Federal Home Loan Bank of Indianapolis 10-Q 2022 Q2 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 June 30, 2023

OR

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

Commission File Number:  000-51404

FEDERAL HOME LOAN BANK OF INDIANAPOLIS

(Exact name of registrant as specified in its charter)

Federally Chartered Corporation	35-6001443
(State or other jurisdiction of incorporation)	(IRS employer identification number)
8250 Woodfield Crossing Blvd. Indianapolis, IN	46240
(Address of principal executive offices)	(Zip code)

(317) 465-0200

(Registrant's telephone number, including area code)

Not Applicable

(Former name or former address, if changed since last report.)

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

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
None	None	None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing for the past 90 days.

x  Yes            o  No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

x   Yes            o  No

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

☐	Large accelerated filer	☐	Accelerated filer	☐	Emerging growth company
x	Non-accelerated Filer	☐	Smaller reporting 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.  o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

☐  Yes            x  No

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

	Shares outstanding as of July 31, 2023
Class A Stock, par value $100	—
Class B Stock, par value $100	27,591,957

Table of Contents		Page
		Number
	Special Note Regarding Forward-Looking Statements	3
PART I.	FINANCIAL INFORMATION
Item 1.	FINANCIAL STATEMENTS (unaudited)
	Statements of Condition as of June 30, 2023 and December 31, 2022	4
	Statements of Income for the Three and Six Months Ended June 30, 2023 and 2022	5
	Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2023 and 2022	6
	Statements of Capital for the Three and Six Months Ended June 30, 2023 and 2022	7
	Statements of Cash Flows for the Six Months Ended June 30, 2023 and 2022	9
	Notes to Financial Statements:
	Note 1 - Summary of Significant Accounting Policies	11
	Note 2 - Recently Adopted and Issued Accounting Guidance	11
	Note 3 - Investments	12
	Note 4 - Advances	16
	Note 5 - Mortgage Loans Held for Portfolio	17
	Note 6 - Derivatives and Hedging Activities	19
	Note 7 - Consolidated Obligations	23
	Note 8 - Affordable Housing Program	24
	Note 9 - Capital	24
	Note 10 - Accumulated Other Comprehensive Income	26
	Note 11 - Segment Information	27
	Note 12 - Estimated Fair Values	28
	Note 13 - Commitments and Contingencies	31
	Note 14 - Related Party and Other Transactions	32
	Defined Terms	33
Item 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
	Presentation	34
	Executive Summary	34
	Results of Operations and Changes in Financial Condition	37
	Operating Segments	46
	Analysis of Financial Condition	47
	Liquidity	55
	Capital Resources	55
	Critical Accounting Estimates	57
	Recent Accounting and Regulatory Developments	57
	Risk Management	58
Item 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	61
Item 4.	CONTROLS AND PROCEDURES	62
PART II.	OTHER INFORMATION
Item 1.	LEGAL PROCEEDINGS	63
Item 1A.	RISK FACTORS	63
Item 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	63
Item 3.	DEFAULTS UPON SENIOR SECURITIES	63
Item 4.	MINE SAFETY DISCLOSURES	63
Item 5.	OTHER INFORMATION	63
Item 6.	EXHIBITS	64

As used in this Form 10-Q, unless the context otherwise requires, the terms "we," "us," "our," and "Bank" refer to the Federal Home Loan Bank of Indianapolis or its management. We use acronyms and terms throughout that are defined herein or in the Defined Terms in Part I Item 1.

Special Note Regarding Forward-Looking Statements

Statements in this Form 10-Q, including statements describing our objectives, projections, estimates or predictions, may be considered to be "forward-looking statements." These statements may use forward-looking terminology, such as "anticipates," "believes," "could," "estimates," "may," "should," "expects," "will," or their negatives or other variations on these terms. We caution that, by their nature, forward-looking statements involve risk or uncertainty and that actual results either 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. These forward-looking statements involve risks and uncertainties including, but not limited to, the following:

•economic and market conditions, including the timing and volume of market activity, inflation or deflation, changes in the value of global currencies, and changes in the financial condition of market participants;

•volatility of market prices, interest rates, and indices or the availability of suitable interest rate indices, or other factors, resulting from the effects of, and changes in, various monetary or fiscal policies and regulations, including those of the Federal Reserve, the Finance Agency and the Federal Deposit Insurance Corporation, or a decline in liquidity in the financial markets, that could affect the value of investments, or collateral we hold as security for the obligations of our members and counterparties;

•changes in demand for our advances and purchases of mortgage loans resulting from:

◦changes in our members' deposit flows and credit demands;

◦changes in products or services we are able to provide;

◦federal or state regulatory developments impacting suitability or eligibility of membership classes;

◦membership changes, including, but not limited to, mergers, acquisitions and consolidations of charters;

◦changes in the general level of housing activity in the United States and particularly our district states of Michigan and Indiana, the level of refinancing activity and consumer product preferences;

◦competitive forces, including, without limitation, other sources of funding available to our members; and

◦changes in the terms and conditions of ownership of our capital stock;

•changes in mortgage asset prepayment patterns, delinquency rates and housing values or improper or inadequate mortgage originations and mortgage servicing;

•ability to introduce and successfully manage new products and services, including new types of collateral securing advances;

•political events, including federal government shutdowns, administrative, legislative, regulatory, or other developments, changes in international political structures and alliances, and judicial rulings that affect us, our status as a secured creditor, our members (or certain classes of members), prospective members, counterparties, GSEs generally, one or more of the FHLBanks and/or investors in the consolidated obligations of the FHLBanks;

•national or international crises, including a pandemic, war, acts of terrorism or natural disasters, and the effects of such crises on our and our counterparties' operations, member demand, market liquidity, and the global funding markets, and the governmental, regulatory, and fiscal interventions undertaken to stabilize local, national, and global economic conditions;

•ability to access the capital markets and raise capital market funding on acceptable terms;

•changes in our credit ratings or the credit ratings of the other FHLBanks and the FHLBank System;

•changes in the level of government guarantees provided to other United States and international financial institutions;

•dealer commitment to supporting the issuance of our consolidated obligations;

•ability of one or more of the FHLBanks to repay its portion of the consolidated obligations, or otherwise meet its financial obligations;

•ability to attract and retain skilled personnel;

•ability to develop, implement and support technology and information systems sufficient to manage our business effectively;

•nonperformance of counterparties to uncleared and cleared derivative transactions;

•changes in terms of derivative agreements and similar agreements;

•loss arising from natural disasters, acts of war, riots, insurrection or acts of terrorism;

•changes in or differing interpretations of accounting guidance; and

•other risk factors identified in our filings with the SEC.

Although we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, additional disclosures may be made through reports filed with the SEC in the future, including our reports on Forms 10-K, 10-Q and 8-K.

3

PART I. FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

Federal Home Loan Bank of Indianapolis

Statements of Condition

(Unaudited, $ amounts in thousands, except par value)

	June 30, 2023		December 31, 2022
Assets:
Cash and due from banks	$	63,585	$	21,161
Interest-bearing deposits (Note 3)	817,845		856,060
Securities purchased under agreements to resell (Note 3)	4,400,000		4,550,000
Federal funds sold (Note 3)	5,027,000		3,148,000
Trading securities (Note 3)	345,258		2,230,248
Available-for-sale securities (Note 3) (amortized cost of $13,586,588 and $12,189,776)	13,590,583		12,179,837
Held-to-maturity securities (Note 3) (estimated fair values of $4,752,998 and $4,156,218)	4,837,706		4,240,201
Advances (Note 4)	36,234,221		36,682,459
Mortgage loans held for portfolio, net (Note 5)	7,899,050		7,686,455
Accrued interest receivable	156,432		152,867
Derivative assets, net (Note 6)	546,750		434,421
Loans to other FHLBanks	250,000		—
Other assets	102,022		102,071
Total assets	$	74,270,452	$	72,283,780
Liabilities:
Deposits	$	663,307	$	595,907
Consolidated obligations (Note 7):
Discount notes	20,199,909		27,387,492
Bonds	48,508,086		39,882,454
Total consolidated obligations, net	68,707,995		67,269,946
Accrued interest payable	283,062		162,584
Affordable Housing Program payable (Note 8)	53,135		38,170
Derivative liabilities, net (Note 6)	29,572		19,209
Mandatorily redeemable capital stock (Note 9)	370,622		372,503
Other liabilities	379,107		441,763
Total liabilities	70,486,800		68,900,082
Commitments and contingencies (Note 13)
Capital (Note 9):
Capital stock (putable at par value of $100 per share):
Class B issued and outstanding shares: 23,804,903 and 21,231,253	2,380,490		2,123,125
Retained earnings:
Unrestricted	1,054,312		963,812
Restricted	359,161		322,552
Total retained earnings	1,413,473		1,286,364
Total accumulated other comprehensive income (loss) (Note 10)	(10,311)		(25,791)
Total capital	3,783,652		3,383,698
Total liabilities and capital	$	74,270,452	$	72,283,780

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

4

Federal Home Loan Bank of Indianapolis

Statements of Income

(Unaudited, $ amounts in thousands)

	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Interest Income:
Advances	$	491,756	$	67,562	$	925,984	$	102,603
Interest-bearing deposits	31,641		2,623		57,894		2,913
Securities purchased under agreements to resell	39,717		6,066		71,667		6,971
Federal funds sold	65,898		7,682		111,385		8,524
Trading securities	2,291		8,347		5,368		13,792
Available-for-sale securities	200,507		38,563		372,226		61,008
Held-to-maturity securities	59,055		9,033		107,480		16,544
Mortgage loans held for portfolio	59,128		51,467		116,883		99,268
Other interest income	149		22		150		22
Total interest income	950,142		191,365		1,769,037		311,645
Interest Expense:
Consolidated obligation discount notes	269,398		26,535		526,174		30,188
Consolidated obligation bonds	543,752		99,192		990,426		150,891
Deposits	8,896		1,547		16,514		1,646
Mandatorily redeemable capital stock	4,370		269		8,480		514
Other interest expense	133		—		201		—
Total interest expense	826,549		127,543		1,541,795		183,239
Net interest income	123,593		63,822		227,242		128,406
Provision for (reversal of) credit losses	(3)		(38)		(2)		(60)
Net interest income after provision for credit losses	123,596		63,860		227,244		128,466
Other Income:
Net gains (losses) on trading securities	758		(14,220)		9,072		(38,415)
Net gains on derivatives	4,970		17,203		3,607		37,197
Net gains on extinguishment of debt	—		—		19,846		—
Other, net	3,423		(4,681)		6,773		(7,882)
Total other income (loss)	9,151		(1,698)		39,298		(9,100)
Other Expenses:
Compensation and benefits	14,878		13,411		31,713		26,367
Other operating expenses	8,630		7,756		16,030		14,850
Federal Housing Finance Agency	1,711		1,801		3,423		3,717
Office of Finance	1,007		1,081		2,080		2,498
Other	4,522		2,154		8,973		4,165
Total other expenses	30,748		26,203		62,219		51,597
Income before assessments	101,999		35,959		204,323		67,769
Affordable Housing Program assessments	10,637		3,623		21,280		6,828
Net income	$	91,362	$	32,336	$	183,043	$	60,941

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

5

Federal Home Loan Bank of Indianapolis

Statements of Comprehensive Income

(Unaudited, $ amounts in thousands)

	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Net income	$	91,362	$	32,336	$	183,043	$	60,941
Other Comprehensive Income:
Net change in unrealized gains (losses) on available-for-sale securities	61,911		(45,228)		13,934		(119,691)
Pension benefits, net	1,206		329		1,546		789
Total other comprehensive income (loss)	63,117		(44,899)		15,480		(118,902)
Total comprehensive income (loss)	$	154,479	$	(12,563)	$	198,523	$	(57,961)

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

6

Federal Home Loan Bank of Indianapolis

Statements of Capital

Three Months Ended June 30, 2023 and 2022

(Unaudited, $ amounts and shares in thousands)

	Capital Stock			Retained Earnings						Accumulated Other Comprehensive Income (Loss)		Total Capital
	Shares	Par Value		Unrestricted		Restricted		Total
Balance, March 31, 2023	22,922	$	2,292,192	$	1,011,191	$	340,888	$	1,352,079	$	(73,428)	$	3,570,843
Total comprehensive income				73,089		18,273		91,362		63,117		154,479
Proceeds from issuance of capital stock	886	88,609										88,609
Redemption/repurchase of capital stock	(3)	(311)										(311)
Cash dividends on capital stock (5.59% annualized)				(29,968)		—		(29,968)				(29,968)
Balance, June 30, 2023	23,805	$	2,380,490	$	1,054,312	$	359,161	$	1,413,473	$	(10,311)	$	3,783,652
Balance, March 31, 2022	21,215	$	2,121,541	$	899,750	$	292,924	$	1,192,674	$	59,055	$	3,373,270
Total comprehensive income (loss)				25,869		6,467		32,336		(44,899)		(12,563)
Proceeds from issuance of capital stock	1,293	129,294										129,294
Cash dividends on capital stock (2.47% annualized)				(13,290)		—		(13,290)				(13,290)
Balance, June 30, 2022	22,508	$	2,250,835	$	912,329	$	299,391	$	1,211,720	$	14,156	$	3,476,711

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

7

Federal Home Loan Bank of Indianapolis

Statements of Capital

Six Months Ended June 30, 2023 and 2022

(Unaudited, $ amounts and shares in thousands)

	Capital Stock			Retained Earnings						Accumulated Other Comprehensive Income (Loss)		Total Capital
	Shares	Par Value		Unrestricted		Restricted		Total
Balance, December 31, 2022	21,231	$	2,123,125	$	963,812	$	322,552	$	1,286,364	$	(25,791)	$	3,383,698
Total comprehensive income				146,434		36,609		183,043		15,480		198,523
Proceeds from issuance of capital stock	2,577	257,689										257,689
Redemption/repurchase of capital stock	(3)	(311)										(311)
Shares reclassified to mandatorily redeemable capital stock, net	—	(13)										(13)
Cash dividends on capital stock (4.98% annualized)				(55,934)		—		(55,934)				(55,934)
Balance, June 30, 2023	23,805	$	2,380,490	$	1,054,312	$	359,161	$	1,413,473	$	(10,311)	$	3,783,652
Balance, December 31, 2021	22,462	$	2,246,201	$	889,869	$	287,203	$	1,177,072	$	133,058	$	3,556,331
Total comprehensive income (loss)				48,753		12,188		60,941		(118,902)		(57,961)
Proceeds from issuance of capital stock	1,665	166,519										166,519
Redemption/repurchase of capital stock	(1,619)	(161,885)										(161,885)
Cash dividends on capital stock (2.39% annualized)				(26,293)		—		(26,293)				(26,293)
Balance, June 30, 2022	22,508	$	2,250,835	$	912,329	$	299,391	$	1,211,720	$	14,156	$	3,476,711

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

8

Federal Home Loan Bank of Indianapolis

Statements of Cash Flows

(Unaudited, $ amounts in thousands)

	Six Months Ended June 30,
	2023		2022
Operating Activities:
Net income	$	183,043	$	60,941
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Amortization and depreciation	(2,909)		50,152
Changes in net derivative and hedging activities	(15,458)		751,617
Net (gains) on extinguishment of debt	(19,846)		—
Provision for (reversal of) credit losses	(2)		(60)
Net (gains) losses on trading securities	(9,072)		38,415
Other adjustments	213		—
Changes in:
Accrued interest receivable	(3,733)		(17,495)
Other assets	(1,055)		5,955
Accrued interest payable	120,610		37,075
Other liabilities	19,243		8,559
Total adjustments, net	87,991		874,218
Net cash provided by operating activities	271,034		935,159
Investing Activities:
Net change in:
Interest-bearing deposits	134,803		(1,219,223)
Securities purchased under agreements to resell	150,000		(1,000,000)
Federal funds sold	(1,879,000)		84,000
Trading securities:
Proceeds from maturities	1,400,000		1,600,000
Proceeds from sales	494,063		200,000
Purchases	—		(1,930,219)
Available-for-sale securities:
Proceeds from maturities and paydowns	161,480		503,910
Proceeds from sales	85,113		—
Purchases	(1,638,271)		(2,362,677)
Held-to-maturity securities:
Proceeds from maturities and paydowns	238,896		630,398
Proceeds from sales	9,769		—
Purchases	(922,252)		(51,312)
Advances:
Principal repayments	175,082,844		71,353,438
Disbursements to members	(174,713,799)		(74,888,350)
Mortgage loans held for portfolio:
Principal collections	331,922		600,449
Purchases from members	(546,639)		(771,838)
Purchases of premises, software, and equipment	(1,855)		(1,989)
Loans to other Federal Home Loan Banks:
Principal repayments	810,000		520,000
Disbursements	(1,060,000)		(520,000)
Net cash used in investing activities	(1,862,926)		(7,253,413)

(continued)

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

9

Federal Home Loan Bank of Indianapolis

Statements of Cash Flows, continued

(Unaudited, $ amounts in thousands)

	Six Months Ended June 30,
	2023		2022
Financing Activities:
Net change in deposits	73,370		(320,726)
Net proceeds (payments) on derivative contracts with financing elements	4,340		(1,118)
Net proceeds from issuance of consolidated obligations:
Discount notes	339,309,328		369,385,849
Bonds	16,099,923		10,677,690
Payments for matured and retired consolidated obligations:
Discount notes	(346,475,227)		(361,928,027)
Bonds	(7,576,968)		(12,277,200)
Loans from other Federal Home Loan Banks:
Proceeds from borrowings	500,000		—
Principal repayments	(500,000)		—
Proceeds from issuance of capital stock	257,689		166,519
Payments for redemption/repurchase of capital stock	(311)		(161,885)
Payments for redemption/repurchase of mandatorily redeemable capital stock	(1,894)		(4,839)
Dividend payments on capital stock	(55,934)		(26,293)
Net cash provided by financing activities	1,634,316		5,509,970
Net increase (decrease) in cash and due from banks	42,424		(808,284)
Cash and due from banks at beginning of period	21,161		867,880
Cash and due from banks at end of period	$	63,585	$	59,596
Supplemental Disclosures:
Cash activities:
Interest payments	$	1,380,115	$	99,903
Affordable Housing Program payments	6,315		8,924
Non-cash activities:
Purchases of investment securities, traded but not yet settled	—		220,413

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

10

Notes to Financial Statements, continued

(Unaudited, $ amounts in thousands unless otherwise indicated)

Note 1 - Summary of Significant Accounting Policies

Unless the context otherwise requires, the terms "Bank," "we," "us," and "our" refer to the Federal Home Loan Bank of Indianapolis or its management. We use acronyms and terms throughout these Notes to Financial Statements that are defined in the Defined Terms.

Basis of Presentation. The accompanying interim financial statements have been prepared in accordance with GAAP and SEC requirements for interim financial information. Accordingly, they do not include all of the information and disclosures required by GAAP for complete financial statements. Certain disclosures that would have substantially duplicated the disclosures in the financial statements, and notes thereto, included in our 2022 Form 10-K have been omitted unless the information contained in those disclosures materially changed. Therefore, these interim financial statements should be read in conjunction with our audited financial statements, and notes thereto, included in our 2022 Form 10-K.

The financial statements contain all adjustments that are, in the opinion of management, necessary for a fair statement of the Bank's financial position, results of operations and cash flows for the interim periods presented. All such adjustments were of a normal recurring nature. The results of operations for the periods presented are not necessarily indicative of the results to be expected for the full calendar year or any other interim period.

Use of Estimates. When preparing financial statements in accordance with GAAP, we are required to make subjective assumptions and estimates that may affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported amounts of income and expense. Although the reported amounts and disclosures reflect our best estimates, actual results could differ significantly from these estimates. The most significant estimates pertain to the fair values of financial instruments.

Significant Accounting Policies. Our significant accounting policies and certain other disclosures are set forth in our 2022 Form 10-K in Note 1 - Summary of Significant Accounting Policies. There have been no significant changes to these policies through June 30, 2023 with the exception of the following that resulted from the adoption of ASU 2022-02, Troubled Debt Restructurings ("TDR") and Vintage Disclosures, on January 1, 2023.

Mortgage Loan Modifications. Under the new accounting guidance, we are required to evaluate whether the terms of a loan modification made for borrowers experiencing financial difficulty are such that the modified loan should be accounted for as a new loan or a continuation of an existing loan. Prior to January 1, 2023, we evaluated mortgage loan modifications resulting from borrowers experiencing financial difficulty utilizing the troubled debt restructuring ("TDR") guidance. For more information, see Note 1 - Summary of Significant Accounting Policies in our 2022 Form 10-K.

Allowance for Credit Losses on Mortgage Loans. Loan modifications resulting from borrowers experiencing financial difficulty are now included in the collective evaluation of credit losses based on a loan's distinct underlying characteristics. Prior to January 1, 2023, TDRs were individually evaluated for purposes of determining the allowance for credit losses.

Note 2 - Recently Adopted and Issued Accounting Guidance

Recently Adopted Accounting Guidance

Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (ASU 2020-04), as amended. As of June 30, 2023, the Bank had transitioned all outstanding LIBOR-indexed instruments to reference SOFR, with the implementation of such fallback effective immediately following June 30, 2023, or at the instrument's next reset date. As a part of finalizing the transition, we adopted certain practical expedients in Topic 848 for qualifying contract modifications related to reference rate reform, including with respect to qualifying hedge relationships. The adoption of this guidance did not have a material impact on the Bank's financial condition, results of operations, or cash flows.

Recently Issued Accounting Guidance

Since the filing of our 2022 Form 10-K, the FASB has not issued any new accounting guidance that is applicable to the Bank.

11

Notes to Financial Statements, continued

(Unaudited, $ amounts in thousands unless otherwise indicated)

Note 3 - Investments

Short-term Investments. 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 maintain a credit rating of triple-B or higher (investment grade) by an NRSRO. At June 30, 2023 and December 31, 2022, none of these investments were with counterparties rated below triple-B, and 4% of these investments, based on amortized cost, were with counterparties that were unrated. The NRSRO ratings may differ from any internal ratings of the investments, if applicable.

Allowance for Credit Losses. At June 30, 2023 and December 31, 2022, based on our evaluations, no allowance for credit losses on any of our short-term investments was deemed necessary.

Investment Securities.

Trading Securities.

Major Security Types. The following table presents our trading securities by type of security.

Security Type	June 30, 2023		December 31, 2022
U.S. Treasury obligations	$	345,258	$	2,230,248
Total trading securities at estimated fair value	$	345,258	$	2,230,248

Net Gains (Losses) on Trading Securities. The following table presents net gains (losses) on trading securities, excluding any offsetting effect of gains (losses) on the associated derivatives.

	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Net gains (losses) on trading securities held at period end	$	615	$	(13,740)	$	2,396	$	(34,831)
Net gains (losses) on trading securities that matured/sold during the period	143		(480)		6,676		(3,584)
Net gains (losses) on trading securities	$	758	$	(14,220)	$	9,072	$	(38,415)

12

Notes to Financial Statements, continued

(Unaudited, $ amounts in thousands unless otherwise indicated)

Available-for-Sale Securities.

Major Security Types. The following table presents our AFS securities by type of security.

	June 30, 2023
			Gross		Gross
	Amortized		Unrealized		Unrealized		Estimated
Security Type	Cost (1)		Gains		Losses		Fair Value
U.S. Treasury obligations	$	5,338,509	$	18,712	$	(109)	$	5,357,112
GSE and TVA debentures	1,752,141		19,029		—		1,771,170
GSE multifamily MBS	6,495,938		19,485		(53,122)		6,462,301
Total AFS securities	$	13,586,588	$	57,226	$	(53,231)	$	13,590,583
	December 31, 2022
			Gross		Gross
	Amortized		Unrealized		Unrealized		Estimated
Security Type	Cost (1)		Gains		Losses		Fair Value
U.S. Treasury obligations	$	4,207,974	$	3,502	$	(1,802)	$	4,209,674
GSE and TVA debentures	1,882,802		20,144		(243)		1,902,703
GSE multifamily MBS	6,099,000		20,064		(51,604)		6,067,460
Total AFS securities	$	12,189,776	$	43,710	$	(53,649)	$	12,179,837

(1)    Includes adjustments made to the cost basis for purchase discount or premium and related accretion or amortization, and, if applicable, fair-value hedging basis adjustments. At June 30, 2023 and December 31, 2022, net unamortized discounts totaled $(298,810) and $(294,587), respectively, and the applicable fair-value hedging basis adjustments totaled net losses of $(1,117,785) and $(1,099,886), respectively. Excludes accrued interest receivable at June 30, 2023 and December 31, 2022 of $54,248 and $53,358, respectively.

13

Notes to Financial Statements, continued

(Unaudited, $ amounts in thousands unless otherwise indicated)

Unrealized Loss Positions. The following table presents our impaired AFS securities (i.e., in an unrealized loss position), aggregated by major security type and length of time that individual securities have been in a continuous unrealized loss position.

	June 30, 2023
	Less than 12 months				12 months or More				Total
	Estimated		Unrealized		Estimated		Unrealized		Estimated		Unrealized
Security Type	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
U.S. Treasury obligations	$	393,973	$	(109)	$	—	$	—	$	393,973	$	(109)
GSE multifamily MBS	1,440,466		(11,166)		2,603,662		(41,956)		4,044,128		(53,122)
Total impaired AFS securities	$	1,834,439	$	(11,275)	$	2,603,662	$	(41,956)	$	4,438,101	$	(53,231)
	December 31, 2022
	Less than 12 months				12 months or More				Total
	Estimated		Unrealized		Estimated		Unrealized		Estimated		Unrealized
Security Type	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
U.S. Treasury obligations	$	1,836,099	$	(1,802)	$	—	$	—	$	1,836,099	$	(1,802)
GSE and TVA debentures	75,024		(243)		—		—		75,024		(243)
GSE multifamily MBS	3,484,309		(41,046)		301,339		(10,558)		3,785,648		(51,604)
Total impaired AFS securities	$	5,395,432	$	(43,091)	$	301,339	$	(10,558)	$	5,696,771	$	(53,649)

Contractual Maturity. The amortized cost and estimated fair value of our non-MBS AFS securities are presented below by contractual maturity. MBS are not presented by contractual maturity because their actual maturities will likely differ from their contractual maturities as borrowers have the right to prepay their obligations with or without prepayment fees.

	June 30, 2023				December 31, 2022
	Amortized		Estimated		Amortized		Estimated
Year of Contractual Maturity	Cost		Fair Value		Cost		Fair Value
Non-MBS:
Due in 1 year or less	$	—	$	—	$	131,329	$	131,517
Due after 1 through 5 years	2,898,606		2,922,057		1,575,581		1,594,583
Due after 5 through 10 years	4,192,044		4,206,225		4,383,866		4,386,277
Total non-MBS	7,090,650		7,128,282		6,090,776		6,112,377
Total MBS	6,495,938		6,462,301		6,099,000		6,067,460
Total AFS securities	$	13,586,588	$	13,590,583	$	12,189,776	$	12,179,837

Realized Gains and Losses. During the three months ended June 30, 2023, for strategic and economic reasons, we sold a GSE MBS. Proceeds from the AFS sale totaled $85,113, resulting in a net realized loss of $(142) determined by the specific identification method. There were no sales during the three and six months ended June 30, 2022.

Allowance for Credit Losses. At June 30, 2023 and December 31, 2022, 100% of our AFS securities were rated single-A, or above, by an NRSRO, based on the lowest long-term credit rating for each security. The NRSRO ratings may differ from any internal ratings of the securities, if applicable.

At June 30, 2023 and December 31, 2022, certain of our AFS securities were in an unrealized loss position; however, no allowance for credit losses was deemed necessary because those losses were considered temporary and recovery of the entire amortized cost basis on these securities at maturity was expected.

14

Notes to Financial Statements, continued

(Unaudited, $ amounts in thousands unless otherwise indicated)

Held-to-Maturity Securities.

Major Security Types. The following table presents our HTM securities by type of security.

	June 30, 2023
			Gross		Gross
			Unrecognized		Unrecognized
	Amortized		Holding		Holding		Estimated
Security Type	Cost (1)		Gains		Losses		Fair Value
MBS:
Other U.S. obligations - guaranteed single-family	$	3,683,444	$	1,108	$	(44,812)	$	3,639,740
GSE single-family	585,800		184		(38,431)		547,553
GSE multifamily	568,462		—		(2,757)		565,705
Total HTM securities	$	4,837,706	$	1,292	$	(86,000)	$	4,752,998
	December 31, 2022
			Gross		Gross
			Unrecognized		Unrecognized
	Amortized		Holding		Holding		Estimated
Security Type	Cost (1)		Gains		Losses		Fair Value
MBS:
Other U.S. obligations - guaranteed single-family	$	2,991,702	$	2,128	$	(43,106)	$	2,950,724
GSE single-family	619,910		518		(39,634)		580,794
GSE multifamily	628,589		—		(3,889)		624,700
Total HTM securities	$	4,240,201	$	2,646	$	(86,629)	$	4,156,218

(1)    Carrying value equals amortized cost, which includes adjustments made to the cost basis for purchase discount or premium and related accretion or amortization. Net unamortized premium at June 30, 2023 and December 31, 2022 totaled $23,795 and $26,125, respectively.

Contractual Maturity. HTM securities are not presented by contractual maturity because they consisted entirely of MBS, whose actual maturities will likely differ from their contractual maturities as borrowers have the right to prepay their obligations with or without prepayment fees.

Realized Gains and Losses. During the six months ended June 30, 2023, we sold a portion of our HTM MBS for which we had previously collected at least 85% of the principal outstanding at the time of acquisition. As such, the sales were considered maturities for purposes of security classification. Proceeds from the sales totaled $9,769, resulting in a net realized loss of $(71) determined by the specific identification method.

Allowance for Credit Losses. At June 30, 2023 and December 31, 2022, 100% of our HTM securities were rated single-A, or above, by an NRSRO, based on the lowest long-term credit rating for each security. The NRSRO ratings may differ from any internal ratings of the securities, if applicable.

At June 30, 2023 and December 31, 2022, based on our evaluation, no allowance for credit losses on any of our HTM securities was deemed necessary.

15

Notes to Financial Statements, continued

(Unaudited, $ amounts in thousands unless otherwise indicated)

Note 4 - Advances

The following table presents our advances outstanding by redemption term.

	June 30, 2023			December 31, 2022
Redemption Term	Amount		WAIR %	Amount		WAIR %
Overdrawn demand and overnight deposit accounts	$	—	—	$	430	6.74
Due in 1 year or less	9,298,969		4.50	14,517,059		3.77
Due after 1 through 2 years	3,419,914		2.89	2,726,023		2.82
Due after 2 through 3 years	3,207,364		3.38	3,316,683		2.73
Due after 3 through 4 years	2,221,038		3.22	2,045,370		2.70
Due after 4 through 5 years	7,435,666		4.19	3,938,017		3.96
Thereafter	11,339,502		3.17	10,747,880		2.70
Total advances, par value	36,922,453		3.71	37,291,462		3.26
Fair-value hedging basis adjustments, net	(693,968)			(615,859)
Unamortized swap termination fees associated with modified advances, net of deferred prepayment fees	5,736			6,856
Total advances (1)	$	36,234,221		$	36,682,459

(1)    Carrying value equals amortized cost, which excludes accrued interest receivable at June 30, 2023 and December 31, 2022 of $52,966 and $50,446, respectively.

The following table presents our advances outstanding by the earlier of the redemption date or the next call date and next put date.

	Earlier of Redemption or Next Call Date				Earlier of Redemption or Next Put Date
Term	June 30, 2023		December 31, 2022		June 30, 2023		December 31, 2022
Overdrawn demand and overnight deposit accounts	$	—	$	430	$	—	$	430
Due in 1 year or less	14,248,371		19,337,582		15,912,969		20,226,164
Due after 1 through 2 years	3,280,214		2,299,023		3,795,814		3,207,023
Due after 2 through 3 years	2,296,614		2,385,483		4,197,364		4,082,583
Due after 3 through 4 years	1,827,938		1,592,245		2,231,038		2,045,370
Due after 4 through 5 years	5,695,965		2,773,917		6,845,766		4,173,117
Thereafter	9,573,351		8,902,782		3,939,502		3,556,775
Total advances, par value	$	36,922,453	$	37,291,462	$	36,922,453	$	37,291,462

Advance Concentrations. At June 30, 2023 and December 31, 2022, our top five borrowers held 38% and 41%, respectively, of total advances outstanding at par. Our top borrower at June 30, 2023 and December 31, 2022 held 13% and 12%, respectively.

Allowance for Credit Losses. At June 30, 2023 and December 31, 2022, based upon the collateral held as security, our credit extension and collateral policies, our credit analysis and the repayment history on advances, no allowance for credit losses on advances was deemed necessary.

16

Notes to Financial Statements, continued

(Unaudited, $ amounts in thousands unless otherwise indicated)

Note 5 - Mortgage Loans Held for Portfolio

The following tables present information on our mortgage loans held for portfolio by term and type.

Term	June 30, 2023		December 31, 2022
Fixed-rate long-term mortgages	$	6,949,896	$	6,676,752
Fixed-rate medium-term (1) mortgages	797,059		856,446
Total mortgage loans held for portfolio, UPB	7,746,955		7,533,198
Unamortized premiums	169,224		168,593
Unamortized discounts	(11,217)		(9,466)
Hedging basis adjustments, net	(5,712)		(5,670)
Total mortgage loans held for portfolio	7,899,250		7,686,655
Allowance for credit losses	(200)		(200)
Total mortgage loans held for portfolio, net (2)	$	7,899,050	$	7,686,455

(1)    Defined as a term of 15 years or less at origination.

(2)    Excludes accrued interest receivable at June 30, 2023 and December 31, 2022 of $32,955 and $30,396, respectively.

Type	June 30, 2023		December 31, 2022
Conventional	$	7,605,034	$	7,383,168
Government-guaranteed or -insured	141,921		150,030
Total mortgage loans held for portfolio, UPB	$	7,746,955	$	7,533,198

Credit Quality Indicators for Conventional Mortgage Loans and Other Delinquency Statistics. The tables below present the key credit quality indicators and other delinquency statistics for our mortgage loans held for portfolio aggregated by (i) the most recent five origination years and (ii) all other prior origination years. Amounts are based on amortized cost, which excludes accrued interest receivable.

	June 30, 2023
	Origination Year
Payment Status	Prior to 2019		2019 to 2023		Total
Past due:
30-59 days	$	41,638	$	14,221	$	55,859
60-89 days	3,912		893		4,805
90 days or more	6,534		648		7,182
Total past due	52,084		15,762		67,846
Total current	2,521,996		5,165,962		7,687,958
Total conventional mortgage loans, amortized cost	$	2,574,080	$	5,181,724	$	7,755,804

	December 31, 2022
	Origination Year
Payment Status	Prior to 2018		2018 to 2022		Total
Past due:
30-59 days	$	17,892	$	13,041	$	30,933
60-89 days	4,537		1,992		6,529
90 days or more	9,498		2,979		12,477
Total past due	31,927		18,012		49,939
Total current	2,422,623		5,062,416		7,485,039
Total conventional mortgage loans, amortized cost	$	2,454,550	$	5,080,428	$	7,534,978

17

Notes to Financial Statements, continued

(Unaudited, $ amounts in thousands unless otherwise indicated)

	June 30, 2023
Other Delinquency Statistics	Conventional			Government			Total
In process of foreclosure (1)	$	977		$	—		$	977
Serious delinquency rate (2)	0.09		%	0.59		%	0.10		%
Past due 90 days or more still accruing interest (3)	$	3,359		$	775		$	4,134
On non-accrual status (4)	$	8,414		$	—		$	8,414
	December 31, 2022
Other Delinquency Statistics	Conventional			Government			Total
In process of foreclosure (1)	$	1,655		$	—		$	1,655
Serious delinquency rate (2)	0.16		%	1.07		%	0.18		%
Past due 90 days or more still accruing interest (3)	$	6,283		$	1,552		$	7,835
On non-accrual status (4)	$	10,984		$	—		$	10,984

(1)    Includes loans for which the decision of foreclosure or similar alternative, such as pursuit of deed-in-lieu of foreclosure, has been reported. Loans in process of foreclosure are included in past due categories depending on their delinquency status, but are not necessarily considered to be on non-accrual status.

(2)    Represents loans 90 days or more past due (including loans in process of foreclosure) expressed as a percentage of the respective amount of mortgage loans outstanding. The total rate is a weighted-average rate. The percentage excludes principal and interest amounts previously paid in full by the servicers on conventional loans that are pending resolution of potential loss claims. Our servicers repurchase seriously delinquent government loans, including Federal Housing Administration loans, when certain criteria are met.

(3)    Although our past due scheduled/scheduled MPP loans are classified as loans past due 90 days or more based on the loan's delinquency status, we do not consider these loans to be on non-accrual status as they are well-secured and in the process of collection.

(4)    As of June 30, 2023 and December 31, 2022, of these conventional mortgage loans on non-accrual status, $1,191 and $3,160, respectively, of UPB did not have a related allowance for credit losses because these loans were either previously charged off to the expected recoverable value and/or the fair value of the underlying collateral, including any credit enhancements, exceeded the amortized cost of the loans.

Allowance for Credit Losses. The table below presents a rollforward of our allowance for credit losses.

	Three Months Ended June 30,				Six Months Ended June 30,
Rollforward of Allowance	2023		2022		2023		2022
Balance, beginning of period	$	200	$	200	$	200	$	200
(Charge-offs), net of recoveries	3		38		2		60
Provision for (reversal of) credit losses	(3)		(38)		(2)		(60)
Balance, end of period	$	200	$	200	$	200	$	200

18

Notes to Financial Statements, continued

(Unaudited, $ amounts in thousands unless otherwise indicated)

Note 6 - Derivatives and Hedging Activities

Managing Credit Risk on Derivatives. We are subject to credit risk due to the risk of nonperformance by the counterparties to our derivative transactions.

Uncleared Derivatives. During the three months ended June 30, 2023, we became subject to two-way initial margin regulatory requirements for uncleared derivative transactions executed on or after September 1, 2022 as our aggregate uncleared derivative exposure to a single counterparty exceeded a specified threshold. Required initial margin must be in the form of non-cash collateral and held at a third-party custodian but such posting does not change ownership of the initial margin. Rather, the counterparty has a security interest in the required initial margin and can only take ownership upon the occurrence of certain events, including an event of default due to bankruptcy, insolvency, or similar proceeding. As a result, at June 30, 2023, our securities pledged as collateral totaled $8,620, which cannot be sold or repledged by the counterparty.

There were no uncleared derivative instruments with credit-risk-related contingent features that were in a net liability position (before cash collateral and related accrued interest on cash collateral) at June 30, 2023.

Cleared Derivatives. At June 30, 2023, we were not required by our clearing agents to post any additional margin.

Financial Statement Effect and Additional Financial Information.

We record derivative instruments, related cash collateral received or pledged/posted and associated accrued interest on a net basis by clearing agent and/or by counterparty when the netting requirements have been met.

The following table presents the notional amount and estimated fair value of our derivative assets and liabilities.

	June 30, 2023						December 31, 2022
	Notional		Derivative		Derivative		Notional		Derivative		Derivative
	Amount		Assets		Liabilities		Amount		Assets		Liabilities
Derivatives designated as hedging instruments:
Interest-rate swaps	$	80,851,192	$	1,025,694	$	2,087,330	$	66,103,220	$	919,089	$	2,178,897
Derivatives not designated as hedging instruments:
Economic hedges:
Interest-rate swaps	764,802		5,772		39		6,200,000		599		525
Interest-rate caps/floors	811,000		2,191		—		611,000		1,310		—
Interest-rate forwards	81,900		185		14		30,200		131		—
MDCs	81,787		37		188		30,855		50		102
Total derivatives not designated as hedging instruments	1,739,489		8,185		241		6,872,055		2,090		627
Total derivatives before adjustments	$	82,590,681	1,033,879		2,087,571		$	72,975,275	921,179		2,179,524
Netting adjustments and cash collateral (1)			(487,129)		(2,057,999)				(486,758)		(2,160,315)
Total derivatives, net, at estimated fair value			$	546,750	$	29,572			$	434,421	$	19,209

(1)    Represents the application of the netting requirements that allow us to settle (i) positive and negative positions and (ii) cash collateral and related accrued interest held or placed, with the same clearing agent and/or counterparty. Cash collateral pledged to counterparties at June 30, 2023 and December 31, 2022, including accrued interest, totaled $1,758,290 and $1,854,876, respectively. Cash collateral received from counterparties and held at June 30, 2023 and December 31, 2022, including accrued interest, totaled $187,421 and $181,319, respectively.

19

Notes to Financial Statements, continued

(Unaudited, $ amounts in thousands unless otherwise indicated)

The following table presents separately the estimated fair value of our derivative instruments meeting and not meeting netting requirements, including the effect of the related collateral.

	June 30, 2023				December 31, 2022
	Derivative Assets		Derivative Liabilities		Derivative Assets		Derivative Liabilities
Derivative instruments meeting netting requirements:
Gross recognized amount
Uncleared	$	978,881	$	2,024,580	$	892,313	$	2,178,098
Cleared	54,776		62,789		28,685		1,324
Total gross recognized amount	1,033,657		2,087,369		920,998		2,179,422
Gross amounts of netting adjustments and cash collateral
Uncleared	(964,698)		(1,995,210)		(884,451)		(2,158,991)
Cleared	477,569		(62,789)		397,693		(1,324)
Total gross amounts of netting adjustments and cash collateral	(487,129)		(2,057,999)		(486,758)		(2,160,315)
Net amounts after netting adjustments and cash collateral
Uncleared	14,183		29,370		7,862		19,107
Cleared	532,345		—		426,378		—
Total net amounts after netting adjustments and cash collateral	546,528		29,370		434,240		19,107
Derivative instruments not meeting netting requirements (1)	222		202		181		102
Total derivatives, net, at estimated fair value	$	546,750	$	29,572	$	434,421	$	19,209

(1)    Includes MDCs and certain interest-rate forwards.

20

Notes to Financial Statements, continued

(Unaudited, $ amounts in thousands unless otherwise indicated)

The following table presents the impact of our qualifying fair-value hedging relationships on net interest income by hedged item, excluding any offsetting interest income/expense of the associated hedged items.

	Three Months Ended June 30, 2023
	Advances		AFS Securities		CO Bonds		Total
Net impact of fair-value hedging relationships on net interest income:
Net interest settlements on derivatives (1)	$	148,661	$	116,903	$	(234,848)	$	30,716
Net gains (losses) on derivatives (2)	221,614		68,048		(255,180)		34,482
Net gains (losses) on hedged items (3)	(223,642)		(85,751)		254,777		(54,616)
Net impact on net interest income	$	146,633	$	99,200	$	(235,251)	$	10,582
Total interest income (expense) recorded in the Statement of Income (4)	$	491,756	$	200,507	$	(543,752)	$	148,511
	Three Months Ended June 30, 2022
	Advances		AFS Securities		CO Bonds		Total
Net impact of fair-value hedging relationships on net interest income:
Net interest settlements on derivatives (1)	$	(18,870)	$	(11,663)	$	31,275	$	742
Net gains (losses) on derivatives (2)	141,937		106,280		(390,352)		(142,135)
Net gains (losses) on hedged items (3)	(147,671)		(122,790)		387,546		117,085
Net impact on net interest income	$	(24,604)	$	(28,173)	$	28,469	$	(24,308)
Total interest income (expense) recorded in the Statement of Income (4)	$	67,562	$	38,563	$	(99,192)	$	6,933

	Six Months Ended June 30, 2023
	Advances		AFS Securities		CO Bonds		Total
Net impact of fair-value hedging relationships on net interest income:
Net interest settlements on derivatives (1)	$	266,555	$	214,175	$	(441,901)	$	38,829
Net gains (losses) on derivatives (2)	38,303		(21,150)		129,196		146,349
Net gains (losses) on hedged items (3)	(47,135)		(18,521)		(129,893)		(195,549)
Net impact on net interest income	$	257,723	$	174,504	$	(442,598)	$	(10,371)
Total interest income (expense) recorded in the Statement of Income (4)	$	925,984	$	372,226	$	(990,426)	$	307,784

	Six Months Ended June 30, 2022
	Advances		AFS Securities		CO Bonds		Total
Net impact of fair-value hedging relationships on net interest income:
Net interest settlements on derivatives (1)	$	(59,024)	$	(34,128)	$	82,664	$	(10,488)
Net gains (losses) on derivatives (2)	498,571		284,010		(1,290,066)		(507,485)
Net gains (losses) on hedged items (3)	(500,575)		(314,279)		1,282,605		467,751
Net impact on net interest income	$	(61,028)	$	(64,397)	$	75,203	$	(50,222)
Total interest income (expense) recorded in the Statement of Income (4)	$	102,603	$	61,008	$	(150,891)	$	12,720

(1)    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.

(2)    Includes increases (decreases) in estimated fair value and price alignment interest.

21

Notes to Financial Statements, continued

(Unaudited, $ amounts in thousands unless otherwise indicated)

(3)    Includes increases (decreases) in estimated fair value and amortization of net losses on ineffective and discontinued fair-value hedging relationships.

(4)    For advances, AFS securities and CO bonds only.

The following table presents the components of our net gains (losses) on derivatives reported in other income.

	Three Months Ended June 30,				Six Months Ended June 30,
Type of Hedge	2023		2022		2023		2022
Net gains (losses) on derivatives not designated as hedging instruments:
Economic hedges:
Interest-rate swaps	$	1,904	$	16,413	$	(8,171)	$	38,463
Interest-rate caps/floors	516		(42)		(429)		131
Interest-rate forwards	723		1,768		58		7,026
Net interest settlements (1)	2,626		881		12,444		(1,137)
MDCs	(799)		(1,817)		(295)		(7,286)
Net gains (losses) on derivatives in other income	$	4,970	$	17,203	$	3,607	$	37,197

(1)    Relates to derivatives that are not in qualifying fair-value hedging relationships. The interest income/expense of the associated hedged items is recorded in net interest income.

The following table presents the amortized cost of, and the related cumulative basis adjustments on, our hedged items in qualifying fair-value hedging relationships.

	June 30, 2023
	Advances		AFS Securities		CO Bonds
Amortized cost of hedged items (1)	$	25,078,490	$	13,586,588	$	37,983,765
Cumulative basis adjustments included in amortized cost:
For active fair-value hedging relationships (2)	$	(693,968)	$	(1,400,651)	$	(1,987,837)
For discontinued fair-value hedging relationships	—		282,866		—
Total cumulative fair-value hedging basis adjustments on hedged items	$	(693,968)	$	(1,117,785)	$	(1,987,837)

	December 31, 2022
	Advances		AFS Securities		CO Bonds
Amortized cost of hedged items (1)	$	20,766,832	$	12,189,776	$	28,717,246
Cumulative basis adjustments included in amortized cost:
For active fair-value hedging relationships (2)	$	(615,898)	$	(1,417,774)	$	(2,147,802)
For discontinued fair-value hedging relationships	39		317,888		—
Total cumulative fair-value hedging basis adjustments on hedged items	$	(615,859)	$	(1,099,886)	$	(2,147,802)

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

(2)    Includes effective and ineffective fair-value hedging relationships. Excludes any offsetting effect of the net estimated fair value of the associated derivatives.

22

Notes to Financial Statements, continued

(Unaudited, $ amounts in thousands unless otherwise indicated)

Note 7 - Consolidated Obligations

In addition to being the primary obligor for all consolidated obligations issued on our behalf, we are jointly and severally liable with each of the other FHLBanks for the payment of the principal and interest on all of the FHLBanks' consolidated obligations outstanding. The par values of the FHLBanks' consolidated obligations outstanding at June 30, 2023 and December 31, 2022 totaled $1.3 trillion and $1.2 trillion, respectively. As provided by the Federal Home Loan Bank Act of 1932 and Finance Agency regulations, consolidated obligations are backed only by the financial resources of all FHLBanks.

Discount Notes. The following table presents our discount notes outstanding, all of which are due within one year of issuance.

Discount Notes	June 30, 2023			December 31, 2022
Book value	$	20,199,909		$	27,387,492
Par value	20,283,393			27,533,665
Weighted average effective interest rate	5.08		%	4.16		%

CO Bonds. The following table presents our CO bonds outstanding by contractual maturity.

	June 30, 2023			December 31, 2022
Year of Contractual Maturity	Amount		WAIR%	Amount		WAIR%
Due in 1 year or less	$	17,235,125	4.31	$	10,016,310	3.05
Due after 1 through 2 years	13,893,905		2.29	8,014,590		1.48
Due after 2 through 3 years	5,123,740		1.43	6,278,940		1.37
Due after 3 through 4 years	5,116,420		1.42	7,130,600		1.25
Due after 4 through 5 years	1,402,680		2.01	2,312,540		1.76
Thereafter	7,701,630		2.50	8,249,080		2.35
Total CO bonds, par value	50,473,500		2.83	42,002,060		1.99
Unamortized premiums	39,488			45,535
Unamortized discounts	(9,781)			(10,165)
Unamortized concessions	(7,284)			(7,174)
Fair-value hedging basis adjustments, net	(1,987,837)			(2,147,802)
Total CO bonds	$	48,508,086		$	39,882,454

The following tables present the par value of our CO bonds outstanding by redemption feature and the earlier of the year of contractual maturity or next call date.

Call Feature	June 30, 2023		December 31, 2022
Non-callable / non-putable	$	14,161,500	$	11,979,560
Callable	36,312,000		30,022,500
Total CO bonds, par value	$	50,473,500	$	42,002,060

Year of Contractual Maturity or Next Call Date	June 30, 2023		December 31, 2022
Due in 1 year or less	$	44,850,625	$	37,066,810
Due after 1 through 2 years	2,543,905		1,444,590
Due after 2 through 3 years	872,740		770,940
Due after 3 through 4 years	384,920		804,100
Due after 4 through 5 years	326,680		268,540
Thereafter	1,494,630		1,647,080
Total CO bonds, par value	$	50,473,500	$	42,002,060

23

Notes to Financial Statements, continued

(Unaudited, $ amounts in thousands unless otherwise indicated)

The following table presents the par value of our CO bonds outstanding by interest-rate payment type.

Interest-Rate Payment Type	June 30, 2023		December 31, 2022
Fixed-rate	$	46,421,500	$	36,957,560
Step-up	1,418,500		2,268,500
Simple variable-rate	2,633,500		2,776,000
Total CO bonds, par value	$	50,473,500	$	42,002,060

Note 8 - Affordable Housing Program

The following table summarizes the activity in our AHP funding obligation.

	Three Months Ended June 30,				Six Months Ended June 30,
AHP Activity	2023		2022		2023		2022
Liability at beginning of period	$	46,615	$	31,937	$	38,170	$	31,049
Assessments (1)	10,637		3,623		21,280		6,828
Subsidy usage, net (2)	(4,117)		(6,607)		(6,315)		(8,924)
Liability at end of period	$	53,135	$	28,953	$	53,135	$	28,953

(1)    Assessments are reported separately on the Statement of Income as a reduction to Income before assessments.

(2)    Subsidies disbursed are reported net of returns/recaptures of previously disbursed subsidies.

Note 9 - Capital

Classes of Capital Stock. The following table presents our capital stock outstanding by sub-series.

Capital Stock Sub-Series	June 30, 2023		December 31, 2022
Class B-1 (1)	$	734,001	$	535,345
Class B-2 (2)	1,646,489		1,587,780
Total Class B	$	2,380,490	$	2,123,125

(1)    Non-activity-based stock.

(2)    Activity-based stock.

Mandatorily Redeemable Capital Stock. The following table presents the activity in our MRCS.

	Three Months Ended June 30,				Six Months Ended June 30,
MRCS Activity	2023		2022		2023		2022
Liability at beginning of period	$	372,487	$	45,591	$	372,503	$	50,422
Reclassification from capital stock	—		—		13		—
Redemptions/repurchases	(1,865)		(8)		(1,894)		(4,839)
Liability at end of period	$	370,622	$	45,583	$	370,622	$	45,583

24

Notes to Financial Statements, continued

(Unaudited, $ amounts in thousands unless otherwise indicated)

The following table presents our MRCS by contractual year of redemption. The year of redemption is the later of (i) the final year of the five-year redemption period, or (ii) the first year in which a non-member no longer has an activity-based stock requirement.

MRCS Contractual Year of Redemption	June 30, 2023		December 31, 2022
Past contractual redemption date (1)	$	777	$	498
Year 1 (2)	8,743		10,048
Year 2	12,124		9,872
Year 3	16,059		19,179
Year 4	3,674		3,674
Year 5	329,245		329,232
Total MRCS	$	370,622	$	372,503

(1)    Balance represents Class B stock that will not be redeemed until the associated credit products and other obligations are no longer outstanding.

(2)    Balance at June 30, 2023 and December 31, 2022 includes $7,875 and $9,585 of Class B stock held by one captive insurance company whose membership was terminated on February 19, 2021. The stock is not past its contractual redemption date, but will be redeemed as soon as the associated credit products and other obligations are no longer outstanding.

The following table presents the distributions related to our MRCS.

	Three Months Ended June 30,				Six Months Ended June 30,
MRCS Distributions	2023		2022		2023		2022
Recorded as interest expense	$	4,370	$	269	$	8,480	$	514
Recorded as distributions from retained earnings	1		—		707		—
Total	$	4,371	$	269	$	9,187	$	514

Capital Requirements. We are subject to three capital requirements under our capital plan and Finance Agency regulations as disclosed in Note 12 - Capital in our 2022 Form 10-K. As presented in the following table, we were in compliance with these Finance Agency capital requirements at June 30, 2023 and December 31, 2022.

	June 30, 2023				December 31, 2022
Regulatory Capital Requirements	Required		Actual		Required		Actual
Risk-based capital	$	1,158,404	$	4,164,585	$	489,240	$	3,781,992
Total regulatory capital	$	2,970,818	$	4,164,585	$	2,891,351	$	3,781,992
Total regulatory capital-to-assets ratio	4.00%		5.61%		4.00%		5.23%
Leverage capital	$	3,713,523	$	6,246,878	$	3,614,189	$	5,672,988
Leverage ratio	5.00%		8.41%		5.00%		7.85%

25

Notes to Financial Statements, continued

(Unaudited, $ amounts in thousands unless otherwise indicated)

Note 10 - Accumulated Other Comprehensive Income

The following table presents a summary of the changes in the components of our AOCI.

AOCI Rollforward	Unrealized Gains (Losses) on AFS Securities		Pension Benefits		Total AOCI (Loss)
Balance, March 31, 2023	$	(57,916)	$	(15,512)	$	(73,428)
OCI before reclassifications:
Net change in unrealized gains	61,911		—		61,911
Reclassifications from OCI to net income:
Pension benefits, net	—		1,206		1,206
Total other comprehensive income	61,911		1,206		63,117
Balance, June 30, 2023	$	3,995	$	(14,306)	$	(10,311)
Balance, March 31, 2022	$	77,479	$	(18,424)	$	59,055
OCI before reclassifications:
Net change in unrealized gains (losses)	(45,228)		—		(45,228)
Reclassifications from OCI to net income:
Pension benefits, net	—		329		329
Total other comprehensive income (loss)	(45,228)		329		(44,899)
Balance, June 30, 2022	$	32,251	$	(18,095)	$	14,156

AOCI Rollforward	Unrealized Gains (Losses) on AFS Securities		Pension Benefits		Total AOCI (Loss)
Balance, December 31, 2022	$	(9,939)	$	(15,852)	$	(25,791)
OCI before reclassifications:
Net change in unrealized gains	13,934		—		13,934
Reclassifications from OCI to net income:
Pension benefits, net	—		1,546		1,546
Total other comprehensive income	13,934		1,546		15,480
Balance, June 30, 2023	$	3,995	$	(14,306)	$	(10,311)
Balance, December 31, 2021	$	151,942	$	(18,884)	$	133,058
OCI before reclassifications:
Net change in unrealized gains (losses)	(119,691)		—		(119,691)
Reclassifications from OCI to net income:
Pension benefits, net	—		789		789
Total other comprehensive income (loss)	(119,691)		789		(118,902)
Balance, June 30, 2022	$	32,251	$	(18,095)	$	14,156

26

Notes to Financial Statements, continued

(Unaudited, $ amounts in thousands unless otherwise indicated)

Note 11 - Segment Information

The following table presents our financial performance by operating segment.

	Three Months Ended June 30, 2023						Three Months Ended June 30, 2022
	Traditional		Mortgage Loans		Total		Traditional		Mortgage Loans		Total
Net interest income	$	112,133	$	11,460	$	123,593	$	50,671	$	13,151	$	63,822
Provision for (reversal of) credit losses	—		(3)		(3)		—		(38)		(38)
Other income (loss)	9,031		120		9,151		(1,732)		34		(1,698)
Other expenses	26,855		3,893		30,748		22,436		3,767		26,203
Income before assessments	94,309		7,690		101,999		26,503		9,456		35,959
Affordable Housing Program assessments	9,868		769		10,637		2,677		946		3,623
Net income	$	84,441	$	6,921	$	91,362	$	23,826	$	8,510	$	32,336
	Six Months Ended June 30, 2023						Six Months Ended June 30, 2022
	Traditional		Mortgage Loans		Total		Traditional		Mortgage Loans		Total
Net interest income	$	202,802	$	24,440	$	227,242	$	103,361	$	25,045	$	128,406
Provision for (reversal of) credit losses	—		(2)		(2)		—		(60)		(60)
Other income (loss)	39,283		15		39,298		(8,942)		(158)		(9,100)
Other expenses	54,272		7,947		62,219		44,202		7,395		51,597
Income before assessments	187,813		16,510		204,323		50,217		17,552		67,769
Affordable Housing Program assessments	19,629		1,651		21,280		5,073		1,755		6,828
Net income	$	168,184	$	14,859	$	183,043	$	45,144	$	15,797	$	60,941

The following table presents our asset balances by operating segment.

Date	Traditional		Mortgage Loans		Total
June 30, 2023	$	66,371,402	$	7,899,050	$	74,270,452
December 31, 2022	64,597,325		7,686,455		72,283,780

27

Notes to Financial Statements, continued

(Unaudited, $ amounts in thousands unless otherwise indicated)

Note 12 - Estimated Fair Values

The following tables present the carrying value and estimated fair value of each of our financial instruments. The total of the estimated fair values does not represent an estimate of our overall market value as a going concern, which would take into account, among other considerations, future business opportunities and the net profitability of assets and liabilities.

	June 30, 2023
			Estimated Fair Value
	Carrying										Netting
Financial Instruments	Value		Total		Level 1		Level 2		Level 3		Adjustments (1)
Assets:
Cash and due from banks	$	63,585	$	63,585	$	63,585	$	—	$	—	$	—
Interest-bearing deposits	817,845		817,845		817,803		42		—		—
Securities purchased under agreements to resell	4,400,000		4,400,000		—		4,400,000		—		—
Federal funds sold	5,027,000		5,027,000		—		5,027,000		—		—
Trading securities	345,258		345,258		—		345,258		—		—
AFS securities	13,590,583		13,590,583		—		13,590,583		—		—
HTM securities	4,837,706		4,752,998		—		4,752,998		—		—
Advances	36,234,221		36,070,388		—		36,070,388		—		—
Mortgage loans held for portfolio, net	7,899,050		7,106,163		—		7,101,949		4,214		—
Loans to other FHLBanks	250,000		250,000		—		250,000		—		—
Accrued interest receivable	156,432		156,432		—		156,432		—		—
Derivative assets, net	546,750		546,750		—		1,033,879		—		(487,129)
Grantor trust assets (2)	57,432		57,432		57,432		—		—		—
Liabilities:
Deposits	663,307		663,307		—		663,307		—		—
Consolidated obligations:
Discount notes	20,199,909		20,205,412		—		20,205,412		—		—
Bonds	48,508,086		47,469,514		—		47,469,514		—		—
Accrued interest payable	283,062		283,062		—		283,062		—		—
Derivative liabilities, net	29,572		29,572		—		2,087,571		—		(2,057,999)
MRCS	370,622		370,622		370,622		—		—		—

28

Notes to Financial Statements, continued

(Unaudited, $ amounts in thousands unless otherwise indicated)

	December 31, 2022
			Estimated Fair Value
	Carrying										Netting
Financial Instruments	Value		Total		Level 1		Level 2		Level 3		Adjustments (1)
Assets:
Cash and due from banks	$	21,161	$	21,161	$	21,161	$	—	$	—	$	—
Interest-bearing deposits	856,060		856,060		856,019		41		—		—
Securities purchased under agreements to resell	4,550,000		4,550,000		—		4,550,000		—		—
Federal funds sold	3,148,000		3,148,000		—		3,148,000		—		—
Trading securities	2,230,248		2,230,248		—		2,230,248		—		—
AFS securities	12,179,837		12,179,837		—		12,179,837		—		—
HTM securities	4,240,201		4,156,218		—		4,156,218		—		—
Advances	36,682,459		36,468,949		—		36,468,949		—		—
Mortgage loans held for portfolio, net	7,686,455		6,867,904		—		6,859,956		7,948		—
Accrued interest receivable	152,867		152,867		—		152,867		—		—
Derivative assets, net	434,421		434,421		—		921,179		—		(486,758)
Grantor trust assets (2)	53,166		53,166		53,166		—		—		—
Liabilities:
Deposits	595,907		595,907		—		595,907		—		—
Consolidated obligations:
Discount notes	27,387,492		27,387,547		—		27,387,547		—		—
Bonds	39,882,454		38,690,400		—		38,690,400		—		—
Accrued interest payable	162,584		162,584		—		162,584		—		—
Derivative liabilities, net	19,209		19,209		—		2,179,524		—		(2,160,315)
MRCS	372,503		372,503		372,503		—		—		—

(1)    Represents the application of the netting requirements that allow us to settle (i) positive and negative positions and (ii) cash collateral and related accrued interest held or placed with the same clearing agent and/or counterparty.

(2)    Included in other assets on the statement of condition.

Summary of Valuation Techniques and Significant Inputs. A description of the valuation techniques, significant inputs, and levels of fair value hierarchy is disclosed in Note 16 - Estimated Fair Values in our 2022 Form 10-K. No significant changes have been made in the current year.

29

Notes to Financial Statements, continued

(Unaudited, $ amounts in thousands unless otherwise indicated)

Estimated Fair Value Measurements. The following tables present, by level within the fair value hierarchy, the estimated fair value of our financial assets and liabilities that are recorded at estimated fair value on a recurring or non-recurring basis on our statement of condition.

	June 30, 2023
									Netting
Financial Instruments	Total		Level 1		Level 2		Level 3		Adjustments (1)
Trading securities:
U.S. Treasury obligations	$	345,258	$	—	$	345,258	$	—	$	—
Total trading securities	345,258		—		345,258		—		—
AFS securities:
U.S. Treasury obligations	5,357,112		—		5,357,112		—		—
GSE and TVA debentures	1,771,170		—		1,771,170		—		—
GSE multifamily MBS	6,462,301		—		6,462,301		—		—
Total AFS securities	13,590,583		—		13,590,583		—		—
Derivative assets:
Interest-rate related	546,713		—		1,033,842		—		(487,129)
MDCs	37		—		37		—		—
Total derivative assets, net	546,750		—		1,033,879		—		(487,129)
Other assets:
Grantor trust assets	57,432		57,432		—		—		—
Total assets at recurring estimated fair value	$	14,540,023	$	57,432	$	14,969,720	$	—	$	(487,129)
Derivative liabilities:
Interest-rate related	$	29,384	$	—	$	2,087,383	$	—	$	(2,057,999)
MDCs	188		—		188		—		—
Total derivative liabilities, net	29,572		—		2,087,571		—		(2,057,999)
Total liabilities at recurring estimated fair value	$	29,572	$	—	$	2,087,571	$	—	$	(2,057,999)

30

Notes to Financial Statements, continued

(Unaudited, $ amounts in thousands unless otherwise indicated)

	December 31, 2022
									Netting
Financial Instruments	Total		Level 1		Level 2		Level 3		Adjustments (1)
Trading securities:
U.S. Treasury obligations	$	2,230,248	$	—	$	2,230,248	$	—	$	—
Total trading securities	2,230,248		—		2,230,248		—		—
AFS securities:
U.S. Treasury obligations	4,209,674		—		4,209,674		—		—
GSE and TVA debentures	1,902,703		—		1,902,703		—		—
GSE multifamily MBS	6,067,460		—		6,067,460		—		—
Total AFS securities	12,179,837		—		12,179,837		—		—
Derivative assets:
Interest-rate related	434,371		—		921,129		—		(486,758)
MDCs	50		—		50		—		—
Total derivative assets, net	434,421		—		921,179		—		(486,758)
Other assets:
Grantor trust assets	53,166		53,166		—		—		—
Total assets at recurring estimated fair value	$	14,897,672	$	53,166	$	15,331,264	$	—	$	(486,758)
Derivative liabilities:
Interest-rate related	$	19,107	$	—	$	2,179,422	$	—	$	(2,160,315)
MDCs	102		—		102		—		—
Total derivative liabilities, net	19,209		—		2,179,524		—		(2,160,315)
Total liabilities at recurring estimated fair value	$	19,209	$	—	$	2,179,524	$	—	$	(2,160,315)

(1)    Represents the application of the netting requirements that allow us to settle (i) positive and negative positions and (ii) cash collateral and related accrued interest held or placed with the same clearing agent and/or counterparty.

Note 13 - Commitments and Contingencies

The following table presents our off-balance-sheet commitments at their notional amounts.

	June 30, 2023
Type of Commitment	Expire within one year		Expire after one year		Total
Standby letters of credit outstanding (1)	$	403,380	$	301,657	$	705,037
Commitments for standby bond purchases	—		195,814		195,814
Unused lines of credit (2)	1,106,859		—		1,106,859
Commitments to fund additional advances (3)	76,317		4,087		80,404
Commitments to purchase mortgage loans, net (4)	81,787		—		81,787
Unsettled CO bonds, at par	178,825		—		178,825
Unsettled discount notes, at par	86,500		—		86,500

(1)    Excludes unconditional commitments to issue standby letters of credit totaling $66,958.

(2)    Maximum line of credit amount per member is $100,000.

(3)    Generally for periods up to six months.

(4)    Generally for periods up to 91 days.

31

Notes to Financial Statements, continued

(Unaudited, $ amounts in thousands unless otherwise indicated)

Pledged Collateral. Cash pledged as collateral to counterparties and clearing agents at June 30, 2023 and December 31, 2022 totaled $1,753,208 and $1,849,797, respectively. Securities pledged as collateral to counterparties at June 30, 2023 and December 31, 2022 totaled $8,620 and $0, respectively.

Standby Bond Purchase Agreements. During the three months ended June 30, 2023, we entered into multiple agreements with a state housing authority within our district whereby we could be required under the terms of the agreements to purchase and hold the state housing authority's bonds until its designated marketing agent can find a suitable investor or the state housing authority repurchases the bond according to a schedule established by the standby agreements. These standby bond purchase commitments have original expiration periods of up to five years, expiring no later than 2028, although some may be renewable at our option. We had not purchased any bonds under these agreements as of June 30, 2023.

Legal Proceedings. We are subject to legal proceedings arising in the normal course of business. We record an accrual for a loss contingency when it is probable that a loss for which we could be liable has been incurred and the amount can be reasonably estimated. After consultation with legal counsel, management is not aware of any such proceedings where the ultimate liability, if any, could have a material effect on our financial condition, results of operations or cash flows.

Additional discussion of other commitments and contingencies is provided in Note 4 - Advances; Note 5 - Mortgage Loans Held for Portfolio; Note 6 - Derivatives and Hedging Activities; Note 7 - Consolidated Obligations; Note 9 - Capital; and Note 12 - Estimated Fair Values.

Note 14 - Related Party and Other Transactions

Transactions with Directors Financial Institutions. The following table presents our transactions with directors' financial institutions, taking into account the beginning and ending dates of the directors' terms, merger activity and other changes in the composition of directors' financial institutions.

Transactions with Directors' Financial Institutions	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Net capital stock issuances (redemptions and repurchases)	$	1,402	$	3,437	$	3,805	$	(46,983)
Net advances (repayments)	(74,218)		3,034,988		(125,512)		1,234,703
Mortgage loan purchases	10,881		4,025		14,004		12,747

The following table presents the aggregate balances of capital stock and advances outstanding for our directors' financial institutions and their balances as a percent of the total balances on our statement of condition.

	June 30, 2023				December 31, 2022
Balances with Directors' Financial Institutions	Par Value		% of Total		Par Value		% of Total
Capital stock	$	56,221	2	%	$	49,869	2	%
Advances	736,725		2	%	886,191		2	%

The composition of our directors' financial institutions changed due to changes in board membership on January 1, 2023 resulting from the 2022 board of directors' election and on April 1, 2023 resulting from the election by the board of directors of new directors to fill unexpired terms.

Transactions with Other FHLBanks. Occasionally, we loan or borrow short-term funds to/from other FHLBanks in order to manage FHLB System-wide liquidity. These loans and borrowings are transacted at current market rates when traded.

On June 30, 2023, the Bank loaned another FHLBank $250,000 which was repaid on the next business day. No loans to any FHLBank were outstanding at December 31, 2022. Additionally, no borrowings from any FHLBank were outstanding at June 30, 2023 or December 31, 2022.

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DEFINED TERMS

advance: Secured loan to member, former member or Housing Associate

AFS: Available-for-Sale

Agency: GSE and Ginnie Mae

AHP: Affordable Housing Program

AOCI: Accumulated Other Comprehensive Income (Loss)

bps: basis points

CDFI: Community Development Financial Institution

Clearinghouse: A United States Commodity Futures Trading Commission-registered derivatives clearing organization

CO bond: Consolidated Obligation bond

EFFR: Effective Federal Funds Rate

Exchange Act: Securities Exchange Act of 1934, as amended

FASB: Financial Accounting Standards Board

FHLBank: A Federal Home Loan Bank

FHLBanks: The 11 Federal Home Loan Banks or a subset thereof

FHLBank System: The 11 Federal Home Loan Banks and the Office of Finance

Finance Agency: Federal Housing Finance Agency

FOMC: Federal Open Market Committee

Form 8-K: Current Report on Form 8-K as filed with the SEC under the Exchange Act

Form 10-K: Annual Report on Form 10-K as filed with the SEC under the Exchange Act

Form 10-Q: Quarterly Report on Form 10-Q as filed with the SEC under the Exchange Act

Freddie Mac: Federal Home Loan Mortgage Corporation

GAAP: Generally Accepted Accounting Principles in the United States of America

Ginnie Mae: Government National Mortgage Association

GSE: United States Government-Sponsored Enterprise

Housing Associate: Approved lender under Title II of the National Housing Act of 1934 that is either a government agency or is chartered under federal or state law with rights and powers similar to those of a corporation

HTM: Held-to-Maturity

LIBOR: London Interbank Offered Rate

LRA: Lender Risk Account

MBS: Mortgage-Backed Securities

MDC: Mandatory Delivery Commitment

Moody's: Moody's Investor Services

MPP: Mortgage Purchase Program, including Original and Advantage unless indicated otherwise

MRCS: Mandatorily Redeemable Capital Stock

MVE: Market Value of Equity

NRSRO: Nationally Recognized Statistical Rating Organization

OCI: Other Comprehensive Income (Loss)

S&P: Standard & Poor's Rating Service

SEC: Securities and Exchange Commission

Securities Act: Securities Act of 1933, as amended

SERP: Collectively, the 2005 FHLBank of Indianapolis Supplemental Executive Retirement Plan, as amended, and the FHLBank of Indianapolis Supplemental Executive Retirement Plan, frozen effective December 31, 2004

SOFR: Secured Overnight Financing Rate

TBA: To Be Announced, a forward contract for the purchase or sale of MBS at a future agreed-upon date for an established price

TVA: Tennessee Valley Authority

UPB: Unpaid Principal Balance

WAIR: Weighted-Average Interest Rate

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

Presentation 

This discussion and analysis by management of the Bank's financial condition and results of operations should be read in conjunction with our 2022 Form 10-K and the interim Financial Statements and related Notes to Financial Statements contained in Item 1. Financial Statements.

Unless otherwise stated, amounts disclosed in this Item are rounded to the nearest million; therefore, dollar amounts of less than one million may not be reflected or, due to rounding, may not appear to agree to the amounts presented in thousands in the Financial Statements and related Notes to Financial Statements. Amounts used to calculate dollar and percentage changes are based on numbers in the thousands. Accordingly, calculations based upon the disclosed amounts (millions) may not produce the same results.

Executive Summary

Overview. As an FHLBank, we are a regional wholesale bank that serves as a financial intermediary between the capital markets and our members. The Bank is structured as a financial cooperative, which allows our business to be scalable and self-capitalizing without taking undue risks, diminishing capital adequacy or jeopardizing profitability. Therefore, the Bank is generally designed to expand and contract in asset size as the needs of our members and their communities change.

We primarily make secured loans in the form of advances to our members and purchase whole mortgage loans from our members. Additionally, we purchase other investments and provide other financial services to our members.

Our principal source of funding is the proceeds from the sale to the public of FHLBank debt instruments, called consolidated obligations, which are the joint and several obligation of all FHLBanks. We obtain additional funds from deposits, other borrowings, and by issuing capital stock to our members.

Our primary source of revenue is interest earned on advances, mortgage loans, and investments, including MBS.

Our net interest income is primarily determined by the size of our balance sheet and the spread between the interest rate earned on our assets and the interest rate paid on our share of the consolidated obligations. A substantial portion of net interest income may also be derived from deploying our capital which has no associated interest cost, i.e., interest-free capital. We use funding and hedging strategies to manage the related interest-rate risk.

Due to our cooperative ownership structure and wholesale nature, we typically earn a narrow interest spread. Accordingly, our net income is relatively low compared to our total assets and capital.

In addition, as a cooperative, some members utilize our products more heavily and own more capital stock than others. As a result, we must achieve a balance in generating membership value from rates we charge on advances or prices we pay to purchase mortgage loans and paying a competitive dividend rate.

We group our products and services within two operating segments: traditional and mortgage loans.

Business Environment. The Bank’s financial performance is influenced by several key national economic and market factors, including fiscal and monetary policies, the conditions in the housing markets and the level and volatility of market interest rates.

Economy and Financial Markets. The U.S. economy remained resilient in the first half of 2023, with consumer spending and business investment driving economic growth.

Second quarter 2023 U.S. real gross domestic product ("GDP"), according to the U.S. Commerce Department, rose at a seasonally- and inflation-adjusted annual rate of 2.4%, above the first quarter annual rate of 2.0%. Consumer spending grew at an annual rate of 1.6%, down from 4.2% growth in the first quarter, but rose enough to drive overall growth alongside stronger business investment. Household outlays accounted for the bulk of economic activity and were responsible for nearly half of the total rise in GDP. Business investment grew at an annual rate of 7.7%, up sharply from 0.6% in the first quarter.

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Consumer spending has been boosted by a tight labor market and higher wages. The labor market remained tight with near historically low jobless claims as the number of job openings exceeded the number of unemployed people looking for work. The U.S. unemployment rate, according to the U.S. Bureau of Labor Statistics, fell slightly from 3.7 % in May to 3.6% in June.

Americans’ growing paychecks surpassed inflation for the first time in two years, providing some financial relief to workers, while complicating the Federal Reserve’s efforts to tame price increases. Inflation-adjusted average hourly wages rose 1.2% in June from a year earlier, according to the U.S. Labor Department. That marked the second straight month of seasonally adjusted gains after two years when workers’ historically elevated raises were erased by price increases. Not adjusting for inflation, private-sector workers’ hourly wages were up more than 4% in June from a year earlier. Those gains have eased over the past year but remain enough to outpace inflation at this time.

In addition to enjoying solid wage growth, Americans are taking comfort in slower price increases for everyday items that have the biggest influence on their perception of inflation. Consumer confidence in June reached its highest level since January 2022 according to the Conference Board.

However, inflation remained high. The personal-consumption expenditures price index, the Federal Reserve's preferred inflation gauge, increased in June 2023 at an annual rate of 3%, according to the Commerce Department, down sharply from a four-decade high annual rate of 7% in June 2022. The associated measure of core prices rose at an annual rate of 4.1% in June compared to a year earlier, which is high enough to warrant more vigilance by the Federal Reserve because it uses this measure as the benchmark for its 2% inflation target. However, June’s core inflation rate was the lowest since September 2021, another sign that overall prices are cooling. Many economists see this core measure as a better measure of future inflation.

Many economists still expect economic growth to ease later this year and into 2024, but they are dialing back their recession predictions. As inflation falls from historic highs and the labor market remains strong, solid economic growth adds to the prospect of a soft landing, in which inflation returns close to the Federal Reserve’s 2% target without a recession.

On August 1, 2023, Fitch Ratings downgraded the Long-Term Credit Ratings of the U.S. and, in turn, certain GSEs, including two FHLBanks that are rated individually, from 'AAA' to 'AA+' and replaced the Negative Rating Watch with a Stable Outlook. The rating downgrade reflects the expected fiscal deterioration over the next three years, a high and growing general government debt burden, and the erosion of governance relative to 'AAA' and 'AA' rated peers over the last two decades that has manifested in repeated debt limit standoffs and last-minute resolutions. Fitch Ratings does not rate our Bank or the consolidated obligations of the FHLBanks.

Conditions in U.S. Housing Markets. The actions by the Federal Reserve to curb inflation by raising interest rates have most directly affected consumers through the housing market. Potential home buyers continue to face high mortgage rates and a shortage of available properties, a combination that has made purchases less affordable.

In mid-July 2023, the average rate for a 30-year fixed-rate mortgage rose to the highest level since November 2022, according to Freddie Mac. Elevated mortgage interest rates have kept many buyers out of the market due to lack of affordability, which has reduced housing demand. At the same time, high mortgage rates have discouraged homeowners from selling as many are reluctant to give up their low mortgage rates, which has limited the supply of homes for sale.

Homes for sale or under contract at the end of June were down 13.6% from a year ago, according to the National Association of Realtors ("NAR"). At the current sales pace, there was only a 3.1-month supply of homes on the market at the end of June. The shortage of existing homes for sale is pushing buyers toward newly built homes and boosting home builders’ sales. However, builders have not erected nearly enough homes to offset the shortage of existing ones, resulting in bidding wars in many places.

The result of lower demand and lower supply has been declining existing-home sales but stubbornly high prices. Existing-home sales, which comprise most of the housing market, decreased in June 2023 by 3.3% from the prior month, the slowest sales pace since January. June sales fell 18.9% from a year earlier, both measures according to the NAR.

Home prices are down slightly from last year’s peaks. The national median existing-home price according to the NAR fell 0.9% in June from a year earlier. However, it is still high on a historical basis, in fact, the second highest level on record in data going back to 1999.

However, housing market conditions vary significantly around the country. Home prices have fallen the most in the western half of the U.S., while prices have continued to rise in many eastern markets.

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Interest Rate Levels and Volatility. The Federal Reserve seeks to achieve maximum employment and inflation at the rate of 2% over the longer run. In support of these goals, at its meeting on May 3, 2023, the FOMC raised the target range for the federal funds rate by another 25 bps to 5.00% to 5.25%. However, at its meeting on June 14, 2023, it held the target range steady.

The following table presents certain key interest rates.

	Average for Three Months Ended				Average for Six Months Ended				Period End
	June 30,				June 30,				June 30,		December 31,
	2023		2022		2023		2022		2023		2022
Federal Funds Effective	4.99	%	0.76	%	4.76	%	0.44	%	5.08	%	4.33	%
SOFR	4.97	%	0.71	%	4.73	%	0.40	%	5.09	%	4.30	%
Overnight LIBOR (1)	4.98	%	0.77	%	4.73	%	0.44	%	5.06	%	4.32	%
1-week Overnight-Indexed Swap	5.01	%	0.84	%	4.78	%	0.49	%	5.07	%	4.34	%
3-month LIBOR (1)	5.40	%	1.54	%	5.15	%	1.02	%	5.55	%	4.77	%
3-month U.S. Treasury yield	5.17	%	1.07	%	4.94	%	0.69	%	5.30	%	4.37	%
2-year U.S Treasury yield	4.29	%	2.72	%	4.32	%	2.09	%	4.90	%	4.43	%
10-year U.S. Treasury yield	3.60	%	2.93	%	3.62	%	2.44	%	3.84	%	3.88	%

(1)    Immediately after June 30, 2023, LIBOR ceased to be provided by any administrator or will no longer be representative.

Source: Bloomberg

The level and volatility of interest rates, including the shape of the yield curve, were affected by several factors, principally efforts by the Federal Reserve beginning in late March 2022 to raise interest rates and tighten monetary policy to combat high inflation.

As the FOMC has raised short-term rates, portions of the Treasury yield curve have become inverted. Investors use the 10-year Treasury yield as an indicator of investor confidence. In recent periods, the 2-year rate has been consistently higher than the 10-year rate, and the 3-month rate nudged above the 10-year rate in the first quarter of 2023 for the first time since before the COVID-19 pandemic.

At its meeting on July 26, 2023, the FOMC raised the target range for the federal funds rate by another 25 bps to 5.25% to 5.50%.

The FOMC stated that "Tighter credit conditions for households and businesses are likely to weigh on economic activity, hiring, and inflation. The extent of these effects remains uncertain. The Committee remains highly attentive to inflation risks. The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run."

"The Committee will continue to assess additional information and its implications for monetary policy. In determining the extent of additional policy firming that may be appropriate to return inflation to 2 percent over time, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments."

"In addition, the Committee will continue reducing its holdings of Treasury securities and agency debt and agency MBS, as described in its previously announced plans."

Impact on Operating Results. Market interest rates and trends affect yields and margins on earning assets, including advances, purchased mortgage loans, and our investment portfolio, which contribute to our overall profitability. Additionally, market interest rates drive mortgage origination and prepayment activity, which can lead to net interest margin volatility in our MPP and MBS portfolios. A flat or inverted yield curve, in which the difference between short-term interest rates and long-term interest rates is low, or negative, respectively, may have an unfavorable impact on our net interest margins. A steep yield curve, in which the difference between short-term and long-term interest rates is high, may have a favorable impact on our net interest margins. The level of interest rates also directly affects our earnings on assets funded by our interest-free capital.

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Lending and investing activity by our member institutions is a key driver for our balance sheet and income growth. Such activity is a function of both prevailing interest rates and economic activity, including local economic factors, particularly relating to the housing and mortgage markets. Positive economic trends can drive interest rates higher, which can impair growth of the mortgage market. A less active mortgage market can affect demand for advances and activity levels in our Advantage MPP. However, borrowing patterns between our insurance company and depository members can differ during various economic and market conditions, thereby easing the potential magnitude of core business fluctuations during business cycles. Member demand for liquidity during stressed market conditions can lead to advances growth.

Results of Operations and Changes in Financial Condition

Results of Operations for the Three and Six Months Ended June 30, 2023 and 2022. The following table presents the comparative highlights of our results of operations ($ amounts in millions).

	Three Months Ended June 30,								Six Months Ended June 30,
Condensed Statements of Comprehensive Income	2023		2022		$ Change		% Change		2023		2022		$ Change		% Change
Net interest income	$	124	$	64	$	60	94	%	$	227	$	128	$	99	77	%
Provision for (reversal of) credit losses	—		—		—				—		—		—
Net interest income after provision for credit losses	124		64		60		94	%	227		128		99		77	%
Other income (loss)	9		(2)		11				39		(9)		48
Other expenses	31		26		5				62		51		11
Income before assessments	102		36		66		184	%	204		68		136		201	%
AHP assessments	11		4		7				21		7		14
Net income	91		32		59		183	%	183		61		122		200	%
Total other comprehensive income (loss)	63		(45)		108				16		(119)		135
Total comprehensive income (loss)	$	154	$	(13)	$	167	1,330	%	$	199	$	(58)	$	257	443	%

The increase in net income for the three months ended June 30, 2023 compared to the corresponding period in the prior year was primarily due to higher earnings on the portion of the Bank's assets funded by its capital, driven substantially by the increase in market interest rates, and an increase in the average balances outstanding of interest-earning assets, substantially advances.

The increase in net income for the six months ended June 30, 2023 compared to the corresponding period in the prior year was primarily due to higher earnings on the portion of the Bank's assets funded by its capital, driven substantially by the increase in market interest rates, an increase in the average balances outstanding of interest-earning assets, substantially advances, and net gains on the extinguishments of certain consolidated obligations.

The changes in total OCI for the three and six months ended June 30, 2023 compared to the corresponding periods in the prior year were substantially due to unrealized gains on AFS securities, in particular investments in U.S. Treasury obligations.

The following table presents the returns on average assets and returns on average equity.

	Three Months Ended June 30,				Six Months Ended June 30,
Ratios	2023		2022		2023		2022
Return on average assets	0.50	%	0.21	%	0.51	%	0.20	%
Return on average equity	10.16	%	3.71	%	10.50	%	3.48	%

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Changes in Financial Condition for the Six Months Ended June 30, 2023. The following table presents the comparative highlights of our changes in financial condition ($ amounts in millions).

Condensed Statements of Condition	June 30, 2023		December 31, 2022		$ Change		% Change
Advances	$	36,234	$	36,683	$	(449)	(1)	%
Mortgage loans held for portfolio, net	7,899		7,687		212		3	%
Liquidity investments (1)	10,654		10,805		(151)		(1)	%
Other investment securities (2)	18,428		16,420		2,008		12	%
Other assets	1,055		689		366		53	%
Total assets	$	74,270	$	72,284	$	1,986	3	%
Consolidated obligations	$	68,708	$	67,270	$	1,438	2	%
MRCS	371		373		(2)		(1)	%
Other liabilities	1,407		1,257		150		12	%
Total liabilities	70,486		68,900		1,586		2	%
Capital stock	2,381		2,123		258		12	%
Retained earnings (3)	1,413		1,287		126		10	%
AOCI	(10)		(26)		16		60	%
Total capital	3,784		3,384		400		12	%
Total liabilities and capital	$	74,270	$	72,284	$	1,986	3	%
Total regulatory capital (4)	$	4,165	$	3,783	$	382	10	%

(1)    Includes cash, interest-bearing deposits, securities purchased under agreements to resell, federal funds sold and U.S. Treasury obligations classified as trading securities.

(2)    Includes AFS and HTM securities.

(3)    Includes restricted retained earnings at June 30, 2023 and December 31, 2022 of $359 million and $323 million, respectively.

(4)    Total capital less AOCI plus MRCS.

Total assets at June 30, 2023 were $74.3 billion, a net increase of $2.0 billion, or 3%, from December 31, 2022, driven primarily by a net increase in other investment securities.

Advances outstanding at June 30, 2023, at carrying value, totaled $36.2 billion, a net decrease of $449 million, or 1%, from December 31, 2022. The par value of advances outstanding decreased by 1% to $36.9 billion, which included a net decrease in short-term advances of 36% and a net increase in long-term advances of 21%. The par value of advances outstanding to depository institutions — comprising commercial banks, savings institutions and credit unions — increased by 3%, while advances outstanding to insurance companies decreased by 8%.

Purchases of mortgage loans from the Bank's members for the six months ended June 30, 2023 totaled $547 million. Mortgage loans held for portfolio at June 30, 2023 totaled $7.9 billion, a net increase of $212 million, or 3%, from December 31, 2022, as the Bank's purchases exceeded principal repayments by borrowers.

Liquidity investments at June 30, 2023 totaled $10.7 billion, a net decrease of $151 million, or 1%, from December 31, 2022. The portion of U.S. Treasury obligations classified as trading securities decreased by $1.9 billion, or 85%, to $345 million, as all of the Bank's purchases of U.S. Treasury obligations in 2023 were classified as available-for-sale. Cash and short-term investments increased by $1.7 billion, or 20%, to $10.3 billion. As a result of this activity, cash and short-term investments represented 97% of the total liquidity investments at June 30, 2023, while U.S. Treasury obligations represented 3%.

Other investment securities, which consist substantially of mortgage-backed securities and U.S. Treasury obligations classified as held-to-maturity or available-for-sale, at June 30, 2023 totaled $18.4 billion, a net increase of $2.0 billion, or 12%, from December 31, 2022, due to purchases of U.S. Treasury obligations and mortgage-backed securities to continue to support the Bank's strong financial position.

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The Bank's consolidated obligations outstanding at June 30, 2023 totaled $68.7 billion, a net increase of $1.4 billion, or 2%, from December 31, 2022, which reflected higher funding needs associated with the net increase in the Bank's total assets.

Total capital at June 30, 2023 was $3.8 billion, a net increase of $400 million, or 12%, from December 31, 2022. The net increase primarily resulted from issuances of capital stock, to support the increase in advance activity, and growth of retained earnings.

The Bank's regulatory capital-to-assets ratio at June 30, 2023 was 5.61%, which exceeds all applicable regulatory capital requirements.

Outlook. We believe that our financial performance will continue to provide sufficient, risk-adjusted returns for our members across a wide range of business, financial, and economic environments.

As disclosed in our Outlook in our 2022 Form 10-K, advances to Flagstar Bank, a former member, cannot be renewed. Remaining advances outstanding to Flagstar at June 30, 2023 totaled $3.15 billion, of which $1.75 billion are putable advances with next put dates in August 2023. Based on the current level of market interest rates, we may extinguish or put these fixed-rate advances to Flagstar without being able to offer replacement funding, which would reduce our advances outstanding.

The downgrade of the U.S. Long-Term Credit Rating by Fitch Ratings to 'AA+', which now aligns with the rating by S&P, caused volatility in the stock and bond markets but is not expected to have a material impact on the Bank's financial position, results of operations, or cash flows.

The ultimate effects of economic and financial markets activity, including fiscal and monetary policies, the strength of the housing markets and the level and volatility of market interest rates, and legislative and regulatory actions continue to evolve and are highly uncertain and, therefore, the future impact on our business is difficult to predict.

Analysis of Results of Operations for the Three and Six Months Ended June 30, 2023 and 2022.

Interest Income. Interest income on advances, mortgage loans held for portfolio, and investment securities is our primary source of revenue. Interest income for the three months ended June 30, 2023 totaled $950 million, an increase of $758 million compared to the corresponding period in the prior year, primarily driven by an increase in yields resulting from the increase in market interest rates and an increase in the average balances of interest-earning assets outstanding, substantially advances.

Interest income for the six months ended June 30, 2023 totaled $1.8 billion, an increase of $1.5 billion compared to the corresponding period in the prior year, primarily driven by an increase in yields resulting from the increase in market interest rates and an increase in the average balances of interest-earning assets outstanding, substantially advances.

Interest Expense. Interest expense on consolidated obligations is our primary expense. Interest expense for the three months ended June 30, 2023 totaled $826 million, an increase of $698 million compared to the corresponding period in the prior year, primarily driven by an increase in our cost of funds resulting from the increase in market interest rates and an increase in the average balances outstanding of interest-bearing liabilities, substantially consolidated obligations.

Interest expense for the six months ended June 30, 2023 totaled $1.5 billion, an increase of $1.4 billion compared to the corresponding period in the prior year, primarily driven by an increase in our cost of funds resulting from the increase in market interest rates and an increase in the average balances outstanding of interest-bearing liabilities, substantially consolidated obligations.

Net Interest Income. As a result, net interest income is our primary source of earnings. The increase in net interest income for the three months ended June 30, 2023 compared to the corresponding period in the prior year was primarily due to higher earnings on the portion of the Bank's assets funded by its capital, driven substantially by the increase in market interest rates, and an increase in the average balances outstanding of interest-earnings assets, substantially advances.

The increase in net interest income for the six months ended June 30, 2023 compared to the corresponding period in the prior year was primarily due to higher earnings on the portion of the Bank's assets funded by its capital, driven substantially by the increase in market interest rates, and an increase in the average balances outstanding of interest-earnings assets, substantially advances.

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For our hedging relationships that qualified for hedge accounting, the differences between the changes in fair value of the hedged items and the associated derivatives (i.e. hedge ineffectiveness) are recorded in net interest income and resulted in net hedging gains of $5.4 million for the three months ended June 30, 2023, compared to net hedging losses of $(6.9) million for the corresponding period in the prior year, and net hedging gains of $5.6 million for the six months ended June 30, 2023, compared to net hedging losses of $(4.8) million for the corresponding period in the prior year.

Our net gains (losses) on derivatives fluctuate due to volatility in the overall interest-rate environment as we hedge our asset or liability risk exposures. In general, we hold derivatives and associated hedged items to the maturity, call, or put date. Therefore, due to timing, nearly all of the cumulative net gains and losses for these financial instruments will generally reverse over the remaining contractual terms of the hedged item. However, there may be instances when we terminate these instruments prior to the maturity, call or put date, which may result in a realized gain or loss. For more information, see Notes to Financial Statements - Note 8 - Derivatives and Hedging Activities in our 2022 Form 10-K.

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The following table presents average daily balances, interest income/expense, and average yields/cost of funds of our major categories of interest-earning assets and their funding sources ($ amounts in millions).

	Three Months Ended June 30,
	2023						2022
	Average Balance		Interest Income/ Expense (1)		Average Yield/ Cost of Funds (1) (2)		Average Balance		Interest Income/ Expense (1)		Average Yield/ Cost of Funds (1) (2)
Assets:
Securities purchased under agreements to resell	$	3,170	$	40	5.03	%	$	3,298	$	6	0.74	%
Federal funds sold	5,204		66		5.08	%	3,925		8		0.79	%
MBS (3)(4)	11,342		163		5.76	%	9,802		36		1.46	%
Other investment securities (3)(4)	7,334		98		5.42	%	8,258		20		0.98	%
Advances (4)	37,042		492		5.33	%	27,455		68		0.99	%
Mortgage loans held for portfolio (4) (5)	7,790		59		3.04	%	7,736		51		2.67	%
Other assets (interest-earning) (6)	2,595		32		4.91	%	1,458		3		0.73	%
Total interest-earning assets	74,477		950		5.12	%	61,932		192		1.24	%
Other assets (7)	(896)						(413)
Total assets	$	73,581					$	61,519
Liabilities and Capital:
Interest-bearing deposits	$	756	9		4.72	%	$	1,215	2		0.51	%
Discount notes	22,264		269		4.85	%	17,102		27		0.62	%
CO bonds (4)	45,801		544		4.76	%	39,146		99		1.02	%
MRCS	372		4		4.71	%	46		—		2.37	%
Other borrowings	11		—		4.87	%	—		—		—	%
Total interest-bearing liabilities	69,204		826		4.79	%	57,509		128		0.89	%
Other liabilities	772						512
Capital stock	2,332						2,168
All other components of capital	1,273						1,330
Total liabilities and capital	$	73,581					$	61,519
Net interest income			$	124					$	64
Net spread on interest-earning assets less interest-bearing liabilities (2)					0.33	%					0.35	%
Net interest margin (8)					0.67	%					0.41	%
Average interest-earning assets to interest-bearing liabilities	1.08						1.08

41

	Six Months Ended June 30,
	2023						2022
	Average Balance		Interest Income/ Expense (1)		Average Yield/ Cost of Funds (1) (2)		Average Balance		Interest Income/ Expense (1)		Average Yield/Cost of Funds (1) (2)
Assets:
Securities purchased under agreements to resell	$	2,998	$	72	4.82	%	$	3,230	$	7	0.44	%
Federal funds sold	4,631		111		4.85	%	3,408		8		0.50	%
MBS (3)(4)	11,035		304		5.55	%	10,070		61		1.22	%
Other investment securities (3)(4)	7,422		181		4.93	%	7,756		31		0.79	%
Advances (4)	36,837		926		5.07	%	26,963		102		0.77	%
Mortgage loans held for portfolio (4) (5)	7,750		117		3.04	%	7,697		99		2.60	%
Other assets (interest-earning) (6)	2,492		58		4.70	%	1,136		3		0.52	%
Total interest-earning assets	73,165		1,769		4.88	%	60,260		311		1.04	%
Other assets (7)	(993)						(71)
Total assets	$	72,172					$	60,189
Liabilities and Capital:
Interest-bearing deposits	$	739	17		4.50	%	$	1,281	1		0.26	%
Discount notes	22,793		526		4.66	%	14,978		30		0.41	%
CO bonds (4)	44,022		991		4.54	%	39,785		151		0.76	%
MRCS	372		8		4.59	%	47		1		2.20	%
Other borrowings	8		—		4.87	%	—		—		—	%
Total interest-bearing liabilities	67,934		1,542		4.58	%	56,091		183		0.66	%
Other liabilities	723						571
Capital stock	2,253						2,177
All other components of capital	1,262						1,350
Total liabilities and capital	$	72,172					$	60,189
Net interest income			$	227					$	128
Net spread on interest-earning assets less interest-bearing liabilities (2)					0.30	%					0.38	%
Net interest margin (8)					0.63	%					0.43	%
Average interest-earning assets to interest-bearing liabilities	1.08						1.07

(1)    Includes hedging gains (losses) on qualifying fair-value hedging relationships. Excludes impact of purchase discount (premium) recorded through mark-to-market gains (losses) on trading securities and net interest settlements on derivatives hedging trading securities.

(2)    Annualized. 

(3)    The average balances of AFS securities are based on amortized cost; therefore, the resulting yields do not reflect changes in the estimated fair value that are a component of OCI.

(4)    Except for AFS securities, interest income/expense and average yield/cost of funds include all components of interest, including the impact of net interest payments or receipts on derivatives in qualifying hedge relationships, amortization of hedge accounting basis adjustments, and prepayment fees on advances. Excludes net interest payments or receipts on derivatives in economic hedging relationships, including those hedging trading securities.

(5)    Includes non-accrual loans.

(6)    Consists of interest-bearing deposits and loans to other FHLBanks (if applicable). Includes the rights or obligations to cash collateral, except for variation margin payments characterized as daily settled contracts.

42

(7)    Includes cumulative changes in the estimated fair value of AFS securities and grantor trust assets.

(8)    Annualized net interest income expressed as a percentage of the average balance of interest-earning assets.

Average Balances. The average balances outstanding of interest-earning assets for the three months ended June 30, 2023 increased by 20% compared to the corresponding period in 2022. The average balances of advances increased by 35%, reflecting higher member utilization of advances. The average balances outstanding of interest-bearing liabilities for the three months ended June 30, 2023 increased by 20% compared to the corresponding period in 2022. As a result, the average balances of total interest-earning assets, net of interest-bearing liabilities, increased by 19%. Such net increase contributed to the increase in interest income on the portion of the Bank's assets funded by its interest-free capital.

The average balances outstanding of interest-earning assets for the six months ended June 30, 2023 increased by 21% compared to the corresponding period in 2022. The average balances of advances increased by 37%, reflecting higher member utilization of advances. The average balances outstanding of interest-bearing liabilities for the six months ended June 30, 2023 increased by 20% compared to the corresponding period in 2022. The average balances of discount notes increased by 52%, reflecting a significant change in the mix of funding, due substantially to the increase in advances and liquidity investments. As a result, the average balances of total interest-earning assets, net of interest-bearing liabilities, increased by 25%. Such net increase contributed to the increase in interest income on the portion of the Bank's assets funded by its interest-free capital.

Yields/Cost of Funds. The average yield on total interest-earning assets, including the impact of hedging gains/losses but excluding certain impacts of trading securities, for the three months ended June 30, 2023 was 5.12%, an increase of 388 bps compared to the corresponding period in 2022, resulting primarily from increases in market interest rates that led to higher yields on all of our interest-earning assets. Such increase contributed to the increase in interest income on the portion of the Bank's assets funded by its interest-free capital. The average cost of funds of total interest-bearing liabilities, including the impact of hedging gains and losses but excluding certain impacts of trading securities, for the three months ended June 30, 2023 was 4.79%, an increase of 390 bps due to higher funding costs on all of our interest-bearing liabilities. The net effect was a decrease in the overall net interest spread compared to the corresponding period in 2022.

The average yield on total interest-earning assets, including the impact of hedging gains/losses but excluding certain impacts of trading securities, for the six months ended June 30, 2023 was 4.88%, an increase of 384 bps compared to the corresponding period in 2022, resulting primarily from increases in market interest rates that led to higher yields on all of our interest-earning assets. Such increase contributed to the increase in interest income on the portion of the Bank's assets funded by its interest-free capital. The average cost of funds of total interest-bearing liabilities, including the impact of hedging gains and losses but excluding certain impacts of trading securities, for the six months ended June 30, 2023 was 4.58%, an increase of 392 bps due to higher funding costs on all of our interest-bearing liabilities. The increase in the average balances of the previously lower-costing discount notes and short-term CO bonds resulted in a disproportionate increase in interest expense due to the inverted yield curve. The net effect was a decrease in the overall net interest spread compared to the corresponding period in 2022.

43

Other Income. The following table presents a comparison of the components of other income ($ amounts in millions). 

	Three Months Ended June 30,				Six Months Ended June 30,
Components	2023		2022		2023		2022
Net unrealized gains (losses) on trading securities (1)	$	1	$	(11)	$	13	$	(18)
Net realized gains (losses) on trading securities (2)	—		(3)		(4)		(20)
Net gains (losses) on trading securities	1		(14)		9		(38)
Net gains (losses) on derivatives hedging trading securities	(2)		17		(12)		41
Net gains (losses) on other derivatives not designated as hedging instruments	4		(1)		4		(3)
Net interest settlements on economic derivatives (3)	3		1		12		(1)
Net gains (losses) on derivatives	5		17		4		37
Net gains on extinguishment of debt	—		—		20		—
Change in fair value of investments indirectly funding the liabilities under the SERP	2		(6)		4		(10)
Other, net	1		1		2		2
Total other income (loss)	$	9	$	(2)	$	39	$	(9)

(1)    Includes impact of purchase discount (premium) recorded through mark-to-market gains (losses). Excludes impact of associated derivatives.

(2)    Includes, at maturity, 100% of original discount (premium) as gain (loss). Excludes impact of associated derivatives.

(3)    Generally offsetting interest income on trading securities or interest expense on the associated funding is included in net interest income.

The increase in total other income for the three months ended June 30, 2023 compared to the corresponding period in 2022 was due primarily to increases in the fair values of SERP-related investments, compared to decreases in the fair values of those investments in the corresponding period in 2022.

The increase in total other income for the six months ended June 30, 2023 compared to the corresponding period in 2022 was due primarily to net gains on debt extinguishments, increases in the fair values of SERP-related investments and net interest settlements received, particularly on swaps hedging trading securities, which were generally offset by a decrease in net interest income on those trading securities.

In the three months ended March 31, 2023, we retired two CO bonds prior to their contractual maturity dates and recognized net gains on debt extinguishment of $20 million. Such a significant gain is not expected to be a recurring component of other income or net income.

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Other Expenses. The following table presents a comparison of the components of other expenses ($ amounts in millions).

	Three Months Ended June 30,				Six Months Ended June 30,
Components	2023		2022		2023		2022
Compensation and benefits	$	15	$	13	$	32	$	26
Other operating expenses	9		8		16		15
Finance Agency and Office of Finance	3		3		5		6
Voluntary allocations to AHP and/or related programs	3		1		6		2
Other	1		1		3		2
Total other expenses	$	31	$	26	$	62	$	51

The net increase in total other expenses for the three months ended June 30, 2023 compared to the corresponding period in 2022 was primarily due to an increase in compensation and benefits and voluntary allocations to AHP and/or related programs. Such increase in compensation and benefits was primarily due to an increase in post-retirement benefits resulting from changes in market conditions, the impact of which was fully offset by a corresponding change in fair value recorded in other income, an increase in employee headcount, and increases in compensation due to inflation and conditions in the labor market, partially offset by lower voluntary contributions to our defined benefit pension plan.

The net increase in total other expenses for the six months ended June 30, 2023 compared to the corresponding period in 2022 was primarily due to an increase in compensation and benefits and voluntary allocations to AHP and/or related programs. Such increase in compensation and benefits was primarily due to an increase in headcount, increases in compensation due to inflation and conditions in the labor market, an increase in post-retirement benefits resulting from changes in market conditions, the impact of which was fully offset by a corresponding change in fair value recorded in other income, and excise tax refunds that were received in 2022 that were not received in 2023.

Our voluntary allocations to AHP and/or related programs increased as a result of our increase in income before assessments. These amounts represent 2.5% of net earnings accrued for voluntary allocations to our AHP or other affordable housing, small business and community investment programs.

AHP Assessments. For the three and six months ended June 30, 2023, our required AHP expense was $11 million and $21 million, respectively. Our AHP expense fluctuates in accordance with our net earnings.

Total Other Comprehensive Income (Loss). Total OCI for the three and six months ended June 30, 2023 consisted substantially of net unrealized gains on AFS securities, compared to net unrealized losses on AFS securities for the corresponding periods in 2022. These amounts represent the portion of the changes in fair value that are not attributable to the risks being hedged in fair-value hedge relationships and were primarily impacted by changes in interest rates, credit spreads and volatility.

45

Operating Segments

Our products and services are grouped within two operating segments: traditional and mortgage loans.

Traditional. The following table presents the financial performance of our traditional segment ($ amounts in millions). 

	Three Months Ended June 30,				Six Months Ended June 30,
Traditional	2023		2022		2023		2022
Net interest income	$	112	$	51	$	203	$	103
Provision for (reversal of) credit losses	—		—		—		—
Other income (loss)	9		(2)		39		(9)
Other expenses	27		22		54		44
Income before assessments	94		27		188		50
AHP assessments	10		3		20		5
Net income	$	84	$	24	$	168	$	45

The increase in net income for the traditional segment for the three months ended June 30, 2023 compared to the corresponding period in 2022 was primarily due to higher earnings on the portion of the Bank's assets funded by its capital, driven substantially by the increase in market interest rates, and an increase in the average balances outstanding of interest-earning assets, substantially advances.

The increase in net income for the traditional segment for the six months ended June 30, 2023 compared to the corresponding period in 2022 was primarily due to higher earnings on the portion of the Bank's assets funded by its capital, driven substantially by the increase in market interest rates, an increase in the average balances outstanding of interest-earning assets, substantially advances, and net gains on the extinguishments of certain consolidated obligations.

Mortgage Loans. The following table presents the financial performance of our mortgage loans segment ($ amounts in millions). 

	Three Months Ended June 30,				Six Months Ended June 30,
Mortgage Loans	2023		2022		2023		2022
Net interest income	$	12	$	13	$	24	$	25
Provision for (reversal of) credit losses	—		—		—		—
Other income (loss)	—		—		—		—
Other expenses	4		4		8		7
Income before assessments	8		9		16		18
AHP assessments	1		1		1		2
Net income	$	7	$	8	$	15	$	16

The slight decrease in net income for the mortgage loans segment for the three and six months ended June 30, 2023 compared to the corresponding periods in 2022 was substantially due to disproportionately higher funding costs relative to the yields on our fixed-rate loan portfolio resulting from the inverted yield curve.

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Analysis of Financial Condition

Total Assets. The table below presents the comparative highlights of our major asset categories ($ amounts in millions).

	June 30, 2023				December 31, 2022
Major Asset Categories	Carrying Value		% of Total		Carrying Value		% of Total
Advances	$	36,234	49	%	$	36,683	51	%
Mortgage loans held for portfolio, net	7,899		11	%	7,687		11	%
Cash and short-term investments	10,309		14	%	8,575		12	%
Trading securities	345		1	%	2,230		3	%
MBS	11,300		15	%	10,307		14	%
Other investment securities	7,128		9	%	6,113		8	%
Other assets (1)	1,055		1	%	689		1	%
Total assets	$	74,270	100	%	$	72,284	100	%

(1)    Includes accrued interest receivable, premises, software and equipment, derivative assets and other miscellaneous assets.

Total assets as of June 30, 2023 were $74.3 billion, a net increase of $2.0 billion, or 3%, compared to December 31, 2022, primarily driven by a net increase in MBS and other investment securities. The mix of our assets at June 30, 2023 changed compared to December 31, 2022 in that all of our purchases of U.S. Treasury obligations in 2023 have been classified as AFS securities, which are included in other investment securities. The resulting decline in trading securities has been substantially offset by an increase in short-term investments to maintain a strong liquidity portfolio.

Advances. In general, advances fluctuate in accordance with our members' funding needs, primarily determined by their deposit levels, mortgage pipelines, loan growth, investment opportunities, available collateral, other balance sheet strategies, and the cost of alternative funding options.

Advances at June 30, 2023 at carrying value totaled $36.2 billion, a net decrease of $449 million, or 1%, compared to December 31, 2022. This slight decrease reflects the maturity of advances to a former member that were not eligible for renewal totaling $1.4 billion. Otherwise, advances outstanding increased due to steady demand by our depository members for advances to support their liquidity needs, rising market interest rates, including the adverse impact on their investment portfolios, and the availability of suitable products to assist our members in managing their balance sheets in the current economic environment.

Our advances portfolio is well-diversified with advances to commercial banks and savings institutions, credit unions, and insurance companies. As a percent of total advances outstanding at par value at June 30, 2023, advances to depository institutions were 66%, while advances to insurance companies were 34%.

47

The table below presents advances outstanding by type of financial institution ($ amounts in millions).

	June 30, 2023				December 31, 2022
Borrower Type	Par Value		% of Total		Par Value		% of Total
Depository institutions:
Commercial banks and savings institutions	$	15,841	43	%	$	13,920	37	%
Credit unions	5,315		14	%	5,163		14	%
Former members	3,368		9	%	4,772		13	%
Total depository institutions	24,524		66	%	23,855		64	%
Insurance companies:
Captive insurance company (1)	175		—	%	213		1	%
Other insurance companies	12,217		34	%	13,217		35	%
Former members (2)	5		—	%	5		—	%
Total insurance companies	12,397		34	%	13,435		36	%
CDFIs	1		—	%	1		—	%
Total advances outstanding	$	36,922	100	%	$	37,291	100	%

(1)    Captive insurance companies that were admitted as FHLBank members prior to September 12, 2014, and did not meet the definition of "insurance company" or fall within another category of institution that is eligible for FHLBank membership under the Final Rule on FHLBank Membership Rule, had their memberships terminated on February 19, 2021. The outstanding advances to one captive insurer are not required to be repaid prior to their various maturity dates through 2024.

(2)    Other than captive insurance companies.

Our advances portfolio includes fixed- and variable-rate advances, as well as callable or prepayable and putable advances. Prepayable advances may be prepaid on specified dates without incurring repayment or termination fees. All other advances may only be prepaid by the borrower paying a fee that is sufficient to make us financially indifferent to the prepayment.

48

The following table presents the par value of advances outstanding by product type and redemption term, some of which contain call or put options ($ amounts in millions).

	June 30, 2023				December 31, 2022
Product Type and Redemption Term	Par Value		% of Total		Par Value		% of Total
Fixed-rate:
Without call or put options (1)
Due in 1 year or less	$	8,416	23	%	$	13,592	36	%
Due after 1 through 5 years	10,868		29	%	7,559		20	%
Due after 5 through 15 years	2,160		6	%	1,696		5	%
Thereafter	14		—	%	15		—	%
Total	21,458		58	%	22,862		61	%
Callable or prepayable
Due in 1 year or less	—		—	%	2		—	%
Due after 1 through 5 years	50		—	%	—		—	%
Due after 5 through 15 years	41		—	%	41		—	%
Total	91		—	%	43		—	%
Putable
Due in 1 year or less	158		—	%	5		—	%
Due after 1 through 5 years	2,000		5	%	1,296		4	%
Due after 5 through 15 years	7,400		20	%	7,191		19	%
Total	9,558		25	%	8,492		23	%
Total fixed-rate (2)	31,107		83	%	31,397		84	%
Variable-rate:
Without call or put options
Due in 1 year or less	432		1	%	515		2	%
Due after 1 through 5 years	170		1	%	160		—	%
Total	602		2	%	675		2	%
Callable or prepayable
Due in 1 year or less	292		1	%	403		1	%
Due after 1 through 5 years	3,196		9	%	3,011		8	%
Due after 5 through 15 years	1,420		4	%	1,450		4	%
Thereafter	305		1	%	355		1	%
Total	5,213		15	%	5,219		14	%
Total variable-rate	5,815		17	%	5,894		16	%
Total advances	$	36,922	100	%	$	37,291	100	%

(1)     Includes fixed-rate amortizing/mortgage matched advances.

(2)     At June 30, 2023 and December 31, 2022, includes $25.3 billion and $21.7 billion, respectively, of fixed-rate advances that are swapped to effectively create variable-rate advances, consistent with our balance sheet strategies to manage interest-rate risk.

During the six months ended June 30, 2023, the par value of advances due in one year or less decreased by 36%, while advances due after one year increased by 21%. As a result, advances due in one year or less, as a percentage of the total outstanding at par, totaled 25% at June 30, 2023, a decrease from 39% at December 31, 2022. However, based on the earlier of the redemption or next put date, advances due in one year or less, as a percentage of the total outstanding, at par, at June 30, 2023 totaled 43%, a decrease from 54% at December 31, 2022. For additional information, see Notes to Financial Statements - Note 4 - Advances.

49

The following table presents our variable-rate advances outstanding by the associated interest-rate index ($ amounts in millions).

Variable Interest-Rate Index	June 30, 2023		December 31, 2022
SOFR	$	2,538	$	2,401
FHLBanks cost of funds	2,956		1,870
LIBOR	—		1,278
Other	146		345
Total variable-rate advances, at par value	$	5,640	$	5,894

Through June 30, 2023, the Bank had exposure related to advances with interest rates indexed to LIBOR totaling $175 million. However, the USD LIBOR index became fixed at June 30, 2023 and, as a result, the Bank has no further variable-rate exposure to LIBOR. The outstanding LIBOR-indexed advances are scheduled to reset to SOFR through September 2023. See Item 3. Quantitative and Qualitative Disclosures About Market Risk - Replacement of the LIBOR Benchmark Interest Rate.

Mortgage Loans Held for Portfolio. Mortgage loans held for portfolio at June 30, 2023, at carrying value, totaled $7.9 billion, a net increase of $212 million, or 3%, from December 31, 2022, as the Bank's purchases exceeded principal repayments.

The following table summarizes the activity in the UPB of mortgage loans held for portfolio ($ amounts in millions).

	Three Months Ended June 30,				Six Months Ended June 30,
Mortgage Loans Activity	2023		2022		2023		2022
Balance, beginning of period	$	7,581	$	7,526	$	7,533	$	7,434
Purchases	344		310		538		763
Principal repayments	(178)		(273)		(324)		(634)
Balance, end of period	$	7,747	$	7,563	$	7,747	$	7,563

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Liquidity and Other Investment Securities. The following table presents a comparison of the components of our liquidity investments and other investment securities at carrying value ($ amounts in millions).

	June 30, 2023				December 31, 2022
Components	Carrying Value		% of Total		Carrying Value		% of Total
Cash and short-term investments:
Cash and due from banks	$	64	—	%	$	21	—	%
Interest-bearing deposits	818		3	%	856		3	%
Securities purchased under agreements to resell	4,400		15	%	4,550		17	%
Federal funds sold	5,027		17	%	3,148		12	%
Total cash and short-term investments	10,309		35	%	8,575		32	%
Trading securities:
U.S. Treasury obligations	345		1	%	2,230		8	%
Total trading securities	345		1	%	2,230		8	%
Total liquidity investments	10,654		36	%	10,805		40	%
Other investment securities:
AFS securities:
U.S. Treasury obligations	5,357		19	%	4,210		16	%
GSE and TVA debentures	1,771		6	%	1,903		7	%
GSE multifamily MBS	6,462		22	%	6,067		22	%
Total AFS securities	13,590		47	%	12,180		45	%
HTM securities:
Other U.S. obligations single-family MBS	3,683		13	%	2,992		11	%
GSE single-family MBS	586		2	%	620		2	%
GSE multifamily MBS	569		2	%	628		2	%
Total HTM securities	4,838		17	%	4,240		15	%
Total other investment securities	18,428		64	%	16,420		60	%
Total cash and investments, carrying value	$	29,082	100	%	$	27,225	100	%

Liquidity Investments. Cash and short-term investments at June 30, 2023 totaled $10.3 billion, an increase of $1.7 billion, or 20%, from December 31, 2022 to support the actual and potential demand for advances. Cash and short-term investments as a percent of total assets at June 30, 2023 and December 31, 2022 totaled 14% and 12%, respectively.

The Bank previously purchased U.S. Treasury obligations as trading securities to enhance its liquidity. Such securities outstanding at June 30, 2023 totaled $345 million, a decrease of $1.9 billion, or 85%, from December 31, 2022, as all of the Bank's purchases of U.S. Treasury obligations in 2023 were classified as AFS.

Liquidity investments at June 30, 2023 totaled $10.7 billion, a decrease of $151 million, or 1%, from December 31, 2022. The total outstanding balance and composition of our liquidity investments are influenced by our liquidity needs, regulatory requirements, actual and anticipated member advance activity, market conditions, and the availability of short-term investments at attractive interest rates, relative to our cost of funds.

51

Other Investment Securities. AFS securities at June 30, 2023 totaled $13.6 billion, a net increase of $1.4 billion, or 12%, from December 31, 2022. The increase resulted from purchases of U.S. Treasury obligations and MBS.

Net unrealized gains on AFS securities, excluding the portion of the changes in fair value that are attributable to the risks being hedged in fair-value hedging relationships, at June 30, 2023 totaled $4 million, compared to net losses of $(10) million at December 31, 2022, primarily due to changes in interest rates, credit spreads and volatility.

HTM securities at June 30, 2023 totaled $4.8 billion, a net increase of $598 million, or 14%, from December 31, 2022. The net increase resulted primarily from purchases of MBS, partially offset by principal payments and maturities of these securities.

Net unrecognized losses on HTM securities at June 30, 2023 totaled $(85) million, an increase in the net losses of $(1) million compared to December 31, 2022, primarily due to changes in interest rates, credit spreads and volatility.

Interest-Rate Payment Terms. Our other investment securities are presented below by interest-rate payment terms ($ amounts in millions).

    

	June 30, 2023				December 31, 2022
Interest-Rate Payment Terms	Amortized Cost		% of Total		Amortized Cost		% of Total
AFS Securities (1):
Total non-MBS fixed-rate	$	7,091	52	%	$	6,091	50	%
Total MBS fixed-rate	6,496		48	%	6,099		50	%
Total AFS securities	$	13,587	100	%	$	12,190	100	%
HTM Securities:
Total MBS fixed-rate	$	201	4	%	$	204	5	%
Total MBS variable-rate	4,636		96	%	4,036		95	%
Total HTM securities	$	4,837	100	%	$	4,240	100	%
AFS and HTM securities:
Total fixed-rate	$	13,788	75	%	$	12,394	75	%
Total variable-rate	4,636		25	%	4,036		25	%
Total AFS and HTM securities	$	18,424	100	%	$	16,430	100	%

(1)    Carrying value for AFS is equal to estimated fair value.

The mix of fixed- vs. variable-rate AFS and HTM securities at June 30, 2023 remained unchanged from December 31, 2022. However, all of the fixed-rate AFS securities are swapped to effectively create variable-rate securities, consistent with our balance sheet strategies to manage interest-rate risk.

The following table presents our variable-rate MBS outstanding by the associated interest-rate index ($ amounts in millions).

Variable Interest-Rate Index	June 30, 2023		December 31, 2022
SOFR	$	2,789	$	1,994
LIBOR	—		2,018
Total variable-rate MBS, at principal amount	$	2,789	$	4,012

Through June 30, 2023, the Bank had exposure related to MBS with interest rates indexed to LIBOR totaling $1.8 billion. However, the USD LIBOR index became fixed at June 30, 2023 and, as a result, the Bank has no further variable-rate exposure to LIBOR. The outstanding LIBOR-indexed MBS are scheduled to reset to SOFR through July 2024. See Item 3. Quantitative and Qualitative Disclosures About Market Risk - Replacement of the LIBOR Benchmark Interest Rate.

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Total Liabilities. Total liabilities at June 30, 2023 were $70.5 billion, a net increase of $1.6 billion, or 2%, from December 31, 2022.

Deposits (Liabilities). Total deposits at June 30, 2023 were $663 million, a net increase of $67 million, or 11%, from December 31, 2022. These deposits provide a relatively small portion of our funding. The balances of these accounts can fluctuate from period to period and vary depending upon such factors as the attractiveness of our deposit pricing relative to the rates available on alternative money market instruments, members' preferences with respect to the maturity of their investments, and members' liquidity.

Consolidated Obligations. The overall balance of our consolidated obligations fluctuates in relation to our total assets and the availability of alternative sources of funds. The carrying value of consolidated obligations outstanding at June 30, 2023 totaled $68.7 billion, a net increase of $1.4 billion, or 2%, from December 31, 2022, which reflected higher funding needs associated with the net increase in the Bank's total assets.

The composition of our consolidated obligations can fluctuate significantly based on comparative changes in their cost levels, supply and demand conditions, demand for various types and maturities of advances, and our overall balance sheet management strategy. Discount notes are issued to provide short-term funds, while CO bonds are generally issued to provide a longer-term mix of funding. Some CO bonds are issued with terms which permit us to repay them when more favorable funding opportunities emerge. We apply a variety of strategies to effectively manage the balance and structure of our consolidated obligations as market conditions and our asset levels change.

The following table presents a breakdown by term of our consolidated obligations outstanding ($ amounts in millions).

	June 30, 2023				December 31, 2022
Term	Par Value		% of Total		Par Value		% of Total
Consolidated obligations due in 1 year or less:
Discount notes	$	20,283	29	%	$	27,534	40	%
CO bonds	17,235		24	%	10,016		14	%
Total due in 1 year or less	37,518		53	%	37,550		54	%
Long-term CO bonds	33,238		47	%	31,986		46	%
Total consolidated obligations	$	70,756	100	%	$	69,536	100	%

The mix of our funding changed from December 31, 2022 as discount notes outstanding decreased and CO bonds outstanding increased, primarily due to more favorable pricing on CO bonds. We continue to seek to maintain a sufficient liquidity and funding balance between our financial assets and financial liabilities.

All of our variable-rate CO bonds outstanding at June 30, 2023 and December 31, 2022 were indexed to SOFR.

Derivatives. The volume of derivative hedges is often expressed in terms of notional amounts, which is the amount upon which interest payments are calculated. The following table presents the notional amounts by type of hedged item regardless of whether it is in a qualifying hedge relationship ($ amounts in millions).

Hedged Item	June 30, 2023		December 31, 2022
Advances	$	26,121	$	24,038
Investments	16,157		15,936
Mortgage loans MDCs	164		61
CO bonds	40,149		30,940
Discount notes	—		2,000
Total notional outstanding	$	82,591	$	72,975

The increase in the total notional amount outstanding from December 31, 2022 of $9.6 billion, or 13%, was substantially due to an increase in derivatives hedging CO bonds, driven primarily by an increase in long-term CO bonds outstanding.

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The following table presents the notional amounts of derivatives (cleared and uncleared) indexed to a variable interest rate ($ amounts in millions).

Variable Interest-Rate Index	June 30, 2023		December 31, 2022
SOFR	$	66,305	$	50,344
EFFR	12,991		14,016
LIBOR	—		8,554
Total variable rate, at notional	$	79,296	$	72,914

Through June 30, 2023, the Bank had exposure related to derivatives with interest rates indexed to LIBOR totaling $3.1 billion. However, the USD LIBOR index became fixed at June 30, 2023 and, as a result, the Bank has no further variable-rate exposure to LIBOR. The outstanding LIBOR-indexed derivatives are scheduled to reset to SOFR through September 2023. See Item 3. Quantitative and Qualitative Disclosures About Market Risk - Replacement of the LIBOR Benchmark Interest Rate.

The following table presents the cumulative impact of fair-value hedging basis adjustments on our statement of condition ($ amounts in millions).

	June 30, 2023
	Advances		AFS Securities		CO Bonds		Total
Cumulative fair-value hedging basis adjustments on hedged items	$	(694)	$	(1,118)	$	1,988	$	176
Estimated fair value of associated derivatives, net	697		1,349		(2,000)		46
Net cumulative fair-value hedging basis adjustments	$	3	$	231	$	(12)	$	222

The cumulative gains on AFS securities resulted from our strategy of terminating certain interest-rate swaps associated with certain MBS and entering into hedging relationships with new interest-rate swaps in connection with our LIBOR transition.

Total Capital. Total capital at June 30, 2023 was $3.8 billion, a net increase of $400 million, or 12%, from December 31, 2022. The net increase primarily resulted from issuances of capital stock to support the increase in advance activity, and growth of retained earnings.

The following table presents a percentage breakdown of the components of GAAP capital.

Components	June 30, 2023		December 31, 2022
Capital stock	63	%	63	%
Retained earnings	37	%	38	%
AOCI	—	%	(1)	%
Total GAAP capital	100	%	100	%

The changes in the components of GAAP capital at June 30, 2023 compared to December 31, 2022 were primarily due to issuances of capital stock and the net change in unrealized gains on AFS securities.

The following table presents a reconciliation of GAAP capital to regulatory capital ($ amounts in millions).

Reconciliation	June 30, 2023		December 31, 2022
Total GAAP capital	$	3,784	$	3,384
Exclude: AOCI	10		26
Add: MRCS	371		373
Total regulatory capital	$	4,165	$	3,783

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Liquidity

Our primary sources of liquidity are holdings of liquid assets, comprised of cash, short-term investments, and trading securities, as well as the issuance of consolidated obligations.

During the six months ended June 30, 2023, we maintained sufficient access to funding; our net proceeds from the issuance of consolidated obligations totaled $355.4 billion.

Changes in Cash Flow. Net cash provided by operating activities for the six months ended June 30, 2023 was $271 million, compared to net cash provided by operating activities for the six months ended June 30, 2022 of $935 million. The net decrease in cash provided of $(664) million was substantially due to the fluctuation in variation margin payments on cleared derivatives. Such payments are treated by the Clearinghouses as daily settled contracts.

Capital Resources

Total Regulatory Capital. The following table provides a breakdown of our outstanding capital stock and MRCS by type of member ($ amounts in millions).

	June 30, 2023				December 31, 2022
Type of Member	Amount		% of Total		Amount		% of Total
Capital Stock:
Depository institutions:
Commercial banks and savings institutions	$	1,066	39	%	$	889	36	%
Credit unions	445		16	%	409		16	%
Total depository institutions	1,511		55	%	1,298		52	%
Insurance companies	870		32	%	825		33	%
CDFIs	—		—	%	—		—	%
Total capital stock, putable at par value	2,381		87	%	2,123		85	%
MRCS:
Captive insurance company (1)	8		—	%	10		—	%
Other former members	363		13	%	363		15	%
Total MRCS	371		13	%	373		15	%
Total regulatory capital stock	$	2,752	100	%	$	2,496	100	%

(1)    Represents a captive insurance company whose membership was terminated on February 19, 2021. On that date, we repurchased its excess stock of $18 million. The remaining balance will not be fully redeemed until the associated credit products and other obligations are no longer outstanding.

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Required and Excess Capital Stock. The following table presents the composition of our regulatory capital stock ($ amounts in millions).

Components	June 30, 2023			December 31, 2022
Required capital stock:
Member capital stock	$	1,741		$	1,678
MRCS	160			225
Total required capital stock	1,901			1,903
Excess capital stock:
Member capital stock not subject to outstanding redemption requests	640			445
Member capital stock subject to outstanding redemption requests	—			—
MRCS	211			148
Total excess capital stock	851			593
Total regulatory capital stock	$	2,752		$	2,496
Excess stock as a percentage of regulatory capital stock	31		%	24		%

The increase in required member capital stock from December 31, 2022 resulted from elevated disbursements of short-term advances during the three months ended March 31, 2023. However, for those advances that matured and were not replaced, the associated capital stock was reclassified to excess stock.

Capital Distributions. The following table summarizes our weighted-average dividend rate and dividend payout ratio.

	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Weighted-average dividend rate (1)	5.44	%	2.46	%	5.14	%	2.38	%
Dividend payout ratio (2)	32.80	%	41.10	%	30.56	%	43.15	%

(1)    Dividends paid in cash during the period (annualized) divided by the average amount of Class B stock eligible for dividends under our capital plan, including MRCS, for that same period.

(2)    Dividends paid in cash during the period divided by net income for that same period.

Even though the dividend rates for the three and six months ended June 30, 2023 were significantly higher than the rates for the corresponding periods in 2022, the dividend payout ratio was lower due to the significant increase in net income, which was partially due to a non-recurring gain on the extinguishment of CO bonds.

On July 27, 2023, our board of directors declared a cash dividend on Class B-2 activity-based stock at an annualized rate of 7.50% and on Class B-1 non-activity-based stock at an annualized rate of 2.50%, resulting in a spread between the rates of 5.00 percentage points. The overall weighted-average annualized rate paid was 5.88%. The dividends were paid in cash on July 28, 2023.

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Adequacy of Capital. We must maintain sufficient permanent capital to meet the combined credit risk, market risk and operational risk components of the risk-based capital requirement. The following table presents our risk-based capital requirement in relation to our permanent capital at June 30, 2023 and December 31, 2022 ($ amounts in millions).

Risk-Based Capital Components	June 30, 2023			December 31, 2022
Credit risk	$	213		$	203
Market risk	678			173
Operational risk	267			113
Total risk-based capital requirement	$	1,158		$	489
Permanent capital	$	4,165		$	3,782
Permanent capital as a percentage of required risk-based capital	360		%	773		%

The increase in our total risk-based capital requirement was primarily caused by an increase in the market risk component due to changes in the stress scenarios provided by the Finance Agency combined with the implementation of SOFR volatilities and discounting derivatives with SOFR; changes in the market environment, including changes in interest rates, CO bond-swap basis, volatility, and option-adjusted spreads; and changes in our balance sheet composition. The operational risk component is calculated as 30% of the credit and market risk components. Our permanent capital at June 30, 2023 remained well in excess of our total risk-based capital requirement.

Critical Accounting Estimates

A full discussion of our critical accounting estimates is included in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Estimates in our 2022 Form 10-K. 

Recent Accounting and Regulatory Developments

Accounting Developments. For a description of how recent accounting developments may impact our financial condition, results of operations or cash flows, see Notes to Financial Statements - Note 2 - Recently Adopted and Issued Accounting Guidance.

Legislative and Regulatory Developments. The following is a summary of significant regulatory actions and developments for the period covered by this report.

Finance Agency’s Review and Analysis of the Federal Home Loan Bank System. In the Fall of 2022, and in the several months that followed, the Finance Agency undertook a review and analysis of the FHLBank System, in part through a series of public listening sessions, regional roundtable discussions, and receipt of comments from stakeholders. This review covered such areas as the FHLBanks’ mission and purpose in a changing marketplace; their organization, operational efficiency, and effectiveness; their role in promoting affordable, sustainable, equitable, and resilient housing and community investment; their role in addressing the unique needs of rural and financially vulnerable communities; member products, services, and collateral requirements; and membership eligibility and requirements. The Finance Agency has stated that its review and analysis will culminate in a written report issued no later than September 30, 2023. The report is expected to (i) summarize the feedback received; (ii) identify actions the Finance Agency plans to take; and (iii) outline any recommendations for consideration by Congress. The report may involve recommendations for changes related to a number of areas such as the FHLBanks’ fulfillment of their mission, membership requirements, contributions to affordable housing and support to community investment and may lead to recommendations for statutory revisions, proposals for new or modified regulations, regulatory guidance under existing regulations, and/or other regulatory or supervisory actions consistent with the Finance Agency’s statutory authority.

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Risk Management

We have exposure to a number of risks in pursuing our business objectives. These risks may be broadly classified as market, credit, liquidity, operational, and business. Market risk is discussed in Item 3. Quantitative and Qualitative Disclosures about Market Risk. For more information, see Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Risk Management in our 2022 Form 10-K.

Credit Risk Management. We face credit risk on advances and other credit products, investments, mortgage loans, derivative financial instruments, and AHP grants.

Advances and Other Credit Products. 

Concentration. Our credit risk is magnified due to the concentration of advances in a few borrowers. As of June 30, 2023, our top borrower held 13% of total advances outstanding, at par, and our top five borrowers held 38% of total advances outstanding, at par. Because of this concentration in advances, we perform frequent credit and collateral reviews on our largest borrowers. In addition, we regularly analyze the implications to our financial management and profitability if we were to lose the business of one or more of these borrowers. 

Investments. We are also exposed to credit risk through our investment portfolio. Our policies restrict the acquisition of investments to high-quality, short-term money market instruments and high-quality long-term securities.

The following table presents the unsecured investment credit exposure to private counterparties, categorized by the domicile of the counterparty's ultimate parent, based on the lowest of the counterparty's NRSRO long-term credit ratings, stated in terms of the S&P equivalent. The table does not reflect the foreign sovereign government's credit rating ($ amounts in millions).

	June 30, 2023
Country	AA		A		Total
Domestic	$	—	$	2,763	$	2,763
Australia	1,400		—		1,400
Canada	—		1,282		1,282
Netherlands	—		400		400
Total unsecured credit exposure	$	1,400	$	4,445	$	5,845

Other Investment Securities. Our long-term investments include MBS guaranteed by the housing GSEs (Fannie Mae and Freddie Mac), other U.S. obligations - guaranteed MBS (Ginnie Mae), U.S. Treasury obligations, and debentures issued by Fannie Mae, Freddie Mac, the TVA and the Federal Farm Credit Banks.

Generally, our goal is to maintain investments in MBS near the 300% regulatory limit in order to enhance earnings and capital for our members and diversify our revenue stream. At June 30, 2023, these investments totaled 289% of total regulatory capital.

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The following table presents the carrying values of our investments, excluding accrued interest, grouped by credit rating and investment category. Applicable rating levels are determined using the lowest relevant long-term rating from S&P and Moody's, each stated in terms of the S&P equivalent. Rating modifiers are ignored when determining the applicable rating level for a given counterparty. Amounts reported do not reflect any subsequent changes in ratings, outlook, or watch status ($ amounts in millions).

	June 30, 2023
Investment	AA			A			Unrated (1)			Total
Short-term investments:
Interest-bearing deposits	$	—		$	818		$	—		$	818
Securities purchased under agreements to resell	2,000			2,000			400			4,400
Federal funds sold	1,400			3,627			—			5,027
Total short-term investments	3,400			6,445			400			10,245
Trading securities:
U.S. Treasury obligations	345			—			—			345
Total trading securities	345			—			—			345
Other investment securities:
U.S. Treasury obligations	5,357			—						5,357
GSE and TVA debentures	1,771			—			—			1,771
GSE MBS	7,617			—			—			7,617
Other U.S. obligations - guaranteed RMBS	3,683			—			—			3,683
Total other investment securities	18,428			—			—			18,428
Total investments, carrying value	$	22,173		$	6,445		$	400		$	29,018
Percentage of total	76		%	23		%	1		%	100		%

(1)    Although the counterparty is unrated, the underlying collateral supporting these investments are U.S. Treasury obligations with a rating of AA.

Mortgage Loans Held for Portfolio. The following table presents the changes in the LRA ($ amounts in millions).

	Three Months Ended		Six Months Ended
LRA Activity	June 30, 2023		June 30, 2023
Liability, beginning of period	$	236	$	235
Additions	4		6
Claims paid	—		—
Distributions to Participating Financial Institutions	(7)		(8)
Liability, end of period	$	233	$	233

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Derivatives. The following table presents key information on derivative positions with counterparties on a settlement date basis using the lower credit rating from S&P and Moody's, stated in terms of the S&P equivalent ($ amounts in millions).

	June 30, 2023
Counterparty and Credit Rating	Notional Amount		Net Estimated Fair Value Before Collateral		Cash Collateral Pledged To (From) Counterparties		Net Credit Exposure
Non-member counterparties:
Asset positions with credit exposure
Uncleared derivatives - A	$	705	$	16	$	(15)	$	1
Liability positions with credit exposure
Uncleared derivatives - A	19,352		(342)		357		15
Cleared derivatives (1)	29,697		(8)		540		532
Total derivative positions with credit exposure to non-member counterparties	49,754		(334)		882		548
Total derivative positions with credit exposure to member institutions (2)	26		—		—		—
Subtotal - derivative positions with credit exposure	49,780		$	(334)	$	882	$	548
Derivative positions without credit exposure	32,811
Total derivative positions	$	82,591

(1)    Represents derivative transactions cleared by two Clearinghouses, each rated AA-.

(2)    Includes MDCs from member institutions under our MPP.

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Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Measuring Market Risks

To evaluate market risk, we utilize multiple risk measurements, including Value-at-Risk, duration of equity, convexity, changes in MVE, duration gap, and earnings at risk. Periodically, we conduct stress tests to measure and analyze the effects that extreme movements in the level of interest rates and the shape of the yield curve would have on our risk position.

Key Metrics. The following table presents certain market and interest-rate metrics under different interest-rate scenarios ($ amounts in millions).

	June 30, 2023
Key Metric	Down 200			Down 100			Base			Up 100			Up 200
MVE	$	4,269		$	4,289		$	4,281		$	4,249		$	4,201
Percent change in MVE from base	(0.3)		%	0.2		%	—		%	(0.7)		%	(1.9)		%
MVE/book value of equity	102.8		%	103.2		%	103.1		%	102.3		%	101.1		%
Duration of equity	(0.9)			(0.1)			0.5			1.0			1.3

	December 31, 2022
Key Metric	Down 200			Down 100			Base			Up 100			Up 200
MVE	$	3,416		$	3,431		$	3,437		$	3,441		$	3,439
Percent change in MVE from base	(0.6)		%	(0.2)		%	—		%	0.1		%	0.1		%
MVE/book value of equity	90.9		%	91.4		%	91.5		%	91.6		%	91.6		%
Duration of equity	(0.6)			(0.3)			(0.1)			(0.1)			0.2

The changes in these key metrics from December 31, 2022 resulted primarily from model enhancements and the change in market value of the Bank's assets and liabilities in response to changes in the market environment, changes in portfolio composition and our hedging strategies.

Duration Gap. The base case duration gap at June 30, 2023 and December 31, 2022 was 0.00% and (0.03)% , respectively.

For information about our use of derivative hedges, see Item 7A. Quantitative and Qualitative Disclosures About Market Risk - Use of Derivative Hedges in our 2022 Form 10-K.

Replacement of the LIBOR Benchmark Interest Rate

The replacement of LIBOR has not had a material impact on the Bank's business, results of operations or financial condition. Through June 30, 2023, the Bank had exposure related to various financial instruments, including advances, MBS and derivatives, with interest rates indexed to LIBOR. However, the USD LIBOR index became fixed at June 30, 2023 and, as a result, the Bank has no further variable-rate exposure to LIBOR. The outstanding LIBOR-indexed financial instruments are scheduled to reset to SOFR through July 2024.

For more information, see Item 1A. Risk Factors - Changes in Response to the Replacement of the LIBOR Benchmark Interest Rate Could Adversely Affect Our Business, Financial Condition and Results of Operations. and Item 7A. Quantitative and Qualitative Disclosures About Market Risk in our 2022 Form 10-K.

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Item 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We are responsible for establishing and maintaining disclosure controls and procedures that are designed to ensure that information required to be disclosed by us in our reports filed under the Exchange Act is: (a) recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms; and (b) accumulated and communicated to our management, including our principal executive officer, principal financial officer, and principal accounting officer, to allow timely decisions regarding required disclosures.

As of June 30, 2023, we conducted an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer (the principal executive officer), Chief Financial Officer (the principal financial officer) and Chief Accounting Officer (the principal accounting officer), of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15 of the Exchange Act. In making this assessment, our management used the criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that evaluation, our Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer concluded that our disclosure controls and procedures were effective as of June 30, 2023.

Internal Control Over Financial Reporting

Changes in Internal Control Over Financial Reporting. There were no changes in our internal control over financial reporting, as defined in rules 13a-15(f) and 15(d)-15(f) of the Exchange Act, that occurred during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on the Effectiveness of Controls. We do not expect that our disclosure controls and procedures and other internal controls will prevent all error and fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can only be reasonable assurance that any design will succeed in achieving its stated goals under all potential future conditions. Additionally, over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

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Part II. OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

In the ordinary course of business, we may from time to time become a party to lawsuits involving various business matters. We are unaware of any lawsuits presently pending which, individually or in the aggregate, could have a material effect on our financial condition or results of operations.

Item 1A. RISK FACTORS

There have been no material changes in the risk factors described in Item 1A. Risk Factors of our 2022 Form 10-K.

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

Not applicable.

Item 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

Item 4. MINE SAFETY DISCLOSURES

Not applicable.

Item 5. OTHER INFORMATION

None.

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Item 6. EXHIBITS

EXHIBIT INDEX

Exhibit Number	Description
10.1*+	Federal Home Loan Bank of Indianapolis Incentive Plan, effective January 1, 2012, as amended and restated, effective as of January 1, 2023 incorporated by reference to Exhibit 10.1 of our Current Report on Form 8-K (Commission File No. 000-51404) filed on June 6, 2023
31.1	Certification of the President - Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of the Executive Vice President - Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.3	Certification of the Senior Vice President - Chief Accounting Officer pursuant to Section 302 of the Sarbanes - Oxley Act of 2002
32	Certification of the President - Chief Executive Officer, Executive Vice President - Chief Financial Officer, and Senior Vice President - Chief Accounting Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
104	Cover Page Interactive Data File (formatted as inline XBRL)

* This document is incorporated by reference.

+ Management contract or compensatory plan or arrangement.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. 

	FEDERAL HOME LOAN BANK OF INDIANAPOLIS
August 10, 2023	By:	/s/ K. LOWELL SHORT, JR.
	Name:	K. Lowell Short, Jr.
	Title:	Senior Vice President - Chief Accounting Officer

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