third-party beneficiaries. Standby letters of credit may be offered to assist members and non-member housing associates in facilitating residential housing finance, community lending, and asset-liability management, and to provide liquidity. In particular, members often use standby letters of credit as collateral for deposits from federal and state government agencies. Standby letters of credit are executed with members for a fee. If the Bank is required to make payment for a beneficiary’s draw, the member either reimburses the Bank for the amount drawn or, subject to the Bank’s discretion, the amount drawn may be converted into a collateralized advance to the member. The maturities of standby letters of credit outstanding at March 31, 2023 are currently no later than 2028. The carrying value of guarantees related to standby letters of credit are recorded in “Other liabilities” on the Statements of Condition and amounted to $2 million at both March 31, 2023 and December 31, 2022.

The Bank monitors the creditworthiness of its standby letters of credit based on an evaluation of its borrowers. The Bank has established parameters for the measurement, review, classification, and monitoring of credit risk related to these standby letters of credit. All standby letters of credit, similar to advances, are fully collateralized at the time of issuance and subject to member borrowing limits as established by the Bank.

Standby Bond Purchase Agreements. The Bank has entered into standby bond purchase agreements with state housing associates within its district pursuant to which, for a fee, it agrees to serve as a standby liquidity provider if required, to purchase and hold the housing associate’s bonds until the designated marketing agent can find a suitable investor or the housing associate repurchases the bonds according to a schedule established by the agreement. Each standby bond purchase agreement includes the provisions under which the Bank would be required to purchase the bonds and typically allows the Bank to terminate the agreement upon the occurrence of a default event of the issuer. At March 31, 2023, the Bank had standby bond purchase agreements with six housing associates. The maturities of standby bond purchase agreements outstanding at March 31, 2023 are currently no later than 2027. During the three months ended March 31, 2023 and 2022, the Bank was not required to purchase any bonds under these agreements.

Commitments to Purchase Mortgage Loans. The Bank enters into commitments that unconditionally obligate it to purchase mortgage loans from its members. These commitments are considered derivatives and their estimated fair value at March 31, 2023 and December 31, 2022 is reported in “Note 6 — Derivatives and Hedging Activities” as mortgage loan purchase commitments.

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Commitments to Issue Consolidated Obligations. The Bank enters into commitments to issue consolidated obligations in the normal course of its business, generally that settle within 30 calendar days. At March 31, 2023, the Bank had commitments to issue $4.5 billion and $14 million of consolidated obligation bonds and discount notes. At December 31, 2022, the Bank had commitments to issue $3.2 billion and $202 million of consolidated obligation bonds and discount notes.

Commitments to Fund Advances. The Bank enters into commitments to fund additional advances up to 24 months in the future. At March 31, 2023 and December 31, 2022, the Bank had commitments to fund advances of $275 million and $128 million.

Other Commitments. For each MPF master commitment, the Bank’s potential loss exposure prior to the PFI’s credit enhancement obligation is estimated and tracked in a first loss account (FLA). For absorbing certain losses in excess of the FLA, PFIs are paid a credit enhancement fee, a portion of which may be performance-based. To the extent the Bank experiences losses under the FLA, it may be able to recapture performance-based credit enhancement fees paid to the PFI to offset these losses. The FLA balance for all MPF master commitments with a PFI credit enhancement obligation was $164 million and $162 million at March 31, 2023 and December 31, 2022.

Legal Proceedings. The Bank is subject to various pending legal proceedings arising in the normal course of business. The Bank is not currently aware of any pending or threatened legal proceedings to which it is a party that it believes could have a material impact on its financial condition, results of operations, or cash flows.

Note 11 — Activities with Stockholders

The Bank is a cooperative. This means the Bank is owned by its customers, whom the Bank calls members. As a condition of membership in the Bank, all members must purchase and maintain membership capital stock based on a percentage of their total assets, subject to a minimum and maximum amount, as of the preceding December 31st. Each member is also required to purchase and maintain activity-based capital stock to support certain business activities with the Bank. All transactions with stockholders are entered into in the ordinary course of business.

TRANSACTIONS WITH DIRECTORS’ FINANCIAL INSTITUTIONS

In the normal course of business, the Bank extends credit to its members whose directors and officers serve as Bank directors (Directors’ Financial Institutions). Finance Agency regulations require that transactions with Directors’ Financial Institutions be made on the same terms and conditions as those with any other member.

The following table summarizes the Bank’s outstanding transactions with Directors’ Financial Institutions (dollars in millions):

	March 31, 2023			December 31, 2022
	Amount		% of Total	Amount		% of Total
Advances	$	437	—	$	317	—
Mortgage loans	98		1	143		2
Deposits	6		—	4		—
Capital stock	43		1	40		1

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BUSINESS CONCENTRATIONS

The Bank considers itself to have business concentrations with stockholders owning 10 percent or more of total capital stock outstanding (including MRCS). At March 31, 2023 and December 31, 2022, the Bank had the following business concentrations with stockholders (dollars in millions):

	March 31, 2023
	Capital Stock					Mortgage		Interest
Stockholder	Amount		% of Total1	Advances		Loans		Income2
Wells Fargo Bank, N.A.3	$	1,090	17	$	27,000	$	8	$	362
Superior Guaranty Insurance Company3,4	6		—	—		156		—
Total	$	1,096	17	$	27,000	$	164	$	362

	December 31, 2022
	Capital Stock					Mortgage		Interest
Stockholder	Amount		% of Total1	Advances		Loans		Income2
Wells Fargo Bank, N.A.3	$	1,290	21	$	32,000	$	9	$	336
Superior Guaranty Insurance Company3,4	7		—	—		162		—
Total	$	1,297	21	$	32,000	$	171	$	336

1    Pursuant to applicable Finance Agency regulations, the Bank’s voting structure limits the voting rights of these stockholders and other members holding a significant amount of the Bank’s capital stock.

2    Represents interest income earned on advances during the three months ended ended March 31, 2023 and the year ended December 31, 2022. Interest income on mortgage loans is excluded from this table as this interest relates to the borrower, not to the stockholder.

3    This stockholder had no standby letters of credit outstanding with the Bank as of March 31, 2023 and December 31, 2022.

4    Superior Guaranty Insurance Company is an affiliate of Wells Fargo Bank, N.A.

Note 12 — Activities with Other FHLBanks

    Overnight Funds. The Bank may lend or borrow unsecured overnight funds to or from other FHLBanks. All such transactions are at current market rates. The following table summarizes loan activity to other FHLBanks during the three months ended March 31, 2023 and 2022 (dollars in millions):

Other FHLBank	Beginning Balance		Loans		Principal Repayment		Ending Balance
2023
Chicago	$	—	$	5	$	(5)	$	—
San Francisco	—		1,005		(1,005)		—
	$	—	$	1,010	$	(1,010)	$	—
2022
Chicago	$	—	$	1	$	(1)	$	—

The following table summarizes borrowing activity from other FHLBanks during the three months ended March 31, 2023 (dollars in millions):

Other FHLBank	Beginning Balance		Borrowing		Principal Payment		Ending Balance
2023
Cincinnati	$	—	$	250	$	—	$	250

During the three months ended March 31, 2022, the Bank did not borrow funds from other FHLBanks.

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

Our Management’s Discussion and Analysis (MD&A) of Financial Condition and Results of Operations should be read in conjunction with our financial statements and condensed notes at the beginning of this Form 10-Q and in conjunction with our MD&A and Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the Securities and Exchange Commission (SEC) on March 8, 2023 (2022 Form 10-K). Our MD&A is designed to provide information that will help the reader develop a better understanding of our financial statements, key financial statement changes from quarter to quarter, and the primary factors driving those changes. Our MD&A is organized as follows:

CONTENTS
Forward-Looking Information	43
Executive Overview	44
Conditions in the Financial Markets	48
Selected Financial Data	50
Results of Operations	51
Net Interest Income	51
Other Income (Loss)	53
Hedging Activities	53
Other Expense	56
Statements of Condition	56
Financial Highlights	56
Cash and Due from Banks	56
Advances	56
Mortgage Loans	57
Investments	58
Consolidated Obligations	59
Capital	60
Derivatives	60
Liquidity and Capital Resources	60
Critical Accounting Estimates	64
Legislative and Regulatory Developments	64
Risk Management	64

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FORWARD-LOOKING INFORMATION

Statements contained in this report, including statements describing the objectives, projections, estimates, or future predictions in our operations, may be forward-looking statements. These statements may be identified by the use of forward-looking terminology, such as believes, projects, expects, anticipates, estimates, intends, strategy, plan, could, should, may, and will or their negatives or other variations on these terms. By their nature, forward-looking statements involve risk or uncertainty, and actual results could differ materially from those expressed or implied or could affect the extent to which a particular objective, projection, estimate, or prediction is realized. As a result, you are cautioned not to place undue reliance on such statements. These risks and uncertainties include, but are not limited to, the following:

•political or economic events, including legislative, regulatory, monetary, judicial, or other developments that affect us, our members, our counterparties, and/or our investors in the consolidated obligations of the 11 Federal Home Loan Banks (FHLBanks);

•the ability to meet capital and other regulatory requirements;

•competitive forces, including without limitation, other sources of funding available to our borrowers that could impact the demand for our advances, other entities purchasing mortgage loans in the secondary mortgage market, and other entities borrowing funds in the capital markets;

•reliance on a relatively small number of member institutions for a large portion of our advance business;

•replacement of the London Interbank Offered Rate (LIBOR) benchmark interest rate and transition to the Secured Overnight Financing Rate (SOFR);

•member consolidations and failures;

•disruptions in the credit and debt markets and the effect on future funding costs, sources, and availability;

•general economic and market conditions that could impact the business we do with our members, including, but not limited to, the timing and volatility of market activity, inflation/deflation, employment rates, geopolitical instability or conflicts, housing market activity and housing prices, and the condition of the capital markets on our consolidated obligations;

•ineffective use of hedging strategies or the availability of derivative instruments in the types and quantities needed for risk management purposes from acceptable counterparties;

•the volatility of reported results due to changes in the fair value of certain assets, liabilities, and derivative instruments;

•risks related to the other FHLBanks that could trigger our joint and several liability for debt issued by the other FHLBanks;

•changes in the relative attractiveness of consolidated obligations due to actual or perceived changes in the FHLBanks’ credit ratings as well as the U.S. Government’s long-term credit rating, including if the U.S. government fails to adequately address its fiscal budget or statutory debt limit;

•increases in delinquency or loss estimates on mortgage loans;

•the ability to develop and support internal controls, business processes, information systems, and other operating technologies that effectively manage the risks we face, including but not limited to, cyber-attacks, widespread health emergencies, and other business interruptions;

•significant business interruptions resulting from third party failures;

•the volatility of credit quality, market prices, interest rates, and other factors that could affect the value of collateral held by us as security for borrower and counterparty obligations; and

•the ability to attract and retain key personnel; and

•natural disasters, including those from significant climate change.

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For additional information regarding these and other risks and uncertainties that could cause our actual results to differ materially from the expectations reflected in our forward-looking statements, see “Item 1A. Risk Factors” in this quarterly report and in our 2022 Form 10-K. Forward-looking statements apply only as of the date they are made, and we undertake no obligation to update or revise any forward-looking statement.

EXECUTIVE OVERVIEW

Our Bank is a member-owned cooperative serving shareholder members in our district. Our mission is to be a reliable provider of funding, liquidity, and services for our members so that they can meet the housing, business, and economic development needs of the communities they serve. Our operating model balances the trade-off between attractively priced products, reasonable returns on capital stock, maintaining an adequate level of capital to meet regulatory capital requirements, and maintaining adequate retained earnings to preserve the par value of member-owned capital stock. Our members include commercial banks, savings institutions, credit unions, insurance companies, and community development financial institutions (CDFIs).

Our financial condition and results of operations are influenced by global and national economies, local economies within our district, and the conditions in the financial, housing, and credit markets, all of which impact the interest rate environment. The interest rate environment significantly impacts our profitability. Throughout 2022 and during the three months ended March 31, 2023, in response to higher inflation, the Federal Open Markets Committee (FOMC or Committee) raised the target range for the federal funds rate, which led to higher interest rates that bolstered our net interest income. Refer to “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Conditions in the Financial Markets” for additional discussion on economic conditions impacting our financial results.

In the first quarter of 2023, we also saw increased advance activity in response to a banking industry disruption sparked by bank closures and concerns about liquidity in the financial system. Similar to our role during the global pandemic, we served as a reliable and on-demand source of liquidity for our members throughout the disruption, and reached a peak advance balance of $133.5 billion in mid-March.

Another way we supported our mission was through Affordable Housing Program (AHP) and voluntary contributions. In addition to our required AHP assessments under the FHLBank Act, we voluntarily set aside $12 million during the first quarter of 2023 to support affordable housing and community development through our Member Impact Fund, a new matching gift grant program for members to strengthen communities in targeted areas of our district.

Financial Results

For the three months ended March 31, 2023, we reported net income of $191 million compared to $54 million for the same period in 2022. The increase in net income, calculated in accordance with accounting principles generally accepted in the United States of America (GAAP), was primarily driven by an increase in net interest income.

Net interest income increased $183 million during the three months ended March 31, 2023 when compared to the same period last year due primarily to higher interest rates, which improved earnings on invested capital, and growth in advance balances.

Refer to “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations” for additional discussion on our results of operations.

    Our total assets increased to $186.4 billion at March 31, 2023, from $164.2 billion at December 31, 2022, driven primarily by an increase in investments and advances. Investments increased $14.1 billion due primarily to increased money market investments of $11.5 billion and the purchase of agency mortgage-backed securities (MBS). Advances increased $7.8 billion due mainly to an increase in borrowings by depository institution members.

Total capital increased to $9.1 billion at March 31, 2023 from $8.8 billion at December 31, 2022, due primarily to an increase in activity-based capital stock resulting from an increase in advance balances. Our regulatory capital ratio decreased to 5.00 percent at March 31, 2023, from 5.41 percent at December 31, 2022, but remained above the required regulatory limit at each period end. Regulatory capital includes capital stock, mandatorily redeemable capital stock (MRCS), and retained earnings.

Refer to “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Statements of Condition” for additional discussion on our financial condition.

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Adjusted Earnings

As part of evaluating our financial performance, we adjust GAAP net interest income and GAAP net income before assessments for the impact of (i) unpredictable items, including, but not limited to, market adjustments relating to derivative and hedging activities and instruments held at fair value, net asset prepayment fee income, MRCS interest expense, debt extinguishment gains (losses), and (ii) other non-routine items, if applicable. The resulting non-GAAP measure, referred to as our adjusted earnings, reflects both adjusted net interest income and adjusted net income.

Because our business model is primarily one of holding assets and liabilities to maturity, management believes that the adjusted earnings measure is helpful in understanding our operating results and provides a meaningful period-to-period comparison of our economic performance in contrast to GAAP results, which can be impacted by fair value changes driven by market volatility on financial instruments recorded at fair value or transactions that are considered to be unpredictable or not routine. As a result, management uses the adjusted earnings measure to assess performance under our incentive compensation plans. Non-GAAP financial measures have inherent limitations and are not audited. While these non-GAAP measures can be used to assist in understanding the components of our earnings, they should not be considered a substitute for results reported under GAAP.

The adjusted net income methodology is calculated on a post-AHP assessment basis. Management believes AHP assessments are a fundamental component of our business and believes this assessment should be included in our adjusted net income calculation.

As indicated in the tables that follow, our adjusted net interest income and adjusted net income increased during the three months ended March 31, 2023 when compared to the same period in 2022. Our adjusted net interest income was impacted primarily by higher interest rates, which improved earnings on invested capital, and growth in advance balances.

The following table summarizes the reconciliation between GAAP and adjusted net interest income (dollars in millions):

	For the Three Months Ended
	March 31,
	2023			2022
GAAP net interest income	$	282		$	99
Exclude:
Prepayment fees on advances, net1	(1)			6
Prepayment fees on investments, net2	5			3
Market value adjustments on fair value hedges3	(10)			3
Total adjustments	(6)			12
Include items reclassified from other income (loss):
Net interest income (expense) on economic hedges	(21)			(1)
Adjusted net interest income	$	267		$	86
GAAP net interest margin	0.66		%	0.46		%
Adjusted net interest margin	0.63		%	0.40		%

1    Prepayment fees on advances, net includes basis adjustment amortization and premium and/or discount amortization.

2    Prepayment fees on investments, net includes basis adjustment amortization, as well as premium and/or discount amortization on non-MBS.

3     Represents market value gains (losses) on derivatives and hedged items in qualifying hedging relationships.

45

The following table summarizes the reconciliation between GAAP net income before assessments and adjusted net income (dollars in millions):

	For the Three Months Ended
	March 31,
	2023		2022
GAAP net income before assessments	$	212	$	60
Exclude:
Prepayment fees on advances, net1	(1)		6
Prepayment fees on investments, net2	5		3
Market value adjustments on economic hedges3	31		17
Market value adjustments on fair value hedges4	(10)		3
Net gains (losses) on financial instruments held under fair value option	(65)		22
Net gains (losses) on trading securities	33		(41)
Net gains (losses) on extinguishment of debt	2		—
Adjusted net income before assessments	217		50
Adjusted AHP assessments5	22		5
Adjusted net income	$	195	$	45

1    Prepayment fees on advances, net includes basis adjustment amortization and premium and/or discount amortization.

2    Prepayment fees on investments, net includes basis adjustment amortization, as well as premium and/or discount amortization on non-MBS.

3    Represents market value gains (losses) on economic derivatives.    

4    Represents market value gains (losses) on derivatives and hedged items in qualifying hedging relationships.

5    Adjusted AHP assessments for this non-GAAP measure are calculated as 10 percent of adjusted net income before assessments. For additional discussion on AHP assessments, refer to “Item 8. Financial Statements and Supplementary Data — Note 10 — Affordable Housing Program” in our 2022 Form 10-K.

For additional discussion on items impacting our GAAP earnings, refer to “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations.”

Replacement of the LIBOR Benchmark Interest Rate

As discussed in our 2022 Form 10-K, we have ceased all new LIBOR-indexed transactions. However, certain of our advances, investments, derivatives, and related collateral are still indexed to LIBOR and have maturity dates that extend beyond June 30, 2023. We are in the process of transitioning away from LIBOR and are utilizing SOFR as our dominant replacement rate on an ongoing basis. In addition, we continue to offer SOFR-indexed advances, issue SOFR-indexed debt, and utilize derivatives indexed to the federal fund or SOFR overnight index swap (OIS) rate.

We are working to ensure we are operationally ready for LIBOR transition activities, including updating our processes and IT systems. During the first quarter of 2023, we began updating our asset contracts and/or replacing our LIBOR-indexed derivatives with SOFR-indexed derivatives and elected the optional expedients set forth under Accounting Standards Update 2020-04 for contract modifications and hedging relationships. The election of these expedients did not have a material effect on our financial condition, results of operations, or cash flows.

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The following table summarizes our variable rate advances, investments, consolidated obligation bonds, and derivatives by interest-rate index (in millions):

	March 31, 2023
	LIBOR		SOFR		Federal Funds OIS		Other1		Total
Advances, principal amount	$	267	$	21,923	$	—	$	19,284	$	41,474
Investment securities
Non-MBS, principal amount	801		—		—		—		801
MBS, principal amount	4,524		1,687		—		—		6,211
Total investment securities	5,325		1,687		—		—		7,012
Consolidated obligation bonds, principal amount	—		61,123		—		—		61,123
Total variable rate financial instruments amount	$	5,592	$	84,733	$	—	$	19,284	$	109,609
Derivatives
Pay leg, notional amount	$	909	$	70,584	$	259	$	—	$	71,752
Receive leg, notional amount	2,502		10,598		31,415		—		44,515

1     Consists primarily of advances indexed in part to consolidated obligation yields.

The following table presents our exposure to LIBOR-indexed advances, investments, and derivatives (in millions):

	March 31, 2023
	LIBOR Tenors That Cease or Will no Longer be Representative Immediately After June 30, 2023
		Due/Terminates through June 30, 2023		Due/Terminates Thereafter		Total
Assets Indexed to LIBOR
Advances, principal amount by redemption term		$	50	$	217	$	267
Investment securities, by contractual maturity1
Non-MBS, principal amount		20		781		801
MBS, principal amount		4		4,520		4,524
Derivatives, receive leg
Cleared, notional amount		374		949		1,323
Uncleared, notional amount		96		1,083		1,179
Total principal/notional amount		$	544	$	7,550	$	8,094
Liabilities Indexed to LIBOR
Derivatives, pay leg
Cleared, notional amount		$	264	$	395	$	659
Uncleared, notional amount		—		250		250
Total principal/notional amount		$	264	$	645	$	909

1    MBS are presented by contractual maturity, however, their expected maturities will likely differ from contractual maturities as borrowers may have the right to call or prepay obligations with or without call or prepayment fees.

By June 2023, all remaining LIBOR advances and investments are expected to fallback to a SOFR index and all remaining LIBOR derivatives are expected to be terminated or replaced with SOFR-indexed derivatives. For a summary of our risks on the replacement of the LIBOR benchmark interest rate, refer to “Item 1A. Risk Factors” in our 2022 Form 10-K.

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CONDITIONS IN THE FINANCIAL MARKETS

Economy and Financial Markets

In March 2023, several U.S. banks experienced significant deposit outflows and financial difficulties, creating stress for the banking industry and the financial markets. During this time, the FHLBanks continued to execute their mission by serving as a reliable source of liquidity and funding for their members. The FHLBanks’ assets and liabilities, primarily advances and consolidated obligations, increased significantly during the first quarter of 2023, driven by increased member demand.

On March 12, 2023, the Federal Reserve Board (Federal Reserve) announced a plan to make available additional funding to eligible depository institutions to help ensure that they have the ability to meet the needs of all their depositors, through eased access to the discount window and the creation of a new Bank Term Funding Program (BTFP). Refer to “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Legislative and Regulatory Developments” for additional information on this regulatory action.

During the first quarter of 2023, the economy saw modest growth in spending and production and job gains picked up, running at a robust pace. The unemployment rate remained low; however, inflation remained elevated. In its March 22, 2023 statement, the FOMC stated that it decided to raise the target range for the federal funds rate by 0.25 percent, bringing the target range to 4.75 to 5.00 percent. The FOMC noted that recent developments relating to the U.S. banking system are likely to result in tighter credit conditions for households and businesses and may weigh on economic activity, hiring, and inflation, although the extent of these effects is uncertain. The Committee stated that it anticipates that some additional policy firming may be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to two percent over time. The Committee stated that it will continue reducing its holdings of Treasury securities and agency debt and agency MBS.

Additionally, in January 2023, the United States reached its statutory debt limit and, since then, the U.S. Treasury has been taking measures to prevent the United States from defaulting on its obligations. The failure by the U.S. Government to adequately address its statutory debt limit in a timely manner, or continued uncertainty relating to the debt limit, could result in downgrades to the U.S. Government credit rating or outlook and cause significant harm to the U.S. economy and global financial stability. In addition, because of our government-sponsored enterprise (GSE) status, the credit ratings of the FHLBank System and our consolidated obligations are directly influenced by the U.S. Government credit rating. Future downgrades in credit ratings or outlook may result in higher funding costs, higher volatilities, or other disruptions, including in our access to the capital markets.

Mortgage Markets

During the first quarter of 2023, mortgage rates increased, on average, compared to the same period last year; however decreased from the prior year-end. In the first quarter of 2023, new and existing home sales increased due to seasonality, lower home prices, and lower rates. The primary driver of mortgage activity was purchase activity in the first quarter of 2023, as mortgage rates remain elevated.

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Interest Rates

    The following table shows information on key market interest rates1:

	First Quarter 2023 3-Month Average		First Quarter 2022 3-Month Average		March 31, 2023 Ending Rate		December 31, 2022 Ending Rate
Federal funds	4.52	%	0.12	%	4.83	%	4.33	%
Three-month LIBOR	4.92		0.53		5.19		4.77
SOFR	4.50		0.09		4.87		4.30
2-year U.S. Treasury	4.34		1.46		4.06		4.43
10-year U.S. Treasury	3.65		1.95		3.48		3.88
30-year residential mortgage note	6.34		3.74		6.24		6.41

1    Source: Bloomberg.

In response to higher inflation, the FOMC raised the target range for the federal funds rate, which led to higher interest rates, on average, during 2023 when compared to the prior year. During the first quarter of 2023, short-term interest rates continued to increase while longer-term interest rates declined.

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SELECTED FINANCIAL DATA

    The following tables present selected financial data for the periods indicated (dollars in millions):

Statements of Condition	March 31, 2023		December 31, 2022		September 30, 2022		June 30, 2022		March 31, 2022
Cash and due from banks	$	71	$	89	$	58	$	50	$	71
Investments1	57,530		43,381		40,753		32,753		34,621
Advances	119,027		111,202		82,196		52,731		44,773
Mortgage loans held for portfolio, net2	8,473		8,348		8,243		7,940		7,702
Total assets	186,417		164,169		133,155		93,968		87,737
Consolidated obligations
Discount notes	72,642		69,170		64,166		50,185		36,743
Bonds	100,883		84,337		58,708		35,130		42,463
Total consolidated obligations3	173,525		153,507		122,874		85,315		79,206
Mandatorily redeemable capital stock	14		15		15		17		18
Total liabilities	177,295		155,418		125,623		87,663		81,792
Capital stock — Class B putable	6,592		6,250		5,086		3,876		3,523
Retained earnings	2,713		2,618		2,538		2,458		2,401
Accumulated other comprehensive income (loss)	(183)		(117)		(92)		(29)		21
Total capital	9,122		8,751		7,532		6,305		5,945
Regulatory capital ratio4	5.00		5.41		5.74		6.76		6.77

	For the Three Months Ended
Statements of Income	March 31, 2023			December 31, 2022			September 30, 2022			June 30, 2022			March 31, 2022
Net interest income	$	282		$	262		$	197		$	125		$	99
Provision (reversal) for credit losses on mortgage loans	—			1			—			1			2
Other income (loss)5	(15)			(53)			(12)			25			—
Other expense6	55			46			39			39			37
AHP assessments	21			16			15			11			6
Net income	191			146			131			99			54
Selected Financial Ratios7
Net interest spread8	0.41		%	0.48		%	0.55		%	0.47		%	0.42		%
Net interest margin9	0.66			0.69			0.69			0.54			0.46
Return on average equity (annualized)	8.51			7.02			7.64			6.43			3.71
Return on average capital stock (annualized)	12.00			9.95			11.71			10.44			6.25
Return on average assets (annualized)	0.44			0.38			0.46			0.42			0.25
Average equity to average assets	5.19			5.36			5.98			6.56			6.67

1    Investments include interest-bearing deposits, securities purchased under agreements to resell, federal funds sold, trading securities, available-for-sale (AFS) securities, and held-to-maturity (HTM) securities.

2    Includes an allowance for credit losses of $5 million, $5 million, $4 million, $4 million, and $3 million at March 31, 2023, December 31, 2022, September 30, 2022, June 30, 2022, and March 31, 2022.

3    The total par value of outstanding consolidated obligations of the 11 FHLBanks was $1,477.7 billion, $1,181.7 billion, $1,031.9 billion, $882.5 billion, and $699.5 billion at March 31, 2023, December 31, 2022, September 30, 2022, June 30, 2022, and March 31, 2022.

4    Represents period-end regulatory capital expressed as a percentage of period-end total assets. Regulatory capital includes Class B capital stock (including MRCS) and retained earnings.

5    Other income (loss) includes, among other things, net gains (losses) on investment securities, net gains (losses) on derivatives, and net gains (losses) on financial instruments held under fair value option.

6    Other expense includes, among other things, compensation and benefits, professional fees, and contractual services.

7    Amounts used to calculate selected financial ratios are based on numbers in actuals. Accordingly, recalculations using numbers in millions may not produce the same results.

8    Represents annualized yield on total interest-earning assets minus annualized cost of total interest-bearing liabilities.

9    Represents net interest income expressed as a percentage of average interest-earning assets.

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RESULTS OF OPERATIONS

Net Interest Income

Our net interest income is impacted by changes in average interest-earning asset and interest-bearing liability balances, and the related yields and costs. The following table presents average balances and annualized yields/costs of major asset and liability categories (dollars in millions):    

	For the Three Months Ended March 31,
	2023						2022
	Average Balance1		Yield/Cost		Interest Income/ Expense2		Average Balance1		Yield/Cost		Interest Income/ Expense2
Interest-earning assets
Interest-bearing deposits	$	3,548	4.47	%	$	39	$	1,196	0.16	%	$	1
Securities purchased under agreements to resell	8,260		4.58		93		4,546		0.10		1
Federal funds sold	15,244		4.57		171		11,302		0.11		3
MBS3,4,5	15,450		5.44		207		11,458		0.93		26
Other investments3,4,5,6	4,829		3.05		37		4,391		1.57		17
Advances4,7	116,571		4.85		1,394		46,761		0.96		111
Mortgage loans8	8,386		3.34		69		7,637		2.81		53
Loans to other FHLBanks	29		4.66		—		—		—		—
Total interest-earning assets	172,317		4.73		2,010		87,291		0.99		212
Non-interest-earning assets	3,096		—		—		806		—		—
Total assets	$	175,413	4.65	%	$	2,010	$	88,097	0.98	%	$	212
Interest-bearing liabilities
Deposits	$	1,112	3.71	%	$	10	$	1,959	0.01	%	$	—
Consolidated obligations
Discount notes4	70,180		4.25		735		29,165		0.18		14
Bonds4	90,971		4.38		983		49,582		0.81		99
Other interest-bearing liabilities9	17		7.68		—		29		4.81		—
Total interest-bearing liabilities	162,280		4.32		1,728		80,735		0.57		113
Non-interest-bearing liabilities	4,023		—		—		1,490		—		—
Total liabilities	166,303		4.21		1,728		82,225		0.56		113
Capital	9,110		—		—		5,872		—		—
Total liabilities and capital	$	175,413	4.00	%	$	1,728	$	88,097	0.52	%	$	113
Net interest income and spread10			0.41	%	$	282			0.42	%	$	99
Net interest margin11			0.66	%					0.46	%
Average interest-earning assets to interest-bearing liabilities			106.18	%					108.12	%

1    Average balances are calculated on a daily weighted average basis and do not reflect the effect of derivative master netting arrangements with counterparties and/or clearing agents.

2    Interest income and expense amounts reported for advances, MBS, other investments, and consolidated obligation bonds include gains (losses) on hedged items and derivatives in qualifying fair value hedge relationships.

3    The average balance of AFS securities is reflected at amortized cost; therefore the resulting yields do not give effect to changes in fair value.

4    Average balances reflect the impact of fair value hedging adjustments and/or fair value option adjustments.

5    Interest income on investment securities includes prepayment fees, net of related amortization, of $5 million and $3 million for the three months ended March 31, 2023 and 2022.

6    Other investments primarily include U.S. Treasury obligations, other U.S. obligations, GSE obligations and Tennessee Valley Authority (TVA) obligations, state or local housing agency obligations, and taxable municipal bonds.

7    Interest income on advances includes prepayment fees, net of related amortization, of $(1) million and $6 million for the three months ended March 31, 2023 and 2022.

8    Non-accrual loans are included in the average balance used to determine the average yield.

9    Other interest-bearing liabilities consist primarily of MRCS and/or borrowings from other FHLBanks.

10    Represents annualized yield on total interest-earning assets minus annualized yield on total interest-bearing liabilities.

11    Represents net interest income expressed as a percentage of average interest-earning assets.

51

The following table presents changes in interest income and interest expense. Changes in interest income and interest expense that are not identifiable as either volume-related or rate-related, but rather attributable to both volume and rate changes, are allocated to the volume and rate categories based on the proportion of the absolute value of the volume and rate changes (dollars in millions).

	Three Months Ended
	March 31, 2023 vs. March 31, 2022
	Total Increase (Decrease) Due to				Total Increase (Decrease)
	Volume		Rate
Interest income
Interest-bearing deposits	$	3	$	35	$	38
Securities purchased under agreements to resell	2		90		92
Federal funds sold	1		167		168
MBS	12		169		181
Other investments	2		18		20
Advances	345		938		1,283
Mortgage loans	5		11		16
Total interest income	370		1,428		1,798
Interest expense
Deposits	—		10		10
Consolidated obligations
Discount notes	42		679		721
Bonds	141		743		884
Total interest expense	183		1,432		1,615
Net interest income	$	187	$	(4)	$	183

NET INTEREST SPREAD AND MARGIN

Net interest spread represents the annualized yield on total interest-earning assets minus the annualized cost of total interest-bearing liabilities. Our net interest spread remained relatively stable during the three months ended March 31, 2023 when compared to the same period in 2022. Net interest margin equals net interest income expressed as a percentage of average interest-earning assets. Our net interest margin increased during the three months ended March 31, 2023 when compared to the same period in 2022 due primarily to higher interest rates, which improved our earnings on invested capital.

Interest income increased during the three months ended March 31, 2023 when compared to the same period in 2022 due primarily to the higher interest rate environment, as well as higher advance volumes. Interest expense increased during the three months ended March 31, 2023 when compared to the same period in 2022 due to the higher interest rate environment and higher consolidated obligation volumes necessary to fund our asset growth and/or meet liquidity requirements.

52

Other Income (Loss)

    The following table summarizes the components of other income (loss) (dollars in millions):

	For the Three Months Ended
	March 31,
	2023		2022
Net gains (losses) on trading securities	$	33	$	(41)
Net gains (losses) on financial instruments held under fair value option	(65)		22
Net gains (losses) on derivatives	10		16
Net gains (losses) on extinguishment of debt	2		—
Standby letter of credit fees	2		2
Other, net	3		1
Total other income (loss)	$	(15)	$	—

Other income (loss) declined $15 million during the three months ended March 31, 2023 when compared to the same period in 2022. During the three months ended March 31, 2023, we recorded net combined losses of $22 million on our trading securities, fair value option instruments, and economic derivatives, including the related interest settlements, compared to net losses of $3 million for the same period in 2022. These changes were primarily driven by the interest rate environment, as well as credit spreads on our fixed rate trading securities. Refer to “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations — Hedging Activities” for additional discussion on our economic derivatives.

Hedging Activities

We use derivatives to manage interest rate risk. Accounting rules affect the timing and recognition of income and expense on derivatives and therefore we may be subject to income statement volatility. If a hedging activity qualifies for hedge accounting treatment (fair value hedge), the net interest settlements of interest receivables or payables related to the derivative are recognized as interest income or expense in the relevant income statement caption consistent with the hedged asset or liability. The net fair value gains and losses of derivatives and hedged items designated in fair value hedge relationships are also recognized as interest income or expense. Amortization of basis adjustments from terminated hedges is also recorded in interest income or expense.

If a hedging activity does not qualify for hedge accounting treatment (economic hedge), the net interest settlements of interest receivables or payables related to the derivative as well as the fair value gains and losses on the derivative are recorded as a component of other income (loss) in “Net gains (losses) on derivatives;” however, there is no fair value adjustment for the corresponding asset or liability being hedged unless changes in the fair value of the asset or liability are normally marked to fair value through earnings (i.e., trading securities and fair value option instruments).

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The following table categorizes the net effect of hedging activities on net income by product (dollars in millions):

	For the Three Months Ended March 31, 2023
Net Effect of Hedging Activities	Advances		Investments		Mortgage Loans		Discount Notes		Bonds		Other		Total
Net interest income:
Net amortization/accretion1	$	9	$	6	$	—	$	—	$	(1)	$	—	$	14
Net gains (losses) on derivatives and hedged items	(6)		11		—		—		(14)		—		(9)
Net interest settlements on derivatives2	135		48		—		—		(49)		—		134
Total impact to net interest income	138		65		—		—		(64)		—		139
Other income (loss):
Net gains (losses) on derivatives3	—		(3)		(1)		21		—		—		17
Net gains (losses) on trading securities4	—		33		—		—		—		—		33
Net gains (losses) on financial instruments held under fair value option4	—		—		—		(65)		—		—		(65)
Price alignment amount on derivatives5	—		—		—		—		—		(7)		(7)
Total impact to other income (loss)	—		30		(1)		(44)		—		(7)		(22)
Total net effect of hedging activities6	$	138	$	95	$	(1)	$	(44)	$	(64)	$	(7)	$	117

1    Represents the amortization/accretion of basis adjustments on closed hedge relationships.

2    Represents the interest component on derivatives that qualify for fair value hedge accounting.

3    Represents net gains (losses) on economic derivatives and the related interest settlements.

4    Represents the net gains (losses) on those trading securities and fair value option instruments for which we have entered into a corresponding economic derivative to hedge the risk of changes in fair value.

5    Includes the price alignment amount on derivatives for which variation margin is characterized as a daily settled contract, which is included in net gains (losses) on derivatives on our Statements of Income.

6    The hedging activity tables do not include the interest component on the related hedged items or the gross prepayment fee income on terminated advance or investment hedge relationships.

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The following table categorizes the net effect of hedging activities on net income by product (dollars in millions):

	For the Three Months Ended March 31, 2022
Net Effect of Hedging Activities	Advances		Investments		Mortgage Loans		Discount Notes		Bonds		Total
Net interest income:
Net amortization/accretion1	$	—	$	—	$	(1)	$	—	$	(1)	$	(2)
Net gains (losses) on derivatives and hedged items	—		7		—		—		(3)		4
Net interest settlements on derivatives2	(39)		(28)		—		—		13		(54)
Total impact to net interest income	(39)		(21)		(1)		—		9		(52)
Other income (loss):
Net gains (losses) on derivatives3	—		32		—		(16)		—		16
Net gains (losses) on trading securities4	—		(41)		—		—		—		(41)
Net gains (losses) on financial instruments held under fair value option4	—		—		—		22		—		22
Total impact to other income (loss)	—		(9)		—		6		—		(3)
Total net effect of hedging activities5	$	(39)	$	(30)	$	(1)	$	6	$	9	$	(55)

1    Represents the amortization/accretion of basis adjustments on closed hedge relationships.

2    Represents the interest component on derivatives that qualify for fair value hedge accounting.

3    Represents net gains (losses) on economic derivatives and the related interest settlements.

4    Represents the net gains (losses) on those trading securities and fair value option instruments for which we have entered into a corresponding economic derivative to hedge the risk of changes in fair value.

5    The hedging activity tables do not include the interest component on the related hedged items or the gross prepayment fee income on terminated advance or investment hedge relationships.

NET AMORTIZATION/ACCRETION

Net amortization/accretion varies from period to period depending on our hedge relationship termination activities and the maturity, call, or prepayment of assets or liabilities previously in hedge relationships. During the three months ended March 31, 2023, our change in amortization activity when compared to the same period last year was driven primarily by the prepayment of advances and investments that were previously in a hedge relationship, as well as the termination of certain advance fair value hedge relationships.

NET GAINS (LOSSES) ON DERIVATIVES AND HEDGED ITEMS

Net gains and losses on derivatives and hedged items designated in fair value hedge relationships are recorded in net interest income. Gains (losses) on derivatives and hedged items are primarily driven by market volatility and the impact it had on interest rates.

NET INTEREST SETTLEMENTS ON DERIVATIVES

Net interest settlements represent the interest component on derivatives that qualify for fair value hedge accounting. These amounts vary from period to period depending on our hedging activities and interest rates and are partially offset by the interest component on the related hedged item within net interest income. The hedging activity tables do not include the impact of the interest component on the related hedged item.

NET GAINS (LOSSES) ON DERIVATIVES

We utilize economic derivatives to manage certain risks on our Statements of Condition. Gains and losses on economic derivatives include interest settlements. Interest settlements represent the interest component on economic derivatives. These amounts vary from period to period depending on our hedging activities and interest rates. During the three months ended March 31, 2023, we recorded net gains of $17 million on our economic derivatives, compared to net gains of $16 million during the same period last year. These changes were primarily driven by the interest rate environment.

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Other Expense

The following table shows the components of other expense (dollars in millions):

	For the Three Months Ended March 31,
	2023		2022
Compensation and benefits	$	20	$	18
Contractual services	6		5
Professional fees	3		3
Other operating expenses	5		4
Total operating expenses	34		30
Federal Housing Finance Agency	2		3
Office of Finance	3		2
Other, net	16		2
Total other expense	$	55	$	37

Other expense increased during the three months ended March 31, 2023 when compared to the same period last year, primarily due to an increase in other, net expense. The increase in other, net expense was mainly due to a $12 million voluntary contribution to our Member Impact Fund, a discretionary non-AHP program intended to support affordable housing and community development.

STATEMENTS OF CONDITION

Financial Highlights

    Our total assets increased to $186.4 billion at March 31, 2023 from $164.2 billion at December 31, 2022. Our total liabilities increased to $177.3 billion at March 31, 2023 from $155.4 billion at December 31, 2022. Total capital increased to $9.1 billion at March 31, 2023 from $8.8 billion at December 31, 2022. See further discussion of changes in our financial condition in the appropriate sections that follow.

Cash and Due from Banks

At March 31, 2023, our total cash balance was $71 million compared to $89 million at December 31, 2022, a decrease of $18 million. Our cash balance is influenced by our liquidity needs, member advance activity, market conditions, and the availability of attractive investment opportunities.

Advances

The following table summarizes our advances by type of institution (dollars in millions):

	March 31, 2023		December 31, 2022
Commercial banks	$	73,758	$	66,303
Savings institutions	1,052		1,498
Credit unions	11,502		12,989
Insurance companies	33,500		31,433
CDFIs	12		12
Total member advances	119,824		112,235
Housing associates	54		74
Non-member borrowers	64		65
Total par value	$	119,942	$	112,374

Our total advance par value increased $7.6 billion or seven percent at March 31, 2023 when compared to December 31, 2022, primarily due to an increase in borrowings by depository institution members. During March 2023, member demand for advances accelerated in response to the stress placed on the banking industry and financial markets resulting from the financial difficulties experienced by certain depository institutions. We served as a reliable and on-demand source of liquidity for our members throughout the disruption, and reached a peak advance balance of $133.5 billion in mid-March.

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The following table summarizes our advances by interest rate payment terms (dollars in millions):

	March 31, 2023			December 31, 2022
	Amount		% of Total	Amount		% of Total
Fixed rate	$	76,963	64	$	63,693	57
Fixed rate, putable	144		—	168		—
Variable rate	22,289		19	23,908		21
Variable rate, callable1	19,185		16	23,291		21
Other2	1,359		1	1,313		1
Overdrawn demand deposit accounts	2		—	1		—
Total advance par value	119,942		100	112,374		100
Premiums	8			11
Fair value hedging adjustments	(923)			(1,183)
Total	$	119,027		$	111,202

1    Callable advances are those advances that may be contractually prepaid by the borrower on predetermined dates without incurring prepayment or termination fees. Interest rates    on our variable rate callable advances reset at each call date to be consistent with either the underlying index or our current offering rate in line with our underlying cost of funds.

2    Includes fixed rate amortizing and fixed rate callable advances.

Fair value hedging adjustments changed $0.3 billion at March 31, 2023 when compared to December 31, 2022 due primarily to the impact of interest rates on our cumulative fair value adjustments on advances in active hedge relationships.

At March 31, 2023 and December 31, 2022, advances outstanding to our five largest member borrowers totaled $49.8 billion and $50.9 billion, which represented 42 percent and 45 percent of our total advances outstanding. The following table summarizes advances outstanding to our five largest member borrowers at March 31, 2023 (dollars in millions):

	Amount		% of Total Advances
Wells Fargo Bank, N.A.	$	27,000	22
Zions Bancorporation, National Association	8,000		7
Umpqua Bank	5,900		5
Athene Annuity and Life Company1	4,606		4
Principal Life Insurance Company	4,250		4
Total par value	$	49,756	42

1    Excludes $0.3 billion of advances with Athene Annuity & Life Assurance Company, an affiliate of Athene Annuity and Life Company.    

We evaluate advances for credit losses on a quarterly basis and have never experienced a credit loss on our advances. For additional discussion on our advance credit risk, refer to “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Risk Management — Credit Risk — Advances.”

Mortgage Loans

    The following table summarizes information on our mortgage loans held for portfolio (dollars in millions):

	March 31, 2023		December 31, 2022
Fixed rate conventional loans	$	8,020	$	7,890
Fixed rate government-insured loans	381		387
Total unpaid principal balance	8,401		8,277
Premiums	98		96
Discounts	(11)		(11)
Basis adjustments from mortgage loan purchase commitments	(10)		(9)
Total mortgage loans held for portfolio	8,478		8,353
Allowance for credit losses	(5)		(5)
Total mortgage loans held for portfolio, net	$	8,473	$	8,348

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Our total mortgage loans increased $0.1 billion or one percent at March 31, 2023 when compared to December 31, 2022. The increase was primarily due to new loan purchases exceeding principal paydowns, driven in part by a decrease in prepayment activity as mortgage rates remained elevated.

We evaluate mortgage loans for credit losses on a quarterly basis. For additional discussion on our mortgage loan credit risk, refer to “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Risk Management — Credit Risk — Mortgage Assets.”

Investments

The following table summarizes the carrying value of our investments (dollars in millions):

	March 31, 2023			December 31, 2022
	Amount		% of Total	Amount		% of Total
Short-term investments1
Interest-bearing deposits	$	2,801	5	$	2,031	4
Securities purchased under agreements to resell	22,900		40	12,590		29
Federal funds sold	9,830		17	9,415		22
Total short-term investments	35,531		62	24,036		55
Long-term investments2
MBS
GSE single-family	734		1	767		2
GSE multifamily	12,740		22	9,805		23
U.S. obligations single-family3	3,755		7	3,678		8
Private-label residential	3		—	4		—
Total MBS	17,232		30	14,254		33
Non-MBS
U.S. Treasury obligations3	2,282		4	2,501		6
Other U.S. obligations3	733		1	834		2
GSE and TVA obligations	880		1	888		2
State or local housing agency obligations	481		1	482		1
Other4	391		1	386		1
Total non-MBS	4,767		8	5,091		12
Total long-term investments	21,999		38	19,345		45
Total investments	$	57,530	100	$	43,381	100

1    Short-term investments have original maturities equal to or less than one year.

2    Long-term investments have original maturities of greater than one year.

3    Represents investment securities backed by the full faith and credit of the U.S. Government.

4    Consists primarily of taxable municipal bonds.

Our investments increased $14.1 billion or 33 percent at March 31, 2023 when compared to December 31, 2022 due primarily to an increase in money market investments of $11.5 billion and the purchase of agency MBS. At March 31, 2023 and December 31, 2022, we had GSE MBS purchases with a total par value of $1.3 billion and $181 million that were traded but not yet settled. These investments were recorded as “available-for-sale” on our Statements of Condition with a corresponding payable recorded in “other liabilities.”

The Finance Agency limits our investments in MBS by requiring that the balance of our MBS not exceed three times regulatory capital at the time of purchase. Our ratio of MBS to regulatory capital was 1.91 and 1.69 at March 31, 2023 and December 31, 2022.

We evaluate investments for credit losses on a quarterly basis. For additional discussion on our investment credit risk, refer to “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Risk Management — Credit Risk — Investments.”

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Consolidated Obligations

    Consolidated obligations, which include bonds and discount notes, are the primary source of funds to support our advances, mortgage loans, and investments. At March 31, 2023 and December 31, 2022, the carrying value of consolidated obligations for which we are primarily liable totaled $173.5 billion and $153.5 billion.

DISCOUNT NOTES

The following table summarizes our discount notes, all of which are due within one year (dollars in millions):

	March 31, 2023		December 31, 2022
Par value	$	73,482	$	70,002
Discounts and concession fees1	(798)		(725)
Fair value option valuation adjustments	(42)		(107)
Total	$	72,642	$	69,170

1    Concessions represent fees paid to dealers in connection with the issuance of certain consolidated obligation discount notes.

Our discount notes increased $3.5 billion or five percent at March 31, 2023 when compared to December 31, 2022. During the three months ended March 31, 2023, we utilized discount notes primarily to fund our increase in short-term assets and/or meet our liquidity requirements.

BONDS

The following table summarizes information on our bonds (dollars in millions):

	March 31, 2023		December 31, 2022
Par value	$	100,985	$	84,572
Premiums	82		86
Discounts and concession fees1	(27)		(23)
Fair value hedging adjustments	(157)		(298)
Total	$	100,883	$	84,337

1    Concessions represent fees paid to dealers in connection with the issuance of certain consolidated obligation bonds.

Our bonds increased $16.5 billion or 20 percent at March 31, 2023 when compared to December 31, 2022. During the three months ended March 31, 2023, we increased our utilization of bonds primarily to fund our asset growth and/or meet our liquidity requirements. Fair value hedging adjustments changed $141 million at March 31, 2023 when compared to December 31, 2022 due primarily to the impact of interest rates on our cumulative fair value adjustments on bonds in active hedge relationships.

For additional information on our consolidated obligations, refer to “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Liquidity — Sources of Liquidity.”

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Capital

The following table summarizes information on our capital (dollars in millions):

	March 31, 2023		December 31, 2022
Capital stock	$	6,592	$	6,250
Retained earnings	2,713		2,618
Accumulated other comprehensive income (loss)	(183)		(117)
Total capital	$	9,122	$	8,751

Our capital increased at March 31, 2023 when compared to December 31, 2022 due primarily to an increase in activity-based capital stock resulting from an increase in advance balances. Refer to “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Capital” for additional information on our capital.

Derivatives

    We use derivatives to manage interest rate risk. The notional amount of derivatives serves as a factor in determining periodic interest payments and cash flows received and paid. However, the notional amount of derivatives represents neither the actual amounts exchanged nor our overall exposure to credit and market risk.

The following table categorizes the notional amount of our derivatives by type (dollars in millions):

	March 31, 2023		December 31, 2022
Interest rate swaps
Non-callable	$	103,999	$	94,582
Callable by counterparty	12,268		6,901
Total interest rate swaps	116,267		101,483
Forward settlement agreements	152		46
Mortgage loan purchase commitments	153		46
Total notional amount	$	116,572	$	101,575

The notional amount of our derivative contracts increased $15.0 billion or 15 percent at March 31, 2023 when compared to December 31, 2022. This was primarily due to increased utilization of non-callable and callable swaps to hedge our advances and consolidated obligations in an effort to manage our interest rate risk. For additional discussion regarding our use of derivatives, see “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Risk Management — Credit Risk — Derivatives.”

LIQUIDITY AND CAPITAL RESOURCES

Our liquidity and capital positions are actively managed in an effort to preserve stable, reliable, and cost-effective sources of funds to meet current and projected future operating financial commitments, as well as regulatory, liquidity, and capital requirements.

Liquidity

SOURCES OF LIQUIDITY

We utilize several sources of liquidity to carry out our business activities. These include, but are not limited to, proceeds from the issuance of consolidated obligations, payments collected on advances and mortgage loans, proceeds from investment securities, member deposits, proceeds from the issuance of capital stock, and current period earnings.

Our primary source of liquidity is proceeds from the issuance of consolidated obligations (bonds and discount notes) in the capital markets. During the three months ended March 31, 2023, proceeds from the issuance of bonds and discount notes were $42.8 billion and $423.4 billion compared to $8.7 billion and $83.9 billion for the same period in 2022. During the three months ended March 31, 2023, we increased our usage of consolidated obligations primarily to fund our asset growth and/or meet our liquidity requirements.

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Access to debt markets has been reliable because investors, driven by increased liquidity preference and our GSE status, have sought the FHLBanks’ debt as an asset of choice. However, due to the short-term maturity of the debt, we may be exposed to additional risks associated with refinancing and our ability to access the capital markets.

We are focused on maintaining an adequate liquidity balance and a funding balance between our financial assets and financial liabilities and work collectively with the other FHLBanks to manage the system-wide liquidity and funding needs. We monitor our debt refinancing risk and liquidity position primarily by tracking the maturities of financial assets and financial liabilities. In managing and monitoring the amounts of assets that require refunding, we consider contractual maturities of our financial assets and liabilities, as well as certain assumptions regarding expected cash flows (i.e., estimated prepayments). External factors, including member borrowing needs, supply and demand in the debt markets, and other factors may affect liquidity balances and the funding balances between financial assets and financial liabilities. Refer to “Item 1. Financial Statements” for additional information regarding the contractual maturities of certain of our financial assets and liabilities.

Our ability to raise funds in the capital markets as well as our cost of borrowing may be affected by our credit ratings. As of April 30, 2023, our consolidated obligations were rated AA+/A-1+ by S&P Global Ratings (S&P) and Aaa/P-1 by Moody’s and both ratings had a stable outlook. For further discussion of how credit rating changes and our ability to access the capital markets may impact us in the future, refer to “Item 1A. Risk Factors” in our 2022 Form 10-K.

Although we are primarily liable for the portion of consolidated obligations that are issued on our behalf, we are also jointly and severally liable with the other FHLBanks for the payment of principal and interest on all consolidated obligations issued by the FHLBank System. At March 31, 2023 and December 31, 2022, the total par value of outstanding consolidated obligations for which we are primarily liable was $174.5 billion and $154.6 billion. At March 31, 2023 and December 31, 2022, the total par value of outstanding consolidated obligations issued on behalf of other FHLBanks for which we are jointly and severally liable was $1,303.2 billion and $1,027.1 billion.

The Office of Finance and FHLBanks have contingency plans in place that prioritize the allocation of proceeds from the issuance of consolidated obligations during periods of financial distress if consolidated obligations cannot be issued in sufficient amounts to satisfy all FHLBank demand. In the event of significant market disruptions or local disasters, our President and chief executive officer (CEO) or designee is authorized to establish interim borrowing relationships with other FHLBanks. To provide further access to funding, the FHLBank Act also authorizes the U.S. Treasury to directly purchase new issue consolidated obligations of the GSEs, including FHLBanks, up to an aggregate principal amount of $4.0 billion. As of April 30, 2023, no purchases had been made by the U.S. Treasury under this authorization.

USES OF LIQUIDITY

    We use our available liquidity, including proceeds from the issuance of consolidated obligations, primarily to repay consolidated obligations, fund advances, and purchase investments. During the three months ended March 31, 2023, repayments of consolidated obligations totaled $446.6 billion compared to $90.9 billion for the same period in 2022.

During the three months ended March 31, 2023, advance disbursements (excluding daily renewals) totaled $220.9 billion compared to $35.4 billion for the same period in 2022. Advance disbursements will vary from period to period depending on member needs and increased during the three months ended March 31, 2023 due primarily to increased member utilization of short-term advances. In particular, we saw accelerated member demand throughout March in response to the stress placed on the banking industry and financial markets resulting from the financial difficulties experienced by certain depository institutions. During the three months ended March 31, 2023, investment purchases (excluding overnight investments) totaled $2.4 billion compared to $2.1 billion for the same period in 2022. In both periods, we purchased money market investments in an effort to manage our liquidity position, and also purchased agency MBS.

We also use liquidity to purchase mortgage loans, redeem member deposits, pledge collateral to derivative counterparties, redeem or repurchase capital stock, pay expenses, and pay dividends.

LIQUIDITY REQUIREMENTS

We are subject to certain liquidity requirements set forth by the Finance Agency and maintain a liquidity contingency funding plan designed to enable us to meet our obligations and the liquidity needs of our members in the event of short-term capital market disruptions, or operational disruptions at our Bank and/or the Office of Finance. For additional details on these liquidity requirements, refer to our 2022 Form 10-K. Our primary liquidity requirement is discussed further below.

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Finance Agency Advisory Bulletin on FHLBank Liquidity (the Liquidity Guidance AB) – This guidance requires us to maintain sufficient liquidity for a period of 10 to 30 calendar days. The base case scenario requires 20 days of positive daily cash balances and assumes that we cannot access the capital markets to issue debt, and during that time we will automatically renew maturing and called advances for all members, including large, highly-rated members, and we hold additional liquid assets equal to one percent of our letters of credit balances. In March 2023, we were non-compliant with this liquidity guidance for one day to meet increased advance demand. At March 31, 2023 and December 31, 2022, we were in compliance with this base case liquidity guidance.

The Liquidity Guidance AB also specifies appropriate funding gap limits to address the risks associated with an FHLBank having too large a mismatch between the contractual maturities of its assets and liabilities. A funding gap measures the difference between assets and liabilities that are scheduled to mature during a specified period and is expressed as a percentage of total assets. The guidance provides recommended funding gap maximums of negative 15 percent at the three-month horizon and negative 30 percent at the one-year horizon. At March 31, 2023 and December 31, 2022, we adhered to these funding gap requirements.

Capital

CAPITAL REQUIREMENTS

    We are subject to certain regulatory capital requirements. First, the FHLBank Act requires that we maintain at all times permanent capital greater than or equal to the sum of our credit, market, and operational risk capital requirements, all calculated in accordance with Finance Agency regulations. Only permanent capital, defined as the amounts paid-in for Class B capital stock (including MRCS), and retained earnings, can satisfy this risk-based capital requirement. Second, the FHLBank Act requires a minimum four percent capital-to-asset ratio, which is defined as total regulatory capital divided by total assets. Total regulatory capital includes Class B capital stock (including MRCS) and retained earnings. Third, the FHLBank Act imposes a five percent minimum leverage ratio, which is defined as the sum of permanent capital weighted 1.5 times and nonpermanent capital weighted 1.0 times, divided by total assets. At March 31, 2023 and December 31, 2022, we did not hold any nonpermanent capital. At March 31, 2023 and December 31, 2022, we were in compliance with all three of the Finance Agency’s regulatory capital requirements.

    In addition to the requirements previously discussed, the Finance Agency Advisory Bulletin on capital stock (the Capital Stock AB) requires each FHLBank to maintain at all times a ratio of at least two percent of capital stock to total assets. For purposes of the Capital Stock AB, capital stock includes MRCS. The capital stock to total assets ratio is measured on a daily average basis at month end. At March 31, 2023 and December 31, 2022, we were in compliance with the Capital Stock AB.

Refer to “Item 1. Financial Statements — Note 8 — Capital” for additional information on our regulatory capital requirements.

CAPITAL STOCK

Our capital stock has a par value of $100 per share, and all shares are issued, redeemed, and repurchased only at the stated par value. We issue a single class of capital stock (Class B capital stock) and have two subclasses of Class B capital stock: membership and activity-based. Each member must purchase and hold membership capital stock in an amount equal to 0.12 percent of its total assets as of the preceding December 31st, subject to a cap of $10.0 million and a floor of $10,000. Each member is also required to purchase activity-based capital stock equal to 4.00 percent of its advances and mortgage loans outstanding and 0.10 percent of its standby letters of credit. All Class B capital stock issued is subject to a notice of redemption period of five years.

The capital stock requirements established in our Capital Plan are designed so that we can remain adequately capitalized as member activity changes. Our Board of Directors may make adjustments to the capital stock requirements within ranges established in our Capital Plan.

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The following table summarizes our regulatory capital stock by type of member (dollars in millions):

	March 31, 2023		December 31, 2022
Commercial banks	$	3,973	$	3,659
Savings institutions	103		119
Credit unions	886		926
Insurance companies	1,629		1,545
CDFIs	1		1
Total GAAP capital stock	6,592		6,250
MRCS	14		15
Total regulatory capital stock	$	6,606	$	6,265

The increase in regulatory capital stock held at March 31, 2023 when compared to December 31, 2022 was due primarily to an increase in activity-based capital stock resulting from an increase in advance balances. For additional information on our capital stock, refer to “Item 1. Financial Statements — Note 8 — Capital.”

Retained Earnings

Our risk management policies require a minimum level of retained earnings based on the amount we believe necessary to help protect the redemption value of capital stock, facilitate safe and sound operations, maintain regulatory capital ratios, and support our ability to pay a relatively stable dividend. We monitor our achievement of this minimum level and may utilize tools such as restructuring our balance sheet, generating additional income, reducing our risk exposures, increasing capital stock requirements, or reducing our dividends to achieve this level of retained earnings. At March 31, 2023 and December 31, 2022, our actual retained earnings exceeded our required minimum level of retained earnings.

We entered into a Joint Capital Enhancement Agreement (JCE Agreement) with all of the other Federal Home Loan Banks in 2011. Under the JCE Agreement, we are required to allocate 20 percent of our quarterly net income to a separate restricted retained earnings account until the balance of that account, calculated as of the last day of each calendar quarter, equals at least one percent of our average balance of outstanding consolidated obligations for the calendar quarter. The restricted retained earnings are not available to pay dividends and are presented separately on our Statements of Condition. At March 31, 2023 and December 31, 2022, our restricted retained earnings balance totaled $741 million and $703 million. One percent of our average balance of outstanding consolidated obligations for the three months ended March 31, 2023 was $1.6 billion.

Dividends

Our dividend philosophy is to pay a consistent dividend equal to or greater than the current market rate for a highly-rated investment (i.e. SOFR), and at a rate that the Board of Directors believes is sustainable under current and projected earnings to maintain an appropriate level of capital and retained earnings. Our dividend is determined quarterly by our Board of Directors, based on policies, regulatory requirements, actual performance, and other considerations that the Board determines to be appropriate.

The following table summarizes dividend-related information (dollars in millions):

	For the Three Months Ended
	March 31,
	2023			2022
Aggregate cash dividends paid1	$	96		$	43
Effective combined annualized dividend rate paid on capital stock2	6.58		%	4.86		%
Annualized dividend rate paid on membership capital stock	3.00		%	3.00		%
Annualized dividend rate paid on activity-based capital stock	7.75		%	6.00		%
Average SOFR	4.50		%	0.09		%

1    Includes aggregate cash dividends paid during the period. Amount excludes cash dividends paid on MRCS. For financial reporting purposes, these dividends were recorded as interest expense on our Statements of Income.

2    Effective combined annualized dividend rate is paid on total capital stock, including MRCS.

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CRITICAL ACCOUNTING ESTIMATES

For a discussion of our critical accounting estimates, refer to our 2022 Form 10-K. There have been no material changes to our critical accounting estimates during the three months ended March 31, 2023.

For a discussion of recently adopted or issued accounting standards, refer to “Item 1. Financial Statements — Note 2 — Recently Adopted and Issued Accounting Guidance.”

LEGISLATIVE AND REGULATORY DEVELOPMENTS

Consumer Financial Protection Bureau (CFPB) Final Rule on Small Business Lending Data

On March 30, 2023, the CFPB issued a final rule requiring certain covered financial institutions to collect and report small business lending data. For purposes of this rule, small businesses are businesses with $5 million or less in gross annual revenue in the preceding fiscal year. An FHLBank will be subject to data collection and reporting obligations if the FHLBank has originated a minimum of 100 “covered credit transactions” to small businesses in each of the two preceding calendar years. The final rule implements phased-in compliance dates, beginning on October 1, 2024, based on the number of originations the covered financial institution makes to small businesses within a specified timeframe. We are assessing whether the obligations will be triggered for us and what operational changes will be necessary for compliance. While we are still analyzing the impact of the final rule, we do not believe these changes will have a material effect on our financial condition or results of operations.

Federal Reserve Bank Term Funding Program

On March 12, 2023, in response to prevailing concerns about the ability of banks to meet the needs of all their depositors, the Federal Reserve announced the implementation of a BTFP as an additional source of liquidity for eligible borrowers, including any U.S. federally insured depository institution or U.S. branch or agency of a foreign bank that is eligible for primary credit with the Federal Reserve. The BTFP offers up to one-year term loans to be secured by eligible collateral owned by eligible borrowers as of March 12, 2023. Such loans can be requested until at least March 11, 2024. The BTFP is subject to $25 billion in credit protection by the U.S. Department of Treasury. The BTFP makes an alternative funding source with favorable terms available for our depository institution members, which could reduce demand for advances from us by some members during the term of the BTFP. We are still analyzing the impact of this new program and cannot predict its effect on our business, financial condition, and results of operations.

Finance Agency Proposed Rule on Fair Lending, Fair Housing, and Equitable Housing Finance Plans

On April 26, 2023, the Finance Agency published a proposed rule that specifies requirements related to FHLBank compliance with fair housing and fair lending laws and prohibitions on unfair or deceptive acts or practices. The fair housing and fair lending laws would be the Fair Housing Act, the Equal Credit Opportunity Act and those acts’ implementing regulations. Further, the proposed rule would outline the Finance Agency’s enforcement authority. The proposal is open for public comment through June 26, 2023, and we are evaluating the potential impact of the proposed rule on us and our operations.

RISK MANAGEMENT

We have risk management policies, established by our Board of Directors, that allow us to monitor and control our exposure to various risks, including interest rate, liquidity, credit, operational, model, information security, legal, regulatory and compliance, diversity, equity, and inclusion (DEI), strategic, and reputational risk, as well as capital adequacy. Our primary risk management objective is to manage our assets and liabilities in ways that ensure liquidity is available to our members and protect the par redemption value of our capital stock. We periodically evaluate our risk management policies in order to respond to changes in our financial position and general market conditions. The following sections outline our interest rate, credit, and information security risks. For additional details on all other risks noted above, please refer to our 2022 Form 10-K.

Interest Rate Risk

We define interest rate risk as the risk that changes in interest rates or spreads will adversely affect our financial condition (market value) or performance (income). Interest rate risk is the principal type of risk to which we are exposed, as our cash flows, and therefore earnings and equity value, can change significantly as interest rates change. Our general approach toward managing interest rate risk is to acquire and maintain a portfolio of assets, liabilities, and derivatives which, taken together, limit our expected exposure to interest rate risk. Our key interest rate risk measures are Market Value of Equity (MVE) and Projected 24-Month Income. Management regularly monitors these key measures, as discussed further in the sections below.

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MARKET VALUE OF EQUITY

MVE measures the net present value of the Bank by either marking positions to market or discounting all future cash flows using market discount rates. MVE is measured as the market value of our assets minus the market value of our liabilities (excluding MRCS). MVE is an estimate of the Bank’s value and takes into account short-term market price fluctuations.

We monitor and manage to MVE policy limits in an effort to ensure the stability of the Bank’s value. Our policy limits are based on declines from the base case in parallel and non-parallel interest rate change scenarios. Any policy limit breach must be reported to the Enterprise Risk Committee of the Bank and the Risk and Compliance Committee of the Board of Directors and be remediated in a timely manner. At March 31, 2023 and December 31, 2022, our base case MVE was $8.9 billion and $8.6 billion, and the increase between periods was primarily due to an increase in activity-based capital stock and retained earnings. During the three months ended March 31, 2023, we recorded net income of $191 million and our dividends totaled $96 million. The earnings in excess of our dividend payments had a positive impact on MVE. At March 31, 2023 and December 31, 2022, we were in compliance with all MVE policy limits.

Market Value of Capital Stock (MVCS) represents our MVE divided by the total outstanding shares of our capital stock (including MRCS). To ensure we remain adequately capitalized, we must ensure our MVCS remains at or above our $100 par value. Our base case MVCS was $135.0 at March 31, 2023 compared to $136.7 at December 31, 2022. The decrease in our base case MVCS was primarily attributable to an increase in activity-based capital stock when compared to December 31, 2022 due to higher advance activity. As we issued this capital stock at par, which was below our current MVCS value, our MVCS was negatively impacted.

For more information on this risk measure, including policy limits, refer to “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Risk Management — Interest Rate Risk — Market Value of Equity” in our 2022 Form 10-K.

PROJECTED 24-MONTH INCOME

The projected 24-month income simulation measures our short-term earnings forecast over a two-year horizon based on forward interest rates and business assumptions. The spread between our projected adjusted return on capital stock (AROCS) and average SOFR is used as the primary measure of our profitability. For additional information on our adjusted earnings measure, refer to “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Executive Overview — Adjusted Earnings.”

We monitor and manage to policy limits, which are based on the spread between our projected AROCS and average SOFR in parallel and non-parallel interest rate change scenarios. Additionally, there is a limit on the decline in projected AROCS from base case AROCS for certain basis shock scenarios to limit basis risk exposure. Any policy limit breach must be reported to the Enterprise Risk Committee of the Bank and the Risk and Compliance Committee of the Board of Directors and be remediated in a timely manner. We were in compliance with all projected 24-month income policy limits at March 31, 2023 and December 31, 2022.

For more information on this risk measure, including policy limits, refer to “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Risk Management — Interest Rate Risk — Projected 24-Month Income” in our 2022 Form 10-K.

CAPITAL ADEQUACY

An adequate capital position is necessary for facilitating safe and sound business operations, protecting the redemption value of our capital stock, maintaining regulatory capital ratios, and supporting our ability to pay dividends and redeem excess capital stock. To ensure capital adequacy, we maintain a minimum level of retained earnings to accomplish business imperatives and cover unexpected losses. Our key capital adequacy measures are regulatory capital and minimum retained earnings in order to maintain capital levels in accordance with Finance Agency regulations. In addition, our risk management policies require that we maintain MVCS at or above our $100 par value.

For additional information on our compliance with regulatory capital requirements as well as our minimum retained earnings, refer to “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Capital.”

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For additional information on MVCS, refer to “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Risk Management — Interest Rate Risk — Market Value of Equity.”

Credit Risk

    We define credit risk as the risk that a member or counterparty will fail to meet its financial obligations. Our primary credit risks arise from our ongoing lending, investing, and hedging activities. Our overall objective in managing credit risk is to operate a sound credit granting process and to maintain appropriate credit administration, measurement, and monitoring practices.

ADVANCES

    We manage our credit exposure to advances through an approach that provides for an established credit limit for each borrower, ongoing reviews of each borrower’s financial condition, and detailed collateral and lending policies to limit risk of loss while balancing borrowers’ needs for a reliable source of funding. In addition, we lend to our borrowers in accordance with the FHLBank Act, Finance Agency regulations, and other applicable laws.

We are required by regulation to obtain sufficient collateral to fully secure our advances, standby letters of credit, and other extensions of credit to borrowers (collectively, credit products). The estimated value of the collateral required to secure each borrower’s credit products is calculated by applying collateral discounts, or haircuts, to the unpaid principal or market value, as applicable, of the collateral. We also have policies and procedures for validating the reasonableness of our collateral valuations. In addition, we perform collateral verifications and on-site reviews based on the risk profile of the borrower. Management believes that these policies effectively manage our credit risk from advances.

At March 31, 2023 and December 31, 2022, borrowers pledged $361.9 billion and $350.2 billion of collateral (net of applicable discounts) to support activity with us, including advances. At March 31, 2023 and December 31, 2022, all of our advances met the requirement to be collateralized at a minimum of 100 percent, net of applicable discounts. Borrowers pledge collateral in excess of their collateral requirement mainly to demonstrate available liquidity and to borrow additional amounts in the future.    

We evaluate advances for credit losses on a quarterly basis. We have never experienced a credit loss on our advances. Based upon our collateral and lending policies, the collateral held as security, and the repayment history on advances, management has determined that there were no expected credit losses on our advances as of March 31, 2023 and December 31, 2022. Refer to “Item 1. Financial Statements — Note 4 — Advances” for additional information on our collateral practices, eligible collateral, and allowance for credit losses.

MORTGAGE LOANS

Mortgage loan credit risk is the risk that we will not receive timely payments of principal and interest due from mortgage borrowers because of borrower defaults. Credit risk on mortgage loans is affected by a number of factors, including loan type, borrower’s credit history, and other factors such as home price fluctuations, unemployment levels, and other economic factors in the local market or nationwide.

The following table presents the unpaid principal balance of our mortgage loans by product type (dollars in millions):

Product Type	March 31, 2023		December 31, 2022
Conventional	$	8,020	$	7,890
Government	381		387
Total unpaid principal balance	$	8,401	$	8,277

We manage the credit risk on mortgage loans by (i) adhering to our underwriting standards, (ii) using agreements to establish credit risk sharing responsibilities with our participating financial institutions (PFIs), and (iii) monitoring the performance of the mortgage loan portfolio and creditworthiness of PFIs.

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We evaluate mortgage loans for credit losses on a quarterly basis and establish an allowance for credit losses to reflect management’s estimate of expected credit losses inherent in the portfolio. At both March 31, 2023 and December 31, 2022, we had an allowance for credit losses of $5 million on our conventional mortgage loans. At March 31, 2023, over 99 percent of our conventional loan portfolio was performing (i.e. current payment status) and charge-offs recorded during the three months ended March 31, 2023 were less than one percent of the total conventional portfolio.

We have never experienced a credit loss on our government-insured mortgage loans. At March 31, 2023 and December 31, 2022, we determined no allowance for credit losses was necessary on our government-insured mortgage loans.

Refer to “Item 1. Financial Statements — Note 5 — Mortgage Loans Held for Portfolio” for additional information on our allowance for credit losses and the payment status of our conventional mortgage loans.

INVESTMENTS

    We maintain an investment portfolio primarily to provide investment income and liquidity. Our primary credit risk on investments is the counterparties’ ability to meet repayment terms. We mitigate this credit risk by purchasing investment quality securities. We define investment quality as a security with adequate financial backing so that full and timely payment of principal and interest on such security is expected and there is minimal risk that the timely payment of principal and interest would not occur because of adverse changes in economic and financial conditions during the projected life of the security. We consider a variety of credit quality factors when analyzing potential investments, including collateral performance, marketability, asset class or sector considerations, local and regional economic conditions, nationally recognized statistical rating organization (NRSRO) credit ratings, and/or the financial health of the underlying issuer. We limit our purchases of MBS to those guaranteed by the U.S. Government or issued by a GSE. We perform ongoing analysis on these investments to determine potential credit issues.

Finance Agency regulations also limit the type of investments we may purchase. We are prohibited from investing in financial instruments issued by non-U.S. entities other than those issued by U.S. branches and agency offices of foreign commercial banks, unless otherwise approved by the Finance Agency. At March 31, 2023, we were in compliance with the regulation and did not own any financial instruments issued by non-U.S. entities, other than those issued by U.S. branches and agency offices of foreign commercial banks, and those approved by the Finance Agency.

In addition, Finance Agency regulations include limits on the amount of unsecured credit we may extend to a counterparty or to a group of affiliated counterparties. These limits are based on a percentage of regulatory capital and the counterparty’s overall credit rating. At March 31, 2023, we were in compliance with the regulatory limits established for unsecured credit.

Refer to“Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Risk Management — Credit Risk” in our 2022 Form 10-K for additional information on these regulatory limits.

Our short-term portfolio may include, but is not limited to, interest-bearing deposits, federal funds sold, securities purchased under agreements to resell, certificates of deposit, commercial paper, and U.S. Treasury obligations. Our long-term portfolio may include, but is not limited to, U.S. Treasury obligations, other U.S. obligations, GSE and TVA obligations, state or local housing agency obligations, taxable municipal bonds, and agency MBS. We consider our long-term investments issued or guaranteed by the U.S. Government, an agency or instrumentality of the U.S. Government, or the Federal Deposit Insurance Corporation (FDIC) to be of the highest credit quality and therefore those exposures are not monitored with other unsecured investments. Given the credit quality of our unsecured long-term investments, our unsecured credit risk is primarily in the short-term portfolio.

We limit short-term unsecured credit exposure primarily to the following overnight investment types:

•Interest-bearing deposits. Primarily consists of unsecured deposits that earn interest.

•Federal funds sold. Unsecured loans of reserve balances at the Federal Reserve Banks between financial institutions.

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

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At March 31, 2023, our unsecured short-term investment exposure consisted of overnight interest-bearing deposits and federal funds sold. The following table presents our unsecured short-term investment exposure by counterparty credit rating and domicile (dollars in millions):

	March 31, 2023
	Credit Rating1,2
Domicile of Counterparty	AA		A		Total
Domestic	$	—	$	3,940	$	3,940
U.S. branches and agency offices of foreign commercial banks
Australia	1,300		—		1,300
Canada	—		2,610		2,610
Finland	1,300		—		1,300
France	—		200		200
Germany	1,300		—		1,300
Netherlands	—		890		890
Norway	200		—		200
United Kingdom	—		890		890
Total U.S. branches and agency offices of foreign commercial banks	4,100		4,590		8,690
Total unsecured short-term investment exposure	$	4,100	$	8,530	$	12,630

1    Represents either the lowest credit rating available for each counterparty based on an NRSRO, or the guarantor credit rating, if applicable. In instances where an NRSRO rating or guarantor rating is not available for the investment, the investment is classified as unrated.

2    Table excludes investments issued or guaranteed by the U.S. Government, U.S. government agencies, government instrumentalities, GSEs, and supranational entities, and does not include related accrued interest.

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Investment Ratings

The following table summarizes the carrying value of our investments by credit rating (dollars in millions):

	March 31, 2023
	Credit Rating1
	AAA		AA		A		BBB		Unrated		Total
Interest-bearing deposits	$	—	$	1	$	2,800	$	—	$	—	$	2,801
Securities purchased under agreements to resell	—		14,600		6,100		—		2,200		22,900
Federal funds sold	—		4,100		5,730		—		—		9,830
Investment securities:
MBS
GSE single-family	—		734		—		—		—		734
GSE multifamily	—		12,740		—		—		—		12,740
U.S. obligations single-family2	—		3,755		—		—		—		3,755
Private-label residential	—		1		1		1		—		3
Total MBS	—		17,230		1		1		—		17,232
Non-MBS
U.S. Treasury obligations2	—		2,282		—		—		—		2,282
Other U.S. obligations2	—		733		—		—		—		733
GSE and TVA obligations	—		880		—		—		—		880
State or local housing agency obligations	451		30		—		—		—		481
Other3	347		44		—		—		—		391
Total non-MBS	798		3,969		—		—		—		4,767
Total investments	$	798	$	39,900	$	14,631	$	1	$	2,200	$	57,530

1    Represents either the lowest credit rating available for each investment based on an NRSRO, or the guarantor credit rating, if applicable. In instances where an NRSRO rating or guarantor rating is not available for the investment, the investment is classified as unrated.

2    Represents investment securities backed by the full faith and credit of the U.S. Government.

3    Consists primarily of taxable municipal bonds.

We evaluate investments for credit losses on a quarterly basis. At March 31, 2023 and December 31, 2022, we determined no allowance for credit losses was necessary on our investments. Refer to “Item 1. Financial Statements — Note 3 — Investments” for additional information on our allowance for credit losses.

DERIVATIVES

    We execute most of our derivative transactions with large banks and major broker-dealers. Over-the-counter derivative transactions may be either executed directly with a counterparty, referred to as uncleared derivatives, or cleared through a clearing agent with a Clearinghouse, referred to as cleared derivatives.

We are subject to credit risk due to the risk of nonperformance by counterparties to our derivative agreements. The amount of credit risk on derivatives depends on the extent to which netting procedures and collateral requirements are used and are effective in mitigating the risk. We manage credit risk through credit analyses, collateral requirements, and adherence to the requirements set forth in our policies and Finance Agency regulations.

The contractual or notional amount of derivatives reflects our involvement in the various classes of financial instruments. Our maximum credit risk is the estimated cost of replacing derivatives if there is a default, minus the value of any related collateral. In determining maximum credit risk, we consider accrued interest receivables and payables as well as our ability to net settle positive and negative positions with the same counterparty and/or clearing agent when netting requirements are met.

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The following table shows our derivative counterparty credit exposure (dollars in millions):

	March 31, 2023
Credit Rating1	Notional Amount		Net Derivatives Fair Value Before Collateral		Cash Collateral Pledged To (From) Counterparty		Net Credit Exposure  to Counterparties
Non-member counterparties:
Asset positions with credit exposure
Uncleared derivatives
A2	$	80	$	—	$	—	$	—
Liability positions with credit exposure
Uncleared derivatives
A2	235		—		—		—
Cleared derivatives3	101,795		(71)		855		784
Total derivative positions with credit exposure to non-member counterparties	102,110		(71)		855		784
Member institutions4	137		1		—		1
Total	102,247		$	(70)	$	855	$	785
Derivative positions without credit exposure	14,325
Total notional	$	116,572

1    Represents either the lowest credit rating available for each counterparty based on an NRSRO, or the guarantor credit rating, if applicable.

2    Net credit exposure is less than $1 million.

3    Represents derivative transactions cleared with CME Clearing and London Clearing House (LCH) Ltd., our Clearinghouses. CME Clearing is not rated, but its parent, CME Group Inc. was rated Aa3 by Moody’s and AA- by S&P at March 31, 2023. LCH Ltd. was rated AA- by S&P at March 31, 2023.

4    Represents mortgage loan purchase commitments with our member institutions.

Refer to “Item 1. Financial Statements — Note 6 — Derivatives and Hedging Activities” for additional information on our derivatives and hedging activities.

Information Security Risk

We define information security risk as the risk arising from unauthorized access, use, disclosure, disruption, modification, or destruction of information or information systems. Importantly, this definition includes the confidentiality, integrity, and availability of both digital and non-digital information managed within information systems and processes.

Information security risk includes the risk that cyber incidents could result in a failure or interruption of our business operations. We have not experienced any such disruption with a material adverse impact. However, we do rely heavily on internal and third-party information systems and other technology to conduct and manage our business and any disruptions to those items could have a material adverse impact on our business operations.

In an effort to mitigate cybersecurity risk, we utilize a widely adopted industry framework to guide and benchmark the activities of our information security program in alignment with our risk appetite statement. Administrative, physical, and logical controls are in place for identifying, monitoring, and controlling system access, sensitive data, and system changes. An independent assessment of our environment relating to the framework guidance is performed periodically and presented to our Board of Directors. To further mitigate our risk, we also maintain cyber insurance coverage in an effort to reduce financial losses stemming from a security incident.

Our Board of Directors is responsible for the oversight of our information security program, establishing our information security risk appetite, and approving our information security policy. The Technology Committee of our Board delegates or directly approves Bank-wide governing policies, standards, guidelines, and procedures for IT and information security, and the Risk and Compliance Committee of our Board has oversight responsibility for information security risk. Our Chief Information Officer establishes our strategic direction and provides executive support for our information security program, and the Director of Information Security is responsible for our information security program.

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In addition, we employ an information security training program that includes security training lessons and phishing exercises for all employees, mandatory staff training on cyber risks, and security testing that includes regular third-party facilitated penetration testing. Our Board of Directors is also required to complete cybersecurity training and participate in a cloud computing education session annually.

Given the importance of cybersecurity and ever-increasing sophistication of potential cyber-attacks, we will continue to invest in and strengthen our cyber-defenses.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

See “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Risk Management — Interest Rate Risk” and the sections referenced therein for quantitative and qualitative disclosures about market risk.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Management is responsible for establishing and maintaining disclosure controls and procedures designed to ensure that information required to be disclosed in reports we file or submit under the Securities Exchange Act of 1934, as amended (the Exchange Act) is (i) recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms; and (ii) accumulated and communicated to our management, including our President and CEO, and chief financial officer (CFO), as appropriate, to allow timely decisions regarding required disclosure.

Management, with the participation of our President and CEO, and CFO, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the quarterly period covered by this report. Based on that evaluation, our President and CEO, and CFO have concluded that our disclosure controls and procedures were effective as of March 31, 2023.

Changes in Internal Control over Financial Reporting

During the quarter ended March 31, 2023, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Refer to “Item 1. Financial Statements — Note 10 — Commitments and Contingencies” for information regarding legal proceedings.

ITEM 1A. RISK FACTORS

For a discussion of our risk factors, refer to our 2022 Form 10-K. There have been no material changes to our risk factors during the three months ended March 31, 2023.

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.

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ITEM 5. OTHER INFORMATION

On April 28, 2023, the Bank entered into a purchase agreement (Purchase Agreement) with Principal Life Insurance Company (Insurer). Under the Purchase Agreement, the Bank purchased a non-participating single premium group annuity contract (Annuity Contract) and transferred to the Insurer the future benefit obligations and annuity administration for approximately 540 participants (Participants) under the Pentegra Defined Benefit Pension Plan for Financial Institutions (Plan).

Upon payment of the premium to the Insurer under the Purchase Agreement (Transaction), the Plan is no longer responsible for the payment of pension benefit obligations to the Participants and the Insurer has assumed responsibility for making such payments. The purchase of the Annuity Contract was funded directly by assets of the Plan. The Bank did not incur any expenses or use any Bank assets in connection with the Transaction. Benefits payable to the Participants are not being reduced as a result of the Transaction.

The purchase of the Annuity Contract was completed on May 2, 2023. Subject to certain conditions set forth in the Purchase Agreement, all Participants will continue to receive their benefits from the Plan until May 31, 2023, after which time the Insurer will assume responsibility for making direct payment of benefits to the Participants and for administrative and customer service support regarding such benefits.

Following the transactions described above, the Bank is no longer a party to the Plan.

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ITEM 6. EXHIBITS

3.1	Organization Certificate of the Federal Home Loan Bank of Des Moines, as amended and restated effective May 31, 20151
3.2	Bylaws of the Federal Home Loan Bank of Des Moines, as amended and restated effective December 8, 20212
4.1	Federal Home Loan Bank of Des Moines Capital Plan, as amended and approved by the Federal Housing Finance Agency on May 31, 20153
10.1	Federal Home Loan Bank of Des Moines 2023 Executive Incentive Plan, effective January 1, 20234
10.2	2023 Director Fee Policy, effective January 1, 20235
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 Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS	XBRL Instance Document - The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document
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1    Incorporated by reference from our Form 8-K filed with the SEC on June 1, 2015 (Commission File No. 000-51999).

2    Incorporated by reference from our Form 8-K filed with the SEC on December 14, 2021 (Commission File No. 000-51999).

3    Incorporated by reference from our Form 10-Q filed with the SEC on August 10, 2022 (Commission File No. 000-51999).

4    Incorporated by reference from our Form 8-K filed with the SEC on March 23, 2023 (Commission File No. 000-51999).

5    Incorporated by reference from our Form 8-K filed with the SEC on November 30, 2022 (Commission File No. 000-51999).

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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.

FEDERAL HOME LOAN BANK OF DES MOINES
(Registrant)
Date:	May 9, 2023
By:	/s/ Kristina K. Williams
	Kristina K. Williams President and Chief Executive Officer
By:	/s/ James G. Livingston
	James G. Livingston Chief Financial Officer (Principal Financial and Accounting Officer)

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