Federal Home Loan Bank of Boston 10-Q 2024 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, 2024

OR

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

FOR THE TRANSITION PERIOD FROM ________ TO ________ .

Commission file number: 000-51402

FEDERAL HOME LOAN BANK OF BOSTON

(Exact name of registrant as specified in its charter)

Federally chartered corporation of the United States			04-6002575
(State or other jurisdiction of incorporation or organization)			(I.R.S. employer identification number)
800 Boylston Street,	Boston	MA	02199
(Address of principal executive offices)			(Zip code)

(617) 292-9600

(Registrant's telephone number, including area code)

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 x    No o

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or 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. (Check one):

Large accelerated filer o	Accelerated filer o	Non-accelerated filer	x	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 Act). Yes ☐    No x

		Shares outstanding as of April 30, 2024  (in thousands)
Class B Stock, par value	$100	21,184

FEDERAL HOME LOAN BANK OF BOSTON

Form 10-Q

Table of Contents

PART I.	FINANCIAL INFORMATION	3
Item 1.	Financial Statements (unaudited)	3
	Statements of Condition	3
	Statements of Operations	4
	Statements of Comprehensive Income (Loss)	5
	Statements of Capital	6
	Statements of Cash Flows	7
	Notes to Financial Statements	9
	Note 1 — Basis of Presentation	9
	Note 2 — Investments	9
	Note 3 — Advances	13
	Note 4 — Mortgage Loans Held for Portfolio	15
	Note 5 — Derivatives and Hedging Activities	18
	Note 6 — Deposits	22
	Note 7 — Consolidated Obligations	23
	Note 8 — Affordable Housing Program	24
	Note 9 — Capital	25
	Note 10 — Accumulated Other Comprehensive Loss	25
	Note 11 — Fair Value	26
	Note 12 — Commitments and Contingencies	31
	Note 13 — Transactions with Shareholders	32
	Note 14 — Subsequent Events	32
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	32
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	53
Item 4.	Controls and Procedures	58
PART II.	OTHER INFORMATION	58
Item 1.	Legal Proceedings	58
Item 1A.	Risk Factors	58
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	58
Item 3.	Defaults Upon Senior Securities	59
Item 4.	Mine Safety Disclosures	59
Item 5.	Other Information	59
Item 6.	Exhibits	59

2

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

FEDERAL HOME LOAN BANK OF BOSTON STATEMENTS OF CONDITION (dollars and shares in thousands, except par value) (unaudited)
	March 31, 2024		December 31, 2023
ASSETS
Cash and due from banks	$	70,616	$	53,412
Interest-bearing deposits	1,808,836		1,643,587
Securities purchased under agreements to resell	1,750,000		1,600,000
Federal funds sold	3,051,000		2,500,000
Investment securities:
Trading securities	1,567		1,395
Available-for-sale securities (amortized cost of $15,886,505 and $15,684,997 at March 31, 2024, and December 31, 2023, respectively)	15,578,184		15,343,745
Held-to-maturity securities (a)	74,156		78,905
Total investment securities	15,653,907		15,424,045
Advances	39,905,499		41,958,583
Mortgage loans held for portfolio, net of allowance for credit losses of $2,600 and $2,000 at March 31, 2024, and December 31, 2023, respectively	3,146,391		3,059,331
Accrued interest receivable	202,275		185,709
Derivative assets, net	363,820		383,073
Other assets	77,932		334,534
Total Assets	$	66,030,276	$	67,142,274
LIABILITIES
Deposits
Interest-bearing	$	894,225	$	896,005
Non-interest-bearing	27,549		26,874
Total deposits	921,774		922,879
Consolidated obligations (COs):
Bonds	41,023,055		40,248,743
Discount notes	20,055,973		22,000,546
Total consolidated obligations	61,079,028		62,249,289
Mandatorily redeemable capital stock	6,083		6,083
Accrued interest payable	283,592		269,517
Affordable Housing Program (AHP) payable	93,262		87,164
Derivative liabilities, net	7,104		3,017
Other liabilities	72,146		65,711
Total liabilities	62,462,989		63,603,660
Commitments and contingencies (Note 12)
CAPITAL
Capital stock – Class B – putable ($100 par value), 19,831 shares and 20,425 shares issued and outstanding at March 31, 2024, and December 31, 2023, respectively	1,983,103		2,042,453
Retained earnings:
Unrestricted	1,360,373		1,339,546
Restricted	466,723		451,154
Total retained earnings	1,827,096		1,790,700
Accumulated other comprehensive loss	(242,912)		(294,539)
Total capital	3,567,287		3,538,614
Total Liabilities and Capital	$	66,030,276	$	67,142,274

_______________________________________

(a)    Fair values of held-to-maturity securities were $73,813 and $78,478 at March 31, 2024, and December 31, 2023, respectively.

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

3

FEDERAL HOME LOAN BANK OF BOSTON STATEMENTS OF OPERATIONS (dollars in thousands) (unaudited)
	For the Three Months Ended March 31,
	2024		2023
INTEREST INCOME
Advances	$	528,497	$	501,206
Prepayment fees on advances, net	49		409
Interest-bearing deposits	36,326		32,602
Securities purchased under agreements to resell	14,311		25,681
Federal funds sold	49,218		52,945
Investment securities:
Trading securities	18		17
Available-for-sale securities	233,171		167,680
Held-to-maturity securities	1,126		1,062
Total investment securities	234,315		168,759
Mortgage loans held for portfolio	28,587		21,188
Other	—		134
Total interest income	891,303		802,924
INTEREST EXPENSE
Consolidated obligations:
Bonds	507,136		378,094
Discount notes	264,603		336,683
Total consolidated obligations	771,739		714,777
Deposits	9,577		6,032
Mandatorily redeemable capital stock	127		192
Other borrowings	18		2
Total interest expense	781,461		721,003
NET INTEREST INCOME	109,842		81,921
Provision for credit losses	600		94
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES	109,242		81,827
OTHER INCOME (LOSS)
Service fees	2,993		3,733
Other, net	(385)		631
Total other income	2,608		4,364
OTHER EXPENSE
Compensation and benefits	12,588		11,212
Other operating expenses	7,092		6,870
Federal Housing Finance Agency (the FHFA)	1,189		1,653
Office of Finance	1,074		1,090
Discretionary housing and community investment programs	2,304		772
Other	1,093		1,032
Total other expense	25,340		22,629
INCOME BEFORE ASSESSMENTS	86,510		63,562
AHP assessments	8,664		6,375
NET INCOME	$	77,846	$	57,187

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

4

FEDERAL HOME LOAN BANK OF BOSTON STATEMENTS OF COMPREHENSIVE INCOME (dollars in thousands) (unaudited)
	For the Three Months Ended March 31,
	2024		2023
Net income	$	77,846	$	57,187
Other comprehensive income:
Net unrealized gains on available-for-sale securities	32,931		10,654
Net unrealized gains (losses) relating to hedging activities	18,696		(10,628)
Total other comprehensive income	51,627		26
Comprehensive income	$	129,473	$	57,213

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

5

FEDERAL HOME LOAN BANK OF BOSTON STATEMENTS OF CAPITAL THREE MONTHS ENDED MARCH 31, 2024 and 2023 (dollars and shares in thousands) (unaudited)
	Capital Stock Class B – Putable			Retained Earnings						Accumulated Other Comprehensive Income (Loss)
	Shares	Par Value		Unrestricted		Restricted		Total				Total Capital
BALANCE, DECEMBER 31, 2022	20,312	$	2,031,178	$	1,290,873	$	399,695	$	1,690,568	$	(306,425)	$	3,415,321
Comprehensive income				45,749		11,438		57,187		26		57,213
Proceeds from issuance of capital stock	16,809	1,680,894										1,680,894
Repurchase of capital stock	(13,077)	(1,307,678)										(1,307,678)
Cash dividends on capital stock				(31,003)				(31,003)				(31,003)
BALANCE, MARCH 31, 2023	24,044	$	2,404,394	$	1,305,619	$	411,133	$	1,716,752	$	(306,399)	$	3,814,747
BALANCE, DECEMBER 31, 2023	20,425	$	2,042,453	$	1,339,546	$	451,154	$	1,790,700	$	(294,539)	$	3,538,614
Comprehensive income				62,277		15,569		77,846		51,627		129,473
Proceeds from issuance of capital stock	6,183	618,309										618,309
Repurchase of capital stock	(6,777)	(677,659)										(677,659)
Cash dividends on capital stock				(41,450)				(41,450)				(41,450)
BALANCE, MARCH 31, 2024	19,831	$	1,983,103	$	1,360,373	$	466,723	$	1,827,096	$	(242,912)	$	3,567,287

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

6

FEDERAL HOME LOAN BANK OF BOSTON STATEMENTS OF CASH FLOWS (dollars in thousands) (unaudited)
	For the Three Months Ended March 31,
	2024		2023
OPERATING ACTIVITIES
Net income	$	77,846	$	57,187
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	15,496		40,388
Provision for credit losses	600		94
Net change in derivatives and hedging activities	112,077		(201,367)
Other adjustments, net	543		1,658
Net change in:
Market value of trading securities	(172)		(79)
Accrued interest receivable	(16,566)		(23,281)
Other assets	6,484		2,235
Accrued interest payable	14,127		69,239
Other liabilities	12,561		(937)
Total adjustments	145,150		(112,050)
Net cash provided by (used in) operating activities	222,996		(54,863)
INVESTING ACTIVITIES
Net change in:
Interest-bearing deposits	(76,062)		365,241
Securities purchased under agreements to resell	(150,000)		(8,400,000)
Federal funds sold	(551,000)		405,000
Loans to other FHLBanks	—		(1,000,000)
Advances to members	1,955,311		(7,954,114)
Available-for-sale securities:
Proceeds	358,628		47,853
Purchases	(439,674)		(285,672)
Held-to-maturity securities:
Proceeds	4,584		5,500
Mortgage loans held for portfolio:
Proceeds	58,328		55,610
Purchases	(147,151)		(23,058)
Other investing activities, net	(207)		(333)
Net cash provided by (used in) investing activities	1,012,757		(16,783,973)

7

FEDERAL HOME LOAN BANK OF BOSTON STATEMENTS OF CASH FLOWS — (Continued) (dollars in thousands) (unaudited)
	For the Three Months Ended March 31,
	2024		2023
FINANCING ACTIVITIES
Net change in deposits	10,143		217,319
Net payments on derivatives with a financing element	19,167		(11,724)
Net proceeds from issuance of consolidated obligations:
Discount notes	24,337,549		50,148,452
Bonds	6,685,488		15,914,328
Payments for maturing and retiring consolidated obligations:
Discount notes	(26,303,060)		(43,725,100)
Discount notes transferred to other FHLBanks	(4,866)		—
Bonds	(5,862,155)		(6,047,640)
Payment of financing lease	(15)		(11)
Proceeds from issuance of capital stock	618,309		1,680,894
Payments for repurchase of capital stock	(677,659)		(1,307,678)
Cash dividends paid	(41,450)		(31,003)
Net cash (used in) provided by financing activities	(1,218,549)		16,837,837
Net increase (decrease) in cash and due from banks	17,204		(999)
Cash and due from banks at beginning of the period	53,412		7,593
Cash and due from banks at end of the period	$	70,616	$	6,594
Supplemental disclosures:
Interest paid	$	777,972	$	602,099
AHP payments	$	1,927	$	2,450
Noncash transfers of mortgage loans held for portfolio to other assets	$	—	$	92
Noncash lease liabilities arising from obtaining right-of-use assets	$	—	$	26,314

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

8

FEDERAL HOME LOAN BANK OF BOSTON

NOTES TO FINANCIAL STATEMENTS

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. In the opinion of management, all adjustments considered necessary have been included. All such adjustments consist of normal recurring accruals. The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. The results of operations for interim periods are not necessarily indicative of the results to be expected for the year ending December 31, 2024. These interim financial statements do not include all the information and footnotes required by GAAP for complete annual financial statements and accordingly should be read in conjunction with the Federal Home Loan Bank of Boston's audited financial statements and related notes in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the Securities and Exchange Commission (the SEC) on March 15, 2024 (the 2023 Annual Report). Unless otherwise indicated or the context requires otherwise, all references in this discussion to “the Bank,” "we," "us," "our," or similar references mean the Federal Home Loan Bank of Boston.

Note 2 — Investments

Interest-Bearing Deposits, Securities Purchased under Agreements to Resell, and Federal Funds Sold

We invest 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, or whose guarantors have received, a credit rating of triple-B or greater (investment grade) by a nationally recognized statistical rating organization (NRSRO), or the equivalent. At March 31, 2024, and December 31, 2023, none of these investments were made to counterparties or, if applicable, guaranteed by entities rated below single-A.

Securities purchased under agreements to resell are short-term and are structured such that they are evaluated daily 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 amount of additional securities as collateral or remit an equivalent amount of cash sufficient to comply with collateral maintenance provisions, generally by the next business day. Based upon the collateral held as security and collateral maintenance provisions with our counterparties, we determined that no allowance for credit losses was needed for our securities purchased under agreements to resell at March 31, 2024, and December 31, 2023.

Federal funds sold are unsecured loans that are transacted on an overnight term or short-term basis. Federal Housing Finance Agency (FHFA) regulations include a limit on the amount of unsecured credit we may extend to a counterparty. All investments in interest-bearing deposits and federal funds sold outstanding as of March 31, 2024, and December 31, 2023, have been repaid according to the contractual terms. No allowance for credit losses was recorded for these assets at March 31, 2024, and December 31, 2023.

Debt Securities

We invest in debt securities, which are classified as either trading, available-for-sale, or held-to-maturity. We are prohibited by FHFA regulations from investing in certain higher-risk securities, such as equity securities and debt instruments that are not investment quality, other than certain investments targeted at low-income persons or communities. We are not required to divest instruments that experience credit deterioration after their purchase.

Trading Securities

Table 2.1 - Trading Securities by Major Security Type

(dollars in thousands)

	March 31, 2024		December 31, 2023
Corporate bonds	$	1,567	$	1,395

9

For the three months ended March 31, 2024 and 2023, net gains on trading securities held at period end were $172 thousand and $79 thousand, respectively.

We do not participate in speculative trading practices and typically hold these investments over a longer time horizon.

Available-for-sale Securities

Table 2.2 - Available-for-Sale Securities by Major Security Type

(dollars in thousands)

	March 31, 2024
			Amounts Recorded in Accumulated Other Comprehensive Income
	Amortized Cost (1)		Unrealized Gains		Unrealized Losses		Fair  Value
United States (U.S.) Treasury obligations	$	5,642,153	$	2,654	$	(4,158)	$	5,640,649
State housing-finance-agency obligations (HFA securities)	22,430		1		(463)		21,968
Supranational institutions	343,491		7		(2,822)		340,676
U.S. government-owned corporations	243,035		—		(13,112)		229,923
Government-sponsored enterprise (GSE)	100,585		—		(3,635)		96,950
	6,351,694		2,662		(24,190)		6,330,166
Mortgage-backed securities (MBS)
U.S. government guaranteed – single-family	46,386		119		(2,456)		44,049
U.S. government guaranteed – multifamily	518,727		—		(45,028)		473,699
GSE – single-family	1,283,613		1,651		(55,351)		1,229,913
GSE – multifamily	7,686,085		7,174		(192,902)		7,500,357
	9,534,811		8,944		(295,737)		9,248,018
Total	$	15,886,505	$	11,606	$	(319,927)	$	15,578,184

	December 31, 2023
			Amounts Recorded in Accumulated Other Comprehensive Income
	Amortized Cost (1)		Unrealized Gains		Unrealized Losses		Fair  Value
U.S. Treasury obligations	$	5,684,157	$	122	$	(19,827)	$	5,664,452
HFA securities	22,430		—		(625)		21,805
Supranational institutions	350,282		3		(3,910)		346,375
U.S. government-owned corporations	252,585		—		(17,394)		235,191
GSE	104,015		—		(4,594)		99,421
	6,413,469		125		(46,350)		6,367,244
MBS
U.S. government guaranteed – single-family	16,854		—		(2,421)		14,433
U.S. government guaranteed – multifamily	521,203		—		(43,527)		477,676
GSE – single-family	954,298		1,665		(51,507)		904,456
GSE – multifamily	7,779,173		3,517		(202,754)		7,579,936
	9,271,528		5,182		(300,209)		8,976,501
Total	$	15,684,997	$	5,307	$	(346,559)	$	15,343,745

_______________________

(1)    Amortized cost of available-for-sale securities includes adjustments made to the cost basis of an investment for accretion, amortization, collection of cash, and fair-value hedge accounting adjustments. Amortized cost excludes accrued interest receivable of $44.2 million and $46.7 million at March 31, 2024, and December 31, 2023, respectively.

10

Table 2.3 - Available-for-Sale Securities in a Continuous Unrealized Loss Position

(dollars in thousands)

	March 31, 2024
	Continuous Unrealized Loss Less than 12 Months				Continuous Unrealized Loss 12 Months or More				Total
	Fair  Value		Unrealized  Losses		Fair  Value		Unrealized  Losses		Fair  Value		Unrealized  Losses
U.S. Treasury obligations	$	—	$	—	$	3,064,314	$	(4,158)	$	3,064,314	$	(4,158)
HFA securities	—		—		13,357		(463)		13,357		(463)
Supranational institutions	81,416		(7)		246,832		(2,815)		328,248		(2,822)
U.S. government-owned corporations	—		—		229,923		(13,112)		229,923		(13,112)
GSE	—		—		96,950		(3,635)		96,950		(3,635)
	81,416		(7)		3,651,376		(24,183)		3,732,792		(24,190)
MBS
U.S. government guaranteed – single-family	—		—		13,972		(2,456)		13,972		(2,456)
U.S. government guaranteed – multifamily	—		—		473,699		(45,028)		473,699		(45,028)
GSE – single-family	84,896		(327)		590,800		(55,024)		675,696		(55,351)
GSE – multifamily	662,137		(3,577)		5,130,600		(189,325)		5,792,737		(192,902)
	747,033		(3,904)		6,209,071		(291,833)		6,956,104		(295,737)
Total	$	828,449	$	(3,911)	$	9,860,447	$	(316,016)	$	10,688,896	$	(319,927)

	December 31, 2023
	Continuous Unrealized Loss Less than 12 Months				Continuous Unrealized Loss 12 Months or More				Total
	Fair  Value		Unrealized  Losses		Fair  Value		Unrealized  Losses		Fair  Value		Unrealized  Losses
U.S. Treasury obligations	$	1,865,124	$	(1,405)	$	3,319,996	$	(18,422)	$	5,185,120	$	(19,827)
HFA securities	—		—		21,805		(625)		21,805		(625)
Supranational institutions	82,354		(188)		251,452		(3,722)		333,806		(3,910)
U.S. government-owned corporations	—		—		235,191		(17,394)		235,191		(17,394)
GSE	—		—		99,421		(4,594)		99,421		(4,594)
	1,947,478		(1,593)		3,927,865		(44,757)		5,875,343		(46,350)
MBS
U.S. government guaranteed – single-family	—		—		14,433		(2,421)		14,433		(2,421)
U.S. government guaranteed – multifamily	—		—		477,676		(43,527)		477,676		(43,527)
GSE – single-family	55,457		(117)		616,857		(51,390)		672,314		(51,507)
GSE – multifamily	1,238,598		(2,993)		5,299,421		(199,761)		6,538,019		(202,754)
	1,294,055		(3,110)		6,408,387		(297,099)		7,702,442		(300,209)
Total	$	3,241,533	$	(4,703)	$	10,336,252	$	(341,856)	$	13,577,785	$	(346,559)

11

Table 2.4 - Available-for-Sale Securities by Contractual Maturity

(dollars in thousands)

	March 31, 2024				December 31, 2023
Year of Maturity	Amortized Cost		Fair  Value		Amortized Cost		Fair  Value
Due in one year or less	$	13,820	$	13,356	$	13,820	$	13,210
Due after one year through five years	6,032,735		6,028,396		6,082,462		6,058,571
Due after five years through 10 years	—		—		—		—
Due after 10 years	305,139		288,414		317,187		295,463
	6,351,694		6,330,166		6,413,469		6,367,244
MBS (1)	9,534,811		9,248,018		9,271,528		8,976,501
Total	$	15,886,505	$	15,578,184	$	15,684,997	$	15,343,745

_______________________

(1)    MBS are not presented by contractual maturity because their expected maturities will likely differ from contractual maturities because borrowers of the underlying loans may have the right to call or prepay obligations with or without call or prepayment fees.

Held-to-Maturity Securities

Table 2.5 - Held-to-Maturity Securities by Major Security Type

(dollars in thousands)

	March 31, 2024
	Amortized Cost(1)		Gross Unrecognized Holding Gains		Gross Unrecognized Holding Losses		Fair Value
MBS
U.S. government guaranteed – single-family	$	3,032	$	15	$	—	$	3,047
GSE – single-family	71,124		416		(774)		70,766
Total	$	74,156	$	431	$	(774)	$	73,813

	December 31, 2023
	Amortized Cost(1)		Gross Unrecognized Holding Gains		Gross Unrecognized Holding Losses		Fair Value
MBS
U.S. government guaranteed – single-family	$	3,123	$	19	$	—	$	3,142
GSE – single-family	75,782		366		(812)		75,336
Total	$	78,905	$	385	$	(812)	$	78,478

_______________________

(1)    Amortized cost of held-to-maturity securities includes adjustments made to the cost basis of an investment for accretion, amortization, and collection of cash. Amortized cost excludes accrued interest receivable of $406 thousand and $399 thousand at March 31, 2024, and December 31, 2023, respectively.

Allowance for Credit Losses on Available-for-Sale Securities and Held-to-Maturity Securities

We evaluate available-for-sale and held-to-maturity investment securities for credit losses on a quarterly basis. Our available-for-sale and held-to-maturity securities are principally debt securities of GSEs or U.S. government-owned corporations, supranational institutions, and state housing finance agency obligations, and MBS issued by Government National Mortgage Association (Ginnie Mae), Federal Home Loan Mortgage Corporation (Freddie Mac), and Federal National Mortgage Association (Fannie Mae) that are backed by single-family or multifamily mortgage loans. We only purchase investment-grade securities. At March 31, 2024, and December 31, 2023, all available-for-sale securities and held-to-maturity securities were rated single-A, or above, by an NRSRO, based on the lowest long-term credit rating for each security.

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We evaluate individual available-for-sale 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, 2024, and December 31, 2023, certain available-for-sale securities were in an unrealized loss position. These losses are considered temporary as we expect to recover the entire amortized cost basis on these available-for-sale investment securities and we neither intend to sell these securities nor do we consider it more likely than not that we will be required to sell these securities before the anticipated recovery of each security's remaining amortized cost basis. Further, we have not experienced any material payment defaults on the instruments.

We evaluate held-to-maturity 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. We have not experienced and do not anticipate any payment defaults on these securities.

Based on our assessment of the credit worthiness of the issuers or guarantors, no allowance for credit losses was recorded on available-for-sale securities or held-to-maturity securities at March 31, 2024, and December 31, 2023.

Note 3 — Advances

General Terms. At both March 31, 2024, and December 31, 2023, we had advances outstanding with interest rates ranging from 0.00 percent to 6.23 percent.

Table 3.1 - Advances Outstanding by Year of Contractual Maturity

(dollars in thousands)

	March 31, 2024				December 31, 2023
	Amount		Weighted Average Rate		Amount		Weighted Average Rate
Overdrawn demand-deposit accounts	$	5,302	5.75	%	$	5,909	5.76	%
Due in one year or less	21,615,380		5.17		21,829,742		5.25
Due after one year through two years	7,096,228		4.29		9,069,939		4.53
Due after two years through three years	3,159,338		4.10		3,306,934		4.02
Due after three years through four years	3,258,358		3.97		2,295,317		4.37
Due after four years through five years	3,237,817		3.73		3,905,361		3.52
Due after five years through fifteen years	1,689,367		3.29		1,601,794		3.26
Thereafter	49,555		1.76		51,660		1.72
Total par value	40,111,345		4.63	%	42,066,656		4.71	%
Discounts	(36,529)				(37,289)
Fair value of bifurcated derivatives (1)	12				790
Fair value hedging adjustments	(169,329)				(71,574)
Total (2)	$	39,905,499			$	41,958,583

_________________________

(1)    At March 31, 2024, and December 31, 2023, we had certain advances with embedded features that met the requirements to be separated from the host contract and designated those embedded features as stand-alone derivatives.

(2)    Excludes accrued interest receivable of $132.0 million and $115.0 million at March 31, 2024, and December 31, 2023, respectively.

We offer advances to members and eligible nonmembers that provide the borrower the right, based upon predetermined option exercise dates, to repay the advance prior to maturity without incurring prepayment or termination fees (callable advances). We also offer certain floating-rate advances that may be contractually prepaid by the borrower on a floating-rate reset date without incurring prepayment or termination fees. Other advances may only be prepaid by paying a fee (prepayment fee) that makes us financially indifferent to the prepayment of the advance.

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Table 3.2 - Advances Outstanding by Year of Contractual Maturity or Next Call Date

(dollars in thousands)

	March 31, 2024		December 31, 2023
Overdrawn demand-deposit accounts	$	5,302	$	5,909
Due in one year or less	24,640,564		26,546,662
Due after one year through two years	5,042,728		5,272,439
Due after two years through three years	2,853,263		2,989,434
Due after three years through four years	2,639,638		1,711,697
Due after four years through five years	3,206,917		3,887,061
Due after five years through fifteen years	1,673,378		1,601,794
Thereafter	49,555		51,660
Total par value	$	40,111,345	$	42,066,656

We currently hold putable advances that provide us with the right to require repayment prior to maturity of the advance (and thereby extinguish the advance) on predetermined exercise dates (put dates). Generally, we would exercise the put options when interest rates increase relative to contractual rates.

Table 3.3 - Advances Outstanding by Year of Contractual Maturity or Next Put Date

(dollars in thousands)

	March 31, 2024		December 31, 2023
Overdrawn demand-deposit accounts	$	5,302	$	5,909
Due in one year or less	27,937,951		27,338,812
Due after one year through two years	6,288,728		8,472,939
Due after two years through three years	1,607,267		1,996,364
Due after three years through four years	2,230,858		1,447,317
Due after four years through five years	1,184,817		1,955,361
Due after five years through fifteen years	806,867		798,294
Thereafter	49,555		51,660
Total par value	$	40,111,345	$	42,066,656

Table 3.4 - Advances by Current Interest Rate Terms

(dollars in thousands)

	March 31, 2024		December 31, 2023
Fixed-rate	$	35,631,859	$	36,330,552
Variable-rate	4,479,486		5,736,104
Total par value	$	40,111,345	$	42,066,656

Credit Risk Exposure and Security Terms. Our advances are primarily made to our members, including commercial banks, insurance companies, savings institutions, and credit unions. We manage our credit exposure to secured member credit products through an integrated approach that generally includes credit limits for borrowers based on the amount and value of available collateral, ongoing reviews of each borrower's financial condition, and collateral and lending policies that are intended to limit risk of loss while balancing borrowers' needs for a reliable source of funding. For additional information on credit risk exposure and security terms see Part II — Item 8 — Financial Statements and Supplementary Data — Note 6 — Advances in the 2023 Annual Report.

The Bank’s decision to lend is based principally on our analysis of each borrower’s financial condition and outlook, though we consider the types and level of collateral as additional factors. At March 31, 2024, and December 31, 2023, we had rights to collateral, on a borrower-by-borrower basis, with an estimated value greater than our outstanding extensions of credit.

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We continue to evaluate and make changes to our collateral guidelines based on market conditions. At March 31, 2024, and December 31, 2023, none of our advances were past due, on nonaccrual status, or considered impaired. In addition, there were no modifications for borrowers experiencing financial difficulties related to advances during the three months ended March 31, 2024 and 2023.

Based upon the collateral held as security, our credit extension and collateral policies, management's credit analysis, and the repayment history on advances, we have not recorded any allowance for credit losses on our advances at March 31, 2024, and December 31, 2023.

Note 4 — Mortgage Loans Held for Portfolio

We invest in mortgage loans through the Mortgage Partnership Finance® (MPF®) program. These mortgage loans are either guaranteed or insured by federal agencies, as is the case with government mortgage loans, or are credit-enhanced, directly or indirectly, by the related entity that sold the loan (a participating financial institution), as is the case with conventional mortgage loans. All such investments are held for portfolio.

Table 4.1 - Mortgage Loans Held for Portfolio

(dollars in thousands)

	March 31, 2024		December 31, 2023
Real estate
Fixed-rate 15-year single-family mortgages	$	183,129	$	192,104
Fixed-rate 20- and 30-year single-family mortgages	2,927,537		2,831,319
Premiums	40,611		39,990
Discounts	(2,251)		(2,222)
Deferred derivative (losses) gains, net	(35)		140
Total mortgage loans held for portfolio(1)	3,148,991		3,061,331
Less: allowance for credit losses	(2,600)		(2,000)
Total mortgage loans, net of allowance for credit losses	$	3,146,391	$	3,059,331

________________________

(1)    Excludes accrued interest receivable of $19.0 million and $17.8 million at March 31, 2024, and December 31, 2023, respectively.

Table 4.2 - Mortgage Loans Held for Portfolio by Collateral/Guarantee Type

(dollars in thousands)

	March 31, 2024		December 31, 2023
Conventional mortgage loans	$	2,966,833	$	2,877,109
Government mortgage loans	143,833		146,314
Total par value	$	3,110,666	$	3,023,423

Credit-Enhancements. Our allowance for credit losses factors in the credit-enhancements associated with conventional mortgage loans under the MPF program. These credit-enhancements apply after the homeowner's equity is exhausted and can include primary and/or supplemental mortgage insurance or other kinds of credit-enhancement. The credit risk analysis of our conventional loans is performed at the individual master commitment level to determine the credit-enhancements available to recover losses on loans under each individual master commitment. For additional information on credit enhancements see Part II — Item 8 — Financial Statements and Supplementary Data — Note 7 — Mortgage Loans Held for Portfolio — Credit-Enhancements in the 2023 Annual Report.

Payment Status of Mortgage Loans. Payment status is a key credit quality indicator for conventional mortgage loans and allows us to monitor borrower performance. A past due loan is one for which the borrower has failed to make a full payment of principal and interest within 30 days of its due date. Other delinquency statistics include nonaccrual loans and loans in process of foreclosure. Tables 4.3 and 4.4 present the payment status for conventional mortgage loans and other delinquency statistics for all mortgage loans at March 31, 2024, and December 31, 2023.

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Table 4.3 - Credit Quality Indicator for Conventional Mortgage Loans

(dollars in thousands)

	March 31, 2024
	Year of Origination
Payment Status at Amortized Cost(1)	Prior to 2020		2020 to 2024		Total
Past due 30-59 days delinquent	$	13,715	$	4,505	$	18,220
Past due 60-89 days delinquent	4,411		1,930		6,341
Past due 90 days or more delinquent	7,112		462		7,574
Total past due	25,238		6,897		32,135
Total current loans	1,395,384		1,575,069		2,970,453
Total conventional mortgage loans	$	1,420,622	$	1,581,966	$	3,002,588

	December 31, 2023
	Year of Origination
Payment Status at Amortized Cost(1)	Prior to 2019		2019 to 2023		Total
Past due 30-59 days delinquent	$	9,392	$	5,630	$	15,022
Past due 60-89 days delinquent	3,068		1,694		4,762
Past due 90 days or more delinquent	6,841		889		7,730
Total past due	19,301		8,213		27,514
Total current loans	1,169,734		1,715,134		2,884,868
Total conventional mortgage loans	$	1,189,035	$	1,723,347	$	2,912,382

_________________________

(1)    Amortized cost excludes accrued interest receivable.

Table 4.4 - Other Delinquency Statistics of Mortgage Loans

(dollars in thousands)

	March 31, 2024
	Amortized Cost in Conventional Mortgage Loans			Amortized Cost in Government Mortgage Loans			Total
In process of foreclosure (1)	$	1,334		$	605		$	1,939
Serious delinquency rate (2)	0.25		%	1.43		%	0.31		%
Past due 90 days or more still accruing interest	$	—		$	2,081		$	2,081
Loans on nonaccrual status (3)	$	7,776		$	—		$	7,776

	December 31, 2023
	Amortized Cost in Conventional Mortgage Loans			Amortized Cost in Government Mortgage Loans			Total
In process of foreclosure (1)	$	1,742		$	623		$	2,365
Serious delinquency rate (2)	0.27		%	0.94		%	0.30		%
Past due 90 days or more still accruing interest	$	—		$	1,356		$	1,356
Loans on nonaccrual status (3)	$	7,913		$	—		$	7,913

_______________________

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

(2)    Loans that are 90 days or more past due or in the process of foreclosure expressed as a percentage of the amortized cost of the total loan portfolio class.

(3)    As of March 31, 2024, and December 31, 2023, $3.1 million and $4.3 million, respectively, of conventional mortgage loans on nonaccrual status did not have an associated allowance for credit losses because either these loans were charged off or the fair value of the underlying collateral, including any credit enhancements, is greater than the amortized cost of the loans.

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Allowance for Credit Losses for Mortgage Loans.

Conventional Mortgage Loans. Conventional mortgage loans are evaluated collectively when similar risk characteristics exist. Conventional mortgage loans that do not share risk characteristics with other mortgage loans are evaluated for expected credit losses on an individual basis. We determine our allowance for credit losses on conventional mortgage 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. We use a discounted cash flow model to project our expected losses. We use a third-party model to project cash flows to estimate the expected credit losses over the life of the loans. The model relies on several inputs, such as both current and forecasted property values and interest rates as well as historical borrower behavior. We incorporate associated credit enhancements and expected recoveries, if any, to determine our estimate of expected credit losses.

Certain conventional mortgage loans may be evaluated for credit losses by using the practical expedient for collateral dependent assets. A mortgage loan is considered collateral dependent when the borrower is experiencing financial difficulty and repayment is expected to be made substantially through the sale of the underlying collateral. We estimate the fair value of this collateral by using a third-party property valuation model. The expected credit loss of a collateral dependent conventional 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. We reserve for these estimated losses or record a direct charge-off of the loan balance if certain triggering criteria are met.

Table 4.5 presents a roll forward of the allowance for credit losses on conventional mortgage loans for the three months ended March 31, 2024 and 2023.

Table 4.5 - Allowance for Credit Losses on Conventional Mortgage Loans

(dollars in thousands)

	For the Three Months Ended March 31,
	2024		2023
Allowance for credit losses (1)
Balance, beginning of period	$	2,000	$	1,900
Net recoveries	—		6
Provision for credit losses	600		94
Balance, end of period	$	2,600	$	2,000

_________________________

(1)    These amounts exclude government mortgage loans because we make no allowance for credit losses based on our investments in government mortgage loans, as discussed below under — Government Mortgage Loans Held for Portfolio.

Government Mortgage Loans Held for Portfolio. We invest in government mortgage loans secured by one- to four-family residential properties. Government mortgage loans are mortgage loans insured or guaranteed by the Federal Housing Administration (the FHA), the U.S. Department of Veterans Affairs (the VA), the Rural Housing Service of the U.S. Department of Agriculture (RHS), or the U.S. Department of Housing and Urban Development (HUD).

The servicer provides and maintains insurance or a guarantee from the applicable government agency. The servicer is responsible for compliance with all government agency requirements and for obtaining the benefit of the applicable insurance or guaranty with respect to defaulted government-guaranteed mortgage loans. Any losses incurred on these loans that are not recovered from the insurer or guarantor are absorbed by the related servicer. Therefore, we only have credit risk for these loans if the servicer fails to pay for losses not covered by insurance or guarantees, but in such instances, we would have recourse against the servicer for such failure. Due to government guarantees or insurance on our government loans, there is no allowance for credit losses for the government mortgage loan portfolio as of March 31, 2024, and December 31, 2023. Additionally, government mortgage loans are not placed on nonaccrual status due to the government guarantee or insurance on these loans and the contractual obligation of the loan servicers to repurchase their related loans when certain criteria are met.

"Mortgage Partnership Finance," "MPF," "eMPF" and "MPF Xtra" are registered trademarks of the Federal Home Loan Bank of Chicago.

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Note 5 — Derivatives and Hedging Activities

Table 5.1 - Fair Value of Derivative Instruments

(dollars in thousands)

	March 31, 2024						December 31, 2023
	Notional Amount of Derivatives		Derivative Assets		Derivative Liabilities		Notional Amount of Derivatives		Derivative Assets		Derivative Liabilities
Derivatives designated as hedging instruments
Interest-rate swaps	$	50,846,703	$	143,528	$	(998,568)	$	51,587,480	$	77,093	$	(1,009,217)
Forward-start interest-rate swaps	1,391,000		126		(13)		1,391,000		254		(170)
Total derivatives designated as hedging instruments	52,237,703		143,654		(998,581)		52,978,480		77,347		(1,009,387)
Derivatives not designated as hedging instruments
Interest-rate swaps	603,493		44		(10)		90,000		—		(729)
Mortgage-delivery commitments (1)	36,827		48		(40)		29,995		290		—
Total derivatives not designated as hedging instruments	640,320		92		(50)		119,995		290		(729)
Total notional amount of derivatives	$	52,878,023					$	53,098,475
Total derivatives before netting and collateral adjustments			143,746		(998,631)				77,637		(1,010,116)
Netting adjustments and cash collateral, including related accrued interest (2)			220,074		991,527				305,436		1,007,099
Derivative assets and derivative liabilities			$	363,820	$	(7,104)			$	383,073	$	(3,017)

_______________________

(1)    Mortgage-delivery commitments are classified as derivatives with changes in fair value recorded in other income.

(2)    Amounts represent the effect of master-netting agreements intended to allow us to settle positive and negative positions with the same counterparty. Cash collateral posted, including accrued interest, was $1.2 billion and $1.3 billion at March 31, 2024, and December 31, 2023, respectively. The change in cash collateral posted is included in the net change in interest-bearing deposits in the statement of cash flows. Cash collateral including accrued interest received was $15.1 million and $3.8 million at March 31, 2024, and December 31, 2023.

Changes in fair value of the derivative hedging instrument and the hedged item attributable to the hedged risk for designated fair-value hedges are recorded in net interest income in the same line as the earnings effect of the hedged item. For designated cash-flow hedges, the entire change in the fair value of the hedging instrument (assuming it is included in the assessment of hedge effectiveness) is reported in other comprehensive income until the hedged transaction affects earnings. At that time, this amount is reclassified from other comprehensive income and recorded in net interest income in the same line as the earnings effect of the hedged item.

Tables 5.2 presents the net gains (losses) on qualifying fair-value hedging relationships. Gains (losses) on derivatives include unrealized changes in fair value as well as net interest settlements.

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Table 5.2 - Net Gains (Losses) on Fair Value Hedging Relationships

(dollars in thousands)

	For the Three Months Ended March 31, 2024
	Advances		Available-for-sale Securities		CO Bonds
Total interest income (expense) presented on the statements of operations	$	528,497	$	233,171	$	(507,136)
Gains (losses) on fair value hedging relationships
Changes in fair value:
Derivatives	$	100,432	$	140,222	$	(46,641)
Hedged items	(98,147)		(137,177)		46,384
Net changes in fair value before price alignment interest	2,285		3,045		(257)
Price alignment interest(1)	(860)		(14,154)		481
Net interest settlements on derivatives(2)(3)	58,344		124,319		(162,260)
Net gains (losses) on qualifying hedging relationships	59,769		113,210		(162,036)
Amortization/accretion of discontinued hedging relationships	(351)		—		(1,506)
Net gains (losses) on derivatives and hedging activities recorded in net interest income	$	59,418	$	113,210	$	(163,542)

	For the Three Months Ended March 31, 2023
	Advances		Available-for-sale Securities		CO Bonds
Total interest income (expense) presented on the statements of operations	$	501,206	$	167,680	$	(378,094)
Gains (losses) on fair value hedging relationships
Changes in fair value:
Derivatives	$	(68,586)	$	(233,315)	$	241,907
Hedged items	67,518		227,211		(242,057)
Net changes in fair value before price alignment interest	(1,068)		(6,104)		(150)
Price alignment interest(1)	(1,754)		(10,058)		283
Net interest settlements on derivatives(2)(3)	28,455		97,226		(140,810)
Net gains (losses) on qualifying hedging relationships	25,633		81,064		(140,677)
Amortization/accretion of discontinued hedging relationships	(512)		—		526
Net gains (losses) on derivatives and hedging activities recorded in net interest income	$	25,121	$	81,064	$	(140,151)

_______________________

(1)    Relates to derivatives for which variation margin payments are characterized as daily settled contracts.

(2)    Represents interest income/expense on derivatives in qualifying fair-value hedging relationships. Net interest settlements on derivatives that are not in qualifying fair-value hedging relationships are reported in other income.

(3)    Excludes the interest income/expense of the respective hedged items recorded in net interest income.

Tables 5.3 presents the net (losses) gains on qualifying cash flow hedging relationships.

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Table 5.3 - Net (Losses) Gains on Cash Flow Hedging Relationships

(dollars in thousands)

	For the Three Months Ended March 31,
	2024		2023
Forward-start interest rate swaps - CO Bonds
Losses reclassified from accumulated other comprehensive loss into interest expense	$	(1,026)	$	(1,127)
Gains (losses) recognized in other comprehensive income (loss)	17,670		(11,755)

For the three months ended March 31, 2024 and 2023, there were no reclassifications from accumulated other comprehensive income into earnings as a result of the discontinuance of cash-flow hedges because the original forecasted transactions were not expected to occur by the end of the originally specified period or within a two-month period thereafter. As of March 31, 2024, the maximum length of time over which we are hedging our exposure to the variability in future cash flows for forecasted transactions is seven years.

As of March 31, 2024, the amount of deferred net losses on derivatives accumulated in other comprehensive income related to cash flow hedges expected to be reclassified to earnings during the next 12 months is $7.2 million.

Table 5.4 - Cumulative Basis Adjustments for Fair-Value Hedges

(dollars in thousands)

	March 31, 2024
Line Item in Statement of Condition	Amortized Cost of Hedged Asset/ Liability(1)		Basis Adjustments for Active Hedging Relationships Included in Amortized Cost		Basis Adjustments for Discontinued Hedging Relationships Included in Amortized Cost		Cumulative Amount of Fair Value Hedging Basis Adjustments
Advances	$	13,303,677	$	(173,583)	$	4,254	$	(169,329)
Available-for-sale securities	11,337,238		(1,024,116)		—		(1,024,116)
Consolidated obligation bonds	24,026,942		(940,168)		33,110		(907,058)

_______________________

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

Impacts on Statement of Cash Flows. Cash paid or received for cleared derivatives variation margin is included on the statement of cash flows in either net change in derivatives and hedging activities as an operating activity or net payments on derivatives with a financing element as a financing activity. The table below shows the impact of variation margin for cleared derivatives on the statement of cash flows:

Table 5.5 - Impact of Variation Margin for Cleared Derivatives on the Statement of Cash Flows

(dollars in thousands)

	Increase (decrease) on Cash Flow Statement
	For the Three Months Ended March 31,
	2024		2023
Operating activity - net change in derivatives and hedging activities	$	173,602	$	(126,571)
Financing activity - net receipts (payments) on derivatives with a financing element	20,553		(3,666)
Total variation margin received (posted) on cleared derivatives	$	194,155	$	(130,237)

Managing Credit Risk on Derivatives. We enter into derivatives that we clear (cleared derivatives) with a derivatives clearing organization (DCO), our counterparty for such derivatives. We also enter into derivatives that are not cleared (uncleared derivatives) under master-netting agreements. Derivatives that we use containing any optionality are not currently eligible for clearing. Accordingly, such derivatives, including the derivatives used to hedge issuance of callable CO bonds, are executed with our uncleared derivatives counterparties.

Certain of our uncleared derivatives master-netting agreements contain provisions that require us to post additional collateral with our uncleared derivatives counterparties if our credit ratings are lowered. Under the terms that govern such agreements, if

20

our credit rating is lowered by Moody's Investors Service Inc. (Moody's) or Standard & Poor's Financial Services LLC (S&P) to a certain level, we are required to deliver additional collateral on uncleared derivatives. In the event of a split between such credit ratings, the lower rating governs. The aggregate fair value of all uncleared derivatives with these provisions that were in a net-liability position (before cash collateral and related accrued interest) at March 31, 2024, was $926.3 million for which we had delivered collateral with a post-haircut value of $829.1 million in accordance with the terms of the master-netting agreements. Securities collateral is subject to valuation haircuts in accordance with the terms of the master-netting arrangements. Table 5.6 sets forth the post-haircut value of incremental collateral that certain uncleared derivatives counterparties could have required us to deliver based on incremental credit rating downgrades at March 31, 2024.

Table 5.6 - Post Haircut Value of Incremental Collateral to be Delivered as of March 31, 2024

(dollars in thousands)

Ratings Downgrade (1)
From	To	Incremental Collateral
AA+	AA or AA-	$	—
AA-	A+, A or A-	—
A-	below A-	74,160

_______________________

(1)    Ratings are expressed in this table according to S&P's conventions but include the equivalent of such rating by Moody's. If there is a split rating, the lower rating is used.

For cleared derivatives, the DCO is our counterparty. The DCO notifies the clearing member of the required initial and variation margin and our agent (clearing member) in turn notifies us. We utilize one of two DCOs, for each cleared derivative transaction, Chicago Mercantile Exchange, Inc. (CME Inc.) or LCH Limited (LCH Ltd). Based upon their rulebooks, we characterize variation margin payments as daily settlement payments, rather than as collateral. At both DCOs, posted initial margin is considered collateral. We post initial margin and exchange variation margin through a clearing member of the DCO which clears our trades, acts as our agent to the DCO and guarantees our performance to the DCO, subject to the terms of relevant agreements. These arrangements expose us to credit risk in the event that one of our clearing members or one of the DCOs fails to meet its obligations. The use of cleared derivatives is intended to mitigate credit risk exposure because the DCO, which is fully secured at all times through margin received from its clearing members, is substituted for the credit risk exposure of individual counterparties in uncleared derivatives, and collateral is posted at least once daily for changes in the fair value of cleared derivatives through a clearing member.

For cleared derivatives, the DCO determines initial margin requirements. Our clearing members, which are U.S. Commodity Futures Trading Commission-registered futures commission merchants, may require us to post margin in excess of DCO requirements based on our credit or other considerations, including but not limited to, credit rating downgrades.

Offsetting of Certain Derivatives. We present derivatives, any related cash collateral received or pledged, and associated accrued interest, on a net basis by counterparty.

Table 5.7 presents separately the fair value of derivatives that are subject to netting due to a legal right of offset based on the terms of our master netting arrangements or similar agreements as of March 31, 2024, and December 31, 2023, which includes cleared and uncleared interest rate swaps, and the fair value of derivatives that are not subject to such netting, which includes mortgage delivery commitments and CO bond firm commitments. Derivatives subject to netting include any related cash collateral received from or pledged to counterparties.

21

Table 5.7 - Netting of Derivative Assets and Derivative Liabilities

(dollars in thousands)

	March 31, 2024
	Derivative Instruments Meeting Netting Requirements
	Gross Recognized Amount		Gross Amounts of Netting Adjustments and Cash Collateral		Derivative Instruments Not Meeting Netting Requirements		Total Derivative Assets and Total Derivative Liabilities
Derivative Assets
Interest-rate swaps
Uncleared	$	134,509	$	(134,322)			$	187
Cleared	9,189		354,396				363,585
Mortgage delivery commitments					$	48	48
Total							$	363,820
Derivative Liabilities
Interest-rate swaps
Uncleared	$	(996,767)	$	989,703			$	(7,064)
Cleared	(1,825)		1,825				—
Mortgage delivery commitments					$	(40)	(40)
Total							$	(7,104)

	December 31, 2023
	Derivative Instruments Meeting Netting Requirements
	Gross Recognized Amount		Gross Amounts of Netting Adjustments and Cash Collateral		Derivative Instruments Not Meeting Netting Requirements		Total Derivative Assets and Total Derivative Liabilities
Derivative Assets
Interest-rate swaps
Uncleared	$	72,517	$	(69,838)			$	2,679
Cleared	4,830		375,274				380,104
Mortgage delivery commitments					$	290	290
Total							$	383,073
Derivative Liabilities
Interest-rate swaps
Uncleared	$	(997,974)	$	994,957			$	(3,017)
Cleared	(12,142)		12,142				—
Total							$	(3,017)

Note 6 — Deposits

We offer demand and overnight deposits for members and qualifying nonmembers. Members that service mortgage loans may deposit funds collected in connection with mortgage loans pending disbursement of such funds to the owners of the mortgage loans, which we classify as "other" in the following table.

22

Table 6.1 - Deposits

(dollars in thousands)

	March 31, 2024		December 31, 2023
Interest-bearing
Demand and overnight	$	894,225	$	896,005
Noninterest-bearing
Other	27,549		26,874
Total deposits	$	921,774	$	922,879

Note 7 — Consolidated Obligations

CO Bonds. CO bonds for which we have received issuance proceeds and are primarily liable were as follows:

Table 7.1 - CO Bonds Outstanding by Contractual Maturity

(dollars in thousands)

	March 31, 2024				December 31, 2023
	Amount		Weighted Average Rate (1)		Amount		Weighted Average Rate (1)
Due in one year or less	$	19,998,375	4.22	%	$	17,841,615	4.27	%
Due after one year through two years	7,679,190		2.71		7,476,350		2.86
Due after two years through three years	6,264,550		1.95		7,014,955		1.76
Due after three years through four years	2,648,150		3.32		2,854,250		2.94
Due after four years through five years	2,278,230		2.99		2,712,400		2.94
Thereafter	3,044,175		3.06		3,193,305		2.95
Total par value	41,912,670		3.40	%	41,092,875		3.30	%
Premiums	30,998				32,419
Discounts	(13,555)				(14,451)
Hedging adjustments	(907,058)				(862,100)
Total	$	41,023,055			$	40,248,743

_______________________

(1)    The CO bonds' weighted-average rate excludes concession fees.

Table 7.2 - CO Bonds Outstanding by Early Redemption Feature

(dollars in thousands)

	March 31, 2024		December 31, 2023
Noncallable and nonputable	$	22,216,170	$	18,882,235
Callable	19,696,500		22,210,640
Total par value	$	41,912,670	$	41,092,875

23

Table 7.3 - CO Bonds Outstanding by Contractual Maturity or Next Call Date

(dollars in thousands)

	March 31, 2024		December 31, 2023
Due in one year or less	$	32,604,875	$	30,900,615
Due after one year through two years	3,748,190		4,203,850
Due after two years through three years	2,159,050		2,487,955
Due after three years through four years	1,095,150		852,750
Due after four years through five years	883,230		1,171,400
Thereafter	1,422,175		1,476,305
Total par value	$	41,912,670	$	41,092,875

Table 7.4 - CO Bonds by Interest Rate-Payment Type

(dollars in thousands)

	March 31, 2024		December 31, 2023
Fixed-rate	$	31,262,670	$	32,454,235
Step-up (1)	5,384,000		5,626,140
Simple variable-rate	5,266,000		3,012,500
Total par value	$	41,912,670	$	41,092,875

_______________________

(1)    Step-up bonds pay interest at increasing fixed rates for specified intervals over the life of the CO bond and can be called at our option on the step-up dates.

CO Discount Notes. Outstanding CO discount notes for which we were primarily liable, all of which are due within one year, were as follows:

Table 7.5 - CO Discount Notes Outstanding

(dollars in thousands)

	Book Value		Par Value		Weighted Average Rate (1)
March 31, 2024	$	20,055,973	$	20,169,851	5.29	%
December 31, 2023	$	22,000,546	$	22,150,970	5.31	%

_______________________

(1)    CO discount notes' weighted-average rate represents a yield to maturity excluding concession fees.

Note 8 — Affordable Housing Program

Table 8.1 - AHP Liability

(dollars in thousands)

	March 31, 2024		December 31, 2023
Balance at beginning of year	$	87,164	$	76,622
AHP expense for the period	8,664		28,648
AHP voluntary contribution	—		2,000
AHP direct grant disbursements	(1,927)		(16,144)
AHP subsidy for AHP advance disbursements	(639)		(3,965)
Return of previously disbursed grants and subsidies	—		3
Balance at end of period	$	93,262	$	87,164

24

Note 9 — Capital

Regulatory Capital Requirements. We are subject to three capital requirements at all times under our capital plan, the Federal Home Loan Bank Act of 1932 (as amended, the FHLBank Act), and FHFA regulations and guidance:

1.    Risk-based capital. We are required to maintain permanent capital, defined as the amounts paid-in for Class B stock and retained earnings, in an amount at least equal to the sum of our credit-risk, market-risk, and operational-risk capital requirements, all of which are calculated in accordance with FHFA rules and regulations, referred to herein as the risk-based capital requirement.

2.    Total regulatory capital. We are required to maintain a total capital-to-assets ratio of at least four percent. Regulatory capital is the sum of permanent capital, the amount of any general loss allowance if consistent with GAAP and not established for specific assets, and other amounts from sources determined by the FHFA as available to absorb losses.

3.    Leverage capital. We are required to maintain a leverage capital-to-assets ratio of at least five percent. Leverage capital is defined as the sum of permanent capital weighted 1.5 times and all other components of total capital.

The FHFA has authority to require us to maintain greater minimum capital levels than are required based on FHFA rules and regulations.

Table 9.1 - Regulatory Capital Requirements

(dollars in thousands)

	March 31, 2024						December 31, 2023
	Required			Actual			Required			Actual
Risk-based capital	$	667,188		$	3,816,282		$	628,052		$	3,839,236
Regulatory capital	$	2,641,211		$	3,816,282		$	2,685,691		$	3,839,236
Capital-to-asset ratio	4.0		%	5.8		%	4.0		%	5.7		%
Leverage capital	$	3,301,514		$	5,724,423		$	3,357,114		$	5,758,854
Leverage capital-to-assets ratio	5.0		%	8.7		%	5.0		%	8.6		%

We are a cooperative whose members own most of our capital stock. Former members, including certain nonmembers that own our capital stock as a result of merger or acquisition, relocation, or involuntary termination of membership, own the remaining capital stock to support business transactions still carried on our statement of condition or, for a small amount of capital stock held by former members, until the five-year redemption period applicable to their membership stock is complete. Shares of capital stock cannot be purchased or sold except between us and our members at $100 per share par value. Each member is required to purchase Class B stock equal to 0.05 percent of the value of the member's total assets measured as of December 31 of the preceding year, subject to a current minimum balance of $10 thousand and a current maximum balance of $5 million (the membership stock investment requirement), and 3.00 percent for overnight advances, 4.00 percent for all other advances, 0.25 percent for outstanding standby letters of credit, and 4.50 percent of the par value of certain mortgage loans we purchased through the MPF program (collectively, the activity-based stock-investment requirement). The sum of the membership stock investment requirement and the activity-based stock investment requirement, rounded up to the nearest whole share, represents the total stock investment requirement.

Restricted Retained Earnings. At March 31, 2024, our restricted retained earnings contribution requirement totaled $613.8 million. At March 31, 2024, and December 31, 2023, restricted retained earnings totaled $466.7 million and $451.2 million, respectively. These restricted retained earnings are not available to pay dividends.

Note 10 — Accumulated Other Comprehensive Income (Loss)

25

Table 10.1 - Accumulated Other Comprehensive Income (Loss)

(dollars in thousands)

	Net Unrealized Gain (Loss) on Available-for-sale Securities		Net Unrealized Gain (Loss) Relating to Hedging Activities		Pension and Postretirement Benefits		Total
Balance, December 31, 2022	$	(350,281)	$	42,482	$	1,374	$	(306,425)
Other comprehensive (loss) income before reclassifications:
Net unrealized gains (losses)	10,654		(11,755)		—		(1,101)
Reclassifications from other comprehensive income to net income
Amortization - hedging activities (1)	—		1,127		—		1,127
Other comprehensive income (loss)	10,654		(10,628)		—		26
Balance, March 31, 2023	$	(339,627)	$	31,854	$	1,374	$	(306,399)
Balance, December 31, 2023	$	(341,252)	$	45,964	$	749	$	(294,539)
Other comprehensive income before reclassifications:
Net unrealized gains	32,931		17,670		—		50,601
Reclassifications from other comprehensive income to net income
Amortization - hedging activities (1)	—		1,026		—		1,026
Other comprehensive income	32,931		18,696		—		51,627
Balance, March 31, 2024	$	(308,321)	$	64,660	$	749	$	(242,912)

_______________________

(1)    Recorded in CO bond interest expense.

Note 11 — Fair Values

A fair-value hierarchy is used to prioritize the inputs of valuation techniques used to measure fair value. A description of the application of the fair-value hierarchy, valuation techniques, and significant inputs is disclosed in Part II — Item 8 — Financial Statements and Supplementary Data — Note 15 — Fair Values in the 2023 Annual Report. There have been no material changes in the fair-value hierarchy classification of financial assets and liabilities, valuation techniques, or significant inputs during the three months ended March 31, 2024.

Table 11.1 presents the carrying value, fair value, and fair value hierarchy of our financial assets and liabilities at March 31, 2024, and December 31, 2023. We record trading securities, available-for-sale securities, derivative assets, derivative liabilities, and certain other assets at fair value on a recurring basis and certain mortgage loans at fair value on a non-recurring basis. We record all other financial assets and liabilities at amortized cost. Refer to Table 11.2 for further details about the financial assets and liabilities held at fair value on either a recurring or non-recurring basis.

26

Table 11.1 - Fair Value Summary

(dollars in thousands)

	March 31, 2024
	Carrying Value		Total Fair Value		Level 1		Level 2		Level 3		Netting Adjustments and Cash Collateral(2)
Financial instruments
Assets:
Cash and due from banks	$	70,616	$	70,616	$	70,616	$	—	$	—	$	—
Interest-bearing deposits	1,808,836		1,808,836		1,808,836		—		—		—
Securities purchased under agreements to resell	1,750,000		1,750,022		—		1,750,022		—		—
Federal funds sold	3,051,000		3,051,001		—		3,051,001		—		—
Trading securities(1)	1,567		1,567		—		1,567		—		—
Available-for-sale securities(1)	15,578,184		15,578,184		—		15,556,216		21,968		—
Held-to-maturity securities	74,156		73,813		—		73,813		—		—
Advances	39,905,499		39,757,607		—		39,757,607		—		—
Mortgage loans, net	3,146,391		2,826,791		—		2,812,735		14,056		—
Accrued interest receivable	202,275		202,275		—		202,275		—		—
Derivative assets(1)	363,820		363,820		—		143,746		—		220,074
Other assets (1)	30,623		30,623		15,041		15,582		—		—
Liabilities:
Deposits	(921,774)		(921,751)		—		(921,751)		—		—
COs:
Bonds	(41,023,055)		(40,658,019)		—		(40,658,019)		—		—
Discount notes	(20,055,973)		(20,052,670)		—		(20,052,670)		—		—
Mandatorily redeemable capital stock	(6,083)		(6,083)		(6,083)		—		—		—
Accrued interest payable	(283,592)		(283,592)		—		(283,592)		—		—
Derivative liabilities(1)	(7,104)		(7,104)		—		(998,631)		—		991,527
Other:
Commitments to extend credit for advances	—		(282)		—		(282)		—		—
Standby letters of credit	(1,323)		(1,323)		—		(1,323)		—		—

27

	December 31, 2023
	Carrying Value		Total Fair Value		Level 1		Level 2		Level 3		Netting Adjustments and Cash Collateral(2)
Financial instruments
Assets:
Cash and due from banks	$	53,412	$	53,412	$	53,412	$	—	$	—	$	—
Interest-bearing deposits	1,643,587		1,643,587		1,643,587		—		—		—
Securities purchased under agreements to resell	1,600,000		1,599,996		—		1,599,996		—		—
Federal funds sold	2,500,000		2,499,995		—		2,499,995		—		—
Trading securities(1)	1,395		1,395		—		1,395		—		—
Available-for-sale securities(1)	15,343,745		15,343,745		—		15,321,940		21,805		—
Held-to-maturity securities	78,905		78,478		—		78,478		—		—
Advances	41,958,583		41,834,762		—		41,834,762		—		—
Mortgage loans, net	3,059,331		2,796,000		—		2,781,976		14,024		—
Accrued interest receivable	185,709		185,709		—		185,709		—		—
Derivative assets(1)	383,073		383,073		—		77,637		—		305,436
Other assets(1)	28,369		28,369		13,724		14,645		—		—
Liabilities:
Deposits	(922,879)		(922,830)		—		(922,830)		—		—
COs:
Bonds	(40,248,743)		(39,887,287)		—		(39,887,287)		—		—
Discount notes	(22,000,546)		(21,998,576)		—		(21,998,576)		—		—
Mandatorily redeemable capital stock	(6,083)		(6,083)		(6,083)		—		—		—
Accrued interest payable	(269,517)		(269,517)		—		(269,517)		—		—
Derivative liabilities(1)	(3,017)		(3,017)		—		(1,010,116)		—		1,007,099
Other:
Commitments to extend credit for advances	—		(2,101)		—		(2,101)		—		—
Standby letters of credit	(1,340)		(1,340)		—		(1,340)		—		—

_______________________

(1)Carried at fair value and measured on a recurring basis.

(2)These amounts represent the effect of master-netting agreements intended to allow us to settle positive and negative positions and also cash collateral and related accrued interest held or placed with the same clearing member and/or counterparty.

28

Fair Value Measured on a Recurring and Nonrecurring Basis.

Table 11.2 - Fair Value of Assets and Liabilities Measured at Fair Value on a Recurring and Nonrecurring Basis

(dollars in thousands)

	March 31, 2024
	Level 1		Level 2		Level 3		Netting Adjustments and Cash Collateral (1)		Total
Assets:
Carried at fair value on a recurring basis
Trading securities:
Corporate bonds	$	—	$	1,567	$	—	$	—	$	1,567
Available-for-sale securities:
U.S. Treasury obligations	—		5,640,649		—		—		5,640,649
HFA securities	—		—		21,968		—		21,968
Supranational institutions	—		340,676		—		—		340,676
U.S. government-owned corporations	—		229,923		—		—		229,923
GSE	—		96,950		—		—		96,950
U.S. government guaranteed – single-family MBS	—		44,049		—		—		44,049
U.S. government guaranteed – multifamily MBS	—		473,699		—		—		473,699
GSE – single-family MBS	—		1,229,913		—		—		1,229,913
GSE – multifamily MBS	—		7,500,357		—		—		7,500,357
Total available-for-sale securities	—		15,556,216		21,968		—		15,578,184
Derivative assets:
Interest-rate-exchange agreements	—		143,698		—		220,074		363,772
Mortgage delivery commitments	—		48		—		—		48
Total derivative assets	—		143,746		—		220,074		363,820
Other assets	15,041		15,582		—		—		30,623
Total assets carried at fair value on a recurring basis	$	15,041	$	15,717,111	$	21,968	$	220,074	$	15,974,194
Liabilities:
Carried at fair value on a recurring basis
Derivative liabilities
Interest-rate-exchange agreements	$	—	$	(998,591)	$	—	$	991,527	$	(7,064)
Mortgage delivery commitments	—		(40)		—		—		(40)
Total liabilities carried at fair value on a recurring basis	$	—	$	(998,631)	$	—	$	991,527	$	(7,104)

29

	December 31, 2023
	Level 1		Level 2		Level 3		Netting Adjustments and Cash Collateral(1)		Total
Assets:
Carried at fair value on a recurring basis
Trading securities:
Corporate bonds	$	—	$	1,395	$	—	$	—	$	1,395
Available-for-sale securities:
U.S. Treasury obligations	—		5,664,452		—		—		5,664,452
HFA securities	—		—		21,805		—		21,805
Supranational institutions	—		346,375		—		—		346,375
U.S. government-owned corporations	—		235,191		—		—		235,191
GSE	—		99,421		—		—		99,421
U.S. government guaranteed – single-family MBS	—		14,433		—		—		14,433
U.S. government guaranteed – multifamily MBS	—		477,676		—		—		477,676
GSE – single-family MBS	—		904,456		—		—		904,456
GSE – multifamily MBS	—		7,579,936		—		—		7,579,936
Total available-for-sale securities	—		15,321,940		21,805		—		15,343,745
Derivative assets:
Interest-rate-exchange agreements	—		77,347		—		305,436		382,783
Mortgage delivery commitments	—		290		—		—		290
Total derivative assets	—		77,637		—		305,436		383,073
Other assets	13,724		14,645		—		—		28,369
Total assets carried at fair value on a recurring basis	$	13,724	$	15,415,617	$	21,805	$	305,436	$	15,756,582
Liabilities:
Carried at fair value on a recurring basis
Derivative liabilities
Interest-rate-exchange agreements	$	—	$	(1,010,116)	$	—	$	1,007,099	$	(3,017)
Total liabilities carried at fair value on a recurring basis	$	—	$	(1,010,116)	$	—	$	1,007,099	$	(3,017)

_______________________

(1)    These amounts represent the effect of master-netting agreements intended to allow us to settle positive and negative positions and also cash collateral and related accrued interest held or placed with the same clearing member and/or counterparty.

Table 11.3 presents a reconciliation of available-for-sale securities that are measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the three months ended March 31, 2024 and 2023.

Table 11.3 - Roll Forward of Level 3 Available-for-Sale HFA Securities

(dollars in thousands)

	For the Three Months Ended March 31,
	2024		2023
Balance at beginning of period	$	21,805	$	32,774
Total gains included in other comprehensive income
Net unrealized gains	163		331
Balance at end of period	$	21,968	$	33,105
Total amount of unrealized gains for the period included in other comprehensive income relating to securities held at period end	$	163	$	331

30

Note 12 — Commitments and Contingencies

Joint and Several Liability. COs are backed by the financial resources of the 11 district Federal Home Loan Banks (the FHLBanks). The FHFA has authority to require any FHLBank to repay all or a portion of the principal and interest on COs for which another FHLBank is the primary obligor. No FHLBank has ever been asked or required to repay the principal or interest on any CO on behalf of another FHLBank. We evaluate the financial condition of the other FHLBanks primarily based on known regulatory actions, publicly available financial information, and individual long-term credit-rating action as of each period-end presented. Based on this evaluation, as of March 31, 2024, and through the filing of this report, we do not believe it is likely that we will be required to repay the principal or interest on any CO on behalf of another FHLBank.

We have considered applicable FASB guidance and determined it is not necessary to recognize a liability for the fair value of our joint and several liability for all of the COs. The joint and several obligation is mandated by the FHLBank Act, as implemented by FHFA regulations, and is not the result of an arms-length transaction among the FHLBanks. The FHLBanks have no control over the amount of the guaranty or the determination of how each FHLBank would perform under the joint and several obligation. Because the FHLBanks are subject to the authority of the FHFA as it relates to decisions involving the allocation of the joint and several liability for the FHLBanks' COs, the FHLBanks' joint and several obligation is excluded from the initial recognition and measurement provisions. Accordingly, we have not recognized a liability for our joint and several obligation related to other FHLBanks' COs at March 31, 2024, and December 31, 2023. The par amounts of other FHLBanks' outstanding COs for which we are jointly and severally liable totaled $1.1 trillion at both March 31, 2024, and December 31, 2023. See Note 7 — Consolidated Obligations for additional information.

Off-Balance-Sheet Commitments

Table 12.1 - Off-Balance Sheet Commitments (1)

(dollars in thousands)

	March 31, 2024						December 31, 2023
	Expire within one year		Expire after one year		Total		Expire within one year		Expire after one year		Total
Standby letters of credit outstanding (2)	$	7,399,693	$	199,534	$	7,599,227	$	8,217,388	$	207,677	$	8,425,065
Commitments for unused lines of credit - advances (3)	1,113,961		—		1,113,961		1,113,354		—		1,113,354
Commitments to make additional advances	218,357		20,464		238,821		13,170		20,463		33,633
Commitments to invest in mortgage loans	36,827		—		36,827		29,995		—		29,995
Unsettled CO bonds, at par	217,600		—		217,600		131,500		—		131,500
Unsettled CO discount notes, at par	600,000		—		600,000		61,008		—		61,008

__________________________

(1)    We have determined that it is unnecessary to record any liability for credit losses on these agreements based on our credit extension and collateral policies.

(2)    The amount of standby letters of credit outstanding excludes commitments to issue standby letters of credit. At March 31, 2024, and December 31, 2023, commitments to issue standby letters of credit that expire within one year totaled $5.4 million and $16.0 million, respectively, and at December 31, 2023, commitments to issue standby letters of credit that expire after one year totaled $13.1 million.

(3)    Commitments for unused line-of-credit advances are generally for periods of up to 12 months. Since many of these commitments are not expected to be drawn upon, the total commitment amount does not necessarily indicate future liquidity requirements.

Standby Letters of Credit. At March 31, 2024, outstanding standby letters of credit expire no later than 2033. Currently, we offer new standby letters of credit with terms typically up to 10 years, while terms greater than 10 years may be available on an exception basis. Unearned fees for the value of the guarantees related to standby letters of credit are recorded in other liabilities and totaled $1.3 million at March 31, 2024, and December 31, 2023.

31

Commitments to Invest in Mortgage Loans. Commitments to invest in mortgage loans are generally for periods not to exceed 60 business days. Such commitments are recorded as derivatives at their fair values on the statement of condition.

Pledged Collateral. We have pledged securities as collateral related to derivatives. See Note 5 — Derivatives and Hedging Activities for additional information about our pledged collateral and other credit-risk-related contingent features.

Legal Proceedings. We are subject to various legal proceedings arising in the normal course of business from time to time. We would record an accrual for a loss contingency when it is probable that a loss has been incurred and the amount can be reasonably estimated. Management does not anticipate that the ultimate liability, if any, arising out of these matters will have a material effect on our financial condition, results of operations, or cash flows.

Note 13 — Transactions with Shareholders

Shareholder Concentrations. We consider shareholder concentrations as holdings of capital stock (including mandatorily redeemable capital stock) by individual members or nonmembers in excess of 10 percent of total capital stock outstanding. At both March 31, 2024, and December 31, 2023, no shareholder had more than 10 percent of total capital stock outstanding.

Transactions with Directors' Institutions. We provide, in the ordinary course of business, products and services to members whose officers or directors serve on our board of directors. In accordance with FHFA regulations, transactions with directors' institutions are conducted on the same terms as those with any other member.

Table 13.1 - Transactions with Directors' Institutions

(dollars in thousands)

	Capital Stock Outstanding		Percent of Total Capital Stock		Par Value of Advances		Percent of Total Par Value of Advances		Total Accrued Interest Receivable		Percent of Total Accrued Interest Receivable on Advances
March 31, 2024	$	108,612	5.5	%	$	2,215,043	5.5	%	$	3,567	2.7	%
December 31, 2023	201,250		9.8		4,485,824		10.7		5,953		5.2

Note 14 — Subsequent Events

On April 19, 2024, the board of directors declared a cash dividend at an annualized rate of 8.40 percent based on daily average capital stock balances outstanding during the first quarter of 2024. The dividend, including dividends classified as interest on mandatorily redeemable capital stock, amounted to $41.2 million and was paid on May 2, 2024.

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

Index to Management's Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements	32
Executive Summary	34
Economic Conditions	35
Selected Financial Data	35
Results of Operations	37
Financial Condition	40
Liquidity and Capital Resources	47
Critical Accounting Estimates	52
Legislative and Regulatory Developments	53

Forward-Looking Statements

This report includes statements describing anticipated developments, projections, estimates, or predictions of ours that are “forward-looking statements.” These statements may involve matters related to, but not limited to, projections of revenues, income, earnings, capital expenditures, dividends, capital structure, or other financial items; repurchases of excess stock, our

32

minimum retained earnings target, or the interest-rate environment in which we do business; statements of management’s plans or objectives for future operations; expectations of effects or changes in fiscal and monetary policies and our future economic performance; or statements of assumptions underlying certain of the foregoing types of statements. These statements may use forward-looking terminology such as, but not limited to, “anticipates,” “believes,” “continued,” “expects,” “plans,” “intends,” “may,” “could,” “estimates,” “assumes,” “should,” “will,” “likely,” or their negatives or other variations on these terms. We caution that, by their nature, forward-looking statements are subject to a number of risks or uncertainties, including the risk factors set forth in Part I — Item 1A — Risk Factors in the 2023 Annual Report and Part II — Item 1A — Risk Factors of this report and the risks set forth below. Actual results could differ materially from those expressed or implied in these forward-looking statements or could affect the extent to which a particular objective, projection, estimate, or prediction is realized. As a result, you are cautioned not to place undue reliance on such statements.

These forward-looking statements involve risks and uncertainties including, but not limited to, the following:

•the effects of economic, financial, credit, and market conditions on our financial and regulatory condition and results of operations, including changes in economic growth, general liquidity conditions, inflation and deflation, employment rates, interest rates, interest rate spreads, interest rate volatility, mortgage originations, prepayment activity, housing prices, asset delinquencies, members’ deposit flows, liquidity needs, and loan demand; changes in the general economy, including changes resulting from U.S. fiscal and monetary policy, actions of the Federal Open Market Committee (FOMC), or changes in credit ratings of the U.S. federal government; and the condition of the mortgage and housing markets on our mortgage-related assets; and the condition of the capital markets on our COs;

•political events, including legislative, regulatory, judicial, or other developments that affect the Bank, its members, counterparties, investors in the consolidated obligations of the FHLBanks, the organization and structure of the FHLBank System, our ability to access the capital markets, or our counterparties, such as any GSE legislative reforms, any changes resulting from the FHFA’s comprehensive review and analysis of the FHLBank System, changes in the FHLBank Act, changes in applicable sections of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992, or changes in other statutes or regulations applicable to the FHLBanks;

•our ability to declare and pay dividends consistent with past practices as well as any plans to repurchase excess capital stock, and any amendments to our capital plan;

•competitive forces including, without limitation, other sources of funding available to our members and other entities borrowing funds in the capital markets;

•changes in the value and liquidity of collateral we hold as security for obligations of our members and counterparties;

•the impact of new accounting standards and the application of accounting rules, including the impact of regulatory guidance on our application of such standards and rules;

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

•membership conditions and changes, including changes resulting from member failures, mergers or changing financial health, changes due to member eligibility, changes in the principal place of business of members, or the addition of new members;

•external events, such as general economic and financial instabilities, political instability, wars, pandemics and other health emergencies, and natural disasters, including disasters caused by significant climate change, which, among other things, could damage our facilities or the facilities of our members, damage or destroy collateral that members have pledged to secure advances or mortgages that we hold for our portfolio, and which could cause us to experience losses or be exposed to a greater risk that pledged collateral would be inadequate in the event of a default;

•the pace of technological change and our ability to develop and support internal controls, information systems, and other operating technologies that effectively manage the risks we face, including but not limited to, failures, interruptions, or security breaches and other cybersecurity incidents; and

•our ability to attract and retain skilled employees, including our key personnel.

These forward-looking statements speak only as of the date they are made, and we do not undertake to update any forward- looking statement herein or that may be made from time to time on our behalf.

The Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our interim financial statements and notes, which begin on page three, and the 2023 Annual Report.

33

EXECUTIVE SUMMARY

Net income for the quarter ended March 31, 2024, was $77.8 million, compared with net income of $57.2 million for the same period in 2023, primarily the result of an increase of $27.4 million in net interest income after provision for credit losses, partially offset by a $1.6 million increase in operating expenses and a $1.5 million increase in expenses for our discretionary housing and community investment programs.

Net interest income after provision for credit losses for the three months ended March 31, 2024, was $109.2 million, compared with $81.8 million for the same period in 2023. The $27.4 million increase in net interest income after provision for credit losses was primarily driven by an increase in average daily yields resulting from higher short-term market interest rates in the quarter ended March 31, 2024, compared to the corresponding prior year period as well as growth in our average mortgage-backed securities portfolio and average mortgage loan portfolio, moderated by declines in our average advances portfolio and average short-term money-market investments. In addition, there was a $12.4 million favorable variance in net unrealized gains and losses on fair value hedge ineffectiveness attributable to an increase in intermediate-term interest rates during the quarter ended March 31, 2024, compared to a decrease in intermediate-term interest rates during the same period in 2023.

Total assets declined $1.1 billion to $66.0 billion over the three months ended March 31, 2024. As of March 31, 2024, advances totaled $39.9 billion, a decrease of $2.1 billion from $42.0 billion at December 31, 2023. At March 31, 2024, investment securities and short-term money-market investments totaled $22.3 billion, an increase of $1.1 billion from December 31, 2023, while mortgage loans totaled $3.1 billion, an increase of $87.1 million from December 31, 2023.

Our retained earnings grew to $1.8 billion at March 31, 2024, an increase of $36.4 million from December 31, 2023, and equals 2.8 percent of total assets at March 31, 2024. We continue to satisfy all regulatory capital requirements as of March 31, 2024.

On April 19, 2024, our board of directors declared a cash dividend that was equivalent to an annual yield of 8.40 percent on the average daily balance of capital stock outstanding during the first quarter of 2024. The yield is equivalent to the daily average of the Secured Overnight Financing Rate (SOFR) for the first quarter of 2024 plus 300 basis points.

Our overall results of operations are influenced by the economy, interest rates, members’ demand for liquidity and our ability to maintain sufficient access to funding at relatively favorable costs. During the three months ended March 31, 2024, average short-term interest rates were higher than in the comparable period of the prior year, due to the Federal Reserve's increase in the target range for the federal funds rate by 100 basis points in 2023. Intermediate-term interest rates also increased during the period covered by this report.

Generally, investor demand for high credit quality, fixed-income investments, including COs, continued to be strong relative to other investments. Yield spreads on CO debt relative to benchmark yields for comparable debt remained relatively stable during the period covered by this report. Our flexibility in utilizing various funding tools, in combination with a diverse investor base and our status as a government-sponsored enterprise, have helped provide reliable market access and demand for COs throughout fluctuating market environments and regulatory changes affecting dealers of and investors in COs. The Bank has continued to meet all funding needs during the quarter ended March 31, 2024.

Net Interest Income, Margin, and Spread

Net interest spread was 0.31 percent for the three months ended March 31, 2024, an increase of 14 basis points from the same period in 2023, and net interest margin was 0.67 percent, an increase of 20 basis points from the three months ended March 31, 2023. The increase in net interest spread and margin was primarily attributable to the favorable variance in net unrealized gains and losses on fair value hedge ineffectiveness and to net accretion of MBS premium. In addition, the increase in net interest margin benefited from higher market interest rates.

Housing and Community Investment Contribution Expenses

We are required to annually set aside a portion of our earnings for our Affordable Housing Program. These funds assist members serving very low-, low-, and moderate-income households and support community economic development. The Bank's net income for the three months ended March 31, 2024, resulted in an accrual of $8.7 million to the AHP pool of funds that will be available to members in 2025.

In addition to the required AHP assessment, the Bank recorded an expense of $2.3 million during the three months ended March 31, 2024, for our Jobs for New England (JNE) program.

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Legislative and Regulatory Developments

Legislation has been proposed or enacted, and the FHFA and others with authority over the economy, our industry, and our business activities have taken action during 2024 as described in Legislative and Regulatory Developments. Such developments affect the way we conduct business and could impact how we satisfy our mission as well as the value of membership in the Bank.

ECONOMIC CONDITIONS

Economic Environment

Real gross domestic product (GDP) increased at an annual rate of 1.6 percent in the first quarter of 2024. The expansion in the first quarter was driven mainly by consumer and government spending. The increase in consumer spending reflected an increase in spending on services that was partly offset by a decrease in spending on goods.

Employment continued to improve with job gains averaging 269,000 per month in the first quarter of 2024. In April 2024, employment increased by 175,000 and the unemployment rate was 3.9 percent. The unemployment rate for the New England region in March 2024 was 3.3 percent, ranging from 2.2 percent in Vermont to 4.5 percent in Connecticut.

In March 2024, the Consumer Price Index (CPI) increased 0.4 percent from the preceding month, representing a year-over- year increase of 3.5 percent. CPI inflation was driven mainly by the cost of shelter and gasoline. The FHFA reported that housing prices rose 7.0 percent across the U.S. from February 2023 to February 2024. Over the same period, housing prices in New England rose 10.5 percent.

Interest-Rate Environment

On May 1, 2024, the FOMC maintained the target range for the federal funds rate at 525 and 550 basis points and stated that in considering any adjustments to the target range for the federal funds rate, the FOMC will carefully assess incoming data, the evolving outlook, and the balance of risks. The FOMC stated it does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent. The FOMC also stated that it would continue reducing its holdings of U.S. Treasury securities, agency debt, and agency mortgage-backed securities. Beginning in June 2024 the FOMC will slow the pace of decline of its securities holdings by reducing the monthly redemption cap on U.S. Treasury securities from $60 billion to $25 billion. The FOMC will maintain the monthly redemption cap on agency debt and agency mortgage-backed securities at $35 billion and will reinvest any principal payments in excess of this cap into U.S. Treasury securities.

In the first quarter of 2024, short-term rates remained elevated, consistent with the FOMC’s target range for the federal funds rate. Long-term rates fluctuated, along with expectations regarding the timing and magnitude of potential rate cuts by the FOMC. At the end of March 2024, 2-, 5- and 10-year Treasury rates were lower than overnight and 3-month rates.

Table 1 - Key Interest Rates(1)

	Three Month Average		Ending Rate
	March 31, 2024	March 31, 2023	March 31, 2024	December 31, 2023
SOFR	5.31%	4.50%	5.34%	5.38%
Federal funds effective rate	5.33%	4.52%	5.33%	5.33%
3-month U.S. Treasury yield	5.37%	4.69%	5.38%	5.33%
2-year U.S. Treasury yield	4.49%	4.36%	4.62%	4.25%
5-year U.S. Treasury yield	4.12%	3.81%	4.21%	3.85%
10-year U.S. Treasury yield	4.15%	3.64%	4.20%	3.88%

________________

(1)    Source: Bloomberg

SELECTED FINANCIAL DATA

The following financial highlights for the statement of condition and statement of operations for December 31, 2023, have been derived from our audited financial statements. Financial highlights for the quarter-ends have been derived from our unaudited financial statements.

35

Table 2 - Selected Financial Data

(dollars in thousands)

	March 31, 2024			December 31, 2023			September 30, 2023			June 30, 2023			March 31, 2023
Statement of Condition
Total assets	$	66,030,276		$	67,142,274		$	62,747,403		$	63,281,547		$	80,163,644
Investments(1)	22,263,743			21,167,632			18,736,546			19,319,360			27,151,119
Advances	39,905,499			41,958,583			40,130,845			40,245,829			49,622,282
Mortgage loans held for portfolio, net(2)	3,146,391			3,059,331			2,940,189			2,807,299			2,724,612
Deposits and other borrowings	921,774			922,879			1,150,506			1,021,973			872,356
Consolidated obligations:
Bonds	41,023,055			40,248,743			37,363,959			40,878,480			41,669,836
Discount notes	20,055,973			22,000,546			20,337,099			17,460,907			33,448,155
Total consolidated obligations	61,079,028			62,249,289			57,701,058			58,339,387			75,117,991
Mandatorily redeemable capital stock	6,083			6,083			6,143			5,303			10,290
Class B capital stock outstanding-putable(3)	1,983,103			2,042,453			2,007,059			2,006,046			2,404,394
Unrestricted retained earnings	1,360,373			1,339,546			1,338,335			1,328,645			1,305,619
Restricted retained earnings	466,723			451,154			440,860			426,846			411,133
Total retained earnings	1,827,096			1,790,700			1,779,195			1,755,491			1,716,752
Accumulated other comprehensive loss	(242,912)			(294,539)			(326,465)			(291,685)			(306,399)
Total capital	3,567,287			3,538,614			3,459,789			3,469,852			3,814,747
Results of Operations
Net interest income after provision for credit losses	$	109,242		$	79,640		$	104,137		$	109,628		$	81,827
Other income, net	2,608			4,733			2,067			3,640			4,364
Other expense	25,340			27,170			28,339			25,958			22,629
AHP assessments	8,664			5,733			7,798			8,742			6,375
Net income	$	77,846		$	51,470		$	70,067		$	78,568		$	57,187
Other Information
Dividends declared	$	41,450		$	39,965		$	46,363		$	39,829		$	31,003
Dividend payout ratio	53.25		%	77.65		%	66.17		%	50.69		%	54.21		%
Weighted-average dividend rate(4)	8.40			8.31			8.04			7.55			6.67
Return on average equity(5)	8.94			6.03			8.27			8.44			6.50
Return on average assets	0.47			0.31			0.43			0.42			0.32
Net interest margin(6)	0.67			0.49			0.65			0.59			0.47
Average equity to average assets	5.22			5.10			5.16			4.96			4.93
Total regulatory capital ratio(7)	5.78			5.72			6.04			5.95			5.15

_______________________

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

(2)The allowance for credit losses for mortgage loans amounted to $2.6 million as of March 31, 2024 and $2.0 million for each of the periods ending December 31, 2023, September 30, 2023, June 30, 2023, and March 31, 2023, respectively.

(3)Capital stock is putable at the option of a member upon five years' written notice, subject to applicable restrictions.

(4)Weighted-average dividend rate is the dividend amount declared divided by the average daily balance of capital stock eligible for dividends.

(5)Return on average equity is net income divided by the total of the average daily balance of outstanding Class B capital stock, accumulated other comprehensive income and total retained earnings.

(6)Net interest margin is net interest income before provision for credit losses as a percentage of average earning assets.

(7)Total regulatory capital ratio is capital stock (including mandatorily redeemable capital stock) plus total retained earnings as a percentage of total assets. See Part I — Item 1 — Financial Statements — Notes to the Financial Statements — Note 9 — Capital.

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RESULTS OF OPERATIONS

Net income increased to $77.8 million for the three months ended March 31, 2024, from $57.2 million for the same period in 2023. The primary reasons for the increase are discussed under Executive Summary.

Net Interest Income

Net interest income after provision for credit losses for the three months ended March 31, 2024, was $109.2 million, compared with $81.8 million for the same period in 2023. The $27.4 million increase in net interest income after provision for credit losses was primarily driven by an increase in average daily yields resulting from higher short-term market interest rates in the quarter ended March 31, 2024, compared to the corresponding prior year period as well as increases of $1.7 billion and $356.1 million in our average mortgage-backed securities portfolio and average mortgage loan portfolio, respectively, moderated by a $4.6 billion decline in our average advances portfolio and a $2.5 billion decline in average short-term money-market investments. In addition, there was a $12.4 million favorable variance in net unrealized gains and losses on fair value hedge ineffectiveness attributable to an increase in intermediate-term interest rates during the quarter ended March 31, 2024, compared to a decrease in interest rates during the same period in 2023. Net interest spread was 0.31 percent for the three months ending March 31, 2024, an increase of 14 basis points from the same period in 2023, and net interest margin was 0.67 percent, an increase of 20 basis points from the same period in 2023.

Table 3 presents major categories of average balances, related interest income/expense, and average yields/rates for interest-earning assets and interest-bearing liabilities. Our primary source of earnings is net interest income, which is the interest earned on advances, mortgage loans, and investments less interest paid on COs, deposits, and other sources of funds.

Table 3 - Net Interest Spread and Margin

(dollars in thousands)

	For the Three Months Ended March 31,
	2024						2023
	Average Balance		Interest Income / Expense		Average Yield/Rate(1)		Average Balance		Interest Income / Expense		Average Yield/Rate(1)
Assets
Advances	$	39,641,233	$	528,546	5.36	%	$	44,255,550	$	501,615	4.60	%
Interest-bearing deposits	2,690,980		36,326		5.43		2,884,371		32,602		4.58
Securities purchased under agreements to resell	1,061,538		14,311		5.42		2,260,600		25,681		4.61
Federal funds sold	3,650,428		49,218		5.42		4,725,589		52,945		4.54
Investment securities (2)	15,783,431		234,315		5.97		14,160,582		168,759		4.83
Mortgage loans (2)(3)	3,096,228		28,587		3.71		2,740,088		21,188		3.14
Other earning assets	—		—		—		11,111		134		4.89
Total interest-earning assets	65,923,838		891,303		5.44		71,037,891		802,924		4.58
Other non-interest-earning assets	1,439,946						1,657,625
Fair-value adjustments on investment securities	(333,089)						(321,986)
Total assets	$	67,030,695	$	891,303	5.35	%	$	72,373,530	$	802,924	4.50	%
Liabilities and capital
Consolidated obligations
Discount notes	$	19,843,709	$	264,603	5.36	%	$	29,943,607	$	336,683	4.56	%
Bonds	40,653,328		507,136		5.02		35,645,506		378,094		4.30
Other interest-bearing liabilities	826,748		9,722		4.73		679,604		6,226		3.72
Total interest-bearing liabilities	61,323,785		781,461		5.13		66,268,717		721,003		4.41
Other non-interest-bearing liabilities	2,206,257						2,537,792
Total capital	3,500,653						3,567,021
Total liabilities and capital	$	67,030,695	$	781,461	4.69	%	$	72,373,530	$	721,003	4.04	%
Net interest income			$	109,842					$	81,921
Net interest spread					0.31	%					0.17	%
Net interest margin					0.67	%					0.47	%

_________________________

(1)    Yields are annualized.

(2)    Average balances are reflected at amortized cost.

37

(3)    Nonaccrual loans are included in the average balances used to determine average yield.

Rate and Volume Analysis

Changes in both average balances (volume) and interest rates influence changes in net interest income and net interest margin. Table 4 summarizes changes in interest income and interest expense for the three months ended March 31, 2024 and 2023. Changes in interest income and interest expense that are not identifiable as either volume or rate-related, but equally attributable to both volume and rate changes, have been allocated to the volume and rate categories based upon the proportion of the absolute value of the volume and rate changes.

Table 4 - Rate and Volume Analysis

(dollars in thousands)

	For the Three Months Ended March 31, 2024 vs. 2023
	Increase (Decrease) due to
	Volume		Rate		Total
Interest income
Advances	$	(55,727)	$	82,658	$	26,931
Interest-bearing deposits	(2,295)		6,019		3,724
Securities purchased under agreements to resell	(15,503)		4,133		(11,370)
Federal funds sold	(13,340)		9,613		(3,727)
Investment securities	20,852		44,704		65,556
Mortgage loans	2,968		4,431		7,399
Other earning assets	(67)		(67)		(134)
Total interest income	(63,112)		151,491		88,379
Interest expense
Consolidated obligations
Discount notes	(127,174)		55,094		(72,080)
Bonds	57,269		71,773		129,042
Other interest-bearing liabilities	1,514		1,982		3,496
Total interest expense	(68,391)		128,849		60,458
Change in net interest income	$	5,279	$	22,642	$	27,921

Average Balance of Advances Outstanding

The average balance of total advances decreased $4.6 billion, or 10.4 percent, for the quarter ended March 31, 2024, compared with the same period in 2023. This decrease in the average balance of advances was concentrated in short-term fixed rate advances and variable-rate advances. We cannot predict future member demand for advances.

Average Balance of Investments

Average short-term money-market investments, consisting of interest-bearing deposits, securities purchased under agreements to resell, federal funds sold, and loans to other FHLBanks, decreased $2.5 billion, or 25.1 percent, for the quarter ended March 31, 2024, compared with the same period in 2023, as liquidity needs were greater in 2023 as compared to 2024 due to increased advances borrowing activity in the first quarter of 2023. The yield earned on short-term money-market investments is highly correlated to short-term market interest rates. As a result of the FOMC’s increase in the target range for the federal funds rate, average yields on overnight federal funds sold increased from 4.54 percent during the quarter ended March 31, 2023, to 5.42 percent during the quarter ended March 31, 2024, while average yields on securities purchased under agreements to resell increased from 4.61 percent for the quarter ended March 31, 2023, to 5.42 percent for the quarter ended March 31, 2024. These investments are used for liquidity management.

Average investment-securities balances increased $1.6 billion, or 11.5 percent for the quarter ended March 31, 2024, compared with the same period in 2023.

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Average Balance of COs

Average CO balances decreased $5.1 billion, or 7.8 percent, for the quarter ended March 31, 2024, compared with the same period in 2023, resulting from our decreased funding needs principally due to the decrease in our average advances balances. This decrease consisted of a $10.1 billion decrease in CO discount notes, partially offset by a $5.0 billion increase in CO bonds.

The average balance of CO discount notes represented approximately 32.8 percent of total average COs for the quarter ended March 31, 2024, compared with 45.7 percent of total average COs for the quarter ended March 31, 2023. The average balance of CO bonds represented 67.2 percent and 54.3 percent of total average COs outstanding during the three months ended March 31, 2024 and 2023, respectively.

Impact of Derivatives and Hedging Activities

Net interest income includes interest accrued on interest-rate-exchange agreements that are associated with advances, investments, and debt instruments that qualify for hedge accounting. The fair value gains and losses of derivatives and hedged items designated in fair-value hedge relationships are also recognized as interest income or interest expense. We enter into derivatives to manage the interest-rate-risk exposures inherent in otherwise unhedged assets and liabilities and to achieve our risk-management objectives. We generally use derivative instruments that qualify for hedge accounting as interest-rate risk-management tools. These derivatives serve to stabilize net income when interest rates fluctuate. Accordingly, the impact of derivatives on net interest income and net interest margin, as well as other income, should be viewed in the overall context of our risk-management strategy.

Table 5 provides a summary of the impact of derivatives and hedging activities on our earnings.

Table 5 - Effect of Derivative and Hedging Activities

(dollars in thousands)

	For the Three Months Ended March 31, 2024
Net Effect of Derivatives and Hedging Activities	Advances		Investments		Mortgage Loans		CO Bonds		CO Discount Notes		Total
Net interest income
Amortization / accretion of hedging activities (1)	$	(351)	$	—	$	—	$	(2,532)	$	—	$	(2,883)
Gains (losses) on designated fair-value hedges	2,285		3,045		—		(257)		—		5,073
Net interest settlements on derivatives(2)	58,344		124,319		—		(162,260)		—		20,403
Price alignment interest (3)	(860)		(14,154)		—		481		—		(14,533)
Total net interest income	59,418		113,210		—		(164,568)		—		8,060
Net gains (losses) on derivatives and hedging activities
Gains (losses) on derivatives not receiving hedge accounting	23		—		—		—		(32)		(9)
Mortgage delivery commitments	—		—		(456)		—		—		(456)
Price alignment interest (3)	—		—		—		—		15		15
Net gains (losses) on derivatives and hedging activities	23		—		(456)		—		(17)		(450)
Total net effect of derivatives and hedging activities	$	59,441	$	113,210	$	(456)	$	(164,568)	$	(17)	$	7,610

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	For the Three Months Ended March 31, 2023
Net Effect of Derivatives and Hedging Activities	Advances		Investments		Mortgage Loans		CO Bonds		Total
Net interest income
Amortization / accretion of hedging activities in net interest income (1)	$	(512)	$	—	$	(82)	$	(601)	$	(1,195)
Losses on designated fair-value hedges	(1,068)		(6,104)		—		(150)		(7,322)
Net interest settlements included in net interest income (2)	28,455		97,226		—		(140,810)		(15,129)
Price alignment interest (3)	(1,754)		(10,058)		—		283		(11,529)
Total net interest income	25,121		81,064		(82)		(141,278)		(35,175)
Net gains on derivatives and hedging activities
Mortgage delivery commitments	—		—		67		—		67
Net gains on derivatives and hedging activities	—		—		67		—		67
Total net effect of derivatives and hedging activities	$	25,121	$	81,064	$	(15)	$	(141,278)	$	(35,108)

________________________

(1)    Represents the amortization/accretion of hedging fair-value adjustments and cash-flow hedge amortization reclassified from accumulated other comprehensive income.

(2)    Represents interest income/expense on derivatives included in net interest income.

(3)    Relates to derivatives for which variation margin payments are characterized as daily settled contracts.

FINANCIAL CONDITION

Advances

At March 31, 2024, the advances portfolio totaled $39.9 billion, a decrease of $2.1 billion from $42.0 billion at December 31, 2023.

Table 6 - Advances Outstanding by Product Type

(dollars in thousands)

 

	March 31, 2024				December 31, 2023
	Par Value		Percent of Total		Par Value		Percent of Total
Fixed-rate advances
Short-term	$	12,176,055	30.4	%	$	11,725,587	27.9	%
Long-term	11,736,506		29.3		11,550,277		27.5
Putable	6,781,070		16.9		5,896,570		14.0
Callable	2,500,000		6.2		2,500,000		5.9
Overnight	1,396,290		3.5		3,599,404		8.6
Amortizing	1,041,938		2.6		1,058,714		2.5
	35,631,859		88.9		36,330,552		86.4
Variable-rate advances
Simple variable (1)	4,464,184		11.1		5,650,195		13.4
Putable	10,000		—		80,000		0.2
All other variable-rate indexed advances	5,302		—		5,909		—
	4,479,486		11.1		5,736,104		13.6
Total par value	$	40,111,345	100.0	%	$	42,066,656	100.0	%

________________________

(1)    Includes floating-rate advances that may be contractually prepaid by the borrower on a floating-rate reset date without incurring prepayment or termination fees.

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See Part I — Item 1 — Financial Statements — Notes to the Financial Statements — Note 3 — Advances for disclosures relating to redemption terms of advances.

Advances Credit Risk

We manage credit risk on advances by monitoring the financial condition of our borrowers and by holding sufficient collateral to protect the Bank from credit losses. All pledged collateral is subject to collateral discounts, or haircuts, to the market value or par value, as applicable, based on our opinion of the risk that such collateral presents. We are prohibited by Section 10(a) of the FHLBank Act from making advances without sufficient collateral. We have never experienced a credit loss on an advance.

We assign each depository borrower to one of the following three categories based on our assessment of the borrower's overall financial condition and other factors:

Category-1    Members that are generally in satisfactory financial condition.

Category-2    Members that show financial weakness or weakening financial trends in key financial indices and/or regulatory findings.

Category-3    Members with financial weaknesses that present an elevated level of concern.

We lend to our non-depository company members based on our assessment of their financial condition and their pledge and delivery of sufficient amounts of eligible collateral.

Table 7 - Advances Outstanding by Borrower Category

(dollars in thousands)

	As of March 31, 2024
	Number of Borrowers	Par Value of Advances Outstanding		Discounted Collateral		Ratio of Discounted Collateral to Advances
Category-1	222	$	34,116,626	$	127,797,210	374.6	%
Category-2	19	998,816		1,747,816		175.0
Category-3	15	508,093		621,545		122.3
Insurance companies	26	4,487,810		6,686,202		149.0
Total	282	$	40,111,345	$	136,852,773	341.2	%

	As of December 31, 2023
	Number of Borrowers	Par Value of Advances Outstanding		Discounted Collateral		Ratio of Discounted Collateral to Advances
Category-1	229	$	35,920,638	$	130,385,492	363.0	%
Category-2	21	1,241,449		1,887,529		152.0
Category-3	15	495,701		626,405		126.4
Insurance companies	24	4,408,868		6,096,632		138.3
Total	289	$	42,066,656	$	138,996,058	330.4	%

The method by which a borrower pledges collateral depends upon the type of borrower (depository vs. non-depository), the category to which the borrower is assigned, and the type of collateral that the borrower pledges. Moreover, borrowers in Category-1 are eligible to specifically list and identify single-family owner-occupied residential mortgage loans at a lower discount than is allowed if the collateral is not specifically listed and identified.

The Bank may adjust the category of a member from time to time based on the financial reviews and other circumstances of the member.

We have not recorded any allowance for credit losses on advances at March 31, 2024, and December 31, 2023, for the reasons discussed in Part 1 — Item 1 — Financial Statements — Notes to the Financial Statements — Note 3 — Advances.

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Table 8 - Top Five Advance-Borrowing Institutions

(dollars in thousands)

	March 31, 2024
Name	Par Value of Advances		Percent of Total Par Value of Advances		Weighted-Average Rate (1)
Webster Bank, N.A.	$	3,659,930	9.1	%	5.49	%
State Street Bank and Trust Company	3,500,000		8.7		5.36
Massachusetts Mutual Life Insurance Company	2,100,000		5.3		1.78
Citizens Bank, N.A.	2,036,022		5.1		5.50
Hingham Institution for Savings	1,684,675		4.2		4.73
Total of top five advance-borrowing institutions	$	12,980,627	32.4	%

	December 31, 2023
Name	Par Value of Advances		Percent of Total Par Value of Advances		Weighted-Average Rate (1)
Citizens Bank, N.A.	$	4,286,128	10.2	%	5.57	%
State Street Bank and Trust Company	2,500,000		6.0		5.27
Webster Bank, N.A.	2,360,018		5.6		5.52
Massachusetts Mutual Life Insurance Company	2,100,000		5.0		1.78
Hingham Institution for Savings	1,692,675		4.0		4.75
Total of top five advance-borrowing institutions	$	12,938,821	30.8	%

_______________________

(1)    Weighted-average rates are based on the contract rate of each advance without taking into consideration the effects of interest-rate-exchange agreements that we may use as hedging instruments.

Investments

At March 31, 2024, investment securities and short-term money-market instruments totaled $22.3 billion, an increase of $1.1 billion from $21.2 billion at December 31, 2023.

Short-term money-market investments increased $866.2 million to $6.6 billion at March 31, 2024, compared with December 31, 2023. The increase was attributable to increases of $551.0 million in federal funds sold, $165.2 million in interest bearing deposits, and $150.0 million in securities purchased under agreements to resell.

Investment securities increased $229.9 million to $15.7 billion at March 31, 2024, compared with $15.4 billion at December 31, 2023.

Investments Credit Risk

We are subject to credit risk on unsecured investments consisting primarily of short-term (meaning one year and under to maturity) money-market instruments issued by high-quality financial institutions and long-term (original maturity in excess of one year) debentures issued or guaranteed by U.S. agencies, U.S government-owned corporations, GSEs, and supranational institutions.

We place short-term funds with large, high-quality financial institutions that must be rated in at least the third-highest internal rating category on a rating scale of FHFA1 through FHFA7, reflecting progressively lower credit quality. The internal rating categories of FHFA1 through FHFA4 are considered to be investment quality. As of March 31, 2024, all of these placements either expired within one day or were payable upon demand. See Part 1 — Item 1 — Business — Business Lines — Investments in the 2023 Annual Report for additional information.

In addition to these unsecured investments, we also make secured investments in the form of securities purchased under agreements to resell secured by U.S. Treasury, U.S. government guaranteed, or agency obligations, with current terms to maturity up to 95 days and in MBS and HFA securities that are directly or indirectly supported by underlying mortgage loans.

42

We actively monitor our investment credit exposures and the credit quality of our counterparties, including assessments of each counterparty's financial performance, capital adequacy, sovereign support, and collateral quality and performance, as well as related market signals such as equity prices and credit default swap spreads. We may reduce or suspend credit limits and/or seek to reduce existing exposures, as appropriate, as a result of these monitoring activities.

Table 9 - Credit Ratings of Investments at Carrying Value

(dollars in thousands)

	As of March 31, 2024
	Long-Term Credit Rating
Investment Category	Triple-A		Double-A		Single-A		Unrated
Money-market instruments: (1)
Interest-bearing deposits	$	—	$	150	$	1,808,686	$	—
Securities purchased under agreements to resell	—		—		1,750,000		—
Federal funds sold	—		486,000		2,565,000		—
Total money-market instruments	—		486,150		6,123,686		—
Investment securities:(2)
Non-MBS:
U.S. Treasury obligations	—		5,640,649		—		—
Corporate bonds	—		—		—		1,567
U.S. government-owned corporations	—		229,923		—		—
GSE	—		96,950		—		—
Supranational institutions	340,676		—		—		—
HFA securities	17,885		4,083		—		—
Total non-MBS	358,561		5,971,605		—		1,567
MBS:
U.S. government guaranteed - single-family	—		47,081		—		—
U.S. government guaranteed - multifamily	—		473,699		—		—
GSE – single-family	—		1,301,037		—		—
GSE – multifamily	—		7,500,357		—		—
Total MBS	—		9,322,174		—		—
Total investment securities	358,561		15,293,779		—		1,567
Total investments	$	358,561	$	15,779,929	$	6,123,686	$	1,567

_______________________

(1)    The counterparty NRSRO rating is used for money-market instruments. Counterparty ratings are obtained from Moody's, Fitch, Inc. (Fitch), and S&P and are each as of March 31, 2024. If there is a split rating, the lowest rating is used. In certain instances where a counterparty is unrated, the Bank may assign a deemed rating to the counterparty and that deemed rating is used.

(2)    The issue rating is used for investment securities. Issue ratings are obtained from Moody’s, Fitch, and S&P. If there is a split rating, the lowest rating is used.

FHFA regulations include limits on the amount of unsecured credit we may extend to a counterparty or to a group of affiliated counterparties based on a percentage of regulatory capital and an internal credit rating determined by each FHLBank. See Part 1 — Item 1 — Business — Business Lines — Investments in the 2023 Annual Report for additional information. Under these regulations, the level of regulatory capital is determined as the lesser of our total regulatory capital or the regulatory capital of the counterparty. The applicable regulatory capital is then multiplied by a specified percentage for each counterparty, the

43

product of which is the maximum amount of unsecured credit exposure we may extend to that counterparty. The percentage that we may offer for extensions of unsecured credit other than overnight sales of federal funds ranges from one to 15 percent based on the counterparty's credit rating. Extensions of unsecured credit for overnight sales of federal funds range from one to 30 percent based on the counterparty’s credit rating. From time to time, we may establish internal credit limits lower than permitted by regulation for individual counterparties.

Table 10 - Unsecured Credit Related to Money-Market Instruments and Debentures by Carrying Value

(dollars in thousands)

	Carrying Value
	March 31, 2024		December 31, 2023
Federal funds sold	$	3,051,000	$	2,500,000
Interest bearing deposits	1,808,836		1,643,587
Supranational institutions	340,676		346,375
U.S. government-owned corporations	229,923		235,191
GSEs	96,950		99,421
Corporate bonds	1,567		1,395

Mortgage Loans

We invest in mortgages through the MPF program. The MPF program is further described under — Mortgage Loans Credit Risk and in Part I — Item 1 — Business — Business Lines — Mortgage Loan Finance in the 2023 Annual Report.

As of March 31, 2024, our mortgage loan investment portfolio totaled $3.1 billion, an increase of $87.1 million from December 31, 2023. This increase is the result of an increase in mortgage loan purchase volumes during the quarter ended March 31, 2024, compared to the same period of the prior year. We expect continued competition from Fannie Mae and Freddie Mac, as well as from private mortgage loan acquirers, for loan investment opportunities.

Mortgage Loans Credit Risk

We are subject to credit risk from the mortgage loans in which we invest due to our exposure to the credit risk of the underlying borrowers and the credit risk of the participating financial institutions when the participating financial institutions retain credit-enhancement and/or servicing obligations. For additional information on the credit risks arising from our participation in the MPF program, see Part II — Item 7 — Management's Discussion and Analysis of Financial Condition and Results of Operations — Financial Condition — Mortgage Loans — Mortgage Loans Credit Risk in the 2023 Annual Report. For information on the credit performance of our mortgage loan portfolio as of March 31, 2024, see Item I — Financial Statements — Note 4 — Mortgage Loans Held for Portfolio in this report.

Although our mortgage loan portfolio includes loans throughout the U.S., concentrations of 5 percent or greater of the par value of our conventional mortgage loan portfolio are shown in Table 11.

Table 11 - State Concentrations by Par Value

	Percentage of Total Par Value of Conventional Mortgage Loans
	March 31, 2024		December 31, 2023
Massachusetts	61	%	62	%
Maine	13		13
Connecticut	7		7
Vermont	5		5
All others	14		13
Total	100	%	100	%

We place conventional mortgage loans on nonaccrual status when the collection of interest or principal is doubtful or contractual principal or interest is 90 days or more past due. Accrued interest on nonaccrual loans is excluded from interest income. We monitor the delinquency levels of the mortgage loan portfolio on a monthly basis.

44

Table 12 - Mortgage Loans - Risk Elements and Credit Losses

(dollars in thousands)

	For the Three Months Ended March 31,
	2024			2023
Average par value of mortgage loans outstanding during the period ending	$	3,058,116		$	2,700,630
Net recoveries	—			6
Net charge-offs to average loans outstanding during the period ending	—		%	—		%
	As of March 31, 2024			As of December 31, 2023
Mortgage loans held for portfolio, par value	$	3,110,666		$	3,023,423
Nonaccrual loans, par value	7,730			7,871
Allowance for credit losses on mortgage loans	2,600			2,000
Allowance for credit losses to mortgage loans held for portfolio	0.08			0.07
Nonaccrual loans to mortgage loans held for portfolio	0.25			0.26
Allowance for credit losses to nonaccrual loans	33.64			25.41

Mortgage Insurance Companies. We are exposed to credit risk from primary mortgage insurance (PMI) coverage on individual loans. As of March 31, 2024, we were the beneficiary of PMI coverage of $85.9 million on $326.4 million of conventional mortgage loans. These amounts relate to loans originated with PMI and for which current loan-to-value ratios exceed 78 percent (determined by recalculating the original loan-to-value ratio using the current par value divided by the appraised home value at the time of loan origination).

We have analyzed our potential loss exposure to mortgage insurance companies and do not expect incremental losses based on these exposures at this time.

Consolidated Obligations

See Liquidity and Capital Resources for information regarding our COs.

Derivative Instruments

All derivatives are recorded on the statement of condition at fair value and classified as either derivative assets or derivative liabilities. Bilateral and cleared derivatives outstanding are classified as assets or liabilities according to the net fair value of derivatives aggregated by each counterparty. Derivative assets' net fair value, net of cash collateral and accrued interest, totaled $363.8 million and $383.1 million as of March 31, 2024, and December 31, 2023, respectively. Derivative liabilities' net fair value, net of cash collateral and accrued interest, totaled $7.1 million and $3.0 million as of March 31, 2024, and December 31, 2023, respectively.

The following table presents a summary of the notional amounts and estimated fair values of our outstanding derivatives, excluding accrued interest, and related hedged item by product and type of accounting treatment as of March 31, 2024, and December 31, 2023. The notional amount represents the hypothetical principal basis used to determine periodic interest payments received and paid. However, the notional amount does not represent an actual amount exchanged or our overall exposure to credit and market risk.

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Table 13 - Derivatives and Hedge-Accounting Treatment

(dollars in thousands)

			March 31, 2024				December 31, 2023
Hedged Item	Derivative	Designation(2)	Notional Amount		Fair  Value		Notional Amount		Fair Value
Advances (1)	Swaps	Fair value	$	13,473,006	$	(32,140)	$	12,534,180	$	(120,326)
	Swaps	Economic	75,000		(12)		90,000		(793)
Total associated with advances			13,548,006		(32,152)		12,624,180		(121,119)
Available-for-sale securities	Swaps	Fair value	12,439,697		(225,165)		12,391,160		(197,733)
COs	Swaps	Fair value	24,934,000		(919,348)		26,662,140		(876,631)
	Swaps	Economic	528,493		(8)		—		—
	Forward starting swaps	Cash Flow	1,391,000		113		1,391,000		83
Total associated with COs			26,853,493		(919,243)		28,053,140		(876,548)
Total			52,841,196		(1,176,560)		53,068,480		(1,195,400)
Mortgage delivery commitments			36,827		8		29,995		290
Total derivatives			$	52,878,023	(1,176,552)		$	53,098,475	(1,195,110)
Accrued interest					321,667				262,631
Cash collateral, including related accrued interest					1,211,601				1,312,535
Net derivatives					$	356,716			$	380,056
Derivative asset					$	363,820			$	383,073
Derivative liability					(7,104)				(3,017)
Net derivatives					$	356,716			$	380,056

 _______________________

(1)    As of March 31, 2024 and December 31, 2023, embedded derivatives separated from certain advance contracts with notional amounts of $75.0 million and $90.0 million, respectively, and fair values of $12 thousand and $790 thousand, respectively, are not included in the table.

(2)    The hedge designation “fair value” represents the hedge classification for transactions that qualify for hedge-accounting treatment and hedge changes in fair value attributable to changes in the designated benchmark interest rate. The hedge designation "cash flow" represents the hedge classification for transactions that qualify for hedge-accounting treatment and hedge the exposure to variability in expected future cash flows. The hedge designation “economic” represents derivatives hedging specific or nonspecific assets, liabilities, or firm commitments that do not qualify or were not documented as fair-value or cash-flow hedges but are documented as serving a non-speculative use and are hedging strategies under our risk-management policy.

Derivative Instruments Credit Risk. We are subject to credit risk on derivatives. This risk arises from the risk of counterparty default on the derivative contract. The amount of unsecured credit exposure to derivative counterparty default is the amount by which the replacement cost of the defaulted derivative contract exceeds the value of any collateral held by us (if the counterparty is the net obligor on the derivative contract) or is exceeded by the value of collateral pledged by us to counterparties (if we are the net obligor on the derivative contract). We accept cash and securities collateral in accordance with the terms of the applicable master netting agreement for uncleared derivatives (principal-to-principal derivatives that are not centrally cleared) from counterparties with whom we are in a current positive fair-value position. We pledge cash and securities collateral in accordance with the terms of the applicable master netting agreement for uncleared derivatives to counterparties with whom we are in a current negative fair-value position. We currently pledge only cash collateral, including initial and variation margin, for cleared derivatives, but may also pledge securities for initial margin as allowed by the applicable DCO and clearing member.

Our daily average aggregate notional amount for uncleared derivatives transactions between June 2023 and August 2023 exceeded $8 billion and, as a result, we remained subject to two-way initial margin obligations as required by the Wall Street Reform and Consumer Protection Act. For uncleared derivatives transactions executed on or after September 1, 2022, a party

46

whose initial margin requirement exceeds a specified threshold (which may not exceed $50 million) would be required to deliver collateral in the amount by which the initial margin requirement exceeds such specified threshold. Initial margin is required to be held at a third-party custodian for the benefit of the secured party, which can only assert ownership of such collateral upon the occurrence of certain events, which may include an event of default due to bankruptcy, insolvency, or similar proceeding. As of March 31, 2024, all initial margin requirements owed to our uncleared derivative counterparties by us or owed to us by our uncleared derivative counterparties were less than specified delivery thresholds.

From time to time, due to timing differences or derivatives-valuation differences, between our calculated derivatives values and those of our counterparties, and to the contractual haircuts applied to securities, we receive from (or pledge to) our counterparties cash or securities collateral whose fair value is less (or more) than the current net positive (or net negative) fair-value of derivatives positions outstanding with them.

Table 14 - Credit Exposure to Derivatives Counterparties

(dollars in thousands)

	As of March 31, 2024
	Notional Amount		Net Derivatives Fair Value Before Collateral		Cash Collateral Pledged to Counterparty		Net Credit Exposure to Counterparties
Asset positions with credit exposure:
Uncleared derivatives
Single-A	$	70,000	$	51	$	—	$	51
Cleared derivatives	20,251,626		7,364		356,220		363,584
Liability positions with credit exposure:
Uncleared derivatives
Single-A	210,500		(115)		252		137
Total interest-rate swap positions with nonmember counterparties to which we had credit exposure	20,532,126		7,300		356,472		363,772
Mortgage delivery commitments (1)	36,827		48		—		48
Total	$	20,568,953	$	7,348	$	356,472	$	363,820

_______________________

(1)    Total fair-value exposures related to commitments to invest in mortgage loans are offset by certain pair-off fees. Commitments to invest in mortgage loans are reflected as derivatives. We do not collateralize these commitments. However, should the participating financial institution fail to deliver the mortgage loans as agreed, the participating financial institution is charged a fee to compensate us for the nonperformance.

For information on our approach to the credit risks arising from our use of derivatives, see Part II — Item 7 — Management’s Discussion and Analysis and Results of Operations — Financial Condition — Derivative Instruments — Derivative Instruments Credit Risk in the 2023 Annual Report.

LIQUIDITY AND CAPITAL RESOURCES

Our financial structure is designed to enable us to expand and contract our assets, liabilities, and capital in response to changes in membership composition and member credit needs. Our primary source of liquidity is our access to the capital markets through CO issuance, which is described in Part I — Item 1 — Business — Consolidated Obligations of the 2023 Annual Report. Outstanding COs and the condition of the market for COs are discussed below under — Debt Financing — Consolidated Obligations. Our equity capital resources are governed by our capital plan, certain portions of which are described under — Capital below as well as by applicable legal and regulatory requirements.

Liquidity

We are required to maintain liquidity in accordance with the FHLBank Act, FHFA regulations and guidance, and policies established by our management and board of directors. We seek to be in a position to meet the credit and liquidity needs of our members and all current and future financial commitments by managing liquidity positions to maintain stable, reliable, and cost-effective sources of funds while taking into account market conditions, member demand, and the maturity profile of our assets and liabilities.

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We are unable to predict future trends in member credit needs because they are driven by complex interactions among a number of factors, including increases and decreases in members assets and deposits, and the attractiveness of advances compared to other sources of wholesale funding. We regularly monitor current trends and anticipate future debt issuance needs and maintain a portfolio of highly liquid assets in order to be prepared to fund member credit needs and investment opportunities. We are generally able to expand our CO debt issuance in response to members' increased need for advances and to increase our acquisitions of mortgage loans. Alternatively, in response to reduced member credit needs, we may allow our COs to mature without replacement, transfer debt to another FHLBank, or repurchase and retire outstanding COs, or redeem callable COs on eligible redemption dates, allowing our balance sheet to shrink.

Sources and Uses of Liquidity. Our primary sources of liquidity are proceeds from the issuance of COs and advance repayments, and maturing short-term investments, as well as cash and investment holdings that are primarily high-quality, short- and intermediate-term financial instruments that can be sold or pledged as collateral under a repurchase agreement. During the three months ended March 31, 2024, we maintained continuous access to funding and adapted our debt issuance to meet the needs of our members.

Secondary sources of liquidity include payments collected on mortgage loans, proceeds from the issuance of capital stock, and deposits from members. In addition, under the FHLBank Act, the U.S. Treasury may purchase up to $4 billion of FHLBank COs. The terms, conditions, and interest rates in such a purchase would be determined by the U.S. Treasury. This authority may be exercised at the discretion of the U.S. Treasury with the agreement of the FHFA only if alternative means cannot be effectively employed to permit members of the FHLBanks to continue to supply reasonable amounts of funds to the mortgage market, and the ability to supply such funds is substantially impaired because of monetary stringency and high interest rates. There were no such purchases by the U.S. Treasury during the three months ended March 31, 2024.

Our uses of liquidity are advance originations and consolidated obligation principal and interest payments. Other uses of liquidity are mortgage loan and investment purchases, dividend payments, general operating expenses, and other contractually obligated payments. We also maintain liquidity to redeem or repurchase excess capital stock, through our daily excess stock repurchases, upon the request of a member or as required under our capital plan.

For information and discussion of our guarantees and other commitments we may have, see Part 1 — Item 1 — Financial Statements — Notes to the Financial Statements — Note 12 — Commitments and Contingencies. For further information and discussion of the joint and several liability for FHLBank COs, see below — Debt Financing — Consolidated Obligations.

Internal Liquidity Sources / Liquidity Management

We have developed a methodology and policies by which we measure and manage the Bank’s short-term liquidity needs based on projected net cash flow and contingent obligations.

Projected Net Cash Flow. We define projected net cash flow as projected sources of funds less projected uses of funds based on contractual maturities or expected option exercise periods, and settlement of committed assets and liabilities, as applicable. For mortgage-related cash flows and callable debt, we incorporate projected prepayments and call exercise.

Liquidity Management Action Trigger. We maintain a liquidity management action trigger pertaining to projected net cash flow: if projected net cash flow falls below zero on or before the 21st day following the measurement date, then management of the Bank is notified and determines whether any corrective action is necessary. We did not breach this threshold at any time during the three months ended March 31, 2024. Table 15 below shows this calculation as of March 31, 2024.

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Table 15 - Projected Net Cash Flow

(dollars in thousands)

	As of March 31, 2024
	21 Days
Uses of funds
Interest payable	$	160,920
Maturing or expected option exercise of liabilities	7,823,574
Committed asset settlements	217,707
Capital outflow	41,298
MPF delivery commitments	36,827
Gross uses of funds	8,280,326
Sources of funds
Interest receivable	263,458
Maturing or projected amortization of assets	12,693,083
Committed liability settlements	812,831
Cash and due from banks and interest bearing deposits	1,879,251
Other	3,731
Gross sources of funds	15,652,354
Projected net cash flow	$	7,372,028

Base Case Liquidity Requirement. The Bank is subject to FHFA guidance on liquidity, including Advisory Bulletin 2018-07 (Liquidity Guidance AB), which communicates the FHFA’s expectations with respect to the maintenance of sufficient liquidity to enable us to provide advances and fund standby letters of credit for members for a specified time without access to the capital markets or other unsecured funding sources.

The Liquidity Guidance AB provides guidance on the level of on-balance sheet liquid assets related to base case liquidity. As part of the base case liquidity measure, the guidance also includes a separate provision covering off-balance sheet commitments from standby letters of credit. In addition, the Liquidity Guidance AB provides guidance related to asset/liability maturity funding gap limits.

Under the Liquidity Guidance AB, FHLBanks are required to maintain sufficient liquid assets to achieve positive projected net cash flow while rolling over maturing advances to all members and assuming no access to capital markets for a period of time between 10 and 30 calendar days, with a specific measurement period set forth in a supervisory letter. The Liquidity Guidance AB also sets forth the initial cash flow assumptions and formula to calculate base case liquidity. With respect to standby letters of credit, the guidance states that FHLBanks should maintain a liquidity reserve of between one percent and 20 percent of its outstanding standby letters of credit commitments, as specified in a supervisory letter.

We were in compliance with the Base Case Liquidity Requirement at all times during the three months ended March 31, 2024.

Balance Sheet Funding Gap Policy. We may use a portion of the short-term COs issued to fund assets with longer terms, including longer-term floating-rate assets. Funding longer-term floating-rate assets with shorter-term liabilities generally does not expose us to significant interest-rate risk because the interest rates on both the floating-rate assets and liabilities typically reset similarly (either through rate resets or re-issuance of the obligations). However, deviations in the cost of our short-term liabilities relative to resetting assets can cause fluctuations in our net interest margin.

Additionally, the Bank is exposed to refinancing risk since, over certain time horizons, it has more liabilities than assets maturing. In order to manage the Bank’s refinancing risk, we maintain a policy that limits the potential difference between the amount of financial assets and the amount of financial liabilities expected to mature within three-month and one-year time horizons inclusive of projected mortgage-related prepayment activity. We measure this difference, or gap, as a percentage of

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total assets over two time horizons, including three months and one year. In conformity with the provisions of the Liquidity Guidance AB, the Bank has instituted a limit and management action trigger framework around these metrics as follows:

Table 16 - Funding Gap Metric

Funding Gap Metric (1)	Limit	Management Action Trigger	Three-Month Average March 31, 2024		Three-Month Average December 31, 2023
3-month Funding Gap	15%	13%	4.5	%	3.8	%
1-year Funding Gap	30%	25%	15.7	%	17.5	%

_______________________

(1)    The funding gap metric is a positive value when maturing liabilities exceed maturing assets, as defined, within the given period. Compliance with Limits and Management Action Triggers are evaluated against the rolling three-month average of the month-end funding gaps.

External Sources of Liquidity

Amended and Restated FHLBanks P&I Funding Contingency Plan Agreement. We have a source of emergency external liquidity through the Amended and Restated FHLBanks P&I Funding Contingency Plan Agreement. Under the terms of that agreement, in the event we do not fund principal and interest payments due with respect to any CO for which issuance proceeds were allocated to us within deadlines established in the agreement, the other FHLBanks will be obligated to fund any shortfall to the extent that any of the other FHLBanks has a net positive settlement balance (that is, the amount by which end-of-day proceeds received by such FHLBank from the sale of COs on that day exceeds payments by such FHLBank on COs on the same day) in its account with the Office of Finance on the day the shortfall occurs. We would then be required to repay the funding to the other FHLBanks. We have never drawn funding under this agreement, nor have we ever been required to provide funding to another FHLBank under this agreement.

Debt Financing — Consolidated Obligations

At March 31, 2024, and December 31, 2023, outstanding COs for which we are primarily liable, including both CO bonds and CO discount notes, totaled $61.1 billion and $62.2 billion, respectively. CO bonds outstanding for which we are primarily liable at March 31, 2024, and December 31, 2023, include issued callable bonds totaling $19.7 billion and $22.2 billion, respectively.

CO discount notes comprised 32.8 percent and 35.3 percent of the outstanding COs for which we are primarily liable at March 31, 2024, and December 31, 2023, respectively, but accounted for 78.4 percent and 75.9 percent of the proceeds from the issuance of such COs during the three months ended March 31, 2024 and 2023, respectively.

Overall, we continued to experience strong demand for COs among investors. During the period covered by this report, the capital markets have supported our funding needs and we have been able to issue debt in the amounts and structures required to satisfy the demand for advances and meet our funding and risk-management needs.

The Federal Reserve continues to signal its vigilance over persistently high inflation. As such, the Federal Reserve has continued to reduce its purchases of U.S. Treasury securities and U.S. Agency mortgage-backed securities. These actions remain important factors that could continue to shape investor demand for debt, including COs.

Capital

Total capital at March 31, 2024, was $3.6 billion compared with $3.5 billion at year-end 2023.

The FHLBank Act and FHFA regulations specify that each FHLBank is required to satisfy certain minimum regulatory capital requirements. We were in compliance with these requirements at March 31, 2024, as discussed in Part I — Item 1— Financial Statements — Notes to the Financial Statements — Note 9 — Capital.

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Table 17 - Mandatorily Redeemable Capital Stock by Expiry of Redemption Notice Period

(dollars in thousands)

	March 31, 2024		December 31, 2023
Past redemption date (1)	$	2,778	$	2,778
Due in one year or less	435		—
Due after one year through two years	689		435
Due after two years through three years	—		689
Due after three years through four years	960		960
Due after four years through five years	1,221		1,221
Total	$	6,083	$	6,083

_______________________

(1)    Amount represents mandatorily redeemable capital stock that has reached the end of the five-year redemption-notice period but the member-related activity (for example, advances) remains outstanding. Accordingly, these shares of stock will not be redeemed until the activity is no longer outstanding.

Capital Rule

The FHFA's regulation on FHLBank capital classification and critical capital levels (the Capital Rule), among other things, establishes criteria for four capital classifications and corrective action requirements for FHLBanks that are classified in any classification other than adequately capitalized. The Capital Rule requires the Director of the FHFA to determine on no less than a quarterly basis the capital classification of each FHLBank. By letter dated March 13, 2024, the Director of the FHFA notified us that, based on financial information as of December 31, 2023, we met the definition of adequately capitalized under the Capital Rule.

Internal Capital Practices and Policies

We also take steps as we believe prudent beyond legal or regulatory requirements in an effort to ensure capital adequacy, reflected in our internal minimum capital requirement, which exceeds regulatory requirements, our minimum retained earnings target, and limitations on our dividends.

Internal Minimum Capital Requirement in Excess of Regulatory Requirements

In an effort to provide protection for our capital base, we maintain an internal minimum capital requirement whereby the amount of paid-in capital stock and retained earnings (together, our actual regulatory capital) must be at least equal to the sum of 4 percent of our total assets plus an amount we measure as our risk exposure with 99 percent confidence using our economic capital model (together, our internal minimum capital requirement). As of March 31, 2024, this internal minimum capital requirement equaled $3.3 billion, which was satisfied by our actual regulatory capital of $3.8 billion.

Minimum Retained Earnings Target

At March 31, 2024, we had total retained earnings of $1.8 billion compared with our minimum retained earnings target of $700.0 million. We generally view our minimum retained earnings target as a floor for retained earnings rather than as a retained earnings limit and expect to continue to grow our retained earnings modestly even though we exceed the target.

For information on limitations on dividends, including limitations when we are under our minimum retained earnings target, see Part II — Item 5 — Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities in the 2023 Annual Report.

Repurchases of Excess Stock

We have the authority, but are not obliged, to repurchase excess stock, as discussed under Part I — Item 1 — Business — Capital Resources — Repurchase of Excess Stock in the 2023 Annual Report.

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Table 18 - Capital Stock Requirements and Excess Capital Stock

(dollars in thousands)

	Membership Stock Investment Requirement		Activity-Based Stock Investment Requirement		Total Stock Investment Requirement (1)		Outstanding Class B Capital Stock (2)		Excess Class B Capital Stock
March 31, 2024	$	346,107	$	1,601,761	$	1,947,888	$	1,989,186	$	41,298
December 31, 2023	335,004		1,666,987		2,002,011		2,048,536		46,525

_______________________

(1)    Total stock investment requirement is rounded up to the nearest $100 on an individual member basis.

(2)    Class B capital stock outstanding includes mandatorily redeemable capital stock.

To facilitate our ability to maintain a prudent level of capitalization and an efficient capital structure, while providing for an equitable allocation of excess stock ownership among members, we conduct daily repurchases of excess stock from any shareholder whose excess stock exceeds the lesser of $3 million or 3 percent of the shareholder’s total stock investment requirement, subject to the minimum repurchase of $100,000. We plan to continue with this practice, subject to regulatory requirements and our anticipated liquidity or capital management needs, although continued repurchases remain at our sole discretion, and we retain authority to adjust our excess stock repurchase practices subject to notice requirements defined in our Capital Plan, or to suspend repurchases of excess stock from any shareholder or all shareholders without prior notice.

Restricted Retained Earnings and the Joint Capital Agreement

At March 31, 2024, our total required contribution to the restricted retained earnings account was $613.8 million compared with the current restricted retained earnings account balance of $466.7 million.

Off-Balance-Sheet Arrangements

Our significant off-balance-sheet arrangements consist of the following:

•commitments that obligate us for additional advances;

•standby letters of credit;

•commitments for unused lines-of-credit advances; and

•unsettled COs.

Off-balance-sheet arrangements are more fully discussed in Part 1 — Item 1 — Financial Statements — Notes to the Financial Statements — Note 12 — Commitments and Contingencies.

CRITICAL ACCOUNTING ESTIMATES

The preparation of financial statements in accordance with GAAP requires management to make a number of judgments, estimates, and assumptions that affect the reported amounts of assets, liabilities, income and expense. To understand the Bank's financial position and results of operations, it is important to understand the Bank's most significant accounting policies and the extent to which management uses judgment, estimates and assumptions in applying those policies. The Bank's critical accounting estimates include:

•Estimation of Fair Values, for derivatives, hedged items in a fair-value hedge relationship, and available-for-sale investment securities; and

•Amortization of Premiums and Accretion of Discounts Associated with Prepayable MBS

Management considers these policies to be critical because they require us to make subjective and complex judgments about matters that are inherently uncertain. Management bases its judgment and estimates on current market conditions and industry practices, historical experience, changes in the business environment and other factors that it believes to be reasonable under the circumstances. Actual results could differ materially from these estimates under different assumptions and/or conditions. The Audit Committee of our board of directors has reviewed these estimates. The assumptions involved in applying these policies are discussed in Part II — Item 7 — Management's Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Estimates in the 2023 Annual Report.

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As of March 31, 2024, we have not made any significant changes to the estimates and assumptions used in applying our critical accounting policies and estimates from those used to prepare our audited financial statements.

LEGISLATIVE AND REGULATORY DEVELOPMENTS

We summarize certain significant legislative and regulatory actions and related developments for the period covered by this report below.

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

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

The Bank continues to monitor the FHFA’s efforts to implement the recommendations from the report, and we are unable to predict what actions will ultimately result, the timing or extent of those actions, and the ultimate effect the actions will have on the Bank or the FHLBank System. We plan to continue engaging with the FHFA and other stakeholders in an effort to ensure that the FHLBank System remains well positioned to serve our members and their communities. For further discussion of the report, see, Part II — Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations — Legislative and Regulatory Developments in our 2023 Annual Report.

FHFA Final Rule on Fair Lending, Fair Housing, and Equitable Housing Finance Plans. On April 29, 2024, the FHFA released its final rule that specifies requirements related to FHLBank compliance with fair housing and fair lending laws and related regulations, including the Fair Housing Act, the Equal Credit Opportunity Act, and their implementing regulations, and prohibitions on unfair or deceptive acts or practices under the Federal Trade Commission Act. The final rule (1) addresses the enforcement authority of the FHFA; (2) articulates standards related to the FHLBank boards of directors oversight of fair housing, fair lending, and principles of equitable housing; and (3) requires each FHLBank to annually report actions it voluntarily takes to address barriers to sustainable housing opportunities for underserved communities (the “Equitable Housing Report Requirements”). The final rule becomes effective 60 days after the date that it is published in the Federal Register, except that the Equitable Housing Report Requirements will become effective on February 15, 2026. We continue to review the final rule and evaluate the impact it may have on our financial condition and results of operations.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Sources and Types of Market and Interest-Rate Risk

Our balance sheet is comprised of different portfolios that require different market- and interest-rate-risk management strategies. The majority of our balance sheet is comprised of assets that can be funded individually or collectively without imposing significant residual interest-rate risk on ourselves. Sources and types of market and interest-rate risk are described in Part II — Item 7A — Quantitative and Qualitative Disclosures About Market Risk — Sources and Types of Market and Interest-Rate Risk in the 2023 Annual Report.

Strategies to Manage Market and Interest-Rate Risk

General

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We use various strategies and techniques in an effort to manage our market and interest-rate risk including the following and combinations of the following:

•the issuance of COs that can be used to match interest-rate-risk exposures of our assets;

•the issuance of COs with embedded call options to mitigate interest-rate and prepayment risks of our mortgage loans and certain MBS;

•the issuance of COs together with interest-rate swaps (either cleared if no optionality or uncleared if containing optionality) that receive a coupon rate that offsets the cost of the debt and any optionality embedded in the debt, thereby effectively creating a floating-rate liability;

•the issuance of advances together with interest-rate swaps that pay a coupon rate that offsets the advance coupon rate and any optionality embedded in the advance, thereby effectively creating a floating-rate asset;

•the purchase of available-for-sale securities together with interest-rate swaps that pay a coupon rate that offsets the security’s coupon rate, thereby effectively creating a floating-rate asset;

•contractual provisions for certain advances that require borrowers to pay us prepayment fees, to make us financially indifferent if the borrower prepays such advances prior to maturity; and

•the use of derivatives to hedge the interest-rate risk of anticipated future CO debt issuance.

The following table provides the outstanding balances for the strategies to manage market and interest-rate risk noted above.

Table 19 - Interest-Rate Risk Management

(dollars in thousands)

	Outstanding Par Value/Notional Balance as of
	March 31, 2024		December 31, 2023
Fixed-rate noncallable debt, not hedged by interest-rate swaps	$	10,561,170	$	10,286,735
Fixed-rate callable debt not hedged by interest-rate swaps	1,186,500		1,131,500
CO debt hedged by interest-rate-exchange agreements (1), including both fair-value hedge relationships and economic hedge relationships	25,462,493		26,662,140
Advances hedged by interest-rate-exchange agreements, including both fair-value hedge relationships and economic hedge relationships	13,548,006		12,624,180
Available-for-sale securities (non-MBS) hedged by interest-rate-exchange agreements	6,861,915		6,861,915
Available-for-sale securities (MBS) hedged by interest-rate-exchange agreements	5,577,782		5,529,245
Total hedged available-for-sale securities	12,439,697		12,391,160
Notional principal balance of forward starting interest-rate swaps hedging the anticipated future issuance of CO debt	1,391,000		1,391,000

_______________________

(1)    The amount for March 31, 2024, includes unsettled CO bonds with a par value of $35.0 million.

Measurement of Market and Interest-Rate Risk and Related Policy Constraints

We measure our exposure to market and interest-rate risk using several techniques applied to the balance sheet and to certain portfolios within the balance sheet. Principal among these measurements as applied to the balance sheet is the potential change in market value of equity (MVE) and interest income due to potential changes in interest rates, interest-rate volatility, spreads, and market prices. We also measure Value at Risk (VaR), duration of equity, MVE sensitivity, and the other metrics discussed below.

MVE is the net economic value of total assets and liabilities, including any derivative transactions. In contrast to the GAAP-based shareholders' equity account, MVE represents the shareholders' equity account in present-value terms. Specifically, MVE equals the difference between the estimated market value of our assets and the estimated market value of our liabilities, net of derivative transactions.

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MVE and, in particular, the ratio of MVE to the book value of equity (BVE), is a measure of the current value of shareholder investment based on market rates, spreads, prices, and volatility at the reporting date. However, these valuations may not be fully representative of future realized prices. Valuations are based on market yields and prices of individual assets, liabilities, and derivatives, and therefore embed elements of option, credit, and liquidity risk which may not be representative of future net income to be earned from the spread between asset yields and funding costs. Further, MVE does not consider future new business activities, or income or expense derived from sources other than financial assets or liabilities. For purposes of measuring this ratio, the BVE is equal to the par value of capital stock including mandatorily redeemable capital stock, retained earnings, and accumulated other comprehensive (loss) income.

We measure our exposure to market and interest-rate risk using several metrics, including:

•the ratio of MVE to BVE;

•the ratio of MVE to the par value of our Class B Stock (Par Stock), which we refer to as the MVE to Par Stock ratio;

•the ratio of MVE to the market value of assets, which we refer to as the economic capital ratio;

•the ratio of MVE to Par Stock subjected to a +/- 2 standard deviation basis shock of the overnight-index swap rate based on the federal funds effective rate (Federal Funds-OIS), SOFR, Treasury and CO curves;

•VaR, which measures the potential change in our MVE, based on a set of stress scenarios (VaR Stress Scenarios) using historically-based interest-rate, volatility and Option Adjusted Spread (OAS) movements starting at the most recent month-end and going back monthly to 1998. For risk-based capital purposes and compliance with our internal management action trigger, VaR is reported as the average of the five worst case scenarios.

•duration of equity, which is calculated as the estimated percentage change to MVE for a 100 basis point parallel shift in rates;

•MVE sensitivity, which is the estimated percent change in MVE in various shocked interest rate scenarios versus base case MVE;

•the duration gap of our assets and liabilities, which is the difference between the estimated durations (percentage change in market value for a 100 basis point shift in rates) of assets and liabilities (including the effect of related hedges) and reflects the extent to which estimated sensitivities to market changes, including, but not limited to, maturity and repricing cash flows for assets and liabilities are matched; and

•the use of an income-simulation model that projects net interest income over a range of potential interest-rate scenarios, including parallel interest-rate shocks, nonparallel interest-rate shocks, and basis changes.

We maintain limits and management action triggers in connection with some of the foregoing metrics. Those limits, management action triggers, and the foregoing market and interest-rate risk metrics are more fully discussed under Part II — Item 7A — Quantitative and Qualitative Disclosures About Market Risk — Measurement of Market and Interest-Rate Risk and Related Policy Constraints in the 2023 Annual Report.

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Table 20 - Interest-Rate / Market-Rate Risk Metrics

	March 31, 2024	December 31, 2023	Target, Limit or Management Action Trigger
MVE	$3.4 billion	$3.5 billion	None
MVE/BVE	96%	99%	None
MVE/Par Stock	173%	170%	Maintain above 130% (management action trigger) and 125% (limit)
Economic Capital Ratio	5.1%	5.2%	Maintain above 4.5% (management action trigger) and 4.0% (limit)
MVE/Par Stock			Maintain above 125% under a +/- 2 standard deviation shock of historically determined basis changes of the SOFR, Federal Funds-OIS, Treasury, and CO yield curves (management action trigger)
+ 2 standard deviation shock	162%	161%
- 2 standard deviation shock	182%	179%
VaR	12.0% of MVE	11.0% of MVE	Management action trigger invoked when VaR exceeds 12% of MVE
Duration of Equity (1)	+1.38 years	+0.75 years	Maintain between +/- 3.5 years (management action trigger) and +/- 4.0 years (limit)
MVE Sensitivity: (1)
Down 200 basis point parallel rate shock	1.9%	0.7%	Maintain above -10% (management action trigger) and -15% (limit)
Up 200 basis point parallel rate shock	(3.8)%	(2.4)%
Duration Gap (1)	+0.85 months	+0.46 months	None

_______________________

(1)    Metrics for measuring against the management action triggers and limits are calculated using a methodology which does not constrain interest rates to a minimum of zero percent. Additional metrics are calculated in accordance with guidance from the FHFA, which requires that we constrain projected future interest rates and discounting yields to a minimum of zero percent. Due to the significant increase in interest rates for the periods ended March 31, 2024, and December 31, 2023, the results of the constrained and unconstrained metrics were the same.

Value at Risk. VaR, which measures the potential change in our MVE, is based on a set of stress scenarios using historically based interest-rate, volatility and OAS movements starting at the most recent month-end and going back monthly to 1998. For risk-based capital purposes and compliance with our internal management action trigger, VaR is reported as the average of the five worst scenarios.

The table below presents the VaR estimate as of March 31, 2024, and December 31, 2023, and represents the estimates of potential reduction to our MVE from potential future changes in interest rates and other market factors, as described above. Estimated potential market value loss exposures are expressed as a percentage of the current MVE. The table is intended to represent a statistically based range of VaR exposures.

Table 21 - Value-at-Risk

(dollars in millions)

	Value-at-Risk (Gain) Loss Exposure
	March 31, 2024				December 31, 2023
Confidence Level	% of MVE (1)		Amount		% of MVE (1)		Amount
50%	7.21	%	$	247.7	6.91	%	$	241.3
75%	8.55		293.9		7.97		278.4
95%	10.70		367.6		9.34		326.1
99%	11.54		396.5		10.68		373.0
Average of five worst scenarios - as of period end	12.00		412.5		10.95		382.5

_____________________________

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(1)    Loss exposure is expressed as a percentage of base MVE.

In certain months during 2024 and 2023 we exceeded our VaR management action trigger. For example, as of February 29, 2024, our VaR measured 12.18 percent of the base case MVE, which exceeded our management action trigger of 12 percent. The VaR calculation is based on a combination of interest rate, volatility and OAS shocks provided by the FHFA for establishment of the market risk component of our risk-based capital requirement. Beginning in the second quarter of 2023, the OAS shocks as provided by the FHFA were significantly increased from prior periods, which resulted in an increased VaR absent an equivalent change in the composition of the balance sheet or exposures as measured by other market risk metrics. The higher OAS shocks are a result of changes made by the FHFA to the assumption underlying this calculation in connection with the cessation of LIBOR in 2023. The potential exists for the FHFA to further change the OAS, interest rate and volatility shocks in the future. Management of the Bank decided to not take any action because the OAS shocks are limited to only assets and we believe that capital levels are sufficient relative to the metric.

Income Simulation. To provide an additional perspective on market and interest-rate risks, we have an income-simulation model that projects adjusted net income over the ensuing 12-month period using a range of potential interest-rate scenarios, including parallel interest-rate shocks, nonparallel interest-rate shocks, and changes in basis risk. The income simulation metric is based on projections of adjusted net income divided by capital stock (including mandatorily redeemable capital stock). Projections of adjusted net income exclude: a) projected prepayment of advances and prepayment penalties; b) loss on early extinguishment of debt; c) changes in fair values from hedging activities and d) changes in fair values of trading securities. The simulations are solely based on simulated movements in interest rates and do not reflect potential impacts of credit events, including, but not limited to, potential provision for credit losses.

Management has put in place management action triggers whereby senior management is explicitly informed of instances where our projected return on capital stock (ROCS) falls below the average yield on SOFR plus our current dividend spread over a twelve-month horizon in a variety of interest-rate shock scenarios limited to +/- 200 basis points and a +/- 2 standard deviation historically based immediate shock to basis spreads followed by an incremental reversion to current levels over 12 months. Our ROCS spread to SOFR remained above this management action trigger minimum during 2024. The results of this analysis for March 31, 2024, showed that in the base case our ROCS was 743 basis points over SOFR, and in the worst case modeled, the down 200 basis points scenario, our ROCS fell 167 basis points to 576 basis points over SOFR. For December 31, 2023, the results of this analysis showed in the base case our ROCS was 671 basis points over SOFR, and in the worst case modeled, the down 200 basis point scenario, our ROCS fell 224 basis points to 447 basis points over SOFR.

Certain Market and Interest-Rate Risk Metrics under Potential Interest-Rate Scenarios

We also monitor the sensitivities of MVE and the duration of equity to potential interest-rate scenarios. The following table presents certain market and interest-rate risk metrics under different interest-rate scenarios.

Table 22 - Market and Interest-Rate Risk Metrics

(dollars in millions)

	March 31, 2024
	Down 300(1)	Down 200(1)	Down 100(1)	Base	Up 100	Up 200	Up 300
MVE	$3,513	$3,501	$3,477	$3,437	$3,380	$3,308	$3,229
Percent change in MVE from base	2.2%	1.9%	1.2%	—%	(1.7)%	(3.8)%	(6.1)%
MVE/BVE	98%	98%	97%	96%	95%	93%	90%
MVE/Par Stock	177%	176%	175%	173%	170%	166%	162%
Duration of Equity	+0.40 years	+0.48 years	+0.92 years	+1.38 years	+1.95 years	+2.28 years	+2.44 years
Return on Capital Stock less SOFR	4.77%	5.76%	6.72%	7.43%	7.97%	8.61%	9.11%
Net income percent change from base	(45.51)%	(29.47)%	(13.71)%	—%	12.29%	25.44%	37.26%

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	December 31, 2023
	Down 300(1)	Down 200(1)	Down 100(1)	Base	Up 100	Up 200	Up 300
MVE	$3,522	$3,518	$3,511	$3,492	$3,459	$3,408	$3,347
Percent change in MVE from base	0.9%	0.7%	0.5%	—%	(0.9)%	(2.4)%	(4.2)%
MVE/BVE	99%	99%	99%	99%	98%	96%	94%
MVE/Par Stock	172%	172%	171%	170%	169%	166%	163%
Duration of Equity	+0.11 years	+0.12 years	+0.38 years	+0.75 years	+1.19 years	+1.65 years	+1.81 years
Return on Capital Stock less SOFR	3.28%	4.47%	5.69%	6.71%	7.84%	8.66%	9.42%
Net income percent change from base	(56.49)%	(37.14)%	(17.69)%	—%	18.74%	34.55%	49.88%

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(1)    In an environment of low interest rates, downward rate shocks are floored as they approach zero, and therefore may not be fully representative of the indicated rate shock.

Item 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Our senior management is responsible for establishing and maintaining a system of disclosure controls and procedures designed to ensure that information required to be disclosed by us in the reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC. Our disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, we recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and our management necessarily is required to apply its judgment in evaluating the cost-benefit relationship of controls and procedures.

Our management has evaluated the effectiveness of the design and operation of our disclosure controls and procedures, with the participation of the president and chief executive officer and chief financial officer, as of March 31, 2024. Based on that evaluation, our president and chief executive officer and chief financial officer have concluded that our disclosure controls and procedures were effective at a reasonable assurance level as of March 31, 2024.

Changes in Internal Control over Financial Reporting

During the quarter ended March 31, 2024, 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

From time to time, we are subject to various legal proceedings arising in the normal course of business. After consultation with legal counsel, we do not anticipate that the ultimate liability, if any, arising out of these matters will have a material adverse effect on our financial condition or results of operations.

ITEM 1A. RISK FACTORS

In addition to the information presented in this report, readers should carefully consider the risk factors set forth in the 2023 Annual Report, which could materially impact our business, financial condition, or future results. These risks are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem immaterial may also materially impact us.

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

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None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None

ITEM 6. EXHIBITS

Number	Exhibit Description	Reference
31.1	Certification of the president and chief executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed within this Form 10-Q
31.2	Certification of the chief financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed within this Form 10-Q
32.1	Certification of the president and chief executive officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Filed within this Form 10-Q
32.2	Certification of the chief financial officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Filed within this Form 10-Q
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	Inline XBRL Taxonomy Extension Schema Document	Filed within this Form 10-Q
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document	Filed within this Form 10-Q
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document	Filed within this Form 10-Q
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document	Filed within this Form 10-Q
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document	Filed within this Form 10-Q
104	The cover page of the Bank’s Quarterly report on Form 10-Q, formatted in Inline XBRL	Included within the Exhibit 101 attachments

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

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Date	FEDERAL HOME LOAN BANK OF BOSTON (Registrant)
May 10, 2024	By:	/s/	Timothy J. Barrett
			Timothy J. Barrett President and Chief Executive Officer
May 10, 2024	By:	/s/	Frank Nitkiewicz
			Frank Nitkiewicz Executive Vice President, Chief Operating Officer and Chief Financial Officer

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