UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

____________________________________

FORM 10-Q

______________________________________________________


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

For the quarterly period ended ~~September 30, 2021~~March 31, 2022


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

Commission File Number: 000-51398

FEDERAL HOME LOAN BANK OF SAN FRANCISCO

(Exact name of registrant as specified in its charter)

___________________________________________

Federally chartered corporation of the United States

94-6000630

(State or other jurisdiction of incorporation or organization)

(I.R.S. employer identification number)

333 Bush Street, Suite 2700

San Francisco,

94104

(Address of principal executive offices)

(Zip code)

(415) 616-1000

(Registrant’s telephone number, including area code)

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

—

___________________________________________

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

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

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

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☒

Smaller reporting company

☐

Emerging growth company

☐

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

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

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


			Shares Outstanding as of ~~October 31, 2021~~April 30, 2022
Class B Stock, par value $100 per share			~~21,330,563~~25,431,822

Table of Contents

Federal Home Loan Bank of San Francisco

Form 10-Q

Index

PART I.

FINANCIAL INFORMATION

Item 1.

Financial Statements

Statements of Condition (Unaudited)

Statements of Income (Unaudited)

Statements of Comprehensive Income (Unaudited)

Statements of Capital Accounts (Unaudited)

Statements of Cash Flows (Unaudited)

Notes to Financial Statements (Unaudited)

Item 2.

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

Results of Operations

5144

Financial Condition

6050

Liquidity and Capital Resources

7159

Risk Management

7361

Critical Accounting Policies and Estimates

8470

Recently Issued Accounting ~~Standards~~Guidance and Interpretations

8570

Recent Developments

8570

~~Off-Balance Sheet Arrangements and Other Commitments~~

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

8670

Item 4.

Controls and Procedures

PART II.

Item 1.

Item 1A.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Item 3.

Defaults Upon Senior Securities

Item 4.

Mine Safety Disclosures

Item 5.

Item 6.

PART I. FINANCIAL INFORMATION

ITEM 1.FINANCIAL STATEMENTS

Federal Home Loan Bank of San Francisco

Statements of Condition

(Unaudited)

(In millions-except par value) September 30,
2021 December 31,
2020
Assets:
Cash and due from banks $ 55 $ 174
Interest-bearing deposits 1,125 1,078
Securities purchased under agreements to resell 6,500 7,250
Federal funds sold 6,133 1,880
Trading securities(a)
2,260 4,260
Available-for-sale (AFS) securities, net of allowance for credit losses of $15 and $21, respectively (amortized cost of $10,504 and $15,456, respectively)(b)
10,825 15,679
Held-to-maturity (HTM) securities (fair values were $3,551 and $5,115, respectively)(a)
3,521 5,081
Advances (includes $1,952 and $2,147 at fair value under the fair value option, respectively) 22,613 30,976
Mortgage loans held for portfolio, net of allowance for credit losses of $1 and $4, respectively 1,134 1,935
Accrued interest receivable 61 82
Derivative assets, net 11 3
Other assets 221 236
Total Assets $ 54,459 $ 68,634
Liabilities:
Deposits $ 826 $ 887
Consolidated obligations:
Bonds (includes $521 and $111 at fair value under the fair value option, respectively) 22,025 44,408
Discount notes 24,814 16,213
Total consolidated obligations 46,839 60,621
Mandatorily redeemable capital stock 4 2
Accrued interest payable 25 24
Affordable Housing Program (AHP) payable 122 120
Derivative liabilities, net 9 12
Other liabilities 260 774
Total Liabilities 48,085 62,440
Commitments and Contingencies (Note 13) 0 0
Capital:
Capital stock—Class B—Putable ($100 par value) issued and outstanding:
23 shares and 23 shares, respectively 2,253 2,284
Unrestricted retained earnings 3,059 2,919
Restricted retained earnings 743 761
Total Retained Earnings 3,802 3,680
Accumulated other comprehensive income/(loss) (AOCI) 319 230
Total Capital 6,374 6,194
Total Liabilities and Capital $ 54,459 $ 68,634


(In millions-except par value)	March 31, 2022		December 31, 2021
Assets:
Cash and due from banks	$	55	$	55
Interest-bearing deposits	1,125		1,125
Securities purchased under agreements to resell	13,500		15,500
Federal funds sold	7,576		5,348
Trading securities(a)	2		252
Available-for-sale (AFS) securities, net of allowance for credit losses of $14 and $17, respectively (amortized cost of $9,393 and $10,009, respectively)(b)	9,570		10,332
Held-to-maturity (HTM) securities (fair values were $2,853 and $3,235, respectively)(a)	2,856		3,211
Advances (includes $1,589 and $1,772 at fair value under the fair value option, respectively)	20,246		17,027
Mortgage loans held for portfolio, net of allowance for credit losses of $1 and $1, respectively	914		980

Accrued interest receivable	39		45
Derivative assets, net	19		8
Other assets	227		238
Total Assets	$	56,129	$	54,121
Liabilities:
Deposits	$	1,024	$	769
Consolidated obligations:
Bonds (includes $1,924 and $627 at fair value under the fair value option, respectively)	28,702		22,716
Discount notes	19,744		23,987
Total consolidated obligations	48,446		46,703
Mandatorily redeemable capital stock	7		3

Accrued interest payable	29		33
Affordable Housing Program (AHP) payable	110		115
Derivative liabilities, net	8		5
Other liabilities	351		269
Total Liabilities	49,975		47,897
Commitments and Contingencies (Note 13)	0		0
Capital:
Capital stock—Class B—Putable ($100 par value) issued and outstanding:
21 shares and 21 shares, respectively	2,097		2,061
Unrestricted retained earnings	3,183		3,124
Restricted retained earnings	692		708
Total Retained Earnings	3,875		3,832
Accumulated other comprehensive income/(loss) (AOCI)	182		331
Total Capital	6,154		6,224
Total Liabilities and Capital	$	56,129	$	54,121

(a)At ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020,~~2021, NaN of these securities were pledged as collateral that may be repledged.

(b)At ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020, $284~~2021, $251 million and ~~$379,~~$252 million, respectively, of these securities were pledged as collateral that may be repledged.

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

Table of Contents

Federal Home Loan Bank of San Francisco

Statements of Income

(Unaudited)


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

(In millions)	(In millions)	2021		2020		2021		2020			(In millions)	2022		2021
Interest Income:	Interest Income:										Interest Income:
Advances	Advances	$	47	$	88	$	167	$	509		Advances	$	41	$	57
Interest-bearing deposits		—		1		1		14
Prepayment fees on advances, net											Prepayment fees on advances, net	(2)		8

Securities purchased under agreements to resell	Securities purchased under agreements to resell	1		1		1		20			Securities purchased under agreements to resell	1		—
Federal funds sold	Federal funds sold	2		1		4		16			Federal funds sold	3		1
Trading securities	Trading securities	13		23		54		61			Trading securities	—		21
AFS securities	AFS securities	57		67		168		179			AFS securities	54		61
HTM securities	HTM securities	10		19		34		92			HTM securities	7		13
Mortgage loans held for portfolio	Mortgage loans held for portfolio	7		7		34		22			Mortgage loans held for portfolio	17		23
Total Interest Income	Total Interest Income	137		207		463		913			Total Interest Income	121		184
Interest Expense:	Interest Expense:										Interest Expense:
Consolidated obligations:	Consolidated obligations:										Consolidated obligations:
Bonds	Bonds	13		47		49		405			Bonds	12		22
Discount notes	Discount notes	3		12		10		163			Discount notes	6		4
Deposits		1		—		1		2
Mandatorily redeemable capital stock		—		1		—		5

Total Interest Expense	Total Interest Expense	17		60		60		575			Total Interest Expense	18		26
Net Interest Income	Net Interest Income	120		147		403		338			Net Interest Income	103		158
Provision for/(reversal of) credit losses	Provision for/(reversal of) credit losses	—		(2)		(8)		30			Provision for/(reversal of) credit losses	(3)		(6)
Net Interest Income After Provision for/(Reversal of) Credit Losses	Net Interest Income After Provision for/(Reversal of) Credit Losses	120		149		411		308			Net Interest Income After Provision for/(Reversal of) Credit Losses	106		164
Other Income/(Loss):	Other Income/(Loss):										Other Income/(Loss):
Net gain/(loss) on trading securities	Net gain/(loss) on trading securities	(13)		(19)		(50)		36			Net gain/(loss) on trading securities	—		(18)
Net gain/(loss) on advances and consolidated obligation bonds held under fair value option	Net gain/(loss) on advances and consolidated obligation bonds held under fair value option	(9)		(7)		(40)		96			Net gain/(loss) on advances and consolidated obligation bonds held under fair value option	(21)		(26)
Net gain/(loss) on derivatives	Net gain/(loss) on derivatives	15		5		25		(156)			Net gain/(loss) on derivatives	8		18
Gain on disgorgement settlement		—		85		—		85
Private-label residential mortgage-backed securities (PLRMBS) trust settlement											Private-label residential mortgage-backed securities (PLRMBS) trust settlement	28		—
Standby letters of credit fees											Standby letters of credit fees	4		4
Other, net	Other, net	4		6		15		18			Other, net	(1)		1
Total Other Income/(Loss)	Total Other Income/(Loss)	(3)		70		(50)		79			Total Other Income/(Loss)	18		(21)
Other Expense:	Other Expense:										Other Expense:
Compensation and benefits	Compensation and benefits	22		23		70		65			Compensation and benefits	24		24
Other operating expense	Other operating expense	13		14		37		41			Other operating expense	12		11
Federal Housing Finance Agency	Federal Housing Finance Agency	2		2		6		6			Federal Housing Finance Agency	2		2
Office of Finance	Office of Finance	1		1		4		4			Office of Finance	1		2

Other, net	Other, net	—		—		(1)		3			Other, net	(1)		—
Total Other Expense	Total Other Expense	38		40		116		119			Total Other Expense	38		39
Income/(Loss) Before Assessment	Income/(Loss) Before Assessment	79		179		245		268			Income/(Loss) Before Assessment	86		104
AHP Assessment	AHP Assessment	8		18		25		27			AHP Assessment	8		10
Net Income/(Loss)	Net Income/(Loss)	$	71	$	161	$	220	$	241		Net Income/(Loss)	$	78	$	94

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

Table of Contents

Federal Home Loan Bank of San Francisco

Statements of Comprehensive ~~Income~~Income/(Loss)

(Unaudited)

Three Months Ended September 30, Nine Months Ended September 30,
(In millions) 2021 2020 2021 2020
Net Income/(Loss) $ 71 $ 161 $ 220 $ 241
Other Comprehensive Income/(Loss):
Net unrealized gain/(loss) on AFS securities (72) 172 92 (138)
Net change in pension and postretirement benefits (3) (1) (3) (1)
Net non-credit-related gain/(loss) on HTM securities — — — 1
Total other comprehensive income/(loss) (75) 171 89 (138)
Total Comprehensive Income/(Loss) $ (4) $ 332 $ 309 $ 103


	Three Months Ended March 31,

(In millions)	2022		2021
Net Income/(Loss)	$	78	$	94
Other Comprehensive Income/(Loss):
Net unrealized gain/(loss) on AFS securities	(149)		137



Total other comprehensive income/(loss)	(149)		137
Total Comprehensive Income/(Loss)	$	(71)	$	231

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

Table of Contents

Federal Home Loan Bank of San Francisco

Statements of Capital Accounts

(Unaudited)

Capital Stock
Class B—Putable Retained Earnings Total
Capital
(In millions) Shares Par Value Restricted Unrestricted Total AOCI
Balance, June 30, 2020 27 $ 2,668 $ 729 $ 2,765 $ 3,494 $ (35) $ 6,127
Comprehensive income/(loss) 32 129 161 171 332
Issuance of capital stock — 30 30
Repurchase of capital stock (2) (233) (233)
Cash dividends paid on capital stock (5.00%) (36) (36) (36)
Balance, September 30, 2020 25 $ 2,465 $ 761 $ 2,858 $ 3,619 $ 136 $ 6,220
Balance, June 30, 2021 23 $ 2,269 $ 761 $ 3,004 $ 3,765 $ 394 $ 6,428
Comprehensive income/(loss) — 71 71 (75) (4)
Issuance of capital stock 4 357 357
Repurchase of capital stock (4) (360) (360)
Capital stock reclassified from/(to) mandatorily redeemable capital stock, net — (13) (13)
Transfers from restricted retained earnings (18) 18 — —
Cash dividends paid on capital stock (6.00%) (34) (34) (34)
Balance, September 30, 2021 23 $ 2,253 $ 743 $ 3,059 $ 3,802 $ 319 $ 6,374

Capital Stock
Class B—Putable Retained Earnings Total
Capital
(In millions) Shares Par Value Restricted Unrestricted Total AOCI
Balance, December 31, 2019 30 $ 3,000 $ 713 $ 2,754 $ 3,467 $ 274 $ 6,741
Adjustment for cumulative effect of accounting change (3) (3) (3)
Comprehensive income/(loss) 48 193 241 (138) 103
Issuance of capital stock 8 781 781
Repurchase of capital stock (13) (1,313) (1,313)
Capital stock reclassified from/(to) mandatorily redeemable capital stock, net — (3) (3)
Partial recovery of prior capital distribution to Financing Corporation 40 40 40
Cash dividends paid on capital stock (5.68%) (126) (126) (126)
Balance, September 30, 2020 25 $ 2,465 $ 761 $ 2,858 $ 3,619 $ 136 $ 6,220
Balance, December 31, 2020 23 $ 2,284 $ 761 $ 2,919 $ 3,680 $ 230 $ 6,194
Comprehensive income/(loss) — 220 220 89 309
Issuance of capital stock 7 685 685
Repurchase of capital stock (7) (700) (700)
Capital stock reclassified from/(to) mandatorily redeemable capital stock, net — (16) (16)
Transfers from restricted retained earnings (18) 18 — —
Cash dividends paid on capital stock (5.65%) (98) (98) (98)
Balance, September 30, 2021 23 $ 2,253 $ 743 $ 3,059 $ 3,802 $ 319 $ 6,374


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







Balance, December 31, 2020	23	$	2,284	$	761	$	2,919	$	3,680	$	230	$	6,194
Comprehensive income/(loss)				—		94		94		137		231
Issuance of capital stock	—	1										1
Repurchase of capital stock	(1)	(47)										(47)


Cash dividends paid on capital stock (5.00%)						(30)		(30)				(30)


Balance, March 31, 2021	22	$	2,238	$	761	$	2,983	$	3,744	$	367	$	6,349

Balance, December 31, 2021	21	$	2,061	$	708	$	3,124	$	3,832	$	331	$	6,224
Comprehensive income/(loss)				—		78		78		(149)		(71)
Issuance of capital stock	9	875										875
Repurchase of capital stock	(8)	(807)										(807)
Capital stock reclassified from/(to) mandatorily redeemable capital stock, net	(1)	(32)										(32)
Transfers from restricted retained earnings				(16)		16		—				—
Cash dividends paid on capital stock (6.00%)						(35)		(35)				(35)
Balance, March 31, 2022	21	$	2,097	$	692	$	3,183	$	3,875	$	182	$	6,154

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

Table of Contents

Federal Home Loan Bank of San Francisco

Statements of Cash Flows

(Unaudited)


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

(In millions)	(In millions)	2021		2020			(In millions)	2022		2021
Cash Flows from Operating Activities:	Cash Flows from Operating Activities:						Cash Flows from Operating Activities:
Net Income/(Loss)	Net Income/(Loss)	$	220	$	241		Net Income/(Loss)	$	78	$	94
Adjustments to reconcile net income/(loss) to net cash provided by/(used in) operating activities:	Adjustments to reconcile net income/(loss) to net cash provided by/(used in) operating activities:						Adjustments to reconcile net income/(loss) to net cash provided by/(used in) operating activities:
Depreciation and amortization/(accretion)	Depreciation and amortization/(accretion)	60		15			Depreciation and amortization/(accretion)	25		7
Provision for/(reversal of) credit losses	Provision for/(reversal of) credit losses	(8)		30			Provision for/(reversal of) credit losses	(3)		(6)
Change in net fair value of trading securities	Change in net fair value of trading securities	50		(36)			Change in net fair value of trading securities	—		18
Change in net fair value adjustment on advances and consolidated obligation bonds held under the fair value option	Change in net fair value adjustment on advances and consolidated obligation bonds held under the fair value option	40		(96)			Change in net fair value adjustment on advances and consolidated obligation bonds held under the fair value option	21		26
Change in net derivatives and hedging activities	Change in net derivatives and hedging activities	417		(1,180)			Change in net derivatives and hedging activities	568		376
PLRMBS trust settlement							PLRMBS trust settlement	(28)		—
Other adjustments, net	Other adjustments, net	5		7			Other adjustments, net	2		2
Net change in:	Net change in:						Net change in:
Accrued interest receivable	Accrued interest receivable	22		41			Accrued interest receivable	6		(1)
Other assets	Other assets	8		(2)			Other assets	7		4
Accrued interest payable	Accrued interest payable	1		(133)			Accrued interest payable	(4)		(5)
Other liabilities	Other liabilities	(13)		(41)			Other liabilities	(66)		(11)
Total adjustments	Total adjustments	582		(1,395)			Total adjustments	528		410
Net cash provided by/(used in) operating activities	Net cash provided by/(used in) operating activities	802		(1,154)			Net cash provided by/(used in) operating activities	606		504
Cash Flows from Investing Activities:	Cash Flows from Investing Activities:						Cash Flows from Investing Activities:
Net change in:	Net change in:						Net change in:
Interest-bearing deposits	Interest-bearing deposits	(10)		834			Interest-bearing deposits	(325)		(1)
Securities purchased under agreements to resell	Securities purchased under agreements to resell	750		250			Securities purchased under agreements to resell	2,000		6,250
Federal funds sold	Federal funds sold	(4,253)		1,239			Federal funds sold	(2,228)		(2,300)

Trading securities:	Trading securities:						Trading securities:
Proceeds		1,950		1
Purchases		—		(2,480)
Proceeds from maturities and paydowns							Proceeds from maturities and paydowns	250		251

AFS securities:	AFS securities:						AFS securities:
Proceeds		8,334		1,929
Proceeds from maturities and paydowns							Proceeds from maturities and paydowns	345		6,244
Purchases	Purchases	(4,275)		(525)			Purchases	—		(4,275)
HTM securities:	HTM securities:						HTM securities:
Proceeds		1,560		1,830
Proceeds from maturities and paydowns							Proceeds from maturities and paydowns	340		693

Advances:	Advances:						Advances:
Repaid	Repaid	111,264		453,774			Repaid	117,731		21,255
Originated	Originated	(103,233)		(425,576)			Originated	(121,347)		(18,649)
Mortgage loans held for portfolio:	Mortgage loans held for portfolio:						Mortgage loans held for portfolio:
Principal collected	Principal collected	805		1,295			Principal collected	74		370
Purchases	Purchases	(7)		(446)			Purchases	—		(7)
Other investing activities, net		—		(2)

Net cash provided by/(used in) investing activities	Net cash provided by/(used in) investing activities	12,885		32,123			Net cash provided by/(used in) investing activities	(3,160)		9,831

Table of Contents

Federal Home Loan Bank of San Francisco

Statements of Cash Flows (continued)

(Unaudited)


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

(In millions)	(In millions)	2021		2020			(In millions)	2022		2021
Cash Flows from Financing Activities:	Cash Flows from Financing Activities:						Cash Flows from Financing Activities:
Net change in deposits and other financing activities	Net change in deposits and other financing activities	65		472			Net change in deposits and other financing activities	323		351

Net (payments)/proceeds on derivative contracts with financing elements	Net (payments)/proceeds on derivative contracts with financing elements	(32)		(133)			Net (payments)/proceeds on derivative contracts with financing elements	(4)		(21)
Net proceeds from issuance of consolidated obligations:	Net proceeds from issuance of consolidated obligations:						Net proceeds from issuance of consolidated obligations:
Bonds	Bonds	15,174		41,669			Bonds	7,488		4,561
Discount notes	Discount notes	61,597		98,750			Discount notes	24,379		16,572
Payments for matured and retired consolidated obligations:	Payments for matured and retired consolidated obligations:						Payments for matured and retired consolidated obligations:
Bonds	Bonds	(37,491)		(58,137)			Bonds	(1,013)		(15,902)
Discount notes	Discount notes	(52,992)		(112,776)			Discount notes	(28,624)		(15,673)
Proceeds from issuance of capital stock	Proceeds from issuance of capital stock	685		781			Proceeds from issuance of capital stock	875		1
Payments for repurchase/redemption of mandatorily redeemable capital stock	Payments for repurchase/redemption of mandatorily redeemable capital stock	(14)		(139)			Payments for repurchase/redemption of mandatorily redeemable capital stock	(28)		(1)
Payments for repurchase of capital stock	Payments for repurchase of capital stock	(700)		(1,313)			Payments for repurchase of capital stock	(807)		(47)
Cash dividends paid	Cash dividends paid	(98)		(126)			Cash dividends paid	(35)		(30)
Partial recovery of prior capital distribution to Financing Corporation		—		40

Net cash provided by/(used in) financing activities	Net cash provided by/(used in) financing activities	(13,806)		(30,912)			Net cash provided by/(used in) financing activities	2,554		(10,189)
Net increase/(decrease) in cash and due from banks	Net increase/(decrease) in cash and due from banks	(119)		57			Net increase/(decrease) in cash and due from banks	—		146
Cash and due from banks at beginning of the period	Cash and due from banks at beginning of the period	174		118			Cash and due from banks at beginning of the period	55		174
Cash and due from banks at end of the period	Cash and due from banks at end of the period	$	55	$	175		Cash and due from banks at end of the period	$	55	$	320
Supplemental Disclosures:	Supplemental Disclosures:						Supplemental Disclosures:
Interest paid	Interest paid	$	78	$	706		Interest paid	$	17	$	39
AHP payments	AHP payments	23		50			AHP payments	13		7
Supplemental Disclosures of Noncash Investing and Financing Activities:							Supplemental Disclosures of Noncash Investing and Financing Activities:

Transfers of HTM securities to AFS securities							Transfers of HTM securities to AFS securities	16		—
Transfers of capital stock to mandatorily redeemable capital stock							Transfers of capital stock to mandatorily redeemable capital stock	32		—

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

Table of Contents

Federal Home Loan Bank of San Francisco

Notes to Financial Statements

~~(Unaudited)~~

~~(Dollars in millions except per share amounts)~~

Note 1 — Basis of Presentation and Significant Accounting Policies

The information about the Federal Home Loan Bank of San Francisco (Bank) included in these unaudited financial statements reflects all adjustments that, in the opinion of the Bank, are necessary for a fair statement of results for the periods presented. These adjustments are of a recurring nature, unless otherwise disclosed. The results of operations in these interim statements are not necessarily indicative of the results to be expected for any subsequent period or for the entire year ending December 31, ~~2021.~~2022. These unaudited financial statements should be read in conjunction with the Bank’s Annual Report on Form 10-K for the year ended December 31, ~~2020 (2020~~2021 (2021 Form 10-K).

There have been no changes to the basis of presentation of the Bank’s financial instruments meeting netting requirements or of the Bank’s investments in variable interest entities disclosed in “Item 8. Financial Statements and Supplementary Data – Note 1 – Summary of Significant Accounting Policies” in the Bank’s ~~2020~~2021 Form 10-K.

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

•accounting for derivatives;

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

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

Actual results could differ significantly from these estimates.

~~Out-of-Period Adjustments in the Statements of Condition and Statements of Income.~~ In the third quarter of 2021, the Bank identified five hedge strategy elections that originated starting in the fourth quarter of 2020 where the transactions were incorrectly designated as fair value hedges when they should have been recorded as non-hedge qualifying economic hedges. The incorrect designations resulted in misstatements to previously issued financial statements as presented in the following tables.

December 31, 2020 March 31, 2021 June 30, 2021
As Reported Overstatement/(Understatement) As Reported Overstatement/(Understatement) As Reported Overstatement/(Understatement)
Advances $ 30,976 $ 1 $ 28,140 $ (17) $ 24,194 $ (13)
Total Assets 68,634 1 57,908 (17) 54,244 (13)

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~~Federal Home Loan Bank of San Francisco~~

~~Notes to Financial Statements (continued)~~

As Reported Overstatement/(Understatement)
Year ended December 31, 2020:
Net gain/(loss) on derivatives $ (152) $ 1
Income/(loss) before assessments 373 1
Three months ended March 31, 2021:
Net gain/(loss) on derivatives $ 18 $ (18)
Income/(loss) before assessments 104 (18)
Three months ended June 30, 2021:
Net gain/(loss) on derivatives $ (8) $ 4
Income/(loss) before assessments 62 4
Six months ended June 30, 2021:
Net gain/(loss) on derivatives $ 10 $ (14)
Income/(loss) before assessments 166 (14)

The Bank made out-of-period adjustments to reverse the net impact on the Bank’s financial statements resulting from the incorrect designations in the third quarter of 2021. These adjustments resulted in an increase in advances and net gain/(loss) on derivatives by $13 for the three months ended September 30, 2021, and an understatement of net gain/(loss) on derivatives of $1 for the nine months ended September 30, 2021. The Bank has evaluated the impact of these adjustments, on a quantitative and qualitative basis, and has concluded that these adjustments were not material to the current and any previously issued financial statements.

Descriptions of the Bank’s significant accounting policies are included in “Item 8. Financial Statements and Supplementary Data – Note 1 – Summary of Significant Accounting Policies” in the Bank’s ~~2020~~2021 Form 10-K. Other changes to these policies as of ~~September 30, 2021,~~March 31, 2022, are discussed in Note 2 – Recently Issued Accounting Guidance.

Private-label Residential Mortgage-backed Securities (PLRMBS) Trust Settlement. A PLRMBS trust settlement is recorded in other income/(loss) as “Private-label residential mortgage-backed securities trust settlement” in the Statements of Income. A trust settlement is considered realized and recorded when the Bank receives cash or assets that are readily convertible to known amounts of cash or claims to cash, when the Bank enters into a signed agreement that is not subject to appeal, where the counterparty has the ability to pay, and the amount to be received can be reasonably estimated. Prior to being realized or realizable, the Bank considers potential settlements to be gain contingencies, and therefore they are not recorded in the Statements of Income.

One of the Bank’s PLRMBS is held within a trust that has been the subject of litigation by the trustee since 2012. Upon final resolution of the litigation, to which the Bank was not a party, the trustee was required to transmit settlement proceeds to the trust. As a result of the distribution of the settlement proceeds in the first quarter of 2022 to the beneficial owners of the securities in the trust, including the Bank, the Bank recorded settlement proceeds of $28 million as income.

Table of Contents

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

Note 2 — Recently Issued Accounting Guidance

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

Accounting Standards Update (ASU)

Description

Effective Date

Effect on the Financial Statements or Other Significant Matters

Facilitation of the Effects of Reference Rate Reform on Financial Reporting, as amended (ASU 2020-04)

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

This guidance is effective immediately for the Bank, and the Bank may elect to apply the amendments prospectively through December 31, 2022.

The Bank has assessed the guidance and has elected some of the optional expedients and exceptions provided. In particular, during the fourth quarter of 2020, the Bank elected optional expedients specific to the discounting transition for cleared derivative transactions on a retrospective basis, which did not have a material effect. Additionally, theThe Bank elected optional expedients related to the discounting transition for uncleared derivative transactions on a prospective basis during ~~the third quarter of~~ 2021, which did not have a material effect.

Troubled Debt Restructurings and Vintage Disclosures

(ASU 2022-02)

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

The guidance becomes effective for the Bank for the interim and annual periods beginning on January 1, 2023. Early adoption is permitted.

The Bank is in the process of evaluating this guidance, and its effect on the Bank’s financial condition, results of operations, cash flows, and financial statement disclosures has not yet been determined.

~~Table of Contents~~

~~Federal Home Loan Bank of San Francisco~~

~~Notes to Financial Statements (continued)~~

Note 3 — Investments

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

Interest-Bearing Deposits, Securities Purchased under Agreements to Resell, and Federal Funds Sold. The Bank invests in interest-bearing deposits, securities purchased under agreements to resell, and Federal funds sold to provide short-term liquidity. These investments are generally transacted with counterparties that have received an investment grade credit rating of BBB or greater by a nationally recognized statistical rating organization (NRSRO). At ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020,~~2021, NaN of these investments were with counterparties rated below BBB nor with unrated counterparties. These may differ from any internal ratings of the investments by the Bank, if applicable.

Table of Contents

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

Federal funds sold are unsecured loans that are generally transacted on an overnight term. ~~Federal Housing~~ Finance Agency ~~(Finance Agency)~~ regulations include a limit on the amount of unsecured credit the Bank may extend to a counterparty. At ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020,~~2021, all investments in interest-bearing deposits and Federal funds sold were repaid or expected to be repaid according to the relevant contractual terms. NaN allowance for credit losses was recorded for these assets at ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020.~~2021. Carrying values of interest-bearing deposits and Federal funds sold exclude de minimis amounts of accrued interest receivable as of ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020.~~2021.

Based upon the collateral held as security and collateral maintenance provisions with its counterparties, the Bank determined that 0 allowance for credit losses was needed for its securities purchased under agreements to resell at ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020.~~2021. The carrying value of securities purchased under agreements to resell excludes de minimis amounts of accrued interest receivable as of ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020.~~2021.

Debt Securities

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

Trading Securities. The estimated fair value of trading securities as of ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020,~~2021, was as follows:


		September 30, 2021		December 31, 2020
(In millions)						(In millions)	March 31, 2022		December 31, 2021
U.S. obligations – Treasury notes	U.S. obligations – Treasury notes	$	2,258	$	4,257	U.S. obligations – Treasury notes	$	—	$	250
MBS – Other U.S. obligations – Ginnie Mae	MBS – Other U.S. obligations – Ginnie Mae	2		3		MBS – Other U.S. obligations – Ginnie Mae	2		2
Total	Total	$	2,260	$	4,260	Total	$	2	$	252

The unrealized net ~~gain/(loss) on trading securities was $(13) and $(19) for the three months ended September 30, 2021 and 2020, respectively, of which $(12) and $(19) related to unrealized~~ gain/(loss) on trading securities held at ~~September 30,~~March 31, 2022 and 2021, was a de minimis amount and 2020, respectively. The net gain/(loss) on trading securities was $(50) and $36 for the nine months ended September 30, 2021 and 2020, respectively, of which $(34) and $36 related to unrealized gain/(loss) on trading securities held at September 30, 2021 and 2020,$(18) million, respectively. These amounts represent the changes in the fair value of the securities during the reported periods.

Table of Contents

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

Available-for-Sale Securities. AFS securities by major security type as of ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020,~~2021, were as follows:


September 30, 2021
		Amortized Cost(1)		Allowance for Credit Losses		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
March 31, 2022												March 31, 2022
(In millions)												(In millions)	Amortized Cost(1)		Allowance for Credit Losses		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value

U.S. obligations – Treasury notes	U.S. obligations – Treasury notes	$	856	$	—	$	—	$	—	$	856	U.S. obligations – Treasury notes	$	545	$	—	$	—	$	—	$	545

MBS:	MBS:											MBS:
Government Sponsored Enterprises (GSEs) – multifamily:	Government Sponsored Enterprises (GSEs) – multifamily:											Government Sponsored Enterprises (GSEs) – multifamily:
Freddie Mac	Freddie Mac	792		—		26		—		818		Freddie Mac	742		—		12		—		754
Fannie Mae	Fannie Mae	7,318		—		129		—		7,447		Fannie Mae	6,777		—		40		(5)		6,812
Subtotal MBS – GSEs – multifamily	Subtotal MBS – GSEs – multifamily	8,110		—		155		—		8,265		Subtotal MBS – GSEs – multifamily	7,519		—		52		(5)		7,566
PLRMBS:	PLRMBS:											PLRMBS:
Prime	Prime	142		—		13		—		155		Prime	124		(1)		11		—		134
Alt-A	Alt-A	1,396		(15)		173		(5)		1,549		Alt-A	1,205		(13)		138		(5)		1,325
Subtotal PLRMBS	Subtotal PLRMBS	1,538		(15)		186		(5)		1,704		Subtotal PLRMBS	1,329		(14)		149		(5)		1,459
Total MBS	Total MBS	9,648		(15)		341		(5)		9,969		Total MBS	8,848		(14)		201		(10)		9,025
Total	Total	$	10,504	$	(15)	$	341	$	(5)	$	10,825	Total	$	9,393	$	(14)	$	201	$	(10)	$	9,570


December 31, 2021
(In millions)	Amortized Cost(1)		Allowance for Credit Losses		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value

U.S. obligations – Treasury notes	$	503	$	—	$	1	$	—	$	504


MBS:
GSEs – multifamily:
Freddie Mac	787		—		24		—		811
Fannie Mae	7,269		—		140		—		7,409
Subtotal MBS – GSEs – multifamily	8,056		—		164		—		8,220
PLRMBS:
Prime	134		(1)		12		—		145
Alt-A	1,316		(16)		167		(4)		1,463
Subtotal PLRMBS	1,450		(17)		179		(4)		1,608
Total MBS	9,506		(17)		343		(4)		9,828
Total	$	10,009	$	(17)	$	344	$	(4)	$	10,332

(1) Amortized cost includes unpaid principal balance, unamortized premiums and discounts, net charge-offs, and valuation adjustments for hedging activities, and excludes accrued interest receivable of $26 million and $29 million at March 31, 2022, and December 31, 2021, respectively.

At March 31, 2022, the amortized cost of the Bank’s MBS classified as AFS included premiums of $56 million, discounts of $40 million, and previous credit losses related to the prior methodology of evaluating credit losses of $396 million for PLRMBS. At December 31, 2021, the amortized cost of the Bank’s MBS classified as AFS included premiums of $59 million, discounts of $41 million, and previous credit losses related to the prior methodology of evaluating credit losses of $405 million for PLRMBS.

The following tables summarize the AFS securities with unrealized losses as of March 31, 2022, and December 31, 2021. The unrealized losses are aggregated by major security type and the length of time that individual securities have been in a continuous unrealized loss position.

Table of Contents

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

December 31, 2020
Amortized
Cost(1)
Allowance for Credit Losses Gross
Unrealized
Gains Gross
Unrealized
Losses Estimated Fair Value
U.S. obligations – Treasury securities:
U.S. Treasury notes $ 2,980 $ — $ 3 $ — $ 2,983
U.S. Treasury bills 2,000 — — — 2,000
Total U.S. obligations – Treasury securities 4,980 — 3 — 4,983
MBS:
GSEs – multifamily:
Freddie Mac 833 — 18 — 851
Fannie Mae 7,744 — 72 (6) 7,810
Subtotal MBS – GSEs – multifamily 8,577 — 90 (6) 8,661
PLRMBS:
Prime 174 (1) 9 — 182
Alt-A 1,725 (20) 168 (20) 1,853
Subtotal PLRMBS 1,899 (21) 177 (20) 2,035
Total MBS 10,476 (21) 267 (26) 10,696
Total $ 15,456 $ (21) $ 270 $ (26) $ 15,679


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







MBS – GSEs – multifamily – Fannie Mae	$	1,443	$	5	$	—	$	—	$	1,443	$	5

PLRMBS:
Prime	13		—		5		—		18		—
Alt-A	165		2		66		3		231		5
Subtotal PLRMBS	178		2		71		3		249		5

Total	$	1,621	$	7	$	71	$	3	$	1,692	$	10

(1) Amortized cost includes unpaid principal balance, unamortized premiums and discounts, net charge-offs, and valuation adjustments for hedging activities, and excludes accrued interest receivable of $30 and $46 at September 30, 2021, and December 31, 2020, respectively.

At September 30, 2021, the amortized cost of the Bank’s MBS classified as AFS included premiums of $60, discounts of $42, and credit-related other-than-temporary impairment (OTTI) of $424 for AFS securities with an OTTI recognized pursuant to the impairment guidance in effect prior to January 1, 2020. At December 31, 2020, the amortized cost of the Bank’s MBS classified as AFS included premiums of $65, discounts of $47, and credit-related OTTI of $486 for AFS securities with an OTTI recognized pursuant to the impairment guidance in effect prior to January 1, 2020.

The following tables summarize the AFS securities with unrealized losses as of September 30, 2021, and December 31, 2020. The unrealized losses are aggregated by major security type and the length of time that individual securities have been in a continuous unrealized loss position.

September 30, 2021
Less Than 12 Months 12 Months or More Total
Estimated
Fair Value Unrealized
Losses Estimated
Fair Value Unrealized
Losses Estimated
Fair Value Unrealized
Losses
U.S. obligations – Treasury notes $ 350 $ — $ — $ — $ 350 $ —
MBS – GSEs – multifamily – Fannie Mae 77 — — — 77 —
PLRMBS:
Prime — — 6 — 6 —
Alt-A — — 172 5 172 5
Subtotal PLRMBS — — 178 5 178 5
Total $ 427 $ — $ 178 $ 5 $ 605 $ 5

~~Table of Contents~~

~~Federal Home Loan Bank of San Francisco~~

~~Notes to Financial Statements (continued)~~


December 31, 2020
December 31, 2021														December 31, 2021
															Less Than 12 Months				12 Months or More				Total
(In millions)														(In millions)	Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses
		Less Than 12 Months				12 Months or More				Total
		Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses
U.S. obligations – Treasury notes		$	501	$	—	$	—	$	—	$	501	$	—
MBS – GSEs – multifamily – Fannie Mae		731		6		222		—		953		6
PLRMBS:	PLRMBS:													PLRMBS:
Prime	Prime	4		—		7		—		11		—		Prime	$	—	$	—	$	6	$	—	$	6	$	—
Alt-A	Alt-A	151		7		168		13		319		20		Alt-A	19		—		146		4		165		4
Subtotal PLRMBS		155		7		175		13		330		20

Total	Total	$	1,387	$	13	$	397	$	13	$	1,784	$	26	Total	$	19	$	—	$	152	$	4	$	171	$	4

Redemption Terms. The amortized cost and estimated fair value of non-MBS investments by contractual maturity (based on contractual final principal payment) and of MBS as of ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020,~~2021, are shown below. Expected maturities of MBS will differ from contractual maturities because borrowers may have the right to call or prepay the underlying obligations with or without call or prepayment fees.


September 30, 2021
March 31, 2022						March 31, 2022
(In millions)						(In millions)
Year of Contractual Maturity	Year of Contractual Maturity	Amortized Cost		Estimated Fair Value		Year of Contractual Maturity	Amortized Cost		Estimated Fair Value

AFS securities other than MBS – Due in 1 year or less		$	856	$	856
AFS securities other than MBS:						AFS securities other than MBS:
Due in 1 year or less						Due in 1 year or less	$	401	$	401
Due after 1 year through 5 years						Due after 1 year through 5 years	144		144

Subtotal						Subtotal	545		545
MBS	MBS	9,648		9,969		MBS	8,848		9,025
Total	Total	$	10,504	$	10,825	Total	$	9,393	$	9,570

December 31, 2020
Year of Contractual Maturity Amortized
Cost Estimated
Fair Value
AFS securities other than MBS:
Due in 1 year or less $ 4,469 $ 4,470
Due after 1 year through 5 years 511 513
Subtotal 4,980 4,983
MBS 10,476 10,696
Total $ 15,456 $ 15,679


December 31, 2021
(In millions)
Year of Contractual Maturity	Amortized Cost		Estimated Fair Value
AFS securities other than MBS – Due in 1 year or less	$	503	$	504





MBS	9,506		9,828
Total	$	10,009	$	10,332

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

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Table of Contents

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)


September 30, 2021
		Amortized Cost(1)		Gross Unrecognized Holding Gains(2)		Gross Unrecognized Holding Losses(2)		Estimated Fair Value
March 31, 2022										March 31, 2022
(In millions)										(In millions)	Amortized Cost(1)		Gross Unrecognized Holding Gains(2)		Gross Unrecognized Holding Losses(2)		Estimated Fair Value

MBS – Other U.S. obligations – single-family:	MBS – Other U.S. obligations – single-family:									MBS – Other U.S. obligations – single-family:
Ginnie Mae	Ginnie Mae	$	135	$	3	$	—	$	138	Ginnie Mae	$	99	$	1	$	—	$	100
MBS – GSEs – single-family:	MBS – GSEs – single-family:									MBS – GSEs – single-family:
Freddie Mac	Freddie Mac	250		7		—		257		Freddie Mac	180		2		(1)		181
Fannie Mae	Fannie Mae	885		15		(1)		899		Fannie Mae	742		6		(2)		746
Subtotal MBS – GSEs – single-family	Subtotal MBS – GSEs – single-family	1,135		22		(1)		1,156		Subtotal MBS – GSEs – single-family	922		8		(3)		927
MBS – GSEs – multifamily:	MBS – GSEs – multifamily:									MBS – GSEs – multifamily:
Freddie Mac	Freddie Mac	1,308		5		—		1,313		Freddie Mac	1,004		—		(3)		1,001
Fannie Mae	Fannie Mae	709		—		(3)		706		Fannie Mae	645		—		(2)		643
Subtotal MBS – GSEs – multifamily	Subtotal MBS – GSEs – multifamily	2,017		5		(3)		2,019		Subtotal MBS – GSEs – multifamily	1,649		—		(5)		1,644
Subtotal MBS – GSEs	Subtotal MBS – GSEs	3,152		27		(4)		3,175		Subtotal MBS – GSEs	2,571		8		(8)		2,571
PLRMBS:	PLRMBS:									PLRMBS:
Prime	Prime	149		1		(1)		149		Prime	130		—		(3)		127
Alt-A	Alt-A	85		4		—		89		Alt-A	56		—		(1)		55
Subtotal PLRMBS	Subtotal PLRMBS	234		5		(1)		238		Subtotal PLRMBS	186		—		(4)		182

Total	Total	$	3,521	$	35	$	(5)	$	3,551	Total	$	2,856	$	9	$	(12)	$	2,853


December 31, 2020
		Amortized Cost(1)		Gross Unrecognized Holding Gains(2)		Gross Unrecognized Holding Losses(2)		Estimated Fair Value
December 31, 2021										December 31, 2021
(In millions)										(In millions)	Amortized Cost(1)		Gross Unrecognized Holding Gains(2)		Gross Unrecognized Holding Losses(2)		Estimated Fair Value

MBS – Other U.S. obligations – single-family:	MBS – Other U.S. obligations – single-family:									MBS – Other U.S. obligations – single-family:
Ginnie Mae	Ginnie Mae	$	261	$	7	$	—	$	268	Ginnie Mae	$	113	$	2	$	—	$	115
MBS – GSEs – single-family:	MBS – GSEs – single-family:									MBS – GSEs – single-family:
Freddie Mac	Freddie Mac	511		11		—		522		Freddie Mac	207		4		—		211
Fannie Mae	Fannie Mae	1,229		21		(1)		1,249		Fannie Mae	804		12		(1)		815
Subtotal MBS – GSEs – single-family	Subtotal MBS – GSEs – single-family	1,740		32		(1)		1,771		Subtotal MBS – GSEs – single-family	1,011		16		(1)		1,026
MBS – GSEs – multifamily:	MBS – GSEs – multifamily:									MBS – GSEs – multifamily:
Freddie Mac	Freddie Mac	1,844		2		(2)		1,844		Freddie Mac	1,177		4		—		1,181
Fannie Mae	Fannie Mae	945		—		(1)		944		Fannie Mae	693		1		(1)		693
Subtotal MBS – GSEs – multifamily	Subtotal MBS – GSEs – multifamily	2,789		2		(3)		2,788		Subtotal MBS – GSEs – multifamily	1,870		5		(1)		1,874
Subtotal MBS – GSEs	Subtotal MBS – GSEs	4,529		34		(4)		4,559		Subtotal MBS – GSEs	2,881		21		(2)		2,900
PLRMBS:	PLRMBS:									PLRMBS:
Prime	Prime	185		—		(4)		181		Prime	140		1		(1)		140
Alt-A	Alt-A	106		3		(2)		107		Alt-A	77		4		(1)		80
Subtotal PLRMBS	Subtotal PLRMBS	291		3		(6)		288		Subtotal PLRMBS	217		5		(2)		220

Total	Total	$	5,081	$	44	$	(10)	$	5,115	Total	$	3,211	$	28	$	(4)	$	3,235

(1) Amortized cost includes unpaid principal balance, unamortized premiums and discounts, and net charge offs, and excludes accrued interest receivable of ~~$3 and $5~~$2 million at ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020, respectively.~~2021.

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

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

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Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

At ~~September 30,~~March 31, 2022, the amortized cost of the Bank’s MBS classified as HTM included premiums of $3 million, discounts of $4 million, and a de minimis amount of previous credit losses related to the prior methodology of evaluating credit losses for PLRMBS. At December 31, 2021, the amortized cost of the Bank’s MBS classified as HTM included premiums of ~~$4,~~$3 million, discounts of $4 million, and ~~credit-related OTTI~~previous credit losses related to the prior methodology of evaluating credit losses of $6 million for HTM securities with an OTTI recognized pursuant to the impairment guidance in effect prior to January 1, 2020. At December 31, 2020, the amortized cost of the Bank’s MBS classified as HTM included premiums of $5, discounts of $6, and credit-related OTTI of $6 for HTM securities with an OTTI recognized pursuant to the impairment guidance in effect prior to January 1, 2020.PLRMBS.

Allowance for Credit Losses on AFS and HTM Securities. The following table presents a rollforward of the allowance for credit losses on investment securities associated with PLRMBS classified as AFS for the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 and ~~2020.~~2021. The Bank recorded 0no allowance for credit losses associated with HTM securities during the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 and ~~2020.~~2021.

Three Months Ended Nine Months Ended
September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020
Balance, beginning of the period $ 14 $ 29 $ 21 $ —
(Charge-offs)/recoveries — (1) (1) (2)
Provision for/(reversal of) credit losses 1 (4) (5) 26
Balance, end of the period $ 15 $ 24 $ 15 $ 24



(In millions)	March 31, 2022		March 31, 2021
Balance, beginning of the period	$	17	$	21
(Charge-offs)/recoveries	—		(1)
Provision for/(reversal of) credit losses	(3)		(5)
Balance, end of the period	$	14	$	15

To evaluate investment securities for credit loss at ~~September 30,~~March 31, 2022, and December 31, 2021, the Bank employed the following methodologies, based on the type of security.

AFS and HTM Securities (Excluding PLRMBS) – The Bank’s AFS and HTM securities are principally U.S. obligations and MBS issued by Ginnie Mae, Freddie Mac, and Fannie Mae that are backed by single-family or multifamily mortgage loans. The Bank only purchases securities considered investment quality. Excluding PLRMBS investments, at ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020,~~2021, substantially all of AFS securities and HTM securities, based on amortized cost, were rated A, or above, by an NRSRO, based on the lowest long-term credit rating for each security. These may differ from any internal ratings of the securities by the Bank, if applicable.

At ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020,~~2021, certain of the Bank’s AFS securities were in an unrealized loss position. These losses are considered temporary as the Bank expects to recover the entire amortized cost basis on these AFS investment securities and neither intends to sell these securities nor considers it more likely than not that it will be required to sell these securities before its anticipated recovery of each security's remaining amortized cost basis. Further, the Bank has not experienced any payment defaults on the instruments. ~~In addition, substantially all of these securities carry an implicit or explicit government guarantee.~~ As a result, 0no allowance for credit losses was recorded on these AFS securities at ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020.~~2021.

As of ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020,~~2021, the Bank had not established an allowance for credit loss on any of its HTM securities because the securities: (i) were all highly rated or had short remaining terms to maturity and (ii) had not experienced, nor did the Bank expect, any payment default on the ~~instruments, and (iii) in the case of GSE or other U.S. obligations, carry an implicit or explicit government guarantee such that the Bank considers the risk of nonpayment to be zero.~~

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~~Federal Home Loan Bank of San Francisco~~

~~Notes to Financial Statements (continued)~~

instruments.

Private-Label Residential Mortgage-Backed Securities – The Bank also holds investments in PLRMBS. The Bank has not purchased any PLRMBS since the first quarter of 2008. However, many of these securities have subsequently experienced significant credit deterioration. As of ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020,~~2021, approximately 5% ~~and 6%, respectively,~~ of PLRMBS (AFS and HTM combined, based on amortized cost) were rated A, or above, by an NRSRO; and the remaining securities were either rated less than A, or were unrated. To determine whether an allowance for credit loss is necessary on these securities, the Bank uses cash flow analyses. For certain PLRMBS where underlying collateral data is not available, alternative procedures as determined by the Bank are used to assess these securities for credit loss measurement.

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

•expected housing price changes;

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Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

•expected interest rate assumptions;

•the remaining payment terms for the security;

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

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

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

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

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

For ~~securities~~PLRMBS with ~~an OTTI recognized pursuant~~previous credit losses related to the ~~impairment guidance in effect~~ prior ~~to January 1, 2020, as~~methodology of ~~September 30, 2021~~evaluating credit losses (securities for which the Bank determined that it does not expect to recover the entire amortized cost basis), ~~the following table presents a summary~~measurement of ~~the significant inputs used in measuring~~ the fair value of PLRMBS classified as Level 3 as of ~~September 30, 2021,~~March 31, 2022, uses significant inputs that include, based on unpaid principal balance, the weighted average percentage of prepayment rates, 11.7%; default rates, 7.5%; and loss severities, 55.8%. The weighted average percentage of the related current credit enhancement for ~~the Bank.~~

September 30, 2021 Current
Prepayment Rates Default Rates Loss Severities Credit Enhancement
Collateral Type at Origination
Weighted Average % (1)
Weighted Average % (1)
Weighted Average % (1)
Weighted Average % (1)
Prime 15.8 4.0 86.5 13.1
Alt-A 10.9 8.1 49.5 7.5
Total 11.3 7.8 52.9 8.1

~~(1)Weighted average percentage is~~these securities, based on unpaid principal ~~balance.~~

balance, was 8.6% as of March 31, 2022. Credit enhancement is defined as the percentage of subordinated tranches, excess spread, and over-collateralization, if any, in a security structure that will generally absorb losses before the Bank will experience a loss on the security. The calculated averages represent the dollar-weighted averages of all the PLRMBS investments in each category shown. The classification is based on the model used to run the estimated cash flows for the CUSIP, which may not necessarily be the same as the classification at the time of origination.

The total net accretion recognized in interest income associated with PLRMBS ~~that were other-than-temporarily impaired~~with previous credit losses related to the prior ~~to January 1, 2020,~~methodology of evaluating credit losses totaled ~~$19~~$14 million and $17 million for the three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020, respectively, and $52 and $54 for the nine months ended September 30, 2021 and 2020,~~ respectively. Accretion of yield adjustments resulting from improvement of expected cash flows that are recognized over the remaining life of

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~~Federal Home Loan Bank of San Francisco~~

~~Notes to Financial Statements (continued)~~

the securities ~~totaled~~total $8 million and $13 ~~and $14~~million for the three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020, respectively, and $39 and $45 for the nine months ended September 30, 2021 and 2020,~~ respectively.

In general, the Bank elects to transfer any PLRMBS that incurred a credit loss during the applicable period from the Bank’s HTM portfolio to its AFS portfolio at their fair values. The Bank previously recognized a credit loss on these HTM PLRMBS, which the Bank believes is evidence of a significant decline in the credit quality of the underlying collateral. The decline in the credit quality of the underlying collateral is the basis for the transfers to the AFS portfolio. These transfers allow the Bank the option to sell these securities prior to maturity in view of changes in interest rates, changes in prepayment risk, or other factors, while recognizing the Bank’s intent to hold these securities for an indefinite period of time. The Bank transferred PLRMBS from its HTM portfolio to its AFS portfolio with an amortized cost of $16 million and fair value of $19 million during the three months ended March 31, 2022. The Bank did 0tnot transfer any PLRMBS from its HTM portfolio to its AFS portfolio during the three ~~and nine~~ months ended September 30, 2021, 0r during the three months ended September 30, 2020. The Bank transferred PLRMBS from its HTM portfolio to its AFS portfolio with an amortized cost and fair value of $1 during the nine months ended September 30, 2020.March 31, 2021.

For the Bank’s PLRMBS, the Bank recorded a ~~provision for~~reversal of credit losses of $1$3 million during the three months ended ~~September 30, 2021, primarily resulting from~~March 31, 2022, largely as a ~~decline~~result of improvements in the fair ~~value prices for~~values of underlying collateral on certain ~~PLRMBS.~~securities. The Bank recorded a reversal of credit losses of $5 million during the ~~nine~~three months ended ~~September 30,~~March 31, 2021, primarily resulting from lower default rates as well as improved projected credit performance in part related to a more optimistic economic outlook because of the monetary and fiscal stimulus measures taken by the U.S. government. The Bank experienced declines in fair value in March 2020 as a result of disruptions in the financial markets combined with illiquidity in the PLRMBS market and decreased expectations of the performance of loan collateral underlying these securities, which caused these assets to be valued at discounts to their amortized cost. The Bank recorded a provision for credit losses on its PLRMBS portfolio of $26 during the nine months ended September 30, 2020. As a result of improvement in the Bank’s PLRMBS fair values during the three months ended September 30, 2020, the Bank recorded a reversal of credit losses on its PLRMBS portfolio of $4.

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Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

Note 4 — Advances

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

Redemption Terms. The Bank had advances outstanding ~~excluding overdrawn demand deposit accounts,~~ at interest rates ranging from 0.13% to 8.57% at ~~September 30, 2021,~~March 31, 2022, and ~~0.00%~~0.13% to 8.57% at December 31, ~~2020,~~2021, as summarized below.

~~Table of Contents~~

~~Federal Home Loan Bank of San Francisco~~

~~Notes to Financial Statements (continued)~~


		September 30, 2021				December 31, 2020
(Dollars in millions)										(Dollars in millions)	March 31, 2022				December 31, 2021
Redemption Term	Redemption Term	Amount Outstanding(1)		Weighted Average Interest Rate		Amount Outstanding(1)		Weighted Average Interest Rate		Redemption Term	Amount Outstanding(1)		Weighted Average Interest Rate		Amount Outstanding(1)		Weighted Average Interest Rate

Within 1 year	Within 1 year	$	8,632	1.61	%	$	11,862	1.65	%	Within 1 year	$	7,572	1.07	%	$	4,129	0.85	%
After 1 year through 2 years	After 1 year through 2 years	2,514		1.53		6,399		1.61		After 1 year through 2 years	3,011		1.62		2,744		1.52
After 2 years through 3 years	After 2 years through 3 years	2,468		1.65		4,321		2.10		After 2 years through 3 years	4,200		1.39		3,092		1.59
After 3 years through 4 years	After 3 years through 4 years	4,082		1.34		2,704		1.79		After 3 years through 4 years	1,608		1.75		2,618		1.31
After 4 years through 5 years	After 4 years through 5 years	3,365		1.83		3,278		1.26		After 4 years through 5 years	3,004		1.92		3,063		1.90
After 5 years	After 5 years	1,246		2.08		1,774		1.79		After 5 years	1,078		2.32		1,212		2.12
Total par value	Total par value	22,307		1.62	%	30,338		1.68	%	Total par value	20,473		1.46	%	16,858		1.45	%
Valuation adjustments for hedging activities	Valuation adjustments for hedging activities	220				509				Valuation adjustments for hedging activities	(244)				103
Valuation adjustments under fair value option	Valuation adjustments under fair value option	86				130				Valuation adjustments under fair value option	17				66
Unamortized discounts		—				(1)

Total	Total	$	22,613			$	30,976			Total	$	20,246			$	17,027

(1)Carrying amounts exclude accrued interest receivable of $5 ~~and $6~~million at ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020, respectively.~~2021.

Many of the Bank’s advances are prepayable at the borrower’s option. However, when advances are prepaid, the borrower is generally charged a prepayment fee intended to make the Bank financially indifferent to the prepayment. In addition, for certain advances with full or partial prepayment symmetry, the Bank may charge the borrower a prepayment fee or pay the borrower a prepayment credit depending on certain circumstances, such as movements in interest rates, when the advance is prepaid. The Bank no longer offers advances with partial prepayment symmetry. The Bank had advances with full prepayment symmetry outstanding totaling ~~$14,363~~$10.1 billion at ~~September 30, 2021,~~March 31, 2022, and ~~$19,919~~$9.0 billion at December 31, ~~2020.~~2021. The Bank had advances with partial prepayment symmetry outstanding totaling ~~$1,596~~$1.4 billion at ~~September 30, 2021,~~March 31, 2022, and ~~$1,817 at~~ December 31, ~~2020.~~2021. Some advances may be repaid on pertinent call dates without prepayment fees (callable advances). The Bank had callable advances outstanding totaling $80 million at March 31, 2022, and $70 ~~at September 30, 2021, and $1,100~~million at December 31, ~~2020.~~2021.

The Bank had putable advances totaling ~~$220~~$120 million at ~~September 30, 2021,~~March 31, 2022, and $220 million at December 31, ~~2020.~~2021. At the Bank’s discretion, the Bank may terminate these advances on predetermined exercise dates and offer replacement funding at prevailing market rates, subject to certain conditions. The Bank would typically exercise such termination rights when interest rates increase relative to contractual rates.

The following table summarizes advances at ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020,~~2021, by the earlier of the year of redemption term or next call date for callable advances and by the earlier of the year of redemption term or next put date for putable advances.

Earlier of Redemption
Term or Next Call Date Earlier of Redemption
Term or Next Put Date
September 30, 2021 December 31, 2020 September 30, 2021 December 31, 2020
Within 1 year $ 8,702 $ 12,962 $ 8,852 $ 12,082
After 1 year through 2 years 2,514 5,299 2,514 6,399
After 2 years through 3 years 2,418 4,321 2,468 4,321
After 3 years through 4 years 4,082 2,704 4,082 2,704
After 4 years through 5 years 3,365 3,278 3,365 3,278
After 5 years 1,226 1,774 1,026 1,554
Total par value $ 22,307 $ 30,338 $ 22,307 $ 30,338

~~Concentration Risk.~~ The following tables present the concentration in advances to the top five borrowers and their affiliates at September 30, 2021 and 2020. The tables also present the interest income from these advances before the impact of interest rate exchange agreements associated with these advances for the three and nine months ended September 30, 2021 and 2020.

1715

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Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

September 30, 2021 Three Months Ended
September 30, 2021 Nine Months Ended
September 30, 2021
Name of Borrower Advances
Outstanding Percentage of
Total
Advances
Outstanding
Interest
Income from
Advances(1)
Percentage of
Total Interest
Income from
Advances
Interest
Income from
Advances(1)
Percentage of
Total Interest
Income from
Advances
First Republic Bank $ 7,700 35 % $ 28 29 % $ 103 32 %
MUFG Union Bank, National Association 4,075 18 24 25 83 25
First Technology Federal Credit Union 1,776 8 7 7 21 6
Luther Burbank Savings 752 3 3 3 11 3
Banc of California, National Association 411 2 3 3 8 3
Subtotal 14,714 66 65 67 226 69
Others 7,593 34 32 33 103 31
Total par value $ 22,307 100 % $ 97 100 % $ 329 100 %


	Earlier of Redemption Term or Next Call Date				Earlier of Redemption Term or Next Put Date
(In millions)	March 31, 2022		December 31, 2021		March 31, 2022		December 31, 2021

Within 1 year	$	7,642	$	4,199	$	7,692	$	4,349
After 1 year through 2 years	2,961		2,744		3,011		2,744
After 2 years through 3 years	4,210		3,042		4,200		3,092
After 3 years through 4 years	1,608		2,618		1,608		2,618
After 4 years through 5 years	3,004		3,063		3,004		3,063
After 5 years	1,048		1,192		958		992
Total par value	$	20,473	$	16,858	$	20,473	$	16,858

September 30, 2020 Three Months Ended
September 30, 2020 Nine Months Ended
September 30, 2020
Name of Borrower Advances
Outstanding Percentage of
Total
Advances
Outstanding
Interest
Income from
Advances(1)
Percentage of
Total Interest
Income from
Advances
Interest
Income from
Advances(1)
Percentage of
Total Interest
Income from
Advances
First Republic Bank $ 13,510 37 % $ 62 35 % $ 201 28 %
MUFG Union Bank, National Association 4,925 13 36 21 141 19
CIT Bank, National Association 2,550 7 4 2 20 3
First Technology Federal Credit Union 1,975 5 11 6 34 5
Luther Burbank Savings 962 3 5 3 16 2
Subtotal 23,922 65 118 67 412 57
Others 12,968 35 57 33 310 43
Total par value $ 36,890 100 % $ 175 100 % $ 722 100 %
Concentration Risk. The following tables present the concentration in advances to the top five borrowers and their affiliates at March 31, 2022 and 2021. The tables also present the interest income from these advances before the impact of interest rate exchange agreements associated with these advances for the three months ended March 31, 2022 and 2021.



(Dollars in millions)	March 31, 2022				Three Months Ended March 31, 2022
Name of Borrower	Advances Outstanding		Percentage of Total Advances Outstanding			Interest Income from Advances(1)		Percentage of Total Interest Income from Advances
MUFG Union Bank, National Association	$	4,050	20	%		$	13	19	%
First Republic Bank	3,700		18			9		13
First Technology Federal Credit Union(2)	1,800		9			8		12
Silvergate Bank	800		4			—		—
Wescom Central Credit Union	760		3			1		2
Subtotal	11,110		54			31		46
Others	9,363		46			37		54
Total par value	$	20,473	100	%		$	68	100	%



(Dollars in millions)	March 31, 2021				Three Months Ended March 31, 2021
Name of Borrower	Advances Outstanding		Percentage of Total Advances Outstanding			Interest Income from Advances(1)		Percentage of Total Interest Income from Advances
First Republic Bank	$	10,505	38	%		$	41	33	%
MUFG Union Bank, National Association	4,575		16			31		25
First Technology Federal Credit Union(2)	1,293		5			7		6
Luther Burbank Savings(2)	841		3			4		3
East West Bank	655		2			2		2
Subtotal	17,869		64			85		69
Others	9,863		36			38		31
Total par value	$	27,732	100	%		$	123	100	%

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

(2) An officer or director of the member is a Bank director.

The Bank held a security interest in collateral from each of the top five advances borrowers and their affiliates sufficient to support their respective advances outstanding, and the Bank does not expect to incur any credit losses on these advances.

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Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

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

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

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

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

•cash or deposits in the Bank;

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~~Federal Home Loan Bank of San Francisco~~

~~Notes to Financial Statements (continued)~~

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

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

At ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020,~~2021, none of the Bank’s credit products were past due or on nonaccrual status. There were no troubled debt restructurings related to credit products during the ~~nine~~three months ended ~~September 30, 2021, or during 2020.~~March 31, 2022, and 2021.

Based on the collateral pledged as security for advances, the Bank’s credit analyses of borrowers’ financial condition, repayment history on advances, and the Bank’s credit extension and collateral policies as of ~~September 30, 2021,~~March 31, 2022, the Bank expects to collect all amounts due according to the contractual terms. Therefore, 0no allowance for losses on advances was deemed necessary by the Bank as of ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020.~~2021.

For more information on the credit risk exposure and security terms of advances, see “Item 8. Financial Statements and Supplementary Data – Note 5 –- Advances” in the Bank’s ~~2020~~2021 Form 10-K.

Interest Rate Payment Terms. Interest rate payment terms for advances at ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020,~~2021, are detailed below:


		September 30, 2021		December 31, 2020
(In millions)						(In millions)	March 31, 2022		December 31, 2021
Par value of advances:	Par value of advances:					Par value of advances:
Fixed rate:	Fixed rate:					Fixed rate:
Due within 1 year	Due within 1 year	$	7,907	$	11,044	Due within 1 year	$	3,079	$	2,768
Due after 1 year	Due after 1 year	13,600		17,126		Due after 1 year	12,901		12,729
Total fixed rate	Total fixed rate	21,507		28,170		Total fixed rate	15,980		15,497
Adjustable rate:
Due within 1 year		725		818
Due after 1 year		75		1,350
Total adjustable rate		800		2,168

Adjustable rate – due within 1 year						Adjustable rate – due within 1 year	4,493		1,361

Total par value	Total par value	$	22,307	$	30,338	Total par value	$	20,473	$	16,858

The Bank did not have any advances with embedded features that met the requirements to separate the embedded feature from the host contract and designate the embedded feature as a stand-alone derivative at ~~September 30, 2021,~~March 31, 2022, or December 31, ~~2020.~~2021. The Bank has generally elected to account for certain advances with embedded features under the fair value option, and these advances are carried at fair value on the Statements of Condition. For more information, see Note 11 – Derivatives and Hedging Activities and Note 12 – Fair Value.

Prepayment Fees, Net. The Bank charges borrowers prepayment fees or pays borrowers prepayment credits when the principal on certain advances is paid prior to original maturity. The Bank records prepayment fees net of any associated fair value adjustments related to prepaid advances that were hedged. The net amount of prepayment fees is reflected as advances interest income in the Statements of Income for the three and nine months ended September 30, 2021 and 2020, as follows:

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Table of Contents

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

Three Months Ended Nine Months Ended
September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020
Prepayment fees received/(paid) $ 2 $ 38 $ 28 $ 77
Fair value adjustments (2) (35) (13) (62)
Net $ — $ 3 $ 15 $ 15
Advance principal prepaid $ 1,397 $ 5,018 $ 5,073 $ 21,804
associated fair value adjustments related to prepaid advances that were hedged. The net amount of prepayment fees is reflected in the Statements of Income for the three months ended March 31, 2022 and 2021, as follows:


	Three Months Ended
(In millions)		March 31, 2022		March 31, 2021
Prepayment fees received/(paid)		$	(1)	$	9
Fair value adjustments		(1)		(1)
Net		$	(2)	$	8
Advance principal prepaid		$	285	$	1,474

Note 5 — Mortgage Loans Held for Portfolio

The following table presents information as of ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020,~~2021, on mortgage loans held for portfolio, all of which are secured by one- to four-unit residential properties and single-unit ~~second~~ homes.


		September 30, 2021		December 31, 2020
(In millions)						(In millions)	March 31, 2022		December 31, 2021
Fixed rate medium-term mortgage loans	Fixed rate medium-term mortgage loans	$	20	$	27	Fixed rate medium-term mortgage loans	$	17	$	18
Fixed rate long-term mortgage loans	Fixed rate long-term mortgage loans	1,087		1,879		Fixed rate long-term mortgage loans	863		936
Subtotal	Subtotal	1,107		1,906		Subtotal	880		954
Unamortized premiums	Unamortized premiums	29		35		Unamortized premiums	37		28
Unamortized discounts	Unamortized discounts	(1)		(2)		Unamortized discounts	(2)		(1)
Mortgage loans held for portfolio(1)	Mortgage loans held for portfolio(1)	1,135		1,939		Mortgage loans held for portfolio(1)	915		981
Less: Allowance for credit losses	Less: Allowance for credit losses	(1)		(4)		Less: Allowance for credit losses	(1)		(1)
Total mortgage loans held for portfolio, net	Total mortgage loans held for portfolio, net	$	1,134	$	1,935	Total mortgage loans held for portfolio, net	$	914	$	980

(1)Excludes accrued interest receivable of ~~$7 and $10~~$6 million at ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020, respectively.~~2021.

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

Payment Status of Mortgage Loans. Payment status is the key credit quality indicator for conventional mortgage loans and allows the Bank to monitor the migration of past due loans. ~~Past~~A past due ~~loans are those~~loan is one where the borrower has failed to make ~~timely payments~~a scheduled full payment of principal and interest ~~in accordance with the terms~~within 30 days of ~~the loan.~~its due date. Other delinquency statistics include nonaccrual loans and loans in process of foreclosure. The following tables present the payment status for mortgage loans and other delinquency statistics for the Bank’s mortgage loans at ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020.~~2021.


March 31, 2022
(Dollars in millions)	Origination Year
Payment Status	2018 to 2022		Prior to 2018		Amortized Cost(1)
30 – 59 days delinquent	$	2	$	5	$	7
60 – 89 days delinquent	1		2		3
90 days or more delinquent	20		14		34
Total past due	23		21		44
Total current loans	494		377		871
Total mortgage loans held for portfolio	$	517	$	398	$	915
In process of foreclosure, included above(2)					$	2
Nonaccrual loans(3)					$	34

Serious delinquencies as a percentage of total mortgage loans outstanding(4)					3.69		%

2018

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Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

September 30, 2021
Origination Year
Payment Status 2017 to 2021 Prior to 2017
Amortized Cost(1)
30 – 59 days delinquent $ 7 $ 2 $ 9
60 – 89 days delinquent 5 2 7
90 days or more delinquent 31 11 42
Total past due 43 15 58
Total current loans 852 225 1,077
Total MPF $ 895 $ 240 $ 1,135
In process of foreclosure, included above(2)
$ 2
Nonaccrual loans(3)
$ 42
Serious delinquencies as a percentage of total mortgage loans outstanding(4)
3.74 %


December 31, 2020
		Origination Year
December 31, 2021									December 31, 2021
(Dollars in millions)									(Dollars in millions)	Origination Year
Payment Status	Payment Status	2016 to 2020		Prior to 2016		Amortized Cost(1)			Payment Status	2017 to 2021		Prior to 2017		Amortized Cost(1)
30 – 59 days delinquent	30 – 59 days delinquent	$	20	$	2	$	22		30 – 59 days delinquent	$	7	$	2	$	9
60 – 89 days delinquent	60 – 89 days delinquent	5		2		7			60 – 89 days delinquent	1		2		3
90 days or more delinquent	90 days or more delinquent	95		9		104			90 days or more delinquent	26		10		36
Total past due	Total past due	120		13		133			Total past due	34		14		48
Total current loans	Total current loans	1,628		178		1,806			Total current loans	729		204		933
Total MPF(5)		$	1,748	$	191	$	1,939
Total mortgage loans held for portfolio									Total mortgage loans held for portfolio	$	763	$	218	$	981
In process of foreclosure, included above(2)	In process of foreclosure, included above(2)					$	1		In process of foreclosure, included above(2)					$	1
Nonaccrual loans(3)	Nonaccrual loans(3)					$	104		Nonaccrual loans(3)					$	36

Serious delinquencies as a percentage of total mortgage loans outstanding(4)	Serious delinquencies as a percentage of total mortgage loans outstanding(4)					5.34		%	Serious delinquencies as a percentage of total mortgage loans outstanding(4)					3.64		%

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

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

(3) At ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020, $42 and $103, respectively,~~2021, $21 million of ~~these~~ mortgage loans on nonaccrual status did not have an associated allowance for credit ~~losses.~~losses because these loans were either previously charged off to the expected recoverable value or the fair value of the underlying collateral, including any credit enhancements, is greater than the amortized cost of the loans.

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

(5) The amortized costs of the mortgage loans by origination year in the 2016 to 2020 column and prior to 2016 column that were previously disclosed in the “Mortgage Loans Held for Portfolio” note were incorrectly presented as of December 31, 2020, in the Bank’s 2020 Form 10-K. The amortized costs of the mortgage loans by origination year as of December 31, 2020, have been corrected. The total amortized costs presented for each period were properly disclosed. These revisions had no effect on the Bank’s total assets, net interest income, or net income for all affected periods.

Allowance for Credit Losses on Mortgage Partnership ~~Finance~~® ~~(MPF~~®Finance® (MPF®) Loans.MPF loans are evaluated ~~collectively~~on a loan-level basis for expected credit losses, ~~when similar risk characteristics exist. MPF loans that do not share risk characteristics with other pools are evaluated for expected credit losses on an individual basis,~~ factoring in the credit enhancement structure at the master commitment level. The Bank determines its ~~allowances~~allowance for credit losses on MPF loans through analyses that include consideration of various loan portfolio and collateral related characteristics, such as past performance, current conditions, and reasonable and supportable forecasts of expected economic conditions. (“Mortgage Partnership Finance” and “MPF” are registered trademarks of the FHLBank of Chicago.) The Bank uses models that employ a variety of methods, such as projected cash flows, to estimate expected credit losses over the life of the loans. These models rely on a number of inputs, such as current and forecasted property values and interest rates as well as historical borrower behavior experience. At ~~September 30, 2021,~~March 31, 2022, the Bank’s reasonable and supportable forecast of housing prices expects, on average, for prices to appreciate 7.8% over a one-year forecast horizon before reverting to long-term housing price appreciation rates of ~~3.3%~~4.0% after five additional years in the forecast based on historical averages. At December 31, ~~2020,~~2021, the Bank’s reasonable and supportable forecast of housing prices expects, on average, for prices to appreciate ~~2.3%~~8.4% over a one-year forecast

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~~Federal Home Loan Bank of San Francisco~~

~~Notes to Financial Statements (continued)~~

horizon before reverting to long-term housing price appreciation rates of ~~3.8% over a three-year~~3.3% after five additional years in the forecast ~~horizon~~ based on historical averages. The Bank also incorporates associated credit enhancements, if any, to determine its estimate of expected credit losses.

Certain MPF loans may be evaluated for credit losses by the Bank using the practical expedient for collateral-dependent assets. A mortgage loan is considered collateral-dependent if repayment is expected to be provided by the sale of the underlying property, that is, if it is considered likely that the borrower will default. The Bank may estimate the fair value of this collateral by applying an appropriate loss severity rate or using third-party estimates or property valuation models. The expected credit loss of a collateral-dependent mortgage loan is equal to the difference between the amortized cost of the loan and the estimated fair value of the collateral, less estimated selling costs. The Bank will either reserve for these estimated losses or record a direct charge-off of the loan balance, if certain triggering criteria are met. Expected recoveries of prior charge-offs, if any, are included in the allowance for credit loss.

The following table presents a rollforward of the allowance for credit losses on the mortgage loan portfolio for the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 and ~~2020.~~2021. The amount of charge-offs and recoveries of allowance for credit losses on the mortgage loan portfolio were de minimis for the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 and ~~2020.~~2021.

Three Months Ended Nine Months Ended
September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020
Balance, beginning of the period $ 2 $ 5 $ 4 $ —
Adjustment for cumulative effect of accounting change — — — 3
Provision for/(reversal of) credit losses (1) 2 (3) 4
Balance, end of the period $ 1 $ 7 $ 1 $ 7

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Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)


	Three Months Ended
(In millions)		March 31, 2022		March 31, 2021
Balance, beginning of the period		$	1	$	4


Provision for/(reversal of) credit losses		—		(1)
Balance, end of the period		$	1	$	3

For more information related to the Bank’s accounting policies for mortgage loans held for portfolio, see “Item 8. Financial Statements and Supplementary Data – Note 1 – Summary of Significant Accounting Policies” in the Bank’s ~~2020~~2021 Form 10-K.

Note 6 — Deposits

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

~~Table of Contents~~

~~Federal Home Loan Bank of San Francisco~~

~~Notes to Financial Statements (continued)~~

Deposits and interest rate payment terms for deposits as of ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020,~~2021, were as follows:


		September 30, 2021				December 31, 2020					March 31, 2022				December 31, 2021
		Amount Outstanding		Weighted Average Interest Rate		Amount Outstanding		Weighted Average Interest Rate
(Dollars in millions)										(Dollars in millions)	Amount Outstanding		Weighted Average Interest Rate		Amount Outstanding		Weighted Average Interest Rate
Interest-bearing deposits:	Interest-bearing deposits:									Interest-bearing deposits:
Adjustable rate	Adjustable rate	$	705	0.01	%	$	732	0.01	%	Adjustable rate	$	999	0.15	%	$	722	0.01	%
Fixed rate	Fixed rate	66		0.01		16		0.01		Fixed rate	1		0.10		18		0.01
Total interest-bearing deposits	Total interest-bearing deposits	771				748				Total interest-bearing deposits	1,000				740
Non-interest-bearing deposits	Non-interest-bearing deposits	55				139				Non-interest-bearing deposits	24				29
Total	Total	$	826			$	887			Total	$	1,024			$	769

Note 7 — Consolidated Obligations

Consolidated obligations, consisting of ~~consolidated obligation~~ bonds and discount notes, are jointly issued by the Federal Home Loan Banks (FHLBanks) through the Office of Finance, which serves as the FHLBanks’ agent. As provided by the Federal Home Loan Bank Act of 1932, as amended (FHLBank Act) or by regulations governing the operations of the FHLBanks, all FHLBanks have joint and several liability for all FHLBank consolidated obligations. For a discussion of the joint and several liability regulation, see “Item 8. Financial Statements and Supplementary Data – Note 16 – Commitments and Contingencies” in the Bank’s ~~2020~~2021 Form 10-K. In connection with each issuance of consolidated obligations, each FHLBank specifies the type, term, and amount of debt it requests to have issued on its behalf. The Office of Finance tracks the amount of debt issued on behalf of each FHLBank. In addition, the Bank separately tracks and records as a liability its specific portion of the consolidated obligations issued and is the primary obligor for that portion of the consolidated obligations issued. The Finance Agency and the U.S. Secretary of the Treasury have oversight over the issuance of FHLBank debt through the Office of Finance.

Redemption Terms. The following is a summary of the Bank’s participation in consolidated obligation bonds at ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020.~~2021.

September 30, 2021 December 31, 2020
Contractual Maturity Amount
Outstanding Weighted
Average
Interest Rate Amount
Outstanding Weighted
Average
Interest Rate
Within 1 year $ 6,565 0.36 % $ 34,542 0.23 %
After 1 year through 2 years 3,628 0.30 6,923 0.21
After 2 years through 3 years 1,750 0.44 751 1.00
After 3 years through 4 years 2,500 0.60 677 0.67
After 4 years through 5 years 5,023 0.87 185 0.82
After 5 years 2,608 1.36 1,311 2.24
Total par value 22,074 0.62 % 44,389 0.31 %
Unamortized premiums 4 10
Unamortized discounts (4) (5)
Valuation adjustments for hedging activities (47) 13
Fair value option valuation adjustments (2) 1
Total $ 22,025 $ 44,408

The Bank’s participation in consolidated obligation bonds outstanding includes callable bonds of $12,133 at September 30, 2021, and $3,140 at December 31, 2020. When a callable bond for which the Bank is the primary

2320

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Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)


(Dollars in millions)	March 31, 2022				December 31, 2021
Contractual Maturity	Amount Outstanding		Weighted Average Interest Rate		Amount Outstanding		Weighted Average Interest Rate
Within 1 year	$	13,996	0.41	%	$	7,349	0.18	%
After 1 year through 2 years	2,125		0.60		1,757		0.67
After 2 years through 3 years	4,290		0.66		4,230		0.63
After 3 years through 4 years	3,470		0.78		1,855		0.72
After 4 years through 5 years	3,713		0.95		5,368		0.89
After 5 years	1,743		1.56		2,303		1.42
Total par value	29,337		0.64	%	22,862		0.64	%
Unamortized premiums	2				3
Unamortized discounts	(4)				(4)
Valuation adjustments for hedging activities	(599)				(139)
Fair value option valuation adjustments	(34)				(6)
Total	$	28,702			$	22,716

The Bank’s participation in consolidated obligation bonds outstanding includes callable bonds of $16.4 billion at March 31, 2022, and $14.6 billion at December 31, 2021. When a callable bond for which the Bank is the primary obligor is issued, the Bank may simultaneously enter into an interest rate swap (wherein the Bank pays a variable rate and receives a fixed rate) with a call feature that mirrors the call option embedded in the bond (a sold callable option in a swap). The Bank had notional amounts of interest rate exchange agreements hedging callable bonds of ~~$10,543~~$14.7 billion at ~~September 30, 2021,~~March 31, 2022, and ~~$930~~$12.8 billion at December 31, ~~2020.~~2021. The combined callable swaps and callable bonds enable the Bank to meet its funding needs at lower costs relative to similar tenor non-callable debt, while effectively converting the Bank’s net payment to an adjustable rate.

The Bank’s participation in consolidated obligation bonds at ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020,~~2021, was as follows:


		September 30, 2021		December 31, 2020
(In millions)						(In millions)	March 31, 2022		December 31, 2021
Par value of consolidated obligation bonds:	Par value of consolidated obligation bonds:					Par value of consolidated obligation bonds:
Non-callable	Non-callable	$	9,941	$	41,249	Non-callable	$	12,981	$	8,242
Callable	Callable	12,133		3,140		Callable	16,356		14,620
Total par value	Total par value	$	22,074	$	44,389	Total par value	$	29,337	$	22,862

The following is a summary of the Bank’s participation in consolidated obligation bonds outstanding at ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020,~~2021, by the earlier of the year of contractual maturity or next call date.


(In millions)						(In millions)
Earlier of Contractual Maturity or Next Call Date	Earlier of Contractual Maturity or Next Call Date	September 30, 2021		December 31, 2020		Earlier of Contractual Maturity or Next Call Date	March 31, 2022		December 31, 2021
Within 1 year	Within 1 year	$	18,323	$	36,667	Within 1 year	$	28,547	$	21,770
After 1 year through 2 years	After 1 year through 2 years	3,623		7,228		After 1 year through 2 years	662		969
After 2 years through 3 years	After 2 years through 3 years	77		396		After 2 years through 3 years	62		72
After 3 years through 4 years		—		47

After 4 years through 5 years	After 4 years through 5 years	3		—		After 4 years through 5 years	18		3
After 5 years	After 5 years	48		51		After 5 years	48		48
Total par value	Total par value	$	22,074	$	44,389	Total par value	$	29,337	$	22,862

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

September 30, 2021 December 31, 2020
Amount
Outstanding
Weighted Average
Interest Rate (1)
Amount
Outstanding
Weighted Average
Interest Rate (1)
Par value $ 24,817 0.04 % $ 16,217 0.12 %
Unamortized discounts (3) (4)
Total $ 24,814 $ 16,213

Table of Contents

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)


	March 31, 2022				December 31, 2021
(Dollars in millions)	Amount Outstanding		Weighted Average Interest Rate (1)		Amount Outstanding		Weighted Average Interest Rate (1)
Par value	$	19,757	0.28	%	$	23,989	0.04	%
Unamortized discounts	(13)				(2)
Total	$	19,744			$	23,987

(1)Represents yield to maturity excluding concession fees.

Interest Rate Payment Terms. Interest rate payment terms for consolidated obligations at ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020,~~2021, are detailed in the following table. For information on the general terms and types of consolidated obligations outstanding, see “Item 8. Financial Statements and Supplementary Data – Note 8 – Consolidated Obligations” in the Bank’s ~~2020~~2021 Form 10-K.

~~Table of Contents~~

~~Federal Home Loan Bank of San Francisco~~

~~Notes to Financial Statements (continued)~~


		September 30, 2021		December 31, 2020
(In millions)						(In millions)	March 31, 2022		December 31, 2021
Par value of consolidated obligations:	Par value of consolidated obligations:					Par value of consolidated obligations:
Bonds:	Bonds:					Bonds:
Fixed rate	Fixed rate	$	14,736	$	6,632	Fixed rate	$	16,835	$	16,654
Adjustable rate	Adjustable rate	6,815		37,712		Adjustable rate	10,544		5,575
Step-up	Step-up	523		45		Step-up	1,958		633

Total bonds, par value	Total bonds, par value	22,074		44,389		Total bonds, par value	29,337		22,862
Discount notes, par value	Discount notes, par value	24,817		16,217		Discount notes, par value	19,757		23,989
Total consolidated obligations, par value	Total consolidated obligations, par value	$	46,891	$	60,606	Total consolidated obligations, par value	$	49,094	$	46,851

The Bank did not have any bonds with embedded features that met the requirements to separate the embedded feature from the host contract and designate the embedded feature as a stand-alone derivative at ~~September 30, 2021,~~March 31, 2022, or December 31, ~~2020.~~2021. The Bank has generally elected to account for certain bonds with embedded features under the fair value option, and these bonds are carried at fair value on the Statements of Condition. For more information, see Note 11 – Derivatives and Hedging Activities and Note 12 – Fair Value.

Note 8 — Accumulated Other Comprehensive Income/(Loss)

The following table summarizes the changes in Accumulated Other Comprehensive Income (AOCI) for the three months ended ~~September 30, 2021~~March 31, 2022 and ~~2020:~~2021:

Net Unrealized Gain/(Loss) on AFS Securities Pension and Postretirement Benefits Total
AOCI
Balance, June 30, 2020 $ (21) $ (14) $ (35)
Other comprehensive income/(loss) before reclassifications:
Net change in pension and postretirement benefits (1) (1)
Net change in fair value 172 172
Net current period other comprehensive income/(loss) 172 (1) 171
Balance, September 30, 2020 $ 151 $ (15) $ 136
Balance, June 30, 2021 $ 408 $ (14) $ 394
Other comprehensive income/(loss) before reclassifications:
Net change in pension and postretirement benefits (3) (3)
Net change in fair value (72) (72)
Net current period other comprehensive income/(loss) (72) (3) (75)
Balance, September 30, 2021 $ 336 $ (17) $ 319


(In millions)	Net Unrealized Gain/(Loss) on AFS Securities		Pension and Postretirement Benefits		Total AOCI
Balance, December 31, 2020	$	244	$	(14)	$	230
Other comprehensive income/(loss):


Net change in fair value	137				137



Net current period other comprehensive income/(loss)	137		—		137

Balance, March 31, 2021	$	381	$	(14)	$	367

Balance, December 31, 2021	$	340	$	(9)	$	331
Other comprehensive income/(loss):

Net change in fair value	(149)				(149)



Net current period other comprehensive income/(loss)	(149)		—		(149)
Balance, March 31, 2022	$	191	$	(9)	$	182

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Table of Contents

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

~~The following table summarizes the changes in AOCI for the nine months ended September 30, 2021 and 2020:~~

Net Unrealized Gain/(Loss) on AFS Securities Net Non-Credit-Related OTTI Loss on AFS Securities Net Non-Credit-Related OTTI Loss on HTM Securities Pension and Postretirement Benefits Total
AOCI
Balance, December 31, 2019 $ 21 $ 268 $ (1) $ (14) $ 274
Other comprehensive income/(loss) before reclassifications:
Net change in pension and postretirement benefits (1) (1)
Net change in fair value (138) — (138)
Accretion of non-credit loss 1 1
Net current period other comprehensive income/(loss) (138) — 1 (1) (138)
Adoption of ASU 2016-13, as amended(1)
268 (268) —
Balance, September 30, 2020 $ 151 $ — $ — $ (15) $ 136
Balance, December 31, 2020 $ 244 $ — $ — $ (14) $ 230
Other comprehensive income/(loss) before reclassifications:
Net change in pension and postretirement benefits (3) (3)
Net change in fair value 92 — 92
Net current period other comprehensive income/(loss) 92 — — (3) 89
Balance, September 30, 2021 $ 336 $ — $ — $ (17) $ 319

(1) With the adoption of changes to accounting standards on measurement of credit losses for financial instruments on January 1, 2020, OTTI assessment was replaced with an evaluation for an allowance for credit loss (see “Item 8. Financial Statements and Supplementary Data – Note 1 – Summary of Significant Accounting Policies” and “Item 8. Financial Statements and Supplementary Data – Note 2 – Recently Issued and Adopted Accounting Guidance” in the Bank’s 2020 Form 10-K for further information).

Note 9 — Capital

Capital Requirements. Under the Housing and Economic Recovery Act of 2008, the Director of the Finance Agency is responsible for setting the risk-based capital standards for the FHLBanks. The FHLBank Act and regulations governing the operations of the FHLBanks require that the Bank’s minimum capital stock requirement for shareholders must be sufficient to enable the Bank to meet its regulatory requirements for total capital, leverage capital, and risk-based capital. ~~The Bank must maintain: (i) total regulatory~~For further information related to the Bank’s capital ~~in an amount equal to at least 4% of its total assets, (ii) leverage capital in an amount equal to at least 5% of its total assets,~~requirements, see “Item 8. Financial Statements and ~~(iii) permanent capital in an amount that is greater than or equal to its risk-based capital requirement.~~

The Finance Agency requires each FHLBank to maintain a ratio of at least 2% of capital stock to total assets in order to help preserve the cooperative structure incentives that encourage members to remain fully engagedSupplementary Data – Note 11 – Capital” in the oversight of their investment in the FHLBank. The Finance Agency will consider the proportion of capital stock to assets, measured on a daily average basis at monthend, when assessing each FHLBank’s capital management practices. Bank’s 2021 Form 10-K.

As of ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020, the Bank complied with this capital guidance.~~

Because the Bank issues only Class B stock, regulatory capital and permanent capital for the Bank are both composed of retained earnings and Class B stock, including mandatorily redeemable capital stock (which is classified as a liability for financial reporting purposes). Regulatory capital and permanent capital do not include AOCI. Leverage capital is defined as the sum of permanent capital, weighted by a 1.5 multiplier, plus non-permanent capital.

~~Table of Contents~~

~~Federal Home Loan Bank of San Francisco~~

~~Notes to Financial Statements (continued)~~

~~The Finance Agency may require an FHLBank to maintain a greater amount of permanent capital than is required by the risk-based capital requirement as defined.~~

~~As of September 30,~~ 2021, ~~and December 31, 2020,~~ the Bank complied with these capital rules and requirements as shown in the following table.


		September 30, 2021						December 31, 2020							March 31, 2022						December 31, 2021
		Required			Actual			Required			Actual
(Dollars in millions)														(Dollars in millions)	Required			Actual			Required			Actual
Risk-based capital	Risk-based capital	$	1,109		$	6,059		$	1,404		$	5,966		Risk-based capital	$	822		$	5,979		$	1,054		$	5,896
Total regulatory capital	Total regulatory capital	$	2,178		$	6,059		$	2,745		$	5,966		Total regulatory capital	$	2,245		$	5,979		$	2,165		$	5,896
Total regulatory capital ratio	Total regulatory capital ratio	4.00		%	11.12		%	4.00		%	8.69		%	Total regulatory capital ratio	4.00		%	10.65		%	4.00		%	10.89		%
Leverage capital	Leverage capital	$	2,723		$	9,088		$	3,432		$	8,949		Leverage capital	$	2,806		$	8,969		$	2,706		$	8,844
Leverage ratio	Leverage ratio	5.00		%	16.69		%	5.00		%	13.04		%	Leverage ratio	5.00		%	15.98		%	5.00		%	16.34		%

Mandatorily Redeemable Capital Stock.The Bank had mandatorily redeemable capital stock totaling $4$7 million outstanding to 3 institutions at ~~September 30, 2021,~~March 31, 2022, and $2$3 million outstanding to 3 institutions at December 31, ~~2020.~~2021. The change in mandatorily redeemable capital stock for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ was as follows:


		Three Months Ended				Nine Months Ended
		September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020
(In millions)										(In millions)	March 31, 2022		March 31, 2021
Balance at the beginning of the period	Balance at the beginning of the period	$	3	$	83	$	2	$	138	Balance at the beginning of the period	$	3	$	2
Reclassified from/(to) capital during the period	Reclassified from/(to) capital during the period	13		—		16		3		Reclassified from/(to) capital during the period	32		—
Repurchase/redemption of mandatorily redeemable capital stock	Repurchase/redemption of mandatorily redeemable capital stock	(12)		(81)		(14)		(139)		Repurchase/redemption of mandatorily redeemable capital stock	(28)		(1)
Balance at the end of the period	Balance at the end of the period	$	4	$	2	$	4	$	2	Balance at the end of the period	$	7	$	1

Cash dividends on mandatorily redeemable capital stock were recorded as interest expense of a de minimis ~~amount and $1~~amounts for both of the three months ended ~~September 30, 2021~~March 31, 2022 and ~~2020, respectively, and of a de minimis amount and $5 for the nine months ended September 30, 2021 and 2020, respectively.~~2021.

The following table presents mandatorily redeemable capital stock amounts by contractual redemption period at ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020.~~2021.


Contractual Redemption Period	Contractual Redemption Period	September 30, 2021		December 31, 2020		Contractual Redemption Period	March 31, 2022		December 31, 2021

After 4 years through 5 years	After 4 years through 5 years	$	3	$	—	After 4 years through 5 years	$	6	$	2
Past contractual redemption date because of remaining activity(1)	Past contractual redemption date because of remaining activity(1)	1		2		Past contractual redemption date because of remaining activity(1)	1		1
Total	Total	$	4	$	2	Total	$	7	$	3

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

The Bank’s mandatorily redeemable capital stock is discussed more fully in “Item 8. Financial Statements and Supplementary Data – Note 11 – Capital” in the Bank’s ~~2020~~2021 Form 10-K.

Excess Stock Repurchase, Retained Earnings, and Dividend Framework. ~~By Finance Agency regulation, dividends may be paid only out of current net earnings or previously retained earnings. As required by the Finance Agency, the~~The Bank’s Excess Stock Repurchase, Retained Earnings, and Dividend Framework (Framework) summarizes the Bank’s capital management principles and objectives, as well as its policies and practices, with respect to retained earnings, dividend payments, and the repurchase of excess capital stock.The Bank may be restricted from paying dividends if the Bank is not in compliance with any of its minimum capital requirements or if payment would cause the Bank to fail to meet any of its minimum capital requirements. In addition, the Bank may

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~~Federal Home Loan Bank of San Francisco~~

~~Notes to Financial Statements (continued)~~

not pay dividends if any principal or interest due on any consolidated obligations has not been paid in full or is not expected to be paid in full, or, under certain circumstances, if the Bank fails to satisfy certain liquidity requirements under applicable Finance Agency regulations.

The Bank’s board of directors reviews the Framework at least annually and may amend the Framework from time to time. The Framework includes a dividend philosophy to endeavor to pay a quarterly dividend at an annualized rate between 5% and 7%. The decision to declare any dividend and the dividend rate are at the discretion of the Bank’s board of directors, which may choose to follow the dividend philosophy as guidance in the dividend declaration. The Board may also revise or eliminate the dividend policy in the future. The Bank’s historical dividend rates and the dividend philosophy are not indicative of future dividend declarations.

The Bank’s Risk Management Policy limits the payment of dividends if the ratio of the Bank’s estimated market value of total capital to par value of capital stock falls below certain levels. If this ratio at the end of any quarter is less than 100% but greater than or equal to 70%, any dividend would be limited to an annualized rate no greater than the daily average of the Federal funds effective rate for the applicable quarter (subject to certain conditions), and if this ratio is less than 70%, the Bank would be restricted from paying a dividend. The ratio of the Bank’s estimated market value of total capital to par value of capital stock was 292% as of September 30, 2021.

In addition, the Bank monitors the condition of its balance sheet, its financial performance, its capital position, overall financial market conditions, and other relevant information as the basis for determining the payment of dividends in future quarters.

~~Retained Earnings –~~ ~~The Bank’s Framework~~ assesses the level and adequacy of retained earnings and establishes amounts to be retained in restricted retained earnings, which are not made available in the current dividend period, and maintains an amount of total retained earnings at least equal to its required retained

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Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

earnings as described in the Framework. ~~As determined using the Bank’s~~The methodology may be revised from time to time, and the required level of ~~total~~required retained earnings ~~had ranged from $2,400 to $2,500 during 2019 and continuing through September 2020. In September 2020,~~under the methodology ~~was revised~~may change due to updating data and ~~resulted~~assumptions used in athe methodology. The required level of retained earnings ~~of $2,900. In January~~was $1.7 billion and $1.5 billion at March 31, 2022, and December 31, 2021, the methodology was further revised and resulted in a required level of retained earnings of $1,900. In July 2021, the methodology was further revised and resulted in a required level of retained earnings of $1,500. respectively.

The JCE Agreement is intended to enhance the capital position of each FHLBank. In accordance with the JCE Agreement, each FHLBank is required to allocate 20% of its net income each quarter to a separate restricted retained earnings account until the balance of the account, calculated as of the last day of each calendar quarter, equals at least 1% of that FHLBank's average balance of outstanding consolidated obligations for the calendar quarter. Under the JCE Agreement, these restricted retained earnings will not be available to pay dividends. With the decline in consolidated obligations outstanding in 2020, the Bank ceased contributions to restricted retained earnings in the fourth quarter of 2020, in accordance with the JCE Agreement, and no further allocations of net income into restricted retained earnings are required until such time as the allocation requirement exceeds the balance of restricted retained earnings. Additionally, the JCE Agreement provides that amounts in restricted retained earnings in excess of 150% of the Bank’s restricted retained earnings minimum (i.e., 1% of the Bank’s total consolidated obligations calculated as of the last day of each calendar quarter) may be released from restricted retained earnings. As a result of the Bank exceeding this threshold, the Bank reclassified ~~$18~~$16 million from restricted retained earnings to unrestricted retained earnings during the ~~third~~first quarter of 2022. The Bank made no reclassifications from restricted retained earnings to unrestricted retained earnings during the first quarter of 2021. The Bank’s restricted retained earnings totaled ~~$743~~$692 million and ~~$761~~$708 million at ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020,~~2021, respectively. The Bank’s unrestricted retained earnings totaled ~~$3,059~~$3.2 billion and ~~$2,919~~$3.1 billion at ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020,~~2021, respectively.

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~~Federal Home Loan Bank of San Francisco~~

~~Notes to Financial Statements (continued)~~

For more information on restricted retained earnings and the Bank’s Framework, see “Item 8. Financial Statements and Supplementary Data – Note 11 – Capital” in the Bank’s ~~2020~~2021 Form 10-K.

Dividend Payments – Finance Agency rules state that FHLBanks may declare and pay dividends only from previously retained earnings or current net earnings and may not declare or pay dividends based on projected or anticipated earnings. There is no requirement that the board of directors declare and pay any dividend. A decision by the board of directors to declare or not declare a dividend is a discretionary matter and is subject to the requirements and restrictions of the FHLBank Act and applicable requirements under the regulations governing the operations of the FHLBanks.

In addition, Finance Agency rules do not permit the Bank to pay dividends in the form of capital stock if its excess capital stock exceeds 1% of its total assets. Excess capital stock is defined as the aggregate of the capital stock held by each shareholder in excess of its minimum capital stock requirement, as established by the Bank’s capital plan. Excess capital stock totaled ~~$139,~~$103 million, or ~~0.26%~~0.18% of total assets as of ~~September 30, 2021.~~March 31, 2022. Excess capital stock totaled ~~$161,~~$120 million, or ~~0.23%~~0.22% of total assets as of December 31, ~~2020.~~2021.

In the ~~third~~first quarter of ~~2021,~~2022, the Bank paid dividends at an annualized rate of 6.00%, totaling ~~$34,~~$35 million, including $34 in dividends on capital stock and a de minimis amount in dividends on mandatorily redeemable capital stock. In the third quarter of 2020, the Bank paid dividends at an annualized rate of 5.00%, totaling $37, including $36 in dividends on capital stock and $1 in dividends on mandatorily redeemable capital stock.

~~In the first nine months of 2021, the Bank paid dividends at an annualized rate of 5.65%, totaling $98, including $98~~$35 million in dividends on capital stock and a de minimis amount in dividends on mandatorily redeemable capital stock. In the first ~~nine months~~quarter of ~~2020,~~2021, the Bank paid dividends at an annualized rate of ~~5.68%~~5.00%, totaling ~~$131,~~$30 million, including ~~$126~~$30 million in dividends on capital stock and $5a de minimis amount in dividends on mandatorily redeemable capital stock.

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

On ~~October~~April 28, ~~2021,~~2022, the Bank’s board of directors declared a quarterly cash dividend on the capital stock outstanding during the ~~third~~first quarter of ~~2021~~2022 at an annualized rate of 6.00%, totaling ~~$36.~~$34 million. The Bank recorded the dividend on ~~October~~April 28, ~~2021. The Bank~~2022, and expects to pay the dividend on ~~November 10, 2021.~~May 11, 2022.

Excess Capital Stock – The Bank’s capital plan provides that the Bank may repurchase some or all of a shareholder’s excess capital stock, including any excess mandatorily redeemable capital stock, at the Bank’s discretion, subject to certain statutory and regulatory requirements. The Bank may also repurchase all of a member’s excess capital stock at a member’s request, at the Bank’s discretion, subject to certain statutory and regulatory requirements. A shareholder’s excess capital stock is defined as any capital stock holdings in excess of the shareholder’s minimum capital stock requirement, as established by the Bank’s capital plan. The Bank’s practice is

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Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

to repurchase the surplus capital stock of all members and the excess capital stock of all former members on a daily schedule. Surplus capital stock is defined as any stock holdings in excess of 115% of a member’s minimum stock requirement. The Bank calculates the amount of stock to be repurchased each business day based on the shareholder’s capital stock outstanding after all stock transactions are completed for the day, ensuring that each member and former member would continue to meet its minimum capital stock requirement after the repurchase. The Bank may change this practice at any time. The Bank repurchased ~~$373~~$835 million and ~~$314 in excess capital stock during the third quarter of 2021 and 2020, respectively, and $714 and $1,452~~$47 million in excess capital stock during the first ~~nine months~~quarter of 2022 and 2021, ~~and 2020,~~ respectively.

The Bank is required to redeem any mandatorily redeemable capital stock that is in excess of a former member’s minimum stock requirement on or after the expiration of the five-year redemption date. During the ~~third~~first quarter of ~~2021~~2022 and ~~2020,~~2021, the Bank redeemed a de minimis amount and $1 million, respectively, in mandatorily redeemable capital stock, for which the

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~~Federal Home Loan Bank of San Francisco~~

~~Notes to Financial Statements (continued)~~

five-year redemption period had expired, at its $100 par value per share. The stock was redeemed on the scheduled redemption dates or, for stock that was not excess stock on its scheduled redemption date because of outstanding activity with the Bank, on the first available repurchase date after the stock was no longer required to support outstanding activity with the Bank.

Concentration. ~~The following table presents the concentration in capital stock~~No institution held ~~by institutions whose capital stock ownership represented~~ 10% or more of the Bank’s outstanding capital stock, including mandatorily redeemable capital stock, as of ~~September 30, 2021,~~March 31, 2022, or December 31, ~~2020.~~2021.

September 30, 2021 December 31, 2020
Name of Institution Capital Stock
Outstanding Percentage
of Total
Capital Stock
Outstanding Capital Stock
Outstanding Percentage
of Total
Capital Stock
Outstanding
First Republic Bank $ 239 11 % $ 354 16 %
Others 2,018 89 1,932 84
Total $ 2,257 100 % $ 2,286 100 %

Note 10 — Segment Information

The Bank uses an analysis of financial results based on the financial components and adjusted net interest income of two operating segments, the advances-related business and the mortgage-related business, as well as other financial information, to review and assess financial performance and determine financial management strategies related to the operations of these 2 business segments. For purposes of segment reporting, adjusted net interest income includes income and expense associated with net settlements from economic hedges that are recorded in “Net gain/(loss) on derivatives” in other ~~income,~~income/(loss), excludes interest income and expense associated with changes in fair value from fair value hedges that are recorded in the same line as the earnings effect of the hedged item, and excludes interest expense that is recorded in “Mandatorily redeemable capital stock.” Affordable Housing Program (AHP) assessments are not included in the segment reporting analysis but are incorporated into the Bank’s overall assessment of financial performance.

For more information on these operating segments, see “Item 8. Financial Statements and Supplementary Data – Note 13 – Segment Information” in the Bank’s ~~2020~~2021 Form 10-K.

The following table presents the Bank’s adjusted net interest income by operating segment and reconciles total adjusted net interest income to income before the AHP assessment for the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 and ~~2020.~~2021.

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Notes to Financial Statements (continued)

Advances-
Related
Business(1)
Mortgage-
Related
Business(2)
Adjusted
Net
Interest
Income(1)
Amortization of Basis
Adjustments and (Gain)/Loss on Fair Value Hedges(1)(3)

Income/(Expense)
on Economic
Hedges(4)
Interest
Expense on
Mandatorily
Redeemable
Capital
Stock(5)
Net
Interest
Income After Provision for/(Reversal of) Credit Losses Other
Income/
(Loss) Other
Expense Income/(Loss)
Before AHP
Assessment
Three months ended:
September 30, 2021 $ 42 $ 62 $ 104 $ — $ (16) $ — $ 120 $ (3) $ 38 $ 79
September 30, 2020 63 53 116 — (34) 1 149 70 40 179
Nine months ended:
September 30, 2021 $ 143 $ 200 $ 343 $ (7) $ (61) $ — $ 411 $ (50) $ 116 $ 245
September 30, 2020 198 140 338 77 (52) 5 308 79 119 268


(In millions)	Advances- Related Business		Mortgage- Related Business(1)		Adjusted Net Interest Income		Amortization of Basis Adjustments and (Gain)/Loss on Fair Value Hedges(2)		Income/(Expense) on Economic Hedges(3)		Net Interest Income After Provision for/(Reversal of) Credit Losses		Other Income/ (Loss)		Other Expense		Income/(Loss) Before AHP Assessment
Three months ended:
March 31, 2022	$	31	$	68	$	99	$	(7)	$	—	$	106	$	18	$	38	$	86
March 31, 2021	52		78		130		(10)		(24)		164		(21)		39		104

(1) Amounts have been corrected to properly disclose the classification of amortization of basis adjustments and certain fees on prepaid advances within adjusted net interest income of the advances-related business segment and within amortization of basis adjustments. The Bank previously disclosed in “Note 10 - Segment Information” in the Bank’s third quarter 2020 Form 10-Q adjusted net interest income totaling $103 and $322 for the three and nine months ended September 30, 2020, respectively. These amounts should have been disclosed as $116 and $338, respectively. These revisions had no effect on total assets, net interest income, or net income of the Bank reported for all affected periods.

~~(2)~~ The mortgage-related business includes total accretion or amortization associated with ~~other-than-temporarily impaired~~ PLRMBS that had previous credit losses related to the prior methodology of evaluating credit losses, which are recognized in interest income, totaled ~~$19~~$14 million and $17 million for the three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020; and totaled $52 and $54 for the nine months ended September 30, 2021 and 2020,~~ respectively. The mortgage-related business includes a provision for/(reversal of) credit losses ~~of a de minimis amount~~totaled $(3) million and ~~$(2)~~$(6) million for the three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020, respectively, and $(8) and $30 for the nine months ended September 30, 2021 and 2020,~~ respectively.

~~(3)~~(2) Represents amortization of amounts deferred for adjusted net interest income purposes only and changes in fair value of the derivative hedging instrument and the hedged item attributable to the hedged risk for designated fair value hedges recorded in net interest income.

~~(4)~~(3) The Bank includes income and expense associated with net settlements from economic hedges in adjusted net interest income in its analysis of financial performance for its 2 operating segments. For financial reporting purposes, the Bank does not include these amounts in net interest income in the Statements of Income, but instead records them in other ~~income~~income/(loss) in “Net gain/(loss) on derivatives.”

~~(5) The Bank excludes interest expense on mandatorily redeemable capital stock from adjusted net interest income in its analysis of financial performance for its 2 operating segments.~~

The following table presents total assets by operating segment at ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020.~~2021.

Advances-
Related Business Mortgage-
Related Business Total
Assets
September 30, 2021 $ 39,798 $ 14,661 $ 54,459
December 31, 2020 50,876 17,758 68,634


(In millions)	Advances- Related Business		Mortgage- Related Business		Total Assets
March 31, 2022	$	43,298	$	12,831	$	56,129
December 31, 2021	40,064		14,057		54,121

Note 11 — Derivatives and Hedging Activities

General. The Bank may enter into interest rate swaps (including callable, putable, and basis swaps) and cap and floor agreements (collectively, interest rate exchange agreements or derivatives). Most of the Bank’s interest rate exchange agreements are executed in conjunction with the origination of advances or the issuance of consolidated obligations to create variable rate structures. The interest rate exchange agreements are generally executed at the same time the advances and consolidated obligations are transacted and generally have the same maturity dates as the related hedged instrument. The Bank transacts most of its derivatives with large banks and major broker-dealers.

For more information related to the Bank’s interest rate exchange agreement instruments and hedging activities, see “Item 8. Financial Statements and Supplementary Data – Note 14 – Derivatives and Hedging Activities” in the Bank’s ~~2020~~2021 Form 10-K. For more information related to the Bank’s accounting policies for derivatives, see “Item 8. Financial Statements and Supplementary Data – Note 1 – Summary of Significant Accounting Policies” in the Bank’s ~~2020~~2021 Form 10-K.

The following table summarizes the notional amount and fair value of derivative instruments, including the effect of netting adjustments and cash collateral as of September 30, 2021, and December 31, 2020. For purposes of this disclosure, the derivative values include the fair value of derivatives and related accrued interest.

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Notes to Financial Statements (continued)

September 30, 2021 December 31, 2020
Notional
Amount of
Derivatives Derivative
Assets Derivative
Liabilities Notional
Amount of
Derivatives Derivative
Assets Derivative
Liabilities
Derivatives designated as hedging instruments:
Interest rate swaps $ 36,138 $ 222 $ 83 $ 35,060 $ 88 $ 128
Total 36,138 222 83 35,060 88 128
Derivatives not designated as hedging instruments:
Interest rate swaps 38,877 1 16 42,804 4 16
Interest rate caps and floors 550 — — 780 — —
Mortgage delivery commitments — — — 1 — —
Total 39,427 1 16 43,585 4 16
Total derivatives before netting and collateral adjustments $ 75,565 223 99 $ 78,645 92 144
Netting adjustments and cash collateral(1)
(212) (90) (89) (132)
Total derivative assets and total derivative liabilities $ 11 $ 9 $ 3 $ 12
The following table summarizes the notional amount and fair value of derivative instruments, including the effect of netting adjustments and cash collateral as of March 31, 2022, and December 31, 2021. For purposes of this disclosure, the derivative values include the fair value of derivatives and related accrued interest.


	March 31, 2022						December 31, 2021
(In millions)	Notional Amount of Derivatives		Derivative Assets		Derivative Liabilities		Notional Amount of Derivatives		Derivative Assets		Derivative Liabilities
Derivatives designated as hedging instruments:
Interest rate swaps	$	32,672	$	459	$	584	$	31,526	$	223	$	148
Derivatives not designated as hedging instruments:
Interest rate swaps	29,622		6		75		31,540		2		21
Interest rate caps and floors	550		1		—		550		—		—

Total	30,172		7		75		32,090		2		21
Total derivatives before netting and collateral adjustments	$	62,844	466		659		$	63,616	225		169
Netting adjustments and cash collateral(1)			(447)		(651)				(217)		(164)
Total derivative assets and total derivative liabilities			$	19	$	8			$	8	$	5

(1) Amounts represent the application of the netting requirements that allow the Bank to settle positive and negative positions, and also cash collateral, including accrued interest, held or placed with the same clearing agents or counterparty. Cash collateral posted, including accrued interest, was ~~$36~~$402 million and ~~$72~~$77 million at ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020,~~2021, respectively. Cash collateral received, including accrued interest, was ~~$158~~$198 million and ~~$30~~$130 million at ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020,~~2021, respectively.

The following tables present, by type of hedged item, the gains and losses on fair value hedging relationships and the impact of those derivatives on the Bank’s Statements of Income for the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 and ~~2020.~~2021.


		Three Months Ended September 30, 2021							Three Months Ended March 31, 2022
		Interest Income/(Expense)
		Advances		AFS Securities		Consolidated Obligation Bonds			Interest Income/(Expense)
(In millions)								(In millions)	Advances		AFS Securities		Consolidated Obligation Bonds
Total interest income/(expense) presented in the Statements of Income	Total interest income/(expense) presented in the Statements of Income	$	47	$	57	$	(13)	Total interest income/(expense) presented in the Statements of Income	$	41	$	54	$	(12)
Gain/(loss) on fair value hedging relationships	Gain/(loss) on fair value hedging relationships							Gain/(loss) on fair value hedging relationships
Derivatives(1)	Derivatives(1)	$	(2)	$	42	$	(1)	Derivatives(1)	$	320	$	429	$	(436)
Hedged items	Hedged items	(41)		(56)		20		Hedged items	(340)		(439)		460
Net gain/(loss) on fair value hedging relationships	Net gain/(loss) on fair value hedging relationships	(43)		(14)		19		Net gain/(loss) on fair value hedging relationships	(20)		(10)		24
Net amortization of gain on discontinued fair value hedging relationships	Net amortization of gain on discontinued fair value hedging relationships	(7)		(27)		—		Net amortization of gain on discontinued fair value hedging relationships	(7)		(27)		—
Net gain/(loss) on derivatives and hedging activities recorded in net interest income	Net gain/(loss) on derivatives and hedging activities recorded in net interest income	$	(50)	$	(41)	$	19	Net gain/(loss) on derivatives and hedging activities recorded in net interest income	$	(27)	$	(37)	$	24

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Notes to Financial Statements (continued)

Three Months Ended September 30, 2020
Interest Income/(Expense)
Advances AFS Securities Consolidated Obligation Bonds
Total interest income/(expense) presented in the Statements of Income $ 88 $ 67 $ (47)
Gain/(loss) on fair value hedging relationships
Derivatives(1)
$ 22 $ 54 $ (1)
Hedged items (111) (89) 8
Net gain/(loss) on fair value hedging relationships (89) (35) 7
Net amortization of gain on discontinued fair value hedging relationships (1) (23) —
Net gain/(loss) on derivatives and hedging activities recorded in net interest income $ (90) $ (58) $ 7

Nine Months Ended September 30, 2021
Interest Income/(Expense)
Advances AFS Securities Consolidated Obligation Bonds
Total interest income/(expense) presented in the Statements of Income $ 167 $ 168 $ (49)
Gain/(loss) on fair value hedging relationships
Derivatives(1)
$ 97 $ 299 $ (17)
Hedged items (260) (349) 60
Net gain/(loss) on fair value hedging relationships (163) (50) 43
Net amortization of gain on discontinued fair value hedging relationships (15) (81) —
Net gain/(loss) on derivatives and hedging activities recorded in net interest income $ (178) $ (131) $ 43


				Three Months Ended March 31, 2021
		Nine Months Ended September 30, 2020
		Interest Income/(Expense)								Interest Income/(Expense)
		Advances			AFS Securities		Consolidated Obligation Bonds
(In millions)									(In millions)	Advances		AFS Securities		Consolidated Obligation Bonds
Total interest income/(expense) presented in the Statements of Income	Total interest income/(expense) presented in the Statements of Income	$	509		$	179	$	(405)	Total interest income/(expense) presented in the Statements of Income	$	57	$	61	$	(22)
Gain/(loss) on fair value hedging relationships	Gain/(loss) on fair value hedging relationships								Gain/(loss) on fair value hedging relationships
Derivatives(1)	Derivatives(1)	$	(715)		$	(995)	$	27	Derivatives(1)	$	134	$	476	$	(47)
Hedged items	Hedged items	488			828		(9)		Hedged items	(197)		(491)		54
Net gain/(loss) on fair value hedging relationships	Net gain/(loss) on fair value hedging relationships	(227)			(167)		18		Net gain/(loss) on fair value hedging relationships	(63)		(15)		7
Net amortization of gain on discontinued fair value hedging relationships	Net amortization of gain on discontinued fair value hedging relationships	(2)			(25)		—		Net amortization of gain on discontinued fair value hedging relationships	(3)		(27)		—
Net gain/(loss) on derivatives and hedging activities recorded in net interest income	Net gain/(loss) on derivatives and hedging activities recorded in net interest income	$	(229)		$	(192)	$	18	Net gain/(loss) on derivatives and hedging activities recorded in net interest income	$	(66)	$	(42)	$	7

(1)Includes net interest settlements.

The following table presents the cumulative basis adjustments on hedged items designated as fair value hedges and the related amortized cost of the hedged items as of ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020.~~2021.

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~~Federal Home Loan Bank of San Francisco~~

~~Notes to Financial Statements (continued)~~


		September 30, 2021						December 31, 2020							March 31, 2022						December 31, 2021
		Advances		AFS Securities		Consolidated Obligation Bonds		Advances		AFS Securities		Consolidated Obligation Bonds
(In millions)														(In millions)	Advances		AFS Securities		Consolidated Obligation Bonds		Advances		AFS Securities		Consolidated Obligation Bonds
Amortized cost of hedged asset/(liability)(1)	Amortized cost of hedged asset/(liability)(1)	$	19,850	$	8,966	$	(11,797)	$	23,605	$	11,557	$	(3,645)	Amortized cost of hedged asset/(liability)(1)	$	14,032	$	8,069	$	(13,488)	$	13,613	$	8,559	$	(13,557)
Fair value hedging basis adjustments:	Fair value hedging basis adjustments:													Fair value hedging basis adjustments:
Active hedging relationships included in amortized cost	Active hedging relationships included in amortized cost	$	95	$	(304)	$	47	$	477	$	43	$	(13)	Active hedging relationships included in amortized cost	$	(353)	$	(764)	$	599	$	(15)	$	(329)	$	139
Discontinued hedging relationships included in amortized cost	Discontinued hedging relationships included in amortized cost	125		928		—		32		1,016		—		Discontinued hedging relationships included in amortized cost	109		865		—		118		901		—
Total amount of fair value hedging basis adjustments	Total amount of fair value hedging basis adjustments	$	220	$	624	$	47	$	509	$	1,059	$	(13)	Total amount of fair value hedging basis adjustments	$	(244)	$	101	$	599	$	103	$	572	$	139

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

The following table presents the components of net gain/(loss) on derivatives as presented in the Statements of Income for the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 and ~~2020.~~2021.

Three Months Ended Nine Months Ended
September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020
Derivatives not designated as hedging instruments Gain/(Loss) Gain/(Loss) Gain/(Loss) Gain/(Loss)
Economic hedges:
Interest rate swaps $ 31 $ 39 $ 86 $ (107)
Net settlements (16) (34) (61) (52)
Mortgage delivery commitments — — — 3
Net gain/(loss) on derivatives(1)
$ 15 $ 5 $ 25 $ (156)

~~(1)~~The Bank made out-of-period adjustments in the third quarter of 2021 that resulted in an overstatement of net gain/(loss) on derivatives of $13 and an understatement of net gain/(loss) on derivatives of $1 for the three and nine months ended September 30, 2021, respectively. For more information on the adjustments, see Note 1 - Basis of Presentation.


(In millions)	Three Months Ended
		March 31, 2022		March 31, 2021
Derivatives not designated as hedging instruments		Gain/(Loss)		Gain/(Loss)



Economic hedges:
Interest rate swaps		$	8	$	42

Net interest settlements		—		(24)



Net gain/(loss) on derivatives		$	8	$	18

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

For cleared derivatives, the clearinghouse is the Bank’s counterparty. The requirement that the Bank post initial and variation margin through a clearing agent to the clearinghouse exposes the Bank to institutional credit risk if the clearing agent fails to meet its obligations. The use of a clearinghouse, or central counterparty, lowers overall credit

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Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

risk exposure because it employs standard valuation and initial and variation margin processes and is specifically designed to withstand remote but plausible counterparty default credit events. Variation margin is posted or collected for changes in the value of the portfolio, and initial margin is posted for changes in risk profile of the portfolio. The Bank has analyzed the enforceability of offsetting rights applicable to its cleared derivative transactions and determined that the exercise of those offsetting rights by a non-defaulting party under these transactions should be upheld under applicable bankruptcy law and Commodity Futures Trading Commission rules in the event of a clearinghouse or clearing agent insolvency and under applicable clearinghouse rules upon a non-insolvency-based event of default of the clearinghouse or clearing agent. Based on this analysis, the Bank presents a net derivative receivable or payable for all of its transactions through a particular clearing agent with a particular clearinghouse.

~~Table of Contents~~

~~Federal Home Loan Bank of San Francisco~~

~~Notes to Financial Statements (continued)~~

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

The Bank’s agreements for uncleared derivative transactions contain provisions that link the Bank’s credit rating from Moody’s Investors Service and S&P Global Ratings to various rights and obligations. Certain of these derivative agreements provide that, if the Bank’s long-term debt rating falls below a specified rating (ranging from A3/A- to Baa3/BBB-), the Bank’s counterparty would have the right, but not the obligation, to terminate all of its outstanding derivative transactions with the Bank; the Bank’s agreements with its clearing agents for cleared derivative transactions have similar provisions with respect to the debt rating of FHLBank System consolidated bonds. If this occurs, the Bank may choose to enter into replacement hedges, either by transferring the existing transactions to another counterparty or entering into new replacement transactions, based on prevailing market rates. The aggregate fair value of all uncleared derivative instruments with credit risk-related contingent features that were in a net derivative liability position (before cash collateral and related accrued interest) at ~~September 30, 2021,~~March 31, 2022, was ~~$17,~~$365 million, for which the Bank had posted cash collateral of ~~$16~~$376 million in the ordinary course of business.

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

The following tables present separately the fair value of derivative assets and derivative liabilities that have met the netting requirements, including the related collateral received from or pledged to counterparties as of ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020.~~2021.

September 30, 2021
Derivative Instruments Meeting Netting Requirements
Amount Recognized Gross Amount of Netting Adjustments and Cash Collateral Total Derivative Assets and Total Derivative Liabilities Noncash Collateral Not Offset That
Can Be Sold or Repledged Net Amount
Derivative Assets
Uncleared $ 222 $ (222) $ — $ — $ —
Cleared 1 10 11 (284) 295
Total $ 11 $ 295
Derivative Liabilities
Uncleared $ 89 $ (80) $ 9 $ — $ 9
Cleared 10 (10) — — —
Total $ 9 $ 9

December 31, 2020
Derivative Instruments Meeting Netting Requirements
Amount Recognized Gross Amount of Netting Adjustments and Cash Collateral Total Derivative Assets and Total Derivative Liabilities Noncash Collateral Not Offset That
Can Be Sold or Repledged Net Amount
Derivative Assets
Uncleared $ 85 $ (85) $ — $ — $ —
Cleared 7 (4) 3 (379) 382
Total $ 3 $ 382
Derivative Liabilities
Uncleared $ 124 $ (114) $ 10 $ — $ 10
Cleared 20 (18) 2 — 2
Total $ 12 $ 12


	March 31, 2022
	Derivative Instruments Meeting Netting Requirements
(In millions)	Amount Recognized		Gross Amount of Netting Adjustments and Cash Collateral		Total Derivative Assets and Total Derivative Liabilities		Noncash Collateral Not Offset That Can Be Sold or Repledged		Net Amount
Derivative Assets
Uncleared	$	463	$	(451)	$	12	$	—	$	12
Cleared	3		4		7		(251)		258
Total					$	19			$	270
Derivative Liabilities
Uncleared	$	633	$	(628)	$	5	$	—	$	5
Cleared	26		(23)		3		—		3
Total					$	8			$	8

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Notes to Financial Statements (continued)


	December 31, 2021
	Derivative Instruments Meeting Netting Requirements
(In millions)	Amount Recognized		Gross Amount of Netting Adjustments and Cash Collateral		Total Derivative Assets and Total Derivative Liabilities		Noncash Collateral Not Offset That Can Be Sold or Repledged		Net Amount
Derivative Assets
Uncleared	$	224	$	(224)	$	—	$	—	$	—
Cleared	1		7		8		(252)		260
Total					$	8			$	260
Derivative Liabilities
Uncleared	$	161	$	(156)	$	5	$	—	$	5
Cleared	8		(8)		—		—		—
Total					$	5			$	5

Note 12 — Fair Value

The following fair value amounts have been determined by the Bank using available market information and the Bank’s best judgment of appropriate valuation methods. These estimates are based on pertinent information available to the Bank at ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020.~~2021. Although the Bank uses its best judgment in estimating the fair value of these financial instruments, there are inherent limitations in any estimation technique or valuation methodology. For example, because an active secondary market does not exist for a portion of the Bank’s financial instruments, in certain cases fair values cannot be precisely quantified or verified and may change as economic and market factors and evaluation of those factors change. The Bank continues to refine its valuation methodologies as markets and products develop and the pricing for certain products becomes more or less transparent. While the Bank believes that its valuation methodologies are appropriate and consistent with those of other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a materially different estimate of fair value as of the reporting date. U.S. GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., an exit price). Therefore, the fair values are not necessarily indicative of the amounts that would be realized in current market transactions, although they do reflect the Bank’s judgment as to how a market participant would estimate the fair values. The fair value summary table does not represent an estimate of the overall market value of the Bank as a going concern, which would take into account future business opportunities and the net profitability of total assets and liabilities.

The following tables present the net carrying value or carrying value, as applicable, the estimated fair value, and the fair value hierarchy level of the Bank’s financial instruments at ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020.~~2021. The Bank records trading securities, AFS securities, derivative assets, derivative liabilities, certain advances, certain consolidated obligations, and certain other assets at fair value on a recurring basis, and on occasion certain mortgage loans held for portfolio and certain other assets at fair value on a nonrecurring basis. The Bank records all other financial assets and liabilities at amortized cost. Refer to the following tables for further details about the financial assets and liabilities held at fair value on either a recurring or non-recurring basis.

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Notes to Financial Statements (continued)


		September 30, 2021													March 31, 2022
		Carrying Value(1)		Estimated Fair Value		Level 1		Level 2		Level 3		Netting Adjustments and Cash Collateral(2)
(In millions)														(In millions)	Carrying Value(1)		Estimated Fair Value		Level 1		Level 2		Level 3		Netting Adjustments and Cash Collateral(2)
Assets	Assets													Assets
Cash and due from banks	Cash and due from banks	$	55	$	55	$	55	$	—	$	—	$	—	Cash and due from banks	$	55	$	55	$	55	$	—	$	—	$	—
Interest-bearing deposits	Interest-bearing deposits	1,125		1,125		1,125		—		—		—		Interest-bearing deposits	1,125		1,125		1,125		—		—		—
Securities purchased under agreements to resell	Securities purchased under agreements to resell	6,500		6,500		—		6,500		—		—		Securities purchased under agreements to resell	13,500		13,500		—		13,500		—		—
Federal funds sold	Federal funds sold	6,133		6,133		—		6,133		—		—		Federal funds sold	7,576		7,576		—		7,576		—		—
Trading securities	Trading securities	2,260		2,260		—		2,260		—		—		Trading securities	2		2		—		2		—		—
AFS securities	AFS securities	10,825		10,825		—		9,121		1,704		—		AFS securities	9,570		9,570		—		8,111		1,459		—
HTM securities	HTM securities	3,521		3,551		—		3,313		238		—		HTM securities	2,856		2,853		—		2,671		182		—
Advances	Advances	22,613		22,721		—		22,721		—		—		Advances	20,246		20,151		—		20,151		—		—
Mortgage loans held for portfolio, net of allowance for credit losses on mortgage loans	Mortgage loans held for portfolio, net of allowance for credit losses on mortgage loans	1,134		1,134		—		1,134		—		—		Mortgage loans held for portfolio, net of allowance for credit losses on mortgage loans	914		872		—		872		—		—

Accrued interest receivable	Accrued interest receivable	61		61		—		61		—		—		Accrued interest receivable	39		39		—		39		—		—
Derivative assets, net(2)	Derivative assets, net(2)	11		11		—		223		—		(212)		Derivative assets, net(2)	19		19		—		466		—		(447)
Other assets(3)	Other assets(3)	24		24		24		—		—		—		Other assets(3)	23		23		23		—		—		—
Liabilities	Liabilities													Liabilities
Deposits	Deposits	826		826		—		826		—		—		Deposits	1,024		1,024		—		1,024		—		—
Consolidated obligations:	Consolidated obligations:													Consolidated obligations:
Bonds	Bonds	22,025		21,986		—		21,986		—		—		Bonds	28,702		28,462		—		28,462		—		—
Discount notes	Discount notes	24,814		24,815		—		24,815		—		—		Discount notes	19,744		19,739		—		19,739		—		—
Total consolidated obligations	Total consolidated obligations	46,839		46,801		—		46,801		—		—		Total consolidated obligations	48,446		48,201		—		48,201		—		—
Mandatorily redeemable capital stock	Mandatorily redeemable capital stock	4		4		4		—		—		—		Mandatorily redeemable capital stock	7		7		7		—		—		—

Accrued interest payable	Accrued interest payable	25		25		—		25		—		—		Accrued interest payable	29		29		—		29		—		—
Derivative liabilities, net(2)	Derivative liabilities, net(2)	9		9		—		99		—		(90)		Derivative liabilities, net(2)	8		8		—		659		—		(651)
Other
Standby letters of credit		31		31		—		31		—		—

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Notes to Financial Statements (continued)


		December 31, 2020													December 31, 2021
		Carrying Value(1)		Estimated Fair Value		Level 1		Level 2		Level 3		Netting Adjustments and Cash Collateral(2)
(In millions)														(In millions)	Carrying Value(1)		Estimated Fair Value		Level 1		Level 2		Level 3		Netting Adjustments and Cash Collateral(2)
Assets	Assets													Assets
Cash and due from banks	Cash and due from banks	$	174	$	174	$	174	$	—	$	—	$	—	Cash and due from banks	$	55	$	55	$	55	$	—	$	—	$	—
Interest-bearing deposits	Interest-bearing deposits	1,078		1,078		1,078		—		—		—		Interest-bearing deposits	1,125		1,125		1,125		—		—		—
Securities purchased under agreements to resell	Securities purchased under agreements to resell	7,250		7,250		—		7,250		—		—		Securities purchased under agreements to resell	15,500		15,500		—		15,500		—		—
Federal funds sold	Federal funds sold	1,880		1,880		—		1,880		—		—		Federal funds sold	5,348		5,348		—		5,348		—		—
Trading securities	Trading securities	4,260		4,260		—		4,260		—		—		Trading securities	252		252		—		252		—		—
AFS securities	AFS securities	15,679		15,679		—		13,644		2,035		—		AFS securities	10,332		10,332		—		8,724		1,608		—
HTM securities	HTM securities	5,081		5,115		—		4,827		288		—		HTM securities	3,211		3,235		—		3,015		220		—
Advances	Advances	30,976		31,166		—		31,166		—		—		Advances	17,027		17,072		—		17,072		—		—
Mortgage loans held for portfolio, net of allowance for credit losses on mortgage loans	Mortgage loans held for portfolio, net of allowance for credit losses on mortgage loans	1,935		1,941		—		1,941		—		—		Mortgage loans held for portfolio, net of allowance for credit losses on mortgage loans	980		981		—		981		—		—
Accrued interest receivable	Accrued interest receivable	82		82		—		82		—		—		Accrued interest receivable	45		45		—		45		—		—
Derivative assets, net(2)	Derivative assets, net(2)	3		3		—		92		—		(89)		Derivative assets, net(2)	8		8		—		225		—		(217)
Other assets(3)	Other assets(3)	22		22		22		—		—		—		Other assets(3)	25		25		25		—		—		—
Liabilities	Liabilities													Liabilities
Deposits	Deposits	887		887		—		887		—		—		Deposits	769		769		—		769		—		—
Consolidated obligations:	Consolidated obligations:													Consolidated obligations:
Bonds	Bonds	44,408		44,457		—		44,457		—		—		Bonds	22,716		22,635		—		22,635		—		—
Discount notes	Discount notes	16,213		16,214		—		16,214		—		—		Discount notes	23,987		23,986		—		23,986		—		—
Total consolidated obligations	Total consolidated obligations	60,621		60,671		—		60,671		—		—		Total consolidated obligations	46,703		46,621		—		46,621		—		—
Mandatorily redeemable capital stock	Mandatorily redeemable capital stock	2		2		2		—		—		—		Mandatorily redeemable capital stock	3		3		3		—		—		—

Accrued interest payable	Accrued interest payable	24		24		—		24		—		—		Accrued interest payable	33		33		—		33		—		—
Derivative liabilities, net(2)	Derivative liabilities, net(2)	12		12		—		144		—		(132)		Derivative liabilities, net(2)	5		5		—		169		—		(164)
Other
Standby letters of credit		36		36		—		36		—		—

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

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

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

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

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

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

~~Table of Contents~~

~~Federal Home Loan Bank of San Francisco~~

~~Notes to Financial Statements (continued)~~

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

Table of Contents

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

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

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

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

The following assets and liabilities, including those for which the Bank has elected the fair value option, are carried at fair value on the Statements of Condition as of ~~September 30, 2021:~~March 31, 2022:

•Trading securities

•AFS securities

•Certain advances

•Derivative assets and liabilities

•Certain consolidated obligation bonds

•Certain other assets

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

Summary of Valuation Methodologies and Primary Inputs.For information related to the valuation methodologies and primary inputs used to develop the measurement of fair value for assets and liabilities that are measured at fair value on a recurring or nonrecurring basis in the Statements of Condition, see “Item 8. Financial Statements and Supplementary Data – Note 15 – Fair Value” in the Bank’s ~~2020~~2021 Form 10-K. There have been no significant changes in these valuation methodologies and primary inputs during the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2022.

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

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Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

Fair Value Measurements. The following tables present the fair value of assets and liabilities, which are recorded on a recurring or nonrecurring basis at ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020,~~2021, by level within the fair value hierarchy.


September 30, 2021
March 31, 2022														March 31, 2022
																Fair Value Measurement Using:						Netting Adjustments and Cash Collateral(1)
(In millions)														(In millions)		Level 1		Level 2		Level 3				Total
Recurring fair value measurements – Assets:														Recurring fair value measurements – Assets:
Trading securities:														Trading securities:
		Fair Value Measurement Using:						Netting Adjustments and Cash Collateral(1)
		Level 1		Level 2		Level 3				Total
Recurring fair value measurements – Assets:
Trading securities:
U.S. obligations – Treasury notes		$	—	$	2,258	$	—			$	—			$	2,258
MBS – Other U.S. obligations – Ginnie Mae														MBS – Other U.S. obligations – Ginnie Mae		$	—	$	2	$	—			$	—			$	2

MBS – Other U.S. obligations – Ginnie Mae		—		2		—		—				2
Total trading securities		—		2,260		—		—				2,260
AFS securities:	AFS securities:													AFS securities:
U.S. obligations – Treasury securities	U.S. obligations – Treasury securities	—		856		—		—				856		U.S. obligations – Treasury securities		—		545		—		—				545
MBS:	MBS:													MBS:
GSEs – multifamily	GSEs – multifamily	—		8,265		—		—				8,265		GSEs – multifamily		—		7,566		—		—				7,566
PLRMBS	PLRMBS	—		—		1,704		—				1,704		PLRMBS		—		—		1,459		—				1,459
Subtotal MBS	Subtotal MBS	—		8,265		1,704		—				9,969		Subtotal MBS		—		7,566		1,459		—				9,025
Total AFS securities	Total AFS securities	—		9,121		1,704		—				10,825		Total AFS securities		—		8,111		1,459		—				9,570
Advances(2)	Advances(2)	—		1,952		—		—				1,952		Advances(2)		—		1,589		—		—				1,589
Derivative assets, net: interest rate-related	Derivative assets, net: interest rate-related	—		223		—		(212)				11		Derivative assets, net: interest rate-related		—		466		—		(447)				19

Other assets	Other assets	24		—		—		—				24		Other assets		23		—		—		—				23
Total recurring fair value measurements – Assets	Total recurring fair value measurements – Assets	$	24	$	13,556	$	1,704	$	(212)			$	15,072	Total recurring fair value measurements – Assets		$	23	$	10,168	$	1,459	$	(447)			$	11,203
Recurring fair value measurements – Liabilities:	Recurring fair value measurements – Liabilities:													Recurring fair value measurements – Liabilities:
Consolidated obligation bonds(3)	Consolidated obligation bonds(3)	$	—	$	521	$	—	$	—			$	521	Consolidated obligation bonds(3)		$	—	$	1,924	$	—	$	—			$	1,924
Derivative liabilities, net: interest rate-related	Derivative liabilities, net: interest rate-related	—		99		—		(90)				9		Derivative liabilities, net: interest rate-related		—		659		—		(651)				8
Total recurring fair value measurements – Liabilities	Total recurring fair value measurements – Liabilities	$	—	$	620	$	—	$	(90)			$	530	Total recurring fair value measurements – Liabilities		$	—	$	2,583	$	—	$	(651)			$	1,932
Nonrecurring fair value measurements – Assets:(4)	Nonrecurring fair value measurements – Assets:(4)													Nonrecurring fair value measurements – Assets:(4)

Impaired mortgage loans held for portfolio	Impaired mortgage loans held for portfolio	$	—	$	—	$	23	$	—			$	23	Impaired mortgage loans held for portfolio		$	—	$	—	$	15	$	—			$	15
Total nonrecurring fair value measurements – Assets	Total nonrecurring fair value measurements – Assets	$	—	$	—	$	23	$	—			$	23	Total nonrecurring fair value measurements – Assets		$	—	$	—	$	15	$	—			$	15

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Notes to Financial Statements (continued)


December 31, 2020
December 31, 2021														December 31, 2021
		Fair Value Measurement Using:						Netting Adjustments and Cash Collateral(1)								Fair Value Measurement Using:												Netting Adjustments and Cash Collateral(1)
		Level 1		Level 2		Level 3				Total
(In millions)														(In millions)		Level 1				Level 2				Level 3						Netting Adjustments and Cash Collateral(1)			Total
Recurring fair value measurements – Assets:	Recurring fair value measurements – Assets:													Recurring fair value measurements – Assets:
Trading securities:	Trading securities:													Trading securities:
U.S. obligations – Treasury notes	U.S. obligations – Treasury notes	$	—	$	4,257	$	—			$	—			$	4,257		U.S. obligations – Treasury notes	$	—			$	250			$	—				$	—		$	250

MBS – Other U.S. obligations – Ginnie Mae	MBS – Other U.S. obligations – Ginnie Mae	—		3		—		—				3		MBS – Other U.S. obligations – Ginnie Mae		—				2				—				—			2
Total trading securities	Total trading securities	—		4,260		—		—				4,260		Total trading securities		—				252				—				—			252
AFS securities:	AFS securities:													AFS securities:
U.S. obligations – Treasury securities	U.S. obligations – Treasury securities	—		4,983		—		—				4,983		U.S. obligations – Treasury securities		—				504				—				—			504
MBS:	MBS:													MBS:
GSEs – multifamily	GSEs – multifamily	—		8,661		—		—				8,661		GSEs – multifamily		—				8,220				—				—			8,220
PLRMBS	PLRMBS	—		—		2,035		—				2,035		PLRMBS		—				—				1,608				—			1,608
Subtotal MBS	Subtotal MBS	—		8,661		2,035		—				10,696		Subtotal MBS		—				8,220				1,608				—			9,828
Total AFS securities	Total AFS securities	—		13,644		2,035		—				15,679		Total AFS securities		—				8,724				1,608				—			10,332
Advances(2)	Advances(2)	—		2,147		—		—				2,147		Advances(2)		—				1,772				—				—			1,772
Derivative assets, net: interest rate-related	Derivative assets, net: interest rate-related	—		92		—		(89)				3		Derivative assets, net: interest rate-related		—				225				—				(217)			8
Other assets	Other assets	22		—		—		—				22		Other assets		25				—				—				—			25
Total recurring fair value measurements – Assets	Total recurring fair value measurements – Assets	$	22	$	20,143	$	2,035	$	(89)			$	22,111	Total recurring fair value measurements – Assets		$	25			$	10,973			$	1,608			$	(217)		$	12,389
Recurring fair value measurements – Liabilities:	Recurring fair value measurements – Liabilities:													Recurring fair value measurements – Liabilities:
Consolidated obligation bonds(3)	Consolidated obligation bonds(3)	$	—	$	111	$	—	$	—			$	111	Consolidated obligation bonds(3)		$	—			$	627			$	—			$	—		$	627
Derivative liabilities, net: interest rate-related	Derivative liabilities, net: interest rate-related	—		144		—		(132)				12		Derivative liabilities, net: interest rate-related		—				169				—				(164)			5
Total recurring fair value measurements – Liabilities	Total recurring fair value measurements – Liabilities	$	—	$	255	$	—	$	(132)			$	123	Total recurring fair value measurements – Liabilities		$	—			$	796			$	—			$	(164)		$	632
Nonrecurring fair value measurements – Assets:(4)	Nonrecurring fair value measurements – Assets:(4)													Nonrecurring fair value measurements – Assets:(4)

Impaired mortgage loans held for portfolio	Impaired mortgage loans held for portfolio	$	—	$	—	$	18	$	—			$	18	Impaired mortgage loans held for portfolio		$	—			$	—			$	23			$	—		$	23
Total nonrecurring fair value measurements – Assets	Total nonrecurring fair value measurements – Assets	$	—	$	—	$	18	$	—			$	18	Total nonrecurring fair value measurements – Assets		$	—			$	—			$	23			$	—		$	23

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

(2)Represents advances recorded under the fair value option at ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020.~~2021.

(3)Represents consolidated obligation bonds recorded under the fair value option at ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020.~~2021.

(4)The fair value information presented is as of the date the fair value adjustment was recorded during the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, and ~~the year ended~~ December 31, ~~2020.~~2021.

The following ~~tables present~~table presents a reconciliation of the Bank’s AFS PLRMBS that are measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 and ~~2020.~~2021.

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Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

Three Months Ended
September 30, 2021 September 30, 2020
Balance, beginning of the period $ 1,827 $ 2,225
Total gain/(loss) realized and unrealized included in:
Interest income 18 17
(Provision for)/reversal of credit losses (1) 4
Unrealized gain/(loss) included in AOCI (6) 29
Settlements (134) (139)
Balance, end of the period $ 1,704 $ 2,136
Total amount of unrealized gain/(loss) for the period included in AOCI relating to assets held at the end of the period $ (5) $ 29
Total amount of gain/(loss) for the period included in earnings attributable to the change in unrealized gains/losses relating to assets held at the end of the period $ 16 $ 20


		Nine Months Ended					Three Months Ended
		September 30, 2021		September 30, 2020
(In millions)						(In millions)	March 31, 2022		March 31, 2021
Balance, beginning of the period	Balance, beginning of the period	$	2,035	$	2,597	Balance, beginning of the period	$	1,608	$	2,035
Total gain/(loss) realized and unrealized included in:	Total gain/(loss) realized and unrealized included in:					Total gain/(loss) realized and unrealized included in:
Interest income	Interest income	52		53		Interest income	14		17
(Provision for)/reversal of credit losses	(Provision for)/reversal of credit losses	5		(26)		(Provision for)/reversal of credit losses	3		5

Other income/(loss)						Other income/(loss)	28		—
Unrealized gain/(loss) included in AOCI	Unrealized gain/(loss) included in AOCI	23		(111)		Unrealized gain/(loss) included in AOCI	(33)		9
Settlements	Settlements	(411)		(378)		Settlements	(177)		(140)
Transfers of HTM securities to AFS securities	Transfers of HTM securities to AFS securities	—		1		Transfers of HTM securities to AFS securities	16		—
Balance, end of the period	Balance, end of the period	$	1,704	$	2,136	Balance, end of the period	$	1,459	$	1,926
Total amount of unrealized gain/(loss) for the period included in AOCI relating to assets held at the end of the period	Total amount of unrealized gain/(loss) for the period included in AOCI relating to assets held at the end of the period	$	24	$	(111)	Total amount of unrealized gain/(loss) for the period included in AOCI relating to assets held at the end of the period	$	(33)	$	8
Total amount of gain/(loss) for the period included in earnings attributable to the change in unrealized gains/losses relating to assets held at the end of the period	Total amount of gain/(loss) for the period included in earnings attributable to the change in unrealized gains/losses relating to assets held at the end of the period	$	55	$	27	Total amount of gain/(loss) for the period included in earnings attributable to the change in unrealized gains/losses relating to assets held at the end of the period	$	17	$	21

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

For more information on the Bank’s election of the fair value option, see “Item 8. Financial Statements and Supplementary Data – Note 15 – Fair Values” in the Bank’s ~~2020~~2021 Form 10-K.

The Bank has elected the fair value option for certain financial instruments to assist in mitigating potential earnings volatility that can arise from economic hedging relationships in which the carrying value of the hedged item is not adjusted for changes in fair value. The potential earnings volatility associated with recording fair value changes of only the hedging derivative is the Bank’s primary reason for electing the fair value option for financial assets and liabilities that do not qualify for hedge accounting or that have not previously met or may be at risk for not meeting the hedge effectiveness requirements.

The following ~~tables summarize~~table summarizes the activity related to financial assets and liabilities for which the Bank elected the fair value option during the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 and ~~2020:~~2021:



	March 31, 2022				March 31, 2021
(In millions)	Advances		Consolidated Obligation Bonds		Advances		Consolidated Obligation Bonds
Balance, beginning of the period	$	1,772	$	627	$	2,147	$	111
New transactions elected for fair value option	10		1,325		650		—
Maturities and terminations	(144)		—		(183)		(80)
Net gain/(loss) on advances and net (gain)/loss on consolidated obligation bonds from changes in fair value recognized in earnings	(49)		(28)		(26)		—
Change in accrued interest	—		—		(1)		—
Balance, end of the period	$	1,589	$	1,924	$	2,587	$	31

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Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

Three Months Ended
September 30, 2021 September 30, 2020
Advances Consolidated
Obligation Bonds Advances Consolidated
Obligation Bonds
Balance, beginning of the period $ 1,984 $ 235 $ 3,478 $ 128
New transactions elected for fair value option — 318 — —
Maturities and terminations (21) (30) (367) (15)
Net gain/(loss) on advances and net (gain)/loss on consolidated obligation bonds from changes in fair value recognized in earnings (11) (2) (8) (1)
Balance, end of the period $ 1,952 $ 521 $ 3,103 $ 112

Nine Months Ended
September 30, 2021 September 30, 2020
Advances Consolidated
Obligation Bonds Advances Consolidated
Obligation Bonds
Balance, beginning of the period $ 2,147 $ 111 $ 4,370 $ 337
New transactions elected for fair value option 670 538 7,070 —
Maturities and terminations (821) (125) (8,432) (225)
Net gain/(loss) on advances and net (gain)/loss on consolidated obligation bonds from changes in fair value recognized in earnings (43) (3) 97 1
Change in accrued interest (1) — (2) (1)
Balance, end of the period $ 1,952 $ 521 $ 3,103 $ 112

For instruments for which the fair value option has been elected, the related contractual interest income and contractual interest expense are recorded as part of net interest income on the Statements of Income. The remaining changes in fair value for instruments for which the fair value option has been elected are recorded as net gains/ (losses) on financial instruments held under the fair value option in the Statements of Income. For advances and consolidated obligations recorded under the fair value option, the Bank determined that none of the remaining changes in fair value were related to instrument-specific credit risk for the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 and ~~2020.~~2021. In determining that there has been no change in instrument-specific credit risk period to period, the Bank primarily considered the following factors:

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

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

The following table presents the difference between the aggregate remaining contractual principal balance outstanding and aggregate fair value of advances and consolidated obligation bonds for which the Bank elected the fair value option at ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020:~~2021:


		September 30, 2021						December 31, 2020							March 31, 2022						December 31, 2021
		Principal Balance		Fair Value		Fair Value Over/(Under) Principal Balance		Principal Balance		Fair Value		Fair Value Over/(Under) Principal Balance
(In millions)														(In millions)	Principal Balance		Fair Value		Fair Value Over/(Under) Principal Balance		Principal Balance		Fair Value		Fair Value Over/(Under) Principal Balance
Advances(1)	Advances(1)	$	1,866	$	1,952	$	86	$	2,017	$	2,147	$	130	Advances(1)	$	1,572	$	1,589	$	17	$	1,706	$	1,772	$	66
Consolidated obligation bonds	Consolidated obligation bonds	523		521		(2)		110		111		1		Consolidated obligation bonds	1,958		1,924		(34)		633		627		(6)

(1) At ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020,~~2021, none of these advances were 90 days or more past due or had been placed on nonaccrual status.

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~~Federal Home Loan Bank of San Francisco~~

~~Notes to Financial Statements (continued)~~

Note 13 — Commitments and Contingencies

As provided by the FHLBank Act or regulations governing the operations of the FHLBanks, all FHLBanks have joint and several liability for all FHLBank consolidated obligations, which are backed only by the financial resources of the FHLBanks. The joint and several liability regulation authorizes the Finance Agency to require any FHLBank to repay all or a portion of the principal or interest on consolidated obligations for which another FHLBank is the primary obligor. The regulations provide a general framework for addressing the possibility that an FHLBank may be unable to repay the consolidated obligations for which it is the primary obligor. The Bank has never been asked or required to repay the principal or interest on any consolidated obligation on behalf of another FHLBank, and as of ~~September 30, 2021,~~March 31, 2022, and through the filing date of this report, does not believe that it is probable that it will be asked to do so. The par value of the outstanding consolidated obligations of the FHLBanks was ~~$641,438~~$699.5 billion at ~~September 30, 2021,~~March 31, 2022, and ~~$746,722~~$652.9 billion at December 31, ~~2020.~~2021. The par value of the Bank’s participation in consolidated obligations was ~~$46,891~~$49.1 billion at ~~September 30, 2021,~~March 31, 2022, and ~~$60,606~~$46.9 billion at December 31, ~~2020.~~2021. For more information on the joint and several liability regulation, see “Item 8. Financial Statements and Supplementary Data – Note 16 – Commitments and Contingencies” in the Bank’s ~~2020~~2021 Form 10-K.

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Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

Off-balance sheet commitments as of ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020,~~2021, were as follows:


	September 30, 2021						December 31, 2020							March 31, 2022						December 31, 2021
(In millions)													(In millions)	Expire Within One Year		Expire After One Year		Total		Expire Within One Year		Expire After One Year		Total
Standby letters of credit outstanding													Standby letters of credit outstanding	$	10,650	$	5,227	$	15,877	$	11,842	$	4,848	$	16,690
Commitments to fund additional advances(1)													Commitments to fund additional advances(1)	30		—		30		—		—		—
Commitments to issue consolidated obligation discount notes, par													Commitments to issue consolidated obligation discount notes, par	1,988		—		1,988		—		—		—
	Expire Within One Year		Expire After One Year		Total		Expire Within One Year		Expire After One Year		Total
Standby letters of credit outstanding	$	10,805	$	4,718	$	15,523	$	14,838	$	4,551	$	19,389

Commitments to issue consolidated obligation discount notes, par	2,136		—		2,136		—		—		—
Commitments to issue consolidated obligation bonds, par	235		—		235		—		—		—
Commitments to purchase mortgage loans	—		—		—		1		—		1

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

Standby letters of credit are generally issued for a fee on behalf of members to support their obligations to third parties. If the Bank is required to make a payment for a beneficiary’s drawing under a letter of credit, the amount is immediately due and payable by the member to the Bank and is charged to the member’s demand deposit account with the Bank. At ~~September 30, 2021,~~March 31, 2022, the original terms of these standby letters of credit range from 1 day to 15 years, including a final expiration in ~~2036.~~2037. The Bank monitors the creditworthiness of members that have standby letters of credit. The value of the Bank’s obligations related to standby letters of credit is recorded in other liabilities and amounted to ~~$31~~$35 million and ~~$36~~$34 million at ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020,~~2021, respectively. Standby letters of credit are fully collateralized at the time of issuance. Based on the Bank’s credit analyses of members’ financial condition and collateral requirements, the Bank deemed it unnecessary to record any additional liability for credit losses on the letters of credit outstanding or other off-balance sheet commitments as of ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020.~~

~~There were 0 commitments to fund advances at September 30, 2021, and December 31, 2020. Advances funded under advance commitments are fully collateralized at the time of funding.~~

The Bank had previously entered into commitments that unconditionally obligated it to purchase mortgage loans from its members. Delivery commitments are recorded at fair value as derivative assets or derivative liabilities in the Statements of Condition.2021.

The Bank has pledged securities as collateral related to its cleared and uncleared derivatives. See Note 11 – Derivatives and Hedging Activities for additional information about the Bank’s pledged collateral and other credit risk-related contingent features. As of ~~September 30, 2021,~~March 31, 2022, the Bank had pledged total collateral of ~~$320,~~$653 million, including securities with a carrying value of ~~$284,~~$251 million, all of which may be repledged, and cash collateral, including accrued interest, of ~~$36~~$402 million to counterparties and the clearinghouse that had market risk exposure to the Bank related to

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~~Federal Home Loan Bank of San Francisco~~

~~Notes to Financial Statements (continued)~~

derivatives. As of December 31, ~~2020,~~2021, the Bank had pledged total collateral of ~~$451,~~$329 million, including securities with a carrying value of ~~$379,~~$252 million, all of which may be repledged, and cash collateral, including accrued interest, of ~~$72~~$77 million to counterparties and the clearinghouse that had market risk exposure to the Bank related to derivatives.

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

Note 14 — Transactions with Certain Members, Certain Nonmembers, and Other FHLBanks

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

September 30, 2021 December 31, 2020
Assets:
Advances $ 3,078 $ 2,650
Accrued interest receivable 2 3
Liabilities:
Deposits $ 122 $ 27
Capital:
Capital Stock $ 111 $ 103

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Three Months Ended Nine Months Ended
September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020
Interest Income:
Advances $ 12 $ 19 $ 38 $ 59
Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)


(In millions)	March 31, 2022		December 31, 2021
Assets:
Advances	$	3,131	$	3,107

Accrued interest receivable	2		2
Liabilities:
Deposits	$	24	$	34
Capital:
Capital Stock	$	116	$	117


	Three Months Ended

(In millions)	March 31, 2022		March 31, 2021


Interest Income – Advances	$	13	$	13

All transactions with members, nonmembers, and their affiliates are entered into in the ordinary course of business. As of ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020,~~2021, no shareholder owned more than 10% of the total voting interests in the Bank because of the statutory limit on members' voting rights. For more information on transactions with members and nonmembers, see “Item 8. Financial Statements and Supplementary Data – Note 17 – Transactions with Certain Members, Certain Nonmembers, and Other FHLBanks” in the Bank’s ~~2020~~2021 Form 10-K.

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

Deposits with other FHLBanks. The Bank may, from time to time, maintain deposits with other FHLBanks. Deposits with other FHLBanks totaled a de minimis ~~amount and $1~~amounts at ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020, respectively,~~2021, and were recorded as “Interest-bearing deposits” in the Statements of Condition.

Overnight Funds. The Bank may borrow or lend unsecured overnight funds from or to other FHLBanks. All such transactions are at current market rates. Interest income and interest expense related to these transactions with other FHLBanks are included in interest income and interest expense in the Statements of Income. Balances outstanding at period end with other FHLBanks, if any, are identified in the Bank’s financial statements. During the ~~nine~~three months ended ~~September 30,~~March 31, 2022, the Bank extended overnight loans to other FHLBanks for $700 million. During the three months ended March 31, 2021, the Bank extended 0 overnight loans to other FHLBanks. During the ~~nine~~three months ended ~~September 30, 2020, the Bank extended overnight loans to other FHLBanks for $925. During the nine months ended September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ the Bank borrowed ~~$120~~$20 million and ~~$885,~~$10 million, respectively, from other FHLBanks. The impact to net interest income related to these transactions was de minimis for all periods in this report.

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~~Federal Home Loan Bank of San Francisco~~

~~Notes to Financial Statements (continued)~~

~~MPF Mortgage Loans~~. The Bank pays a membership fee to the FHLBank of Chicago for its participation in the MPF Program and a transaction services fee that is assessed monthly based on the amount of mortgage loans in which the Bank invested and which remain outstanding on its Statements of Condition. For the three months ended September 30, 2021 and 2020, the Bank recorded a de minimis amount and $1, respectively, in MPF membership fee expense and transaction services fee expense to the FHLBank of Chicago, which were recorded in the Statements of Income as other expense. For the nine months ended September 30, 2021 and 2020, the Bank recorded $1 and $2, respectively, in MPF membership fee expense and transaction services fee expense to the FHLBank of Chicago, which were recorded in the Statements of Income as other expense.

~~Transactions with the Office of Finance. The Bank’s proportionate share of the cost of operating the Office of Finance is identified in the Statements of Income.~~

~~Note 15 — Subsequent Events~~

~~There were no material events identified, subsequent to September 30, 2021, until the time of the Form 10-Q filing with the Securities and Exchange Commission.~~

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

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

•changes in economic and market conditions, including conditions in the mortgage, housing, and capital markets;

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

•the timing and volume of market activity;

•natural disasters, pandemics or other widespread health emergencies (such as the COVID-19 pandemic), terrorist attacks, civil unrest, geopolitical instability or conflicts (including the recent outbreak of hostilities in Eastern Europe), trade disruptions, economic or other sanctions, or other unanticipated or catastrophic events;

•changes to, and replacement of, the London Interbank Offered Rate (LIBOR) benchmark interest rate, and the use and acceptance of the Secured Overnight Financing Rate (SOFR) and any alternative reference rate;

•political events, including legislative, regulatory, judicial, or other developments that affect the Bank, its members, counterparties, or investors in the consolidated obligations of the Federal Home Loan Banks (FHLBanks), such as the impact of any government-sponsored enterprises (GSE) legislative reforms, changes in the Federal Home Loan Bank Act of 1932, as amended (FHLBank Act), changes in applicable sections of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992, or changes in other statutes or regulations applicable to the FHLBanks;

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

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

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

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

•changes in Bank members’ demand for Bank advances;

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

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

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

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

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

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

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

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

•changes in key Bank personnel;

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

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

~~Table of Contents~~

Readers of this report should not rely solely on the forward-looking statements and should consider all risks and uncertainties addressed throughout this report, as well as those discussed under “Item 1A. Risk Factors” in the Bank’s Annual Report on Form 10-K for the year ended December 31, ~~2020 (2020~~2021 (2021 Form 10-K).

Quarterly Overview

Net income for the ~~third~~first quarter of ~~2021~~2022 was ~~$71~~$78 million, compared with net income of ~~$161~~$94 million for the ~~third~~first quarter of ~~2020.~~2021. The ~~$90~~$16 million decrease in net income relative to the prior-year period ~~reflected a decrease in other income/(loss) of $73 million and~~was primarily attributable to a decrease in net interest income of ~~$27 million. These decreases to net income were partially offset by a $10~~$55 million, ~~reduction in the Affordable Housing Program (AHP) assessment,~~ which ~~reflected the decline in pre-assessment income.~~

The $73 million decrease in other income/(loss) was primarily a result of the Bank's receipt of disgorgement proceeds in connection with a Securities and Exchange Commission enforcement action, in the amount of $85 million, in the third quarter of 2020. This decrease in other income/(loss) was partially offset by an increase of $39 million in ~~net fair value gains associated with non-hedge qualifying derivatives and a decrease in net fair value losses associated with financial instruments carried at fair value.~~ other income/(loss).

The ~~$27~~$55 million decrease in net interest income for the first quarter of 2022 primarily reflected a ~~decrease~~net decline in average interest-earning assets ~~and~~of $8.6 billion, mainly a reduction in investment securities of $10.3 billion. Lower yields on interest-earning assets also decreased interest income by $11 million compared to the prior-year period, despite recent increases in interest rates on new or renewed advances. Additional drivers of the decrease to net interest income were a decrease of $7 million in net gains on designated fair value hedges and a $6 million decrease in net prepayment fee income on advances and MBS, from $8 million for the first quarter of ~~$11 million. These decreases~~2021 to $2 million for the first quarter of 2022.

The $39 million increase in other income/(loss) for the first quarter of 2022 primarily resulted from recording $28 million in settlement proceeds as income from the final resolution on litigation of one of the Bank's private-label residential mortgage-backed securities (PLRMBS) held within a trust that has been the subject of litigation by the trustee (the Bank was not a party) since 2012. In addition, net ~~interest income were partially offset~~fair value losses associated with derivatives and financial instruments carried at fair value decreased by ~~an improvement~~$13 million (driven by a decrease in ~~interest spreads~~net fair value losses of $18 million on ~~interest-earning assets.~~trading securities that matured since the first quarter of 2021).

At ~~September 30, 2021,~~March 31, 2022, total assets were ~~$54.5~~$56.1 billion, ~~a decrease~~an increase of ~~$14.1~~$2.0 billion from ~~$68.6~~$54.1 billion at December 31, ~~2020.~~2021. Advances ~~decreased $8.4~~increased by $3.2 billion, to ~~$22.6~~$20.2 billion at ~~September 30, 2021,~~March 31, 2022, from ~~$31.0~~$17.0 billion at December 31, ~~2020,~~2021, as ~~many members maintained significant deposit balances and~~demand for advances remained muted compared to prior years in response to elevated market liquidity ~~resulting from the ongoing economic and financial market impacts of the COVID-19 pandemic, including government intervention. In addition,~~levels. The increase in total assets was partially offset by a decrease in total investments ~~decreased $4.8~~of $1.2 billion, to ~~$30.4~~$34.6 billion at ~~September 30, 2021,~~March 31, 2022, from ~~$35.2~~$35.8 billion at December 31, ~~2020.~~2021. The ~~majority of the~~ decrease in investments primarily reflected a ~~reduction~~decline in ~~U.S. Treasury securities of $6.1 billion and~~ securities purchased under agreements to resell of ~~$0.8~~$2.0 billion and a decline in MBS of $1.2 billion, which was partially offset by an increase in Federal funds sold of ~~$4.3 billion, as the Bank continued to manage its liquidity. MBS also contributed to the decline in investments by $2.3~~$2.2 billion. Furthermore, mortgage loans held for portfolio decreased $0.8 billion, to $1.1 billion at September 30, 2021, from $1.9 billion at December 31, 2020, as the Bank stopped purchasing new loans for its own portfolio on March 31, 2021.

Accumulated other comprehensive ~~income/(loss)~~income (AOCI) ~~increased~~decreased by $89149 million during ~~2021,~~the first quarter of 2022, to ~~$319~~$182 million at ~~September 30, 2021,~~March 31, 2022, from ~~$230~~$331 million at December 31, ~~2020. The increase in AOCI~~ ~~during~~2021, primarily ~~reflected higher~~reflecting lower fair values of MBS classified as available-for-sale (AFS). primarily due to the increase in market interest rates during the first quarter.

On ~~October~~April 28, ~~2021,~~2022, the Bank’s board of directors declared a quarterly cash dividend on the average capital stock outstanding during the ~~third~~first quarter of ~~2021~~2022 at an annualized rate of 6.00% that will total ~~$36~~$34 million. The quarterly dividend rate is consistent with the Bank's dividend philosophy of endeavoring to pay a quarterly dividend at a rate between 5% and 7% annualized. The Bank recorded the dividend on ~~October~~April 28, ~~2021,~~2022, and the Bank expects to pay the dividend on ~~November 10, 2021.~~May 11, 2022.

As of ~~September 30, 2021,~~March 31, 2022, the Bank complied with all of its regulatory capital requirements. The Bank’s total regulatory capital ratio was ~~11.1%~~10.7%, exceeding the 4.0% requirement. The Bank had ~~$6.1~~$6.0 billion in permanent capital, exceeding its risk-based capital requirement of ~~$1.1 billion.~~$822 million. Total retained earnings as of March 31, 2022, of $3.9 billion were consistent with the level at yearend 2021.

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The Bank will continue to monitor ~~the~~its financial condition, ~~of its balance sheet,~~ its financial performance, its capital position, overall financial market conditions, and other relevant information as the basis for determining the payment of dividends in future quarters.

As previously disclosed, legislation has been introduced in the U.S. Senate and House of Representatives that, if enacted in its proposed form, would require that the FHLBanks set aside higher percentages of their earnings for their affordable housing and community investment programs than is currently required under the current law. As part of the Congressional budget reconciliation process, a legislative proposal is under consideration to set aside fifteen percent of an FHLBank’s net income for its affordable housing program. The FHLBanks have had

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~~discussions with members of Congress and their staffs about the potential impact of any proposal in this regard and continue to closely monitor any such proposals and developments.~~

COVID-19 Pandemic Impact. In 2020, the COVID-19 pandemic impacted the financial markets and created substantial uncertainty about future economic activity and the Bank’s operating environment. In response, the federal government and the Federal Reserve used their full range of tools to support the economy. The emergency measures taken by the federal government and the Federal Reserve helped facilitate liquidity and support stability in fixed income markets but contributed to the significant reduction in demand for advances from members. The Bank continued to meet its funding needs through the ~~third~~first quarter of ~~2021.~~2022.

The Bank transitioned to remote work in mid-March 2020 and continued to operate effectively with employees working remotely ~~through~~throughout 2021 and the ~~third~~first quarter of ~~2021.~~2022. The Bank has assessed the remote work environment and has taken measures to mitigate cyber-security risks and operational challenges that could affect the Bank’s ability to conduct business or increase the risk of operational incidents and errors. Possible adverse impacts as a result of the Bank’s workforce working remotely may include, but are not limited to, increased risk of operational incidents, cyber-security threats, and operational challenges that could affect the Bank’s ability to conduct business or increase the risk of operational errors. The Bank transitioned to a hybrid work schedule in mid-April 2022 under which employees may work certain days during the week in the office and certain days remotely.

To reduce the risk of the operational impact of the pandemic, the Bank maintains a Board-approved Business Continuity Management Program, along with a Crisis Management Plan and Business Continuity Plans (BCPs), that are updated and tested annually. The Bank’s BCPs provide procedures to ensure personnel safety and welfare, to safeguard the Bank’s assets (including physical property and information), and to permit the continued operations of the Bank in the event of a short-term disruption or long-term catastrophic event. The Bank’s BCPs contain operating procedures for all critical processes and identify resources and staff necessary to continue operations based on business-defined recovery time objectives and communication requirements for internal and external stakeholders.

The full duration and impact of the pandemic and subsequent governmental and public actions remain uncertain. Demand for advances may continue to remain low or decrease because of the impact of government stimulus on member liquidity, Federal Reserve Board policies, ~~(including lower interest rates set by the Federal Open Market Committee (FOMC)),~~ and reduced member asset activity. The Bank believes that lower demand from the Bank’s members for advances will likely continue into the foreseeable future.

Management will continue to monitor the COVID-19 pandemic’s impact on the Bank’s financial condition and operations, including the Bank’s liquidity, advance levels, funding spreads, and workforce effectiveness.

The Russian Federation’s Invasion of Ukraine. In late February 2022, the Russian Federation invaded Ukraine, which led to increased price volatility across financial markets, including the U.S. Treasury market. Although volatility has also increased in the market for the FHLBanks’ consolidated obligations, the cost of newly-issued short-term consolidated obligations has generally tracked the U.S. Treasury market and demand for consolidated obligations remains strong. Financial market participants continue to evaluate the effects of this conflict and the global response on the U.S. economy and financial markets, which remain uncertain.

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Financial Highlights

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

Financial Highlights

(Unaudited)


(Dollars in millions)	(Dollars in millions)	September 30, 2021			June 30, 2021			March 31, 2021			December 31, 2020			September 30, 2020			(Dollars in millions)	March 31, 2022			December 31, 2021			September 30, 2021			June 30, 2021			March 31, 2021
Selected Balance Sheet Items at Quarter End	Selected Balance Sheet Items at Quarter End																Selected Balance Sheet Items at Quarter End
Total Assets	Total Assets	$	54,459		$	54,244		$	57,908		$	68,634		$	75,870		Total Assets	$	56,129		$	54,121		$	54,459		$	54,244		$	57,908
Advances	Advances	22,613			24,194			28,140			30,976			37,693			Advances	20,246			17,027			22,613			24,194			28,140
Mortgage Loans Held for Portfolio, Net	Mortgage Loans Held for Portfolio, Net	1,134			1,301			1,581			1,935			2,404			Mortgage Loans Held for Portfolio, Net	914			980			1,134			1,301			1,581
Investments(1)	Investments(1)	30,364			28,403			27,526			35,228			35,221			Investments(1)	34,629			35,768			30,364			28,403			27,526
Consolidated Obligations:(2)	Consolidated Obligations:(2)																Consolidated Obligations:(2)
Bonds	Bonds	22,025			28,839			33,011			44,408			54,921			Bonds	28,702			22,716			22,025			28,839			33,011
Discount Notes	Discount Notes	24,814			17,598			17,109			16,213			13,300			Discount Notes	19,744			23,987			24,814			17,598			17,109
Mandatorily Redeemable Capital Stock		4			3			1			2			2

Capital Stock —Class B —Putable	Capital Stock —Class B —Putable	2,253			2,269			2,238			2,284			2,465			Capital Stock —Class B —Putable	2,097			2,061			2,253			2,269			2,238
Unrestricted Retained Earnings	Unrestricted Retained Earnings	3,059			3,004			2,983			2,919			2,858			Unrestricted Retained Earnings	3,183			3,124			3,059			3,004			2,983
Restricted Retained Earnings	Restricted Retained Earnings	743			761			761			761			761			Restricted Retained Earnings	692			708			743			761			761
Accumulated Other Comprehensive Income/(Loss) (AOCI)	Accumulated Other Comprehensive Income/(Loss) (AOCI)	319			394			367			230			136			Accumulated Other Comprehensive Income/(Loss) (AOCI)	182			331			319			394			367
Total Capital	Total Capital	6,374			6,428			6,349			6,194			6,220			Total Capital	6,154			6,224			6,374			6,428			6,349
Selected Operating Results for the Quarter	Selected Operating Results for the Quarter																Selected Operating Results for the Quarter
Net Interest Income	Net Interest Income	$	120		$	125		$	158		$	167		$	147		Net Interest Income	$	103		$	119		$	120		$	125		$	158
Provision for/(Reversal of) Credit Losses	Provision for/(Reversal of) Credit Losses	—			(2)			(6)			(4)			(2)			Provision for/(Reversal of) Credit Losses	(3)			2			—			(2)			(6)
Other Income/(Loss)	Other Income/(Loss)	(3)			(26)			(21)			(20)			70			Other Income/(Loss)	18			—			(3)			(26)			(21)
Other Expense	Other Expense	38			39			39			46			40			Other Expense	38			43			38			39			39
Affordable Housing Program Assessment	Affordable Housing Program Assessment	8			7			10			11			18			Affordable Housing Program Assessment	8			7			8			7			10
Net Income/(Loss)	Net Income/(Loss)	$	71		$	55		$	94		$	94		$	161		Net Income/(Loss)	$	78		$	67		$	71		$	55		$	94
Selected Other Data for the Quarter	Selected Other Data for the Quarter																Selected Other Data for the Quarter
Net Interest Margin(3)	Net Interest Margin(3)	0.85		%	0.88		%	1.04		%	0.94		%	0.69		%	Net Interest Margin(3)	0.78		%	0.87		%	0.85		%	0.88		%	1.04		%
Operating Expenses as a Percent of Average Assets		0.25			0.25			0.23			0.23			0.17

Return on Average Assets	Return on Average Assets	0.49			0.38			0.61			0.52			0.76			Return on Average Assets	0.59			0.48			0.49			0.38			0.61
Return on Average Equity	Return on Average Equity	4.34			3.45			6.04			6.04			10.59			Return on Average Equity	4.91			4.08			4.34			3.45			6.04
Annualized Dividend Rate	Annualized Dividend Rate	6.00			6.00			5.00			5.00			5.00			Annualized Dividend Rate	6.00			6.00			6.00			6.00			5.00
Dividend Payout Ratio(4)	Dividend Payout Ratio(4)	48.99			60.67			32.44			34.61			22.81			Dividend Payout Ratio(4)	44.63			53.84			48.99			60.67			32.44
Average Equity to Average Assets Ratio	Average Equity to Average Assets Ratio	11.32			11.07			10.01			8.65			7.16			Average Equity to Average Assets Ratio	11.91			11.70			11.32			11.07			10.01
Selected Other Data at Quarter End	Selected Other Data at Quarter End																Selected Other Data at Quarter End
Regulatory Capital Ratio(5)	Regulatory Capital Ratio(5)	11.12			11.13			10.33			8.69			8.02			Regulatory Capital Ratio(5)	10.65			10.89			11.12			11.13			10.33
Duration Gap (in months)	Duration Gap (in months)	—			1			1			1			2			Duration Gap (in months)	1.1			0.4			0.3			0.5			1.1

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

(2)As provided by the FHLBank Act or regulations governing the operations of the FHLBanks, all of the FHLBanks have joint and several liability for FHLBank consolidated obligations, which are backed only by the financial resources of the FHLBanks. The joint and several liability regulation authorizes the Finance Agency to require any FHLBank to repay all or a portion of the principal or interest on consolidated obligations for which another FHLBank is the primary obligor. The Bank has never been asked or required to repay the principal or interest on any consolidated obligation on behalf of another FHLBank, and as of ~~September 30, 2021,~~March 31, 2022, and through the filing date of this report, does not believe that it is probable that it will be asked to do so. The par value of the outstanding consolidated obligations of all FHLBanks at the dates indicated was as follows:

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	Par Value (In millions)
March 31, 2022	$	699,530
December 31, 2021	652,862
September 30, 2021	$	641,438
June 30, 2021	666,747
March 31, 2021	696,385
~~December 31, 2020~~	~~746,722~~
~~September 30, 2020~~	~~819,863~~

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

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

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

Results of Operations

Net Interest Income. The primary source of the Bank’s earnings is net interest income, which is the interest earned on advances, mortgage loans, and investments, including net accretion of related income from improvement in expected cash flows on certain PLRMBS ~~that were other-than-temporarily-impaired~~with previous credit losses related to the prior ~~to January 1, 2020,~~methodology of evaluating credit losses, less interest paid on consolidated obligations, deposits, mandatorily redeemable capital stock, and other borrowings. The Average Balance Sheets ~~tables~~table that ~~follow present~~follows presents the average balances of interest-earning asset categories and the sources that funded those interest-earning assets (liabilities and capital) for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ together with the related interest income and expense. ~~They~~It also ~~present~~presents the average rates on total interest-earning assets and the average costs of total funding sources.

5144

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~~Third~~First Quarter of ~~2021~~2022 Compared to ~~Third~~First Quarter of ~~2020~~2021


Average Balance Sheets	Average Balance Sheets															Average Balance Sheets

		Three Months Ended															Three Months Ended
		September 30, 2021							September 30, 2020								March 31, 2022							March 31, 2021
(Dollars in millions)	(Dollars in millions)	Average Balance			Interest Income/ Expense		Average Rate		Average Balance			Interest Income/ Expense		Average Rate		(Dollars in millions)	Average Balance			Interest Income/ Expense		Average Rate		Average Balance			Interest Income/ Expense		Average Rate
Assets	Assets															Assets
Interest-earning assets:	Interest-earning assets:															Interest-earning assets:
Interest-bearing deposits	Interest-bearing deposits	$	1,148		$	—	0.14	%	$	2,956		$	1	0.16	%	Interest-bearing deposits	$	1,322		$	—	0.16	%	$	1,253		$	—	0.14	%
Securities purchased under agreements to resell	Securities purchased under agreements to resell	1,260			1		0.08		4,740			1		0.09		Securities purchased under agreements to resell	2,125			1		0.11		1,732			—		0.08
Federal funds sold	Federal funds sold	7,446			2		0.09		3,380			1		0.09		Federal funds sold	9,256			3		0.12		4,265			1		0.08
Trading securities:	Trading securities:															Trading securities:
Mortgage-backed securities (MBS)		2			—		2.04		3			—		2.99
MBS																MBS	2			—		1.78		2			—		2.52
Other investments	Other investments	2,522			13		2.06		4,291			23		2.08		Other investments	47			—		2.04		4,087			21		2.09
Available-for-sale (AFS) securities:(1)
AFS securities:(1)																AFS securities:(1)
MBS(2)(3)	MBS(2)(3)	9,819			56		2.30		10,909			63		2.31		MBS(2)(3)	9,228			54		2.35		10,222			59		2.33
Other investments(3)	Other investments(3)	904			1		0.27		4,966			4		0.31		Other investments(3)	452			—		0.34		4,064			2		0.19
Held-to-maturity (HTM) securities:(1)
HTM securities:(1)																HTM securities:(1)
MBS	MBS	3,750			10		1.08		5,915			19		1.28		MBS	2,997			7		1.03		4,621			13		1.14

Mortgage loans held for portfolio(4)	Mortgage loans held for portfolio(4)	1,221			7		2.34		2,670			7		0.98		Mortgage loans held for portfolio(4)	943			17		7.27		1,746			23		5.39
Advances~~(3)~~(5)	Advances~~(3)~~(5)	28,486			47		0.66		44,932			88		0.78		Advances~~(3)~~(5)	26,859			39		0.59		29,831			65		0.88

Loans to other FHLBanks																Loans to other FHLBanks	8			—		0.15		—			—		—
Total interest-earning assets	Total interest-earning assets	56,558			137		0.96		84,762			207		0.97		Total interest-earning assets	53,239			121		0.92		61,823			184		1.21
Other assets~~(5)~~(6)	Other assets~~(5)~~(6)	897			—				(29)			—				Other assets~~(5)~~(6)	707			—				1,024			—
Total Assets	Total Assets	$	57,455		$	137			$	84,733		$	207			Total Assets	$	53,946		$	121			$	62,847		$	184
Liabilities and Capital	Liabilities and Capital															Liabilities and Capital
Interest-bearing liabilities:	Interest-bearing liabilities:															Interest-bearing liabilities:
Consolidated obligations:	Consolidated obligations:															Consolidated obligations:
Bonds(3)	Bonds(3)	$	24,512		$	13	0.22	%	$	61,660		$	47	0.30	%	Bonds(3)	$	25,170		$	12	0.20	%	$	38,381		$	22	0.23	%
Discount notes	Discount notes	24,996			3		0.05		15,458			12		0.29		Discount notes	20,702			6		0.12		16,454			4		0.10
Deposits and other borrowings	Deposits and other borrowings	970			1		0.08		918			—		0.12		Deposits and other borrowings	1,117			—		0.11		1,108			—		0.09
Mandatorily redeemable capital stock	Mandatorily redeemable capital stock	6			—		4.31		31			1		13.17		Mandatorily redeemable capital stock	4			—		6.25		2			—		6.66

Total interest-bearing liabilities	Total interest-bearing liabilities	50,484			17		0.13		78,067			60		0.30		Total interest-bearing liabilities	46,993			18		0.16		55,945			26		0.19
Other liabilities~~(4)~~(6)	Other liabilities~~(4)~~(6)	465			—				599			—				Other liabilities~~(4)~~(6)	530			—				609			—
Total Liabilities	Total Liabilities	50,949			17				78,666			60				Total Liabilities	47,523			18				56,554			26
Total Capital	Total Capital	6,506			—				6,067			—				Total Capital	6,423			—				6,293			—
Total Liabilities and Capital	Total Liabilities and Capital	$	57,455		$	17			$	84,733		$	60			Total Liabilities and Capital	$	53,946		$	18			$	62,847		$	26
Net Interest Income	Net Interest Income				$	120						$	147			Net Interest Income				$	103						$	158
Net Interest Spread~~(6)~~(7)	Net Interest Spread~~(6)~~(7)						0.83	%						0.67	%	Net Interest Spread~~(6)~~(7)						0.76	%						1.02	%
Net Interest Margin~~(7)~~(8)	Net Interest Margin~~(7)~~(8)						0.85	%						0.69	%	Net Interest Margin~~(7)~~(8)						0.78	%						1.04	%
Interest-earning Assets/Interest-bearing Liabilities	Interest-earning Assets/Interest-bearing Liabilities	112.03		%					108.58		%					Interest-earning Assets/Interest-bearing Liabilities	113.29		%					110.51		%

(1)The average balances of AFS securities and HTM securities are reflected at amortized cost. As a result, the average rates do not reflect changes in fair ~~value or non-credit-related losses.~~value.

(2)Interest income on AFS securities includes accretion of yield adjustments on ~~other-than-temporarily impaired~~certain PLRMBS (resulting from improvement in expected cash flows) ~~recognized pursuant~~with previous credit losses related to the ~~impairment guidance in effect~~ prior ~~to January 1, 2020,~~methodology of evaluating credit losses, totaling ~~$13~~$8 million and ~~$14~~$13 million for the three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively.

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

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	Three Months Ended
	March 31, 2022
(In millions)	Advances		AFS Securities		Consolidated Obligation Bonds		Total
(Amortization)/accretion of hedging activities	$	(7)	$	(27)	$	—	$	(34)
Net gain/(loss) on derivatives and hedged items	1		3		—		4
Net interest settlements on derivatives	(21)		(13)		24		(10)
Total net interest income/(expense)	$	(27)	$	(37)	$	24	$	(40)

Three Months Ended
September 30, 2021
(In millions) Advances AFS Securities Consolidated Obligation Bonds Total
(Amortization)/accretion of hedging activities $ (7) $ (27) $ — $ (34)
Net gain/(loss) on derivatives and hedged items 1 2 — 3
Net interest settlements on derivatives (44) (16) 19 (41)
Total net interest income/(expense) $ (50) $ (41) $ 19 $ (72)


		Three Months Ended									Three Months Ended
		September 30, 2020									March 31, 2021
(In millions)	(In millions)	Advances		AFS Securities		Consolidated Obligation Bonds		Total		(In millions)	Advances		AFS Securities		Consolidated Obligation Bonds		Total
(Amortization)/accretion of hedging activities	(Amortization)/accretion of hedging activities	$	(1)	(23)		$	—	$	(24)	(Amortization)/accretion of hedging activities	$	(3)	$	(27)	$	—	$	(30)
Net gain/(loss) on derivatives and hedged items	Net gain/(loss) on derivatives and hedged items	2		12		—		14		Net gain/(loss) on derivatives and hedged items	2		9		—		11
Net interest settlements on derivatives	Net interest settlements on derivatives	(91)		(47)		7		(131)		Net interest settlements on derivatives	(65)		(24)		7		(82)
Total net interest income/(expense)	Total net interest income/(expense)	$	(90)	$	(58)	$	7	$	(141)	Total net interest income/(expense)	$	(66)	$	(42)	$	7	$	(101)

(4)Nonperforming mortgage loans are included in average balances used to determine average rate. Interest income from retrospective adjustment of the effective yields and from the amortization of upfront loan costs and delivery commitments was $9 million and $8 million for the three months ended March 31, 2022 and 2021, respectively.

(5)Interest income includes net prepayment fees on advances of $(2) million and $8 million for the three months ended March 31, 2022 and 2021, respectively.

(6)Includes forward settling transactions and valuation adjustments for certain cash items.

~~(5)Includes non-credit-related losses on HTM securities.~~

~~(6)~~(7)Net interest spread is calculated as the difference between the average rate earned on interest-earning assets and the average rate paid on interest-bearing liabilities.

~~(7)~~(8)Net interest margin is calculated as net interest income (annualized) divided by average interest-earning assets.

Net interest income in the ~~third~~first quarter of ~~2021~~2022 was ~~$120~~$103 million, ~~an 18%~~a 35% decrease from ~~$147~~$158 million in the ~~third~~first quarter of ~~2020.~~2021. The following table details the changes in interest income and interest expense for the ~~third~~first quarter of ~~2021~~2022 compared to the ~~third~~first quarter of ~~2020.~~2021. Changes in both volume and interest rates influence changes in net interest income, net interest spread, and net interest margin.

Change in Net Interest Income: Rate/Volume Analysis
Three Months Ended September 30, 2021, Compared to Three Months Ended September 30, 2020
Increase/
(Decrease)
Attributable to Changes in(1)
(In millions) Average Volume Average Rate
Interest-earning assets:
Interest-bearing deposits $ (1) $ (1) $ —
Federal funds sold 1 1 —
Trading securities: Other investments (10) (10) —
AFS securities:
MBS(2)
(7) (6) (1)
Other investments(2)
(3) (3) —
HTM securities: MBS (9) (6) (3)
Mortgage loans held for portfolio — (5) 5
Advances(2)
(41) (29) (12)
Total interest-earning assets (70) (59) (11)
Interest-bearing liabilities:
Consolidated obligations:
Bonds(2)
(34) (23) (11)
Discount notes (9) 4 (13)
Deposits and other borrowings 1 1 —
Mandatorily redeemable capital stock (1) (1) —
Total interest-bearing liabilities (43) (19) (24)
Net interest income $ (27) $ (40) $ 13

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Change in Net Interest Income: Rate/Volume Analysis Three Months Ended March 31, 2022, Compared to Three Months Ended March 31, 2021

	Increase/ (Decrease)		Attributable to Changes in(1)
(In millions)			Average Volume		Average Rate
Interest-earning assets:

Securities purchased under agreements to resell	$	1	$	—	$	1
Federal funds sold	2		1		1
Trading securities: Other investments	(21)		(20)		(1)

AFS securities:
MBS(2)	(5)		(6)		1
Other investments(2)	(2)		(3)		1

HTM securities: MBS	(6)		(5)		(1)

Mortgage loans held for portfolio	(6)		(13)		7
Advances(2)	(26)		(6)		(20)
Total interest-earning assets	(63)		(52)		(11)
Interest-bearing liabilities:
Consolidated obligations:
Bonds(2)	(10)		(7)		(3)
Discount notes	2		1		1


Total interest-bearing liabilities	(8)		(6)		(2)
Net interest income	$	(55)	$	(46)	$	(9)

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

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

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The net interest margin was 8578 basis points for the ~~third~~first quarter of ~~2021, 16~~2022, 26 basis points ~~higher~~lower than the net interest margin for the ~~third~~first quarter of ~~2020,~~2021, which was 69104 basis points. The net interest spread was 8376 basis points for the ~~third~~first quarter of ~~2021, 16~~2022, 26 basis ~~points higher~~point lower than the net interest spread for the ~~third~~first quarter of ~~2020,~~2021, which was 67102 basis points. These ~~increases were~~decreases primarily reflected a ~~result~~decline in average interest-earning assets of $8.6 billion, lower ~~funding costs, partially offset by~~yields on interest-earning assets despite recent increase in interest rates on new or renewed advances, a ~~decrease~~reduction in net gains on designated fair value ~~hedges.~~hedges, and a decrease in net prepayment fee income on advances and MBS.

For ~~securities previously identified as other-than-temporarily impaired pursuant~~PLRMBS with previous credit losses related to the ~~impairment guidance in effect~~ prior ~~to January 1, 2020,~~methodology of evaluating credit losses, the Bank updates its estimate of future estimated cash flows on a regular basis. If there is no additional credit loss on the security, the yield of the security is adjusted ~~upward~~ on a prospective basis and accreted into interest income ~~when there is a significant increase in~~based on the expected cash flows. As a result of improvements in the estimated cash flows of securities previously identified as other-than-temporarily impaired, the net accretion of income is likely to continue to be a positive source of net interest income in future periods.

Member demand for wholesale funding from the Bank can vary greatly depending on a number of factors, including economic and market conditions, competition from other wholesale funding sources, member deposit inflows and outflows, the activity level of the primary and secondary mortgage markets, and strategic decisions made by individual member institutions. As a result, Bank asset levels and operating results may vary significantly from period to period.

Other Income/(Loss). The following table presents the components of “Other Income/(Loss)” for the three months ended ~~September 30, 2021~~March 31, 2022 and ~~2020.~~2021.

Other Income/(Loss)
Three Months Ended
(In millions) September 30, 2021 September 30, 2020
Other Income/(Loss):
Net gain/(loss) on trading securities(1)
$ (13) $ (19)
Net gain/(loss) on advances and consolidated obligation bonds held under fair value option (9) (7)
Net gain/(loss) on derivatives 15 5
Gain on disgorgement settlement — 85
Other, net 4 6
Total Other Income/(Loss) $ (3) $ 70

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Other Income/(Loss)

	Three Months Ended
(In millions)	March 31, 2022		March 31, 2021
Other Income/(Loss):
Net gain/(loss) on trading securities(1)	$	—	$	(18)
Net gain/(loss) on advances and consolidated obligation bonds held under fair value option	(21)		(26)
Net gain/(loss) on derivatives	8		18
Private-label residential mortgage-backed securities trust settlement	28		—
Standby letters of credit fees	4		4
Other, net	(1)		1
Total Other Income/(Loss)	$	18	$	(21)

(1)The net gain/(loss) on trading securities that were economically hedged totaled ~~$(13) million~~a de minimis amount and ~~$(19)~~$(18) million for the three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020, respectively.~~

~~Net Gain/(Loss) on Advances and Consolidated Obligation Bonds Held Under Fair Value Option –~~ The following table presents the net gain/(loss) recognized in earnings on advances and consolidated obligation bonds held under the fair value option for the three months ended September 30, 2021 and 2020.

Net Gain/(Loss) on Advances and Consolidated Obligations Bonds Held Under Fair Value Option
Three Months Ended
(In millions) September 30, 2021 September 30, 2020
Advances $ (11) $ (8)
Consolidated obligation bonds 2 1
Total $ (9) $ (7)

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

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

~~Additional information about advances and consolidated obligation bonds held under the fair value option is provided in “Item 1. Financial Statements – Note 12 – Fair Value.”~~

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

The following table shows the accounting classification of economic hedges and the categories of hedged items that contributed to the gains and losses on derivatives that were recorded in “Net gain/(loss) on derivatives” in the third quarter of 2021 and 2020.

Sources of Gains/(Losses) Recorded in Net Gain/(Loss) on Derivatives
Three Months Ended September 30, 2021, Compared to Three Months Ended September 30, 2020
Three Months Ended
(In millions) September 30, 2021 September 30, 2020
Hedged Item Gain/(Loss) on
Economic
Hedges Income/
(Expense) on
Economic
Hedges Total Gain/(Loss) on
Economic
Hedges Income/
(Expense) on
Economic
Hedges Total
Advances:
Elected for fair value option $ 21 $ (10) $ 11 $ 25 $ (14) $ 11
Not elected for fair value option 3 3 6 — (5) (5)
Consolidated obligation bonds:
Elected for fair value option (1) — (1) (1) 1 —
Not elected for fair value option (1) — (1) (5) 2 (3)
Consolidated obligation discount notes:
Not elected for fair value option 1 (1) — 2 (2) —
Non-MBS investments:
Not elected for fair value option 8 (8) — 18 (16) 2
Total $ 31 $ (16) $ 15 $ 39 $ (34) $ 5

During the third quarter of 2021, net gains on derivatives totaled $15 million compared to net gains of $5 million in the third quarter of 2020. These amounts included expense of $16 million and expense of $34 million resulting from net settlements on derivative instruments used in economic hedges in the third quarter of 2021 and 2020, respectively. Excluding the impact of income or expense from net settlements on derivative instruments used in economic hedges, the net gains or losses on economic hedges were primarily associated with the effects of changes in market interest rates, interest rate spreads, interest rate volatility, and other market factors during the period. In addition, the Bank made out-of-period adjustments in the third quarter of 2021 that resulted in an overstatement of net gain/(loss) on derivatives of $13 million for the three months ended September 30, 2021. For more information on the adjustment, see “Item 1. Financial Statements – Note 1 – Basis of Presentation.”

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

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~~Additional information about derivatives and hedging activities is provided in “Item 1. Financial Statements – Note 11 – Derivatives and Hedging Activities.”~~

~~Nine Months Ended September 30, 2021, Compared to Nine Months Ended September 30, 2020~~

Average Balance Sheets
Nine Months Ended
September 30, 2021 September 30, 2020
(Dollars in millions) Average
Balance Interest
Income/
Expense Average
Rate Average
Balance Interest
Income/
Expense Average
Rate
Assets
Interest-earning assets:
Interest-bearing deposits $ 1,195 $ 1 0.14 % $ 3,577 $ 14 0.54 %
Securities purchased under agreements to resell 1,417 1 0.07 5,020 20 0.52
Federal funds sold 5,843 4 0.08 5,039 16 0.43
Trading securities:
MBS 2 — 2.29 3 — 3.26
Other investments 3,461 54 2.07 3,880 61 2.08
AFS securities:(1)
MBS(2)(3)
9,957 165 2.22 10,712 152 1.90
Other investments(3)
2,174 3 0.21 5,199 27 0.69
HTM securities:(1)
MBS 4,161 34 1.11 6,499 92 1.89
Mortgage loans held for portfolio 1,464 34 3.08 3,023 22 0.96
Advances(4)
28,832 167 0.77 58,622 509 1.16
Total interest-earning assets 58,506 463 1.06 101,574 913 1.20
Other assets(4)(5)
986 — 215 —
Total Assets $ 59,492 $ 463 $ 101,789 $ 913
Liabilities and Capital
Interest-bearing liabilities:
Consolidated obligations:
Bonds(3)
$ 31,258 $ 49 0.21 % $ 69,743 $ 405 0.78 %
Discount notes 20,172 10 0.06 24,077 163 0.90
Deposits and other borrowings 1,123 1 0.08 799 2 0.37
Mandatorily redeemable capital stock 4 — 4.02 82 5 8.34
Borrowings from other FHLBanks — — — 1 — 8.70
Total interest-bearing liabilities 52,557 60 0.15 94,702 575 0.81
Other liabilities(4)
520 — 749 —
Total Liabilities 53,077 60 95,451 575
Total Capital 6,415 — 6,338 —
Total Liabilities and Capital $ 59,492 $ 60 $ 101,789 $ 575
Net Interest Income $ 403 $ 338
Net Interest Spread(6)
0.91 % 0.39 %
Net Interest Margin(7)
0.92 % 0.44 %
Interest-earning Assets/Interest-bearing Liabilities 111.32 % 107.26 %

~~(1)The average balances of AFS securities and HTM securities are reflected at amortized cost. As a result, the average rates do not reflect changes in fair value or non-credit-related losses.~~

~~(2)~~Interest income on AFS securities includes accretion of yield adjustments on other-than-temporarily impaired PLRMBS (resulting from improvement in expected cash flows) recognized pursuant to the impairment guidance in effect prior to January 1, 2020, totaling $39 million and $45 million for the nine months ended September 30, 2021 and 2020, respectively.

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

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Nine Months Ended
September 30, 2021
(In millions) Advances AFS Securities Consolidated Obligation Bonds Total
(Amortization)/accretion of hedging activities $ (15) $ (81) $ — $ (96)
Net gain/(loss) on derivatives and hedged items 2 11 — 13
Net interest settlements on derivatives (165) (61) 43 (183)
Total net interest income/(expense) $ (178) $ (131) $ 43 $ (266)

Nine Months Ended
September 30, 2020
(In millions) Advances AFS Securities Consolidated Obligation Bonds Total
(Amortization)/accretion of hedging activities $ (2) $ (25) $ — $ (27)
Net gain/(loss) on derivatives and hedged items (4) (24) — (28)
Net interest settlements on derivatives (223) (143) 18 (348)
Total net interest income/(expense) $ (229) $ (192) $ 18 $ (403)

~~(4)Includes forward settling transactions and valuation adjustments for certain cash items.~~

~~(5)Includes non-credit-related OTTI losses on HTM securities.~~

~~(6)Net interest spread is the difference between the average rate earned on interest-earning assets and the average rate paid on interest-bearing liabilities.~~

~~(7)Net interest margin is net interest income (annualized) divided by average interest-earning assets.~~

Net interest income in the first nine months of 2021 was $403 million, a 19% increase from $338 million in the first nine months of 2020. The following table details the changes in interest income and interest expense for the first nine months of 2021 compared to the first nine months of 2020. Changes in both volume and interest rates influence changes in net interest income, net interest spread, and net interest margin.

Change in Net Interest Income: Rate/Volume Analysis
Nine Months Ended September 30, 2021, Compared to Nine Months Ended September 30, 2020
Increase/
(Decrease)
Attributable to Changes in(1)
(In millions) Average Volume Average Rate
Interest-earning assets:
Interest-bearing deposits $ (13) $ (6) $ (7)
Securities purchased under agreements to resell (19) (9) (10)
Federal funds sold (12) 1 (13)
Trading securities: Other investments (7) (7) —
AFS securities:
MBS(2)
13 (6) 19
Other investments(2)
(24) (11) (13)
HTM securities: MBS (58) (27) (31)
Mortgage loans held for portfolio 12 (10) 22
Advances(2)
(342) (207) (135)
Total interest-earning assets (450) (282) (168)
Interest-bearing liabilities:
Consolidated obligations:
Bonds(2)
(356) (154) (202)
Discount notes (153) (23) (130)
Deposits and other borrowings (1) — (1)
Mandatorily redeemable capital stock (5) (3) (2)
Total interest-bearing liabilities (515) (180) (335)
Net interest income $ 65 $ (102) $ 167

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

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

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The net interest margin was 92 basis points for the first nine months of 2021, 48 basis points higher than the net interest margin for the first nine months of 2020, which was 44 basis points. The net interest spread was 91 basis points for the first nine months of 2021, 52 basis point higher than the net interest spread for the first nine months of 2020, which was 39 basis points. These increases were primarily a result of an increase in net gains on designated fair value hedges, an improvement in retrospective adjustment of the effective yields on mortgage loans and related delivery commitments, and lower funding costs.

~~Other Income/(Loss).~~ ~~The following table presents the components of “Other Income/(Loss)” for the nine months ended September 30, 2021 and 2020.~~

Other Income/(Loss)
Nine Months Ended
(In millions) September 30, 2021 September 30, 2020
Other Income/(Loss):
Net gain/(loss) on trading securities(1)
$ (50) $ 36
Net gain/(loss) on advances and consolidated obligation bonds held under fair value option (40) 96
Net gain/(loss) on derivatives 25 (156)
Gain on disgorgement settlement — 85
Other, net 15 18
Total Other Income/(Loss) $ (50) $ 79

~~(1)The net gain/(loss) on trading securities that were economically hedged totaled $(50) million and $36 million for the nine months ended September 30, 2021 and 2020,~~ respectively.

Net Gain/(Loss) on Advances and Consolidated Obligation Bonds Held Under Fair Value Option – The following table presents the net gain/(loss) on advances and consolidated obligation bonds held under the fair value option for the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 and ~~2020.~~2021.


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

		Nine Months Ended
(In millions)	(In millions)	September 30, 2021		September 30, 2020		(In millions)	2022		2021
Advances	Advances	$	(43)	$	97	Advances	$	(49)	$	(26)
Consolidated obligation bonds	Consolidated obligation bonds	3		(1)		Consolidated obligation bonds	28		—
Total	Total	$	(40)	$	96	Total	$	(21)	$	(26)

Additional information about advances and consolidated obligation bonds held under the fair value option is provided in “Item 1. Financial Statements – Note 12 – Fair Value.”

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

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Sources of Gains/(Losses) Recorded in Net Gain/(Loss) on Derivatives Nine Months Ended September 30, 2021, Compared to Nine Months Ended September 30, 2020
Sources of Gains/(Losses) Recorded in Net Gain/(Loss) on Derivatives Three Months Ended March 31, 2022, Compared to Three Months Ended March 31, 2021														Sources of Gains/(Losses) Recorded in Net Gain/(Loss) on Derivatives Three Months Ended March 31, 2022, Compared to Three Months Ended March 31, 2021

		Nine Months Ended													Three Months Ended
(In millions)	(In millions)	September 30, 2021						September 30, 2020						(In millions)	March 31, 2022						March 31, 2021
Hedged Item	Hedged Item	Gain/(Loss) on Economic Hedges		Income/ (Expense) on Economic Hedges		Total		Gain/(Loss) on Economic Hedges		Income/ (Expense) on Economic Hedges		Total		Hedged Item	Gain/(Loss) on Economic Hedges		Income/ (Expense) on Economic Hedges		Total		Gain/(Loss) on Economic Hedges		Income/ (Expense) on Economic Hedges		Total
Advances:	Advances:													Advances:
Elected for fair value option	Elected for fair value option	$	67	$	(29)	$	38	$	(89)	$	(24)	$	(113)	Elected for fair value option	$	45	$	(8)	$	37	$	42	$	(10)	$	32
Not elected for fair value option	Not elected for fair value option	(13)		4		(9)		30		(27)		3		Not elected for fair value option	18		5		23		(11)		—		(11)
Consolidated obligation bonds:	Consolidated obligation bonds:													Consolidated obligation bonds:
Elected for fair value option	Elected for fair value option	(2)		1		(1)		1		1		2		Elected for fair value option	(23)		1		(22)		—		—		—
Not elected for fair value option	Not elected for fair value option	(4)		1		(3)		—		9		9		Not elected for fair value option	(32)		1		(31)		(4)		—		(4)
Consolidated obligation discount notes:	Consolidated obligation discount notes:													Consolidated obligation discount notes:
Not elected for fair value option	Not elected for fair value option	3		(2)		1		(3)		24		21		Not elected for fair value option	(1)		1		—		2		—		2
MBS:														MBS:
Not elected for fair value option														Not elected for fair value option	1		—		1		—		—		—
Non-MBS investments:														Non-MBS investments:
Not elected for fair value option														Not elected for fair value option	—		—		—		13		(14)		(1)

Non-MBS investments:
Not elected for fair value option		35		(36)		(1)		(46)		(35)		(81)
Mortgage delivery commitment:
Not elected for fair value option		—		—		—		3		—		3

Total	Total	$	86	$	(61)	$	25	$	(104)	$	(52)	$	(156)	Total	$	8	$	—	$	8	$	42	$	(24)	$	18

During the first ~~nine months~~quarter of ~~2021,~~2022, net gains on derivatives ~~and hedging activities~~ totaled ~~$25~~$8 million compared to net ~~losses~~gains of ~~$156~~$18 million in the first ~~nine months~~quarter of ~~2020.~~2021. These amounts included expense of ~~$61 million~~a de minimis amount and expense of ~~$52~~$24 million resulting from net settlements on derivative instruments used in economic hedges in the first ~~nine months~~quarter of ~~2021~~2022 and ~~2020,~~2021, respectively. Excluding the impact of income or expense from net settlements on derivative instruments used in economic hedges, the net gains or losses on ~~fair value and~~ economic hedges were primarily associated with the effects of changes in market interest rates, interest rate spreads, interest rate volatility, and other market factors during the period.

Additional information about derivatives and hedging activities is provided in “Item 1. Financial Statements – Note 11 – Derivatives and Hedging Activities.”

PLRMBS Trust Settlement – One of the Bank’s PLRMBS investments is held within a trust that has been the subject of litigation by the trustee since 2012. Upon final resolution of the litigation, to which the Bank was not a party, the trustee was required to transmit settlement proceeds to the trust. As a result of the distribution of the settlement proceeds in the first quarter of 2022 to the beneficial owners of the securities in the trust, including the Bank, the Bank recorded settlement proceeds of $28 million as income. The Bank recorded no settlement proceeds in the first quarter of 2021.

Other Expense. During the first quarter of 2022, other expenses totaled $38 million, compared to $39 million in the first quarter of 2021.

Return on Average Equity. Return on average equity ~~(ROE)~~ was 4.34% (annualized) for the third quarter of 2021, compared to 10.59% (annualized) for the third quarter of 2020. The decrease primarily reflected lower net income for the third quarter of 2021, which decreased 56%, from $161 million in the third quarter of 2020 to $71 million in the third quarter of 2021, and an increase in average equity from $6.1 billion in the third quarter of 2020 to $6.5 billion in the third quarter of 2021.

~~ROE was 4.59%~~4.91% (annualized) for the first ~~nine months~~quarter of ~~2021,~~2022, compared to ~~5.08%~~6.04% (annualized) for the first ~~nine months~~quarter of ~~2020.~~2021. The decrease ~~primarily~~ reflected lower net income for the first ~~nine months~~quarter of ~~2021,~~2022, which decreased 9%17%, from ~~$241~~$94 million in the first ~~nine months~~quarter of ~~2020~~2021 to ~~$220~~$78 million in the first ~~nine months~~quarter of ~~2021,~~2022, and an increase in average equity from $6.3 billion in the first ~~nine months~~quarter of ~~2020~~2021 to $6.4 billion in the first ~~nine months~~quarter of ~~2021.~~2022.

Dividends and Retained Earnings. In the ~~third~~first quarter of ~~2021,~~2022, the Bank paid dividends at an annualized rate of 6.00%, totaling ~~$34~~$35 million, including ~~$34~~$35 million in dividends on capital stock and a de minimis amount in dividends on mandatorily redeemable capital stock. In the ~~third~~first quarter of 2020, the Bank paid dividends at an annualized rate of 5.00%, totaling $37 million, including $36 million in dividends on capital stock and $1 million in dividends on mandatorily redeemable capital stock.

~~In the first nine months~~ of 2021, the Bank paid dividends at an

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annualized rate of ~~5.65%~~5.00%, totaling ~~$98~~$30 million, including ~~$98~~$30 million in dividends on capital stock and a de minimis amount ~~in dividends on mandatorily redeemable~~

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~~capital stock. In the first nine months of 2020, the Bank paid dividends at an annualized rate of 5.68%, totaling $131 million, including $126 million in dividends on capital stock and $5 million~~ in dividends on mandatorily redeemable capital stock.

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

On October 28, 2021, the Bank’s board of directors declared a cash dividend on the capital stock outstanding during the third quarter of 2021 at an annualized rate of 6.00%, totaling $36 million. The Bank recorded the dividend on October 28, 2021. The Bank expects to pay the dividend on November 10, 2021.

The Bank’s Excess Stock Repurchase, Retained Earnings, and Dividend Framework (Framework) assesses the level and adequacy of retained earnings and establishes amounts to be retained in restricted retained earnings, which are not made available in the current dividend period, and maintains an amount of total retained earnings at least equal to its required retained earnings as described in the Framework. As determined using the Bank’s methodology, the required level of total retained earnings had ranged from ~~$2.4~~$1.5 billion to ~~$2.5~~$2.9 billion during ~~all~~2021. The methodology may be revised from time to time, and the required level of ~~2019 and continuing through September 2020. In September 2020,~~required retained earnings under the methodology ~~was further revised~~may change due to updating data and ~~resulted~~assumptions used in athe methodology. In January 2022, the required level of retained earnings ~~of $2.9~~was increased from $1.5 billion to $1.7 billion. In January 2021, the methodology was further revised and resulted in a required level of retained earnings of $1.9 billion. In July 2021, the methodology was further revised and resulted in a required level of retained earnings of $1.5 billion.

The Bank satisfies its retained earnings requirement with both restricted retained earnings (i.e., amounts related to the Joint Capital Enhancement (JCE) Agreement) and unrestricted retained earnings. The Bank’s retained earnings requirement may be changed at any time. The board of directors periodically reviews the retained earnings methodology and analysis to determine whether any adjustments are appropriate. TotalJCE Agreement provides that amounts in restricted retained earnings ~~were $743 million and $761 million~~in excess of 150% of the Bank’s restricted retained earnings minimum (i.e., 1% of the Bank’s total consolidated obligations calculated as of ~~September 30, 2021,~~the last day of each calendar quarter) may be released from restricted retained earnings. As a result of the Bank exceeding this threshold, the Bank reclassified $16 million from restricted retained earnings to unrestricted retained earnings during the first quarter of 2022. The Bank made no reclassifications from restricted retained earnings to unrestricted retained earnings during the first quarter of 2021. The Bank’s unrestricted retained earnings totaled $3.2 billion and $3.1 billion at March 31, 2022, and December 31, ~~2020,~~2021, respectively. The Bank’s restricted retained earnings totaled $692 million and $708 million at March 31, 2022, and December 31, 2021, respectively.

For more information, see “Item 1. Financial Statements – Note 9 – Capital” in this report and see “Item 1. Business – Dividends and Retained Earnings,” “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Risk Management – Liquidity Risk,” and “Item 8. Financial Statements and Supplementary Data – Note 1511 – Capital – Excess Stock Repurchase, Retained Earnings, and Dividend Framework” in the Bank’s ~~2020~~2021 Form 10-K.

Financial Condition

Total assets were ~~$54.5~~$56.1 billion at ~~September 30, 2021,~~March 31, 2022, compared to ~~$68.6~~$54.1 billion at December 31, ~~2020.~~2021. Advances ~~decreased~~increased by ~~$8.4~~$3.2 billion, or ~~27%~~19%, to ~~$22.6~~$20.2 billion at ~~September 30, 2021,~~March 31, 2022, from ~~$31.0~~$17.0 billion at December 31, ~~2020.~~2021. MBS investments decreased by ~~$2.3~~$1.1 billion, or ~~15%~~8%, to ~~$13.5~~$11.9 billion at ~~September 30, 2021,~~March 31, 2022, from ~~$15.8~~$13.0 billion at December 31, ~~2020.~~2021. Average total assets were ~~$57.5 billion for the third quarter of 2021, a 32% decrease from $84.7 billion for the third quarter of 2020. Average total assets were $59.5~~$53.9 billion for the first ~~nine months~~quarter of ~~2021,~~2022, a ~~41%~~14% decrease from ~~$101.8~~$62.8 billion for the first ~~nine months~~quarter of ~~2020.~~2021. Average advances were ~~$28.5 billion for the third quarter of 2021, a 37% decrease from $44.9 billion for the third quarter of 2020. Average advances were $28.8~~$26.9 billion for the first ~~nine months~~quarter of ~~2021,~~2022, a ~~51%~~10% decrease from ~~$58.6~~$29.8 billion for the first ~~nine months~~quarter of ~~2020.~~2021. Average MBS investments were ~~$13.6 billion for the third quarter of 2021, a 19% decrease from $16.8 billion for the third quarter of 2020. Average MBS investments were $14.1~~$12.2 billion for the first ~~nine months~~quarter of ~~2021,~~2022, an 18% decrease from ~~$17.2~~$14.8 billion for the first ~~nine months~~quarter of ~~2020.~~2021.

Advances outstanding at ~~September 30, 2021,~~March 31, 2022, included net unrealized ~~gains~~losses of ~~$306~~$227 million, of which ~~$220~~$244 million represented unrealized ~~gains~~losses on advances hedged in accordance with the accounting for derivative instruments and hedging activities and ~~$86~~$17 million represented unrealized gains on economically hedged advances that are carried at fair value in accordance with the fair value option. Advances outstanding at December 31, ~~2020,~~2021, included unrealized gains of ~~$639~~$169 million, of which ~~$509~~$103 million represented unrealized gains on advances hedged in accordance with the accounting for derivative instruments and hedging activities and ~~$130~~$66 million represented unrealized gains on economically hedged advances that are carried at fair value in accordance with the fair value

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option. The change in the net unrealized ~~gains~~losses on the hedged advances and advances carried at fair value from December 31, ~~2020,~~2021, to ~~September 30, 2021,~~March 31, 2022, was primarily attributable to the effects of changes in market interest rates, interest rate spreads, interest rate volatility, and other market factors relative to the terms on the Bank’s advances during the period.

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Total liabilities were ~~$48.1~~$50.0 billion at ~~September 30, 2021, a decrease~~March 31, 2022, an increase of ~~$14.3~~$2.1 billion from ~~$62.4~~$47.9 billion at December 31, ~~2020,~~2021, primarily reflecting a ~~$13.8~~$1.7 billion ~~decrease~~increase in consolidated obligations outstanding to ~~$46.8~~$48.4 billion at ~~September 30, 2021,~~March 31, 2022, from ~~$60.6~~$46.7 billion at December 31, ~~2020.~~2021. Average total liabilities were ~~$50.9 billion for the third quarter of 2021, a 35% decrease compared to $78.7 billion for the third quarter of 2020. Average total liabilities were $53.1~~$47.5 billion for the first ~~nine months~~quarter of ~~2021,~~2022, a ~~45%~~16% decrease compared to ~~$95.5~~$56.6 billion for the first ~~nine months~~quarter of ~~2020.~~2021. Average consolidated obligations were ~~$49.5 billion for the third quarter of 2021 and $77.1 billion for the third quarter of 2020. Average consolidated obligations were $51.4~~$45.9 billion for the first ~~nine months~~quarter of ~~2021~~2022 and ~~$93.8~~$54.8 billion for the first ~~nine months~~quarter of ~~2020.~~2021.

Consolidated obligations outstanding at ~~September 30, 2021,~~March 31, 2022, included unrealized gains of ~~$47~~$599 million on consolidated obligation bonds hedged in accordance with the accounting for derivative instruments and hedging activities and ~~$2 million of~~ unrealized gains of $34 million on economically hedged consolidated obligation bonds that are carried at fair value in accordance with the fair value option. Consolidated obligations outstanding at December 31, ~~2020,~~2021, included unrealized losses of ~~$13~~$139 million on consolidated obligation bonds hedged in accordance with the accounting for derivative instruments and hedging activities and unrealized losses of $1$6 million on economically hedged consolidated obligation bonds that are carried at fair value in accordance with the fair value option. The change in the net unrealized gains on the hedged consolidated obligation bonds and on the consolidated obligation bonds carried at fair value from December 31, ~~2020,~~2021, to ~~September 30, 2021,~~March 31, 2022, were primarily attributable to the effects of changes in market interest rates, interest rate spreads, interest rate volatility, and other market factors relative to the actual terms on the Bank’s consolidated obligation bonds during the period.

As provided by the FHLBank Act or regulations governing the operations of the FHLBanks, all FHLBanks have joint and several liability for all FHLBank consolidated obligations. The joint and several liability regulation authorizes the Finance Agency to require any FHLBank to repay all or a portion of the principal or interest on consolidated obligations for which another FHLBank is the primary obligor. The Bank has never been asked or required to repay the principal or interest on any consolidated obligation on behalf of another FHLBank, and as of ~~September 30, 2021,~~March 31, 2022, and through the filing date of this report, does not believe that it is probable that it will be asked to do so. The par value of the outstanding consolidated obligations of the FHLBanks was ~~$641.4~~$699.5 billion at ~~September 30, 2021,~~March 31, 2022, and ~~$746.7~~$652.9 billion at December 31, ~~2020.~~

Changes in the long-term credit ratings of individual FHLBanks do not necessarily affect the credit rating of the consolidated obligations issued on behalf of the FHLBanks. Rating agencies may change or withdraw a rating from time to time because of various factors, including operating results or actions taken, business developments, or changes in their opinion regarding, among other factors, the general outlook for a particular industry or the economy.2021.

Certain Bank assets ~~liabilities,~~ and derivatives are indexed to LIBOR. The Bank recognizes that the impending discontinuation of LIBOR presents risks and challenges that could have an impact on the Bank’s business. For information about the risks to the Bank from discontinuation of LIBOR, see “Item 1A. Risk Factors” in the Bank’s ~~2020~~2021 Form 10-K. Accordingly, the Bank has established the LIBOR Transition Working Group, led by the Chief Financial Officer, and developed a LIBOR Phase Out Transition Plan (Transition Plan). Among other things, the Transition Plan ~~addresses three~~identifies key strategies to manage and mitigate the risks ~~to the Bank~~ associated with the discontinuation of LIBOR: (i) execute hedging strategies that permit alternative reference rates, including SOFR, (ii) transact SOFR-indexed advances and bonds, ~~and~~ (iii) where practicable, implement improved fallback provisions for the discontinuation of LIBOR in new and legacy ~~contracts.~~contracts, and (iv) where practicable, terminate LIBOR derivatives with maturities after June 30, 2023, and replace them with SOFR derivatives. In addition, the Transition Plan ~~limits~~prohibits new LIBOR transactions, ~~with maturities beyond the end of 2021~~ consistent with the limits set by the Finance Agency’s Supervisory Letter issued on September 27, 2019. The Transition Plan states that the Bank’s Asset and Liability Management Committee has primary responsibility for driving the transition from LIBOR to SOFR and that the

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Bank’s Business Development Committee is responsible for advance product development to facilitate our members’ transition from LIBOR to an alternative index.

On October 21, 2020, the Finance Agency issued a Supervisory Letter to the FHLBanks that required each FHLBank to adhere to the Fallbacks Protocol (Protocol) by December 31, 2020, and, to the extent necessary, to amend any bilateral agreements regarding the adoption of the Protocol by December 15, 2020. On October 23, 2020, International Swaps and Derivatives Association, Inc. (ISDA) launched the Supplement to the 2006 ISDA Definitions (Supplement) and the ISDA 2020 Interbank Offered Rate (IBOR) Protocol. Both the Supplement and the Protocol took effect on January 25, 2021. As part of its LIBOR transition efforts, the Bank and all of its uncleared derivatives counterparties have adhered to the Protocol. On January 25, 2021, all of the Bank’s outstanding legacy bilateral derivative transactions that referenced a covered IBOR, including U.S. dollar LIBOR, were amended to apply the new ISDA-recommended IBOR fallbacks in the event of the relevant IBOR’s cessation.

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On March 5, 2021, the United Kingdom’s Financial Conduct Authority (FCA) further announced that LIBOR will either cease to be provided by any administrator or no longer be representative immediately after ~~December 31, 2021, in the case of 1-week and 2-month U.S. dollar LIBOR, and immediately after~~ June 30, 2023, in the case of the remaining U.S. dollar LIBOR settings.

Although the ~~Financial Conduct Authority~~FCA does not expect LIBOR to become unrepresentative before the applicable cessation date and intends to consult on requiring the administrator of LIBOR to continue publishing LIBOR of certain currencies and tenors on a non-representative, synthetic basis for a period after the applicable cessation date, there is no assurance that LIBOR, of any particular currency or tenor, will continue to be published or be representative through any particular date. The ~~Financial Conduct Authority’s~~FCA’s announcements constitutes an index cessation event under the Protocol and Supplement, and as a result, the fallbacks spread adjustment for each tenor was fixed as of the date of the announcement.

~~At September 30, 2021,~~On March 15, 2022, the ~~Bank had~~Adjustable Interest Rate (LIBOR) Act was signed into law. The legislation provides a statutory fallback mechanism on a nationwide basis to replace LIBOR with a benchmark rate, selected by the Federal Reserve Board based on SOFR including any applicable tenor spread adjustment, for certain contracts that reference LIBOR and contain no ~~exposure to LIBOR settings that cease immediately after December 31, 2021.~~fallback provisions or insufficient fallback provisions.

The following tables present LIBOR-indexed variable rate financial instruments for LIBOR tenors that cease or will no longer be representative immediately after June 30, 2023, by due date or termination date at ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020.~~2021.


LIBOR-Indexed Financial Instruments

March 31, 2022
(In millions)	Due/Terminates in 2022		Due/Terminates through June 30, 2023		Due/Terminates thereafter		Total
Assets indexed to LIBOR:
Par value of advances by redemption term	$	75	$	—	$	10	$	85
Unpaid principal balance of MBS by contractual maturity(1)	—		10		3,686		3,696
Notional amount of receive leg LIBOR interest rate swaps by termination date
Cleared	398		309		522		1,229
Uncleared	73		20		10		103
Total	$	546	$	339	$	4,228	$	5,113

Notional amount of pay leg LIBOR interest rate swaps by termination date
Cleared	$	35	$	56	$	300	$	391
Uncleared	35		—		—		35
Total	$	70	$	56	$	300	$	426

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LIBOR-Indexed Financial Instruments
(In millions)
September 30, 2021
Due/Terminates in 2021 Due/Terminates in 2022 Due/Terminates through June 30, 2023 Due/Terminates thereafter Total
Assets indexed to LIBOR:
Par value of advances by redemption term $ — $ 250 $ — $ 10 $ 260
Unpaid principal balance of investment securities by contractual maturity
MBS(1)
— — 19 4,385 4,404
Notional amount of receive leg LIBOR interest rate swaps by termination date
Cleared 453 517 309 641 1,920
Uncleared 21 112 23 287 443
Total $ 474 $ 879 $ 351 $ 5,323 $ 7,027
Liabilities indexed to LIBOR:
Par value of consolidated obligation bonds by contractual maturity $ 300 $ — $ — $ — $ 300
Notional amount of pay leg LIBOR interest rate swaps by termination date
Cleared — 210 50 79 339
Uncleared — 35 — — 35
Total $ 300 $ 245 $ 50 $ 79 $ 674


December 31, 2020
		Due/Terminates in 2021		Due/Terminates in 2022		Due/Terminates through June 30, 2023		Due/Terminates thereafter		Total
December 31, 2021												December 31, 2021
(In millions)												(In millions)	Due/Terminates in 2022		Due/Terminates through June 30, 2023		Due/Terminates thereafter		Total
Assets indexed to LIBOR:	Assets indexed to LIBOR:											Assets indexed to LIBOR:
Par value of advances by redemption term	Par value of advances by redemption term	$	100	$	250	$	—	$	10	$	360	Par value of advances by redemption term	$	250	$	—	$	10	$	260
Unpaid principal balance of investment securities by contractual maturity

MBS(1)		—		1		98		5,645		5,744

Unpaid principal balance of MBS by contractual maturity(1)												Unpaid principal balance of MBS by contractual maturity(1)	—		12		4,098		4,110
Notional amount of receive leg LIBOR interest rate swaps by termination date	Notional amount of receive leg LIBOR interest rate swaps by termination date											Notional amount of receive leg LIBOR interest rate swaps by termination date
Cleared	Cleared	6,852		887		369		798		8,906		Cleared	517		309		562		1,388
Uncleared	Uncleared	213		112		22		394		741		Uncleared	112		23		10		145
Total	Total	$	7,165	$	1,250	$	489	$	6,847	$	15,751	Total	$	879	$	344	$	4,680	$	5,903

Liabilities indexed to LIBOR:
Par value of consolidated obligation bonds by contractual maturity		$	6,798	$	—	$	—	$	—	$	6,798
Notional amount of pay leg LIBOR interest rate swaps by termination date	Notional amount of pay leg LIBOR interest rate swaps by termination date											Notional amount of pay leg LIBOR interest rate swaps by termination date
Cleared	Cleared	1,523		559		100		28		2,210		Cleared	210		52		40		302
Uncleared	Uncleared	238		35		—		95		368		Uncleared	35		—		—		35
Total	Total	$	8,559	$	594	$	100	$	123	$	9,376	Total	$	245	$	52	$	40	$	337

(1)Certain MBS with multiple indices where LIBOR is the majority index are included in this amount.

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As of ~~September 30,~~March 31, 2022, and December 31, 2021, interest rate caps and floors indexed to LIBOR ~~totaling $550 million were due to terminate after June 30, 2023. As of December 31, 2020, interest rate caps and floors indexed to LIBOR totaling $230 million were due to terminate in 2021 and~~ totaling $550 million were due to terminate after June 30, 2023.

Market activity in SOFR-indexed financial instruments continues to increase. During ~~2021~~2022 and in total since November 2018, the Bank has issued ~~$1.1~~$5.5 billion and ~~$102.3~~$209.0 billion, respectively, in SOFR-indexed consolidated obligation bonds. The ~~table below presents the par value of variable rate~~Bank had consolidated obligation bonds ~~by interest rate index~~indexed to SOFR totaling $10.5 billion at ~~September 30, 2021,~~March 31, 2022, and $5.6 billion at December 31, ~~2020.~~

Variable Rate Consolidated Obligation Bonds by Interest Rate Index
(In millions) Amount Outstanding
Interest Rate Index September 30, 2021 December 31, 2020
LIBOR $ 300 $ 6,798
SOFR 6,515 30,915
Total par value $ 6,815 $ 37,713
2021.

For more information on LIBOR-indexed advances, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Financial Condition – Segment Information – Advances-Related Business.” For more information on LIBOR-indexed investments and derivatives, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Risk Management.”

Segment Information

The Bank uses an analysis of financial results based on the financial components and adjusted net interest income of two operating segments, the advances-related business and the mortgage-related business, as well as other financial information, to review and assess financial performance and determine financial management strategies related to the operations of these two business segments. For purposes of segment reporting, adjusted net interest income includes income and expense associated with net settlements from economic hedges that are recorded in “Net gain/(loss) on derivatives” in other ~~income,~~income/(loss), excludes interest income and expense associated with changes in fair value of the derivative hedging instrument and the hedged item attributable to the hedged risk for designated fair value hedges that are recorded in net interest income, and excludes interest expense that is recorded in “Mandatorily redeemable capital stock.” ~~AHP~~Affordable Housing Program (AHP) assessments are not included in the segment reporting analysis but are incorporated into the Bank’s overall assessment of financial performance. For a reconciliation of the Bank’s operating segment adjusted net interest income to the Bank’s total net interest income, see “Item 1. Financial Statements – Note 10 – Segment Information.”

Advances-Related Business. The advances-related business consists of advances and other credit products, related financing and hedging instruments, liquidity and other non-MBS investments associated with the Bank’s role as a liquidity provider, and capital. Assets associated with this segment ~~decreased $11.1~~increased $3.2 billion to ~~$39.8~~$43.3 billion ~~(73%~~(77% of total assets) at ~~September 30, 2021,~~March 31, 2022, from ~~$50.9~~$40.1 billion (74% of total assets) at December 31, ~~2020.~~2021.

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

Adjusted net interest income for this segment was ~~$42~~$31 million in the ~~third~~first quarter of ~~2021,~~2022, a decrease of $21 million, or ~~33%~~40%, compared to ~~$63 million in the third quarter of 2020, which was primarily due to a decline in spreads on advances-related assets. Adjusted net interest income for this segment was $143~~$52 million in the first ~~nine months~~quarter of 2021, ~~a decrease of $55 million, or 28%, compared to $198 million in the first nine months of 2020,~~ which was primarily due to lower profit spreads and balances of advances and other credit products.

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Adjusted net interest income for this segment represented ~~40%~~31% and ~~54% of total adjusted net interest income for the third quarter of 2021 and 2020, respectively, and 42% and 59%~~40% of total adjusted net interest income for the first ~~nine months~~quarter of ~~2021~~2022 and ~~2020,~~2021, respectively.

Advances – The par value of advances outstanding ~~decreased~~increased by ~~$8.0~~$3.6 billion, or ~~26%~~21%, to ~~$22.3~~$20.5 billion at ~~September 30, 2021,~~March 31, 2022, from ~~$30.3~~$16.9 billion at December 31, ~~2020.~~2021. Average advances outstanding were ~~$28.5 billion for the third quarter of 2021, a 37% decrease from $44.9 billion for the third quarter of 2020. Average advances outstanding were $28.8~~$26.9 billion for the first ~~nine months~~quarter of ~~2021,~~2022, a ~~51%~~10% decrease from ~~$58.6~~$29.8 billion for the first ~~nine months~~quarter of ~~2020.~~2021. Outstanding balances of advances may significantly increase and decrease from period to period because of a member’s liquidity and financial strategies; therefore, ~~quarter~~period end balances may vary significantly from average balances for the ~~quarter.~~period.

~~As of September 30, 2021, advances~~Advances outstanding to the Bank’s top five borrowers and their affiliates ~~decreased~~increased by ~~$4.8~~$2.2 billion ~~from the Bank’s top five borrowers and their affiliates as of December 31, 2020, and advances outstanding~~ to ~~the Bank’s other borrowers decreased by $3.2 billion. Advances to the top five borrowers decreased to $14.7~~$11.1 billion at ~~September 30, 2021,~~March 31, 2022, from ~~$19.5~~$8.9 billion at December 31, ~~2020,~~2021, including First Republic Bank, whose advances and capital stock exceeded 10% of the Bank’s total advances and capital stock, respectively, as of September 30, 2021. If First Republic Bank continues to prepay advances or does not renew advances that come due, and if no other advances are made to replace these advances, the Bank’s total advances may be significantly reduced in following quarters. In addition, it was announced on September 21, 2021, that U.S. Bancorp entered into an agreement to acquire MUFG Union Bank, National Association (Union Bank), and First Republic Bank, whose advances exceeded 10% of the Bank’s total advances as of March 31, 2022. (See “Item 1. Financial Statements – Note 4 – Advances – Concentration Risk” for further information.) On September ~~30, 2021.~~21, 2021, U.S. Bancorp entered into an agreement to acquire Union Bank. U.S. Bancorp is not a member of the Bank. If Union Bank is no longer a member of the Bank or any successor to Union Bank does not become a member of the Bank, and if no other advances are made to replace Union Bank’s outstanding advances, the Bank’s total advances may be significantly reduced due to the loss of a significant member. ~~(See “Item 1. Financial Statements – Note 4 –~~Other acquisitions have been announced or completed involving large regional financial institutions in the Bank’s district, which potentially reduce the opportunity to grow advances from these large regional financial institutions. Advances ~~– Concentration Risk” and “Item 1. Financial Statements – Note 9 – Capital – Concentration” for further information.)~~outstanding to the Bank’s other borrowers increased by $1.4 billion. The ~~$8.0~~$3.6 billion ~~decrease~~increase in advances outstanding reflected a ~~$6.7~~$1.8 billion ~~decrease in fixed rate advances, a $1.1 billion decrease~~increase in adjustable rate advances, a $1.3 billion increase in variable rate advance, and a ~~$0.2~~$0.5 billion ~~decrease~~increase in ~~variable~~fixed rate advances.

The Bank has a significant long-term funding arrangement with a borrower that had, in prior periods, significantly contributed to the level of outstanding advances and may significantly contribute to the level of outstanding advances in the ~~future.~~future; however, there can be no assurance that any advances will be made under this arrangement.

The components of the advances portfolio at ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020,~~2021, are presented in the following table.

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Advances Portfolio by Product Type	Advances Portfolio by Product Type									Advances Portfolio by Product Type

		September 30, 2021				December 31, 2020					March 31, 2022				December 31, 2021
(Dollar in millions)		Par Value		Percentage of Total Par Value		Par Value		Percentage of Total Par Value
(Dollars in millions)										(Dollars in millions)	Par Value		Percentage of Total Par Value		Par Value		Percentage of Total Par Value
Adjustable – LIBOR	Adjustable – LIBOR	$	250	1	%	$	250	1	%	Adjustable – LIBOR	$	75	—	%	$	250	1	%

Adjustable – SOFR										Adjustable – SOFR	2,000		10		—		—

Adjustable – SOFR, callable at borrower’s option		—		—		1,100		4

Subtotal adjustable rate advances	Subtotal adjustable rate advances	250		1		1,350		5		Subtotal adjustable rate advances	2,075		10		250		1
Fixed	Fixed	5,274		24		6,108		20		Fixed	4,373		21		4,765		28
Fixed – amortizing	Fixed – amortizing	74		—		126		—		Fixed – amortizing	53		—		69		—
Fixed – with PPS(1)	Fixed – with PPS(1)	1,566		7		1,687		5		Fixed – with PPS(1)	1,362		7		1,406		9
Fixed – with FPS(1)	Fixed – with FPS(1)	14,293		64		19,919		66		Fixed – with FPS(1)	9,982		49		8,957		54
Fixed – with caps and PPS(1)	Fixed – with caps and PPS(1)	10		—		110		—		Fixed – with caps and PPS(1)	10		—		10		—

Fixed – callable at borrower’s option with FPS(1)	Fixed – callable at borrower’s option with FPS(1)	70		—		—		—		Fixed – callable at borrower’s option with FPS(1)	80		—		70		—

Fixed – putable at Bank’s option	Fixed – putable at Bank’s option	200		1		200		1		Fixed – putable at Bank’s option	100		1		200		1
Fixed – putable at Bank’s option with PPS(1)	Fixed – putable at Bank’s option with PPS(1)	20		—		20		—		Fixed – putable at Bank’s option with PPS(1)	20		—		20		—
Subtotal fixed rate advances	Subtotal fixed rate advances	21,507		96		28,170		92		Subtotal fixed rate advances	15,980		78		15,497		92
Daily variable rate	Daily variable rate	550		3		818		3		Daily variable rate	2,418		12		1,111		7
Total par value	Total par value	$	22,307	100	%	$	30,338	100	%	Total par value	$	20,473	100	%	$	16,858	100	%

(1)Partial prepayment symmetry (PPS) and full prepayment symmetry (FPS) are product features under which the Bank may charge the borrower a prepayment fee or pay the borrower a prepayment credit, depending on certain circumstances, such as movements in interest rates, when the advance is prepaid. ~~Any~~Advances with PPS are no longer offered, and any prepayment credit on an advance with PPS would be limited to the lesser of 10% of the par value of the advance or the gain recognized on the termination of the associated interest rate swap, which may also include a similar contractual gain limitation.

The following table presents the par value of LIBOR-indexed advances for LIBOR tenors that cease or will no longer be representative immediately after June 30, 2023, by redemption term at ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020.~~2021.


LIBOR-Indexed Advances by Redemption Term	LIBOR-Indexed Advances by Redemption Term					LIBOR-Indexed Advances by Redemption Term
(In millions)	(In millions)	Par Value				(In millions)	Par Value
Redemption Term	Redemption Term	September 30, 2021		December 31, 2020		Redemption Term	March 31, 2022		December 31, 2021

Due in 2021		$	—	$	100

Due in 2022	Due in 2022	250		250		Due in 2022	$	75	$	250

Due after June 30, 2023(1)	Due after June 30, 2023(1)	10		10		Due after June 30, 2023(1)	10		10
Total LIBOR-Indexed Advances(2)	Total LIBOR-Indexed Advances(2)	$	260	$	360	Total LIBOR-Indexed Advances(2)	$	85	$	260

(1)For more information on the Bank’s Transition Plan, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Financial Condition.”

(2)Total LIBOR-indexed advances include fixed rate advances with caps and PPS.

For a discussion of advances credit risk, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Risk Management – Credit Risk – Advances.”

Non-MBS Investments – The Bank’s non-MBS investment portfolio consists of financial instruments that are used primarily to facilitate the Bank’s role as a cost-effective provider of credit and liquidity to members and to support the operations of the Bank. The Bank’s total non-MBS investment portfolio ~~was $16.9 billion and $19.4~~remained consistent at $22.7 billion as of ~~September 30, 2021,~~March 31, 2022, and December 31, 2020, respectively. The decrease in the total size of the non-MBS investment portfolio primarily reflected a decrease in securities purchased under agreements to resell and U.S. Treasury securities, that was partially offset by an increase in Federal funds sold, as the Bank continued to manage its liquidity.2021.

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Interest rate payment terms for non-MBS investments classified as trading and AFS at ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020,~~2021, are detailed in the following table:

Non-MBS Investments: Interest Rate Payment Terms
(In millions) September 30, 2021 December 31, 2020
Fair value of fixed rate trading securities $ 2,258 $ 4,257
Amortized cost of AFS securities 856 4,980

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Non-MBS Investments: Interest Rate Payment Terms

(In millions)	March 31, 2022		December 31, 2021

Fair value of fixed rate trading securities	$	—	$	250



Amortized cost of AFS securities	545		503

Borrowings – Total liabilities (primarily consolidated obligations) funding the advances-related business ~~decreased~~increased to ~~$33.4~~$37.2 billion at ~~September 30, 2021,~~March 31, 2022, from ~~$44.7~~$33.8 billion at December 31, ~~2020.~~2021. For further information and discussion of the Bank’s joint and several liability for FHLBank consolidated obligations, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Financial Condition” and “Item 1. Financial Statements – Note 13 – Commitments and Contingencies.”

To meet the specific needs of certain investors, fixed and adjustable rate consolidated obligation bonds may contain embedded call options or other features that result in complex coupon payment terms. When these types of consolidated obligation bonds are issued on behalf of the Bank, the Bank typically enters into interest rate exchange agreements with features that offset the complex features of the bonds to convert the bonds to adjustable rate instruments. For example, the Bank may issue fixed rate callable bonds and simultaneously execute an interest rate exchange agreement with call features to offset the call options embedded in the callable bonds.

At ~~September 30,~~March 31, 2022, the notional amount of interest rate exchange agreements associated with the advances-related business totaled $47.4 billion, of which $15.8 billion were hedging advances, $27.7 billion were hedging consolidated obligations, $0.6 billion were economically hedging non-MBS investments, and $3.3 billion were offsetting derivatives. At December 31, 2021, the notional amount of interest rate exchange agreements associated with the advances-related business totaled ~~$58.6~~$48.0 billion, of which ~~$22.2~~$15.8 billion were hedging advances, ~~$27.3~~$24.3 billion were hedging consolidated obligations, ~~$3.1~~$0.8 billion were economically hedging non-MBS investments, and $6.0 billion were offsetting derivatives. At December 31, 2020, the notional amount of interest rate exchange agreements associated with the advances-related business totaled $67.4 billion, of which $28.5 billion were hedging advances, $20.7 billion were hedging consolidated obligations, $7.1 ~~billion were economically hedging non-MBS investments, and $11.1~~ billion were offsetting derivatives. The hedges associated with advances and consolidated obligations were primarily used to convert the fixed rate cash flows of the advances and consolidated obligations to adjustable rate cash flows or to manage the interest rate sensitivity and net repricing gaps of assets, liabilities, and interest rate exchange agreements.

FHLBank System consolidated obligation bonds and discount notes, along with similar debt securities issued by other GSEs such as Fannie Mae and Freddie Mac, are generally referred to as agency debt. The costs of debt issued by the FHLBanks and the other GSEs generally rise and fall with increases and decreases in general market interest rates.

In early March 2020, the FOMC stated that the COVID-19 outbreak presented evolving risks to economic activity. Consequently, the FOMC decided to lower the target range for the Federal funds rate by 50 basis points, to a target range of 1.00% to 1.25%, noting that it would closely monitor developments and their implications for the economic outlook and would act as appropriate to support the economy. On March 15, 2020, the ~~FOMC again~~Federal Open Market Committee (FOMC) lowered the Federal funds rate, to a target range of 0.00% to 0.25%, noting that the COVID-19 ~~outbreak~~pandemic had harmed communities and disrupted economic activity in many countries, including the United ~~States,~~States. At its March 2022 meeting, the FOMC stated that indicators of economic activity and ~~had significantly affected global financial conditions. In~~employment have continued to strengthen, and it raised the ~~weeks before and after~~target range of the ~~early March 2020~~ Federal funds rate to 0.25% to 0.50%, anticipating that ongoing increases in the target range will be appropriate. Interest rate ~~cut, interest rates declined significantly. Since~~changes may adversely impact and increase the ~~end~~volatility of reported earnings. The FOMC noted that the ~~first quarter~~implications for the U.S. economy from the Russian Federation’s invasion of ~~2020, financial conditions have improved,~~Ukraine are highly uncertain, but in ~~part because~~the near term it is likely to create additional upward pressure on inflation and weigh on economic activity. In addition, the FOMC expects to begin reducing its holdings of ~~the monetary~~Treasury securities and ~~fiscal stimulus measures taken,~~agency debt and ~~the Bank continues to be able to meet its funding needs.~~MBS at a coming meeting. The following table presents a comparison of selected market interest rates as of ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020.~~2021.

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Selected Market Interest Rates
Market Instrument September 30, 2021 December 31, 2020 September 30, 2020 December 31, 2019
Federal Reserve target range for overnight Federal funds 0.00-0.25 % 0.00-0.25 % 0.00-0.25 % 1.50-1.75 %
Secured Overnight Financing Rate 0.05 0.07 0.08 1.55
3-month Treasury bill 0.03 0.06 0.10 1.55
2-year Treasury note 0.28 0.12 0.13 1.57
5-year Treasury note 0.97 0.36 0.28 1.69


Selected Market Interest Rates

Market Instrument	March 31, 2022		December 31, 2021		March 31, 2021		December 31, 2020
Federal Reserve target range for overnight Federal funds	0.25-0.50	%	0.00-0.25	%	0.00-0.25	%	0.00-0.25	%
Secured Overnight Financing Rate	0.29		0.05		0.01		0.07
3-month Treasury bill	0.50		0.04		0.18		0.06

2-year Treasury note	2.34		0.73		0.16		0.12
5-year Treasury note	2.46		1.26		0.95		0.36

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

Assets associated with this segment were ~~$14.7~~$12.8 billion ~~(27%~~(23% of total assets) at ~~September 30, 2021,~~March 31, 2022, and ~~$17.8~~$14.1 billion at December 31, ~~2020~~2021 (26% of total assets).

Adjusted net interest income for this segment was ~~$62~~$68 million in the ~~third~~first quarter of ~~2021, an increase~~2022, a decrease of $9$10 million, or ~~17%~~13%, from ~~$53~~$78 million in the ~~third~~first quarter of ~~2020, which~~2021. This decrease was primarily a result of ~~higher spreads~~lower earnings from lower ~~funding costs. Adjusted net interest income for this segment was $200 million in the first nine months~~balances of ~~2021, an increase of $60 million, or 43%, from $140 million in the first nine months of 2020. This increase was primarily~~mortgage-related products, a ~~result of higher spreads from lower funding costs, an improvement~~decline in retrospective adjustment of the effective yields on mortgage loans and related delivery commitments, and a reversal of prior period expected credit losses, partially offset by ~~lower earnings~~higher spreads from lower ~~balances of mortgage-related products.~~

funding costs. Adjusted net interest income for this segment represented ~~60%~~69% and ~~46% of total adjusted net interest income for the third quarter of 2021 and 2020, respectively, and 58% and 41%~~60% of total adjusted net interest income for the first ~~nine months~~quarter of ~~2021~~2022 and ~~2020,~~2021, respectively.

MBS Investments – The Bank’s MBS portfolio was ~~$13.5~~$11.9 billion at ~~September 30, 2021,~~March 31, 2022, compared with ~~$15.8~~$13.0 billion at December 31, ~~2020.~~2021. During the first ~~nine months~~quarter of ~~2021,~~2022, the Bank’s MBS portfolio decreased ~~with $2.0~~as a result of $0.6 billion in principal repayments, ~~and~~ a ~~$0.3~~$0.4 billion decrease in basis adjustments, ~~partially offset by~~and $0.1 billion of fair value ~~gains.~~losses. Average MBS investments were ~~$13.6 billion in the third quarter of 2021, a decrease of $3.2 billion from $16.8 billion in the third quarter of 2020. Average MBS investments were $14.1~~$12.2 billion in the first ~~nine months~~quarter of ~~2021,~~2022, a decrease of ~~$3.1~~$2.6 billion from ~~$17.2~~$14.8 billion in the first ~~nine months~~quarter of ~~2020.~~2021. For a discussion of the composition of the Bank’s MBS portfolio, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Risk Management – Credit Risk – Investments.”

Interest rate payment terms for MBS ~~investments~~ classified as trading, AFS, and held-to-maturity (HTM) at ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020,~~2021, are shown in the following table:


MBS: Interest Rate Payment Terms

(In millions)	March 31, 2022		December 31, 2021
Fair value of trading securities:

Adjustable rate	$	2	$	2
Total trading securities	$	2	$	2
Amortized cost of AFS securities:
Fixed rate	$	7,868	$	8,423
Adjustable rate	980		1,083
Total AFS securities	$	8,848	$	9,506
Amortized cost of HTM securities:
Fixed rate	$	348	$	403
Adjustable rate	2,508		2,808
Total HTM securities	$	2,856	$	3,211

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MBS Investments: Interest Rate Payment Terms
(In millions) September 30, 2021 December 31, 2020
Fair value of trading securities:
Adjustable rate $ 2 $ 3
Total trading securities $ 2 $ 3
Amortized cost of AFS securities:
Fixed rate $ 8,496 $ 9,050
Adjustable rate 1,152 1,426
Total AFS securities $ 9,648 $ 10,476
Amortized cost of HTM securities:
Fixed rate $ 491 $ 1,013
Adjustable rate 3,030 4,068
Total HTM securities $ 3,521 $ 5,081

MPF Program – Under the MPF Program, the Bank purchased from members, for its own portfolio, conventional conforming fixed rate mortgage loans under the MPF Original product. In addition, the Bank facilitated the purchase of conforming fixed rate mortgage loans from members for concurrent sale to Fannie Mae under the MPF Xtra® product. When members sold loans under the MPF Xtra product, the loans were sold to a third-party investor and were not recorded on the Bank’s Statements of Condition. On December 17, 2020, the Bank announced that it would no longer offer new commitments to directly purchase, or to facilitate the purchase of, mortgage loans from its members. On March 31, 2021, the Bank closed all remaining open commitments to purchase mortgage loans for its own portfolio under the MPF Original ~~product, and by June 30, 2021, the Bank no longer facilitated the purchase of mortgage loans under the MPF Xtra~~ product.

As of September 30, 2021, all mortgage loans purchased by the Bank under the MPF Program were qualifying conventional conforming fixed rate, first lien mortgage loans with fully amortizing loan terms of up to 30 years. A conventional loan is one that is not insured by the federal government or any of its agencies. Conforming loan size, which is established annually as required by Finance Agency regulations, may not exceed the loan limits set by the Finance Agency each year. All MPF loans are secured by owner-occupied, one- to four-unit residential properties or single-unit second homes.

Mortgage loan balances decreased to ~~$1.1 billion~~$914 million at ~~September 30, 2021,~~March 31, 2022, from ~~$1.9 billion~~$980 million at December 31, ~~2020,~~2021, a decrease of ~~$0.8 billion.~~$66 million. Average mortgage loans were ~~$1.2 billion~~$943 million in the ~~third~~first quarter of ~~2021,~~2022, a decrease of ~~$1.5 billion~~$803 million from ~~$2.7 billion in the third quarter of 2020. Average mortgage loans were $1.5 billion~~$1,746 million in the first ~~nine months~~quarter of ~~2021, a decrease of $1.5 billion from $3.0 billion in the first nine months of 2020.~~2021.

At ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020,~~2021, the Bank held conventional conforming fixed rate mortgage loans purchased under one of two MPF products, MPF Plus or MPF Original, which are described in greater detail in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Risk Management – Credit Risk – MPF Program” in the Bank’s ~~2020~~2021 Form 10-K. Mortgage loan balances at ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020,~~2021, were as follows:

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Mortgage Loan Balances by MPF Product Type	Mortgage Loan Balances by MPF Product Type					Mortgage Loan Balances by MPF Product Type

(In millions)	(In millions)	September 30, 2021		December 31, 2020		(In millions)	March 31, 2022		December 31, 2021
MPF Plus	MPF Plus	$	113	$	139	MPF Plus	$	100	$	106
MPF Original	MPF Original	994		1,767		MPF Original	780		848
Subtotal	Subtotal	1,107		1,906		Subtotal	880		954
Unamortized premiums	Unamortized premiums	29		35		Unamortized premiums	37		28
Unamortized discounts	Unamortized discounts	(1)		(2)		Unamortized discounts	(2)		(1)
Mortgage loans held for portfolio	Mortgage loans held for portfolio	1,135		1,939		Mortgage loans held for portfolio	915		981
Less: Allowance for credit losses	Less: Allowance for credit losses	(1)		(4)		Less: Allowance for credit losses	(1)		(1)
Mortgage loans held for portfolio, net	Mortgage loans held for portfolio, net	$	1,134	$	1,935	Mortgage loans held for portfolio, net	$	914	$	980

The Bank performs periodic reviews of its mortgage loan portfolio to identify probable credit losses in the portfolio and to determine the likelihood of collection on the loans in the portfolio. For more information on the Bank’s mortgage loan portfolio, see “Item 1. Financial Statements – Note 5 – Mortgage Loans Held for Portfolio” in this report as well as “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Risk Management – Credit Risk – MPF Program” and “Item 8. Financial Statements and Supplementary Data – Note 1 – Summary of Significant Accounting Policies” in the Bank’s ~~2020~~2021 Form 10-K.

Borrowings – Total consolidated obligations funding the mortgage-related business decreased ~~$3.1~~$1.3 billion to ~~$14.7~~$12.8 billion at ~~September 30, 2021,~~March 31, 2022, from ~~$17.8~~$14.1 billion at December 31, ~~2020.~~2021. For further information and discussion of the Bank’s joint and several liability for FHLBank consolidated obligations, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Financial Condition” and “Item 1. Financial Statements – Note 13 – Commitments and Contingencies.”

The notional amount of derivative instruments associated with the mortgage-related business totaled ~~$17.0~~$15.4 billion at ~~September 30, 2021,~~March 31, 2022, of which ~~$8.0~~$7.9 billion were associated with MBS and ~~$9.0~~$7.5 billion were hedging or were associated with consolidated obligations funding the mortgage portfolio. The notional amount of derivative instruments associated with the mortgage-related business totaled ~~$11.2~~$15.6 billion at December 31, ~~2020,~~2021, of which ~~$8.3~~$8.0 billion were associated with MBS ~~$2.5~~and $7.6 billion were hedging or were associated with consolidated obligations funding the mortgage ~~portfolio, and $0.4 billion were offsetting derivatives.~~portfolio.

For information on the Bank’s management of interest rate risk and market risk related to the mortgage-related business segment, see “Item 3. Quantitative and Qualitative Disclosures About Market Risk – Segment Market Risk – Mortgage-Related Business.”

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Interest Rate Exchange Agreements

A derivative transaction or interest rate exchange agreement is a financial contract whose fair value is generally derived from changes in the value of an underlying asset or liability. The Bank uses interest rate swaps; interest rate cap and floor agreements; and callable and putable interest rate swaps (collectively, interest rate exchange agreements) to manage its exposure to market risks inherent in its ordinary course of business, including its lending, investment, and funding activities. For more information on the Bank’s interest rate exchange agreements by type of hedged item, hedging instrument, associated hedging strategy, accounting designation as specified under the accounting for derivative instruments and hedging activities, and notional amount, and the primary strategies that the Bank employs for using interest rate exchange agreements and the associated market risks, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Risk Management – Interest Rate Exchange Agreements” in the Bank’s ~~2020~~2021 Form 10-K.

Credit Risk. For a discussion of derivatives credit exposure, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Risk Management – Derivative Counterparties.”

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Derivative Counterparties. The following table presents the concentration in derivatives with derivative counterparties whose outstanding notional balances represented 10% or more of the Bank’s total notional amount of derivatives outstanding as of ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020.~~2021.

Concentration of Derivative Counterparties
(Dollars in millions) September 30, 2021 December 31, 2020
Derivative Counterparty
Credit
Rating(1)
Notional
Amount Percentage of
Total
Notional Amount
Credit
Rating(1)
Notional
Amount Percentage of
Total
Notional Amount
Uncleared
Others At least BBB $ 16,185 21 % At least BBB $ 7,227 9 %
Subtotal uncleared 16,185 21 7,227 9
Cleared
LCH Ltd(2)
Credit Suisse Securities (USA) LLC A 12,830 17 A 28,977 37
Morgan Stanley & Co. LLC A 46,550 62 A 42,440 54
Subtotal cleared 59,380 79 71,417 91
Total(3)
$ 75,565 100 % $ 78,644 100 %


Concentration of Derivative Counterparties

(Dollars in millions)	March 31, 2022					December 31, 2021
Derivative Counterparty	Credit Rating(1)	Notional Amount		Percentage of Total Notional Amount		Credit Rating(1)	Notional Amount		Percentage of Total Notional Amount
Uncleared




Others	At least BBB	$	20,149	32	%	At least BBB	$	18,381	29	%
Subtotal uncleared		20,149		32			18,381		29
Cleared
LCH Ltd(2)
Morgan Stanley & Co. LLC	A	28,185		45		A	33,268		52
Goldman Sachs & Co. LLC	A	14,510		23		A	11,967		19
Subtotal cleared		42,695		68			45,235		71
Total		$	62,844	100	%		$	63,616	100	%

(1)The credit ratings used by the Bank are based on the lower of Moody’s Investors Service (Moody’s) or S&P Global Ratings (S&P) ratings.

(2)London Clearing House (LCH) Ltd is the Bank’s counterparty for all of its cleared swaps and was rated AA- with a Stable CreditWatch by S&P at ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020.~~2021. For purposes of clearing swaps with LCH Ltd, ~~Credit Suisse Securities (USA)~~Morgan Stanley & Co. LLC and ~~Morgan Stanley~~Goldman Sachs & Co. LLC are the Bank’s clearing agents.

~~(3)Total notional amount at December 31, 2020, does not include $1 million of mortgage delivery commitments with members.~~

Liquidity and Capital Resources

The Bank’s financial strategies are designed to enable the Bank to expand and contract its assets, liabilities, and capital as membership composition and member credit needs change. The Bank’s liquidity and capital resources are designed to support its financial strategies. The Bank’s primary source of liquidity is its access to the debt capital markets through consolidated obligation issuance. The maintenance of the Bank’s capital resources is governed by its capital plan.

Liquidity

The Bank seeks to maintain the liquidity necessary to repay maturing consolidated obligations for which it is the primary obligor, meet other obligations and commitments, and meet expected and unexpected member credit demands. The Bank monitors its financial position to maintain ready access to available funds to meet normal

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transaction requirements, take advantage of appropriate investment opportunities, and manage unforeseen liquidity demands.

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

The Finance Agency has established base case liquidity guidelines that each FHLBank maintain sufficient liquidity at least equal to its anticipated cash outflows, assuming no new consolidated obligation issuance, renewal of all maturing advances, a specified percentage drawdown on letters of credit balances, and certain Treasury investments as a source of funds. The Finance Agency’s guidance provides that base case liquidity should generally be maintained for 10 to 30 days. The Bank actively monitors and manages refinancing risk. Finance Agency guidance specifies tolerance levels related to the size of each FHLBank’s funding gaps to measure refinancing risk as the

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difference between assets and liabilities that are scheduled to mature during a specified period, expressed as a percentage of total assets. The guidance limits three-month and one-year funding gaps generally between the range of –10% to –20% and –25% to –35%, respectively. Funding gaps are measured at monthend, using the average ratio for the three most recent monthends. The Bank is also required to perform an annual liquidity stress test and report the results to the Finance Agency.

In addition to the Finance Agency’s guidelines on contingent liquidity, the Bank models its cash commitments and expected cash flows on a daily basis to determine its projected liquidity position. If a market or operational disruption occurred that prevented the issuance of new consolidated obligations, the Bank could meet its obligations by: (i) allowing short-term liquid investments to mature, (ii) using eligible securities as collateral for repurchase agreement borrowings, and (iii) if necessary, allowing advances to mature without renewal. In addition, the Bank may be able to borrow on a short-term unsecured basis from other financial institutions (Federal funds purchased) or other FHLBanks (inter-FHLBank borrowings).

As of ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020,~~2021, the Bank held total sources of funds in an amount that would have allowed the Bank to meet its liquidity needs without issuing new consolidated obligations for over ten days, in accordance with the Finance Agency guidance. In addition, the Bank’s funding gap positions as of ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020,~~2021, were within the tolerance levels provided by the Finance Agency guidance. The Bank had committed to the issuance of $2.0 billion in consolidated obligations at March 31, 2022. The Bank had no commitments to issue consolidated obligations at December 31, 2021.

For more information, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources – Liquidity” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Risk Management – Liquidity Risk” in the Bank’s ~~2020~~2021 Form 10-K.

In addition, in the ordinary course of business, the Bank engages in financial transactions that, in accordance with U.S. GAAP, are not recorded on the Bank’s Statements of Condition or may be recorded on the Bank’s Statements of Condition in amounts that are different from the full contract or notional amount of the transactions. For example, the Bank routinely enters into commitments to extend advances and issues standby letters of credit. These commitments and standby letters of credit may represent future cash requirements of the Bank, although the standby letters of credit usually expire without being drawn upon. Standby letters of credit are subject to the same underwriting and collateral requirements as advances made by the Bank. At March 31, 2022, the Bank had $30 million in advance commitments and $15.9 billion in standby letters of credit outstanding. At December 31, 2021, the Bank had no advance commitments and $16.7 billion in standby letters of credit outstanding.

For additional information, see “Item 1. Financial Statements – Note 13 – Commitments and Contingencies.”

~~Regulatory Capital Requirements~~

Under the Housing and Economic Recovery Act of 2008 (Housing Act), the Director of the Finance Agency is responsible for setting the risk-based capital standards for the FHLBanks. The FHLBank Act and regulations governing the operations of the FHLBanks require that the Bank’s minimum capital stock requirement for shareholders must be sufficient to enable the Bank to meet its regulatory requirements for total capital, leverage capital, and risk-based capital. The Bank must maintain: (i) total regulatory capital in an amount equal to at least 4% of its total assets, (ii) leverage capital in an amount equal to at least 5% of its total assets, and (iii) permanent capital in an amount that is greater than or equal to its risk-based capital requirement.

The Finance Agency requires each FHLBank to maintain a ratio of at least 2% of capital stock to total assets in order to help preserve the cooperative structure incentives that encourage members to remain fully engaged in the oversight of their investment in the FHLBank. The Finance Agency will consider the proportion of capital stock to assets, measured on a daily average basis at monthend, when assessing each FHLBank’s capital management practices. As of September 30, 2021, and December 31, 2020, the Bank complied with this capital guidance.

The risk-based capital requirement is equal to the sum of the Bank’s credit risk, market risk, and operations risk capital requirements, all of which are calculated in accordance with the rules and regulations of the Finance Agency. The Finance Agency may require an FHLBank to maintain a greater amount of permanent capital than is required by the risk-based capital requirement as defined.

The following table shows the Bank’s compliance with the Finance Agency’s capital requirements at September 30, 2021, and December 31, 2020. The Bank’s risk-based capital requirement decreased to $1.1 billion at September 30, 2021, from $1.4 billion at December 31, 2020.

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Regulatory Capital Requirements
September 30, 2021 December 31, 2020
(Dollars in millions) Required Actual Required Actual
Risk-based capital $ 1,109 $ 6,059 $ 1,404 $ 5,966
Total regulatory capital $ 2,178 $ 6,059 $ 2,745 $ 5,966
Total regulatory capital ratio 4.00 % 11.12 % 4.00 % 8.69 %
Leverage capital $ 2,723 $ 9,088 $ 3,432 $ 8,949
Leverage ratio 5.00 % 16.69 % 5.00 % 13.04 %
Regulatory Capital Requirements

The Bank’s capital requirements are ~~more fully~~ discussed in “Item 1, Financial Statements – Note 9 – Capital” in this report and “Item 8. Financial Statements and Supplementary Data – Note 11 – Capital” in the Bank’s ~~2020~~2021 Form 10-K.

Risk Management

The Bank has an integrated corporate governance and internal control framework designed to support effective management of the Bank’s business activities and the risks inherent in these activities. As part of this framework, the Bank’s board of directors has adopted a Risk Governance Policy that outlines the key roles and responsibilities of the board of directors and management and sets forth how the Bank is organized to achieve its risk management objectives, including the implementation of the Bank’s strategic objectives, risk management strategies, and corporate ~~governance, and standards of conduct.~~governance. The policy also establishes the Bank’s risk governance organizational structure and identifies the general roles and responsibilities of the board of directors and management in establishing risk management policies, procedures, and guidelines; in overseeing the enterprise risk profile; and in implementing enterprise risk management processes and business strategies. The policy establishes an independent risk oversight function to identify, assess, measure, monitor, and report on the enterprise risk profile and risk management capabilities of the Bank. For more information, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Risk Management” in the Bank’s ~~2020~~2021 Form 10-K.

Advances. The Bank manages the credit risk of advances and other credit products by setting the credit and collateral terms available to individual members and housing associates based on their creditworthiness and on the quality and value of the assets they pledge as collateral. The Bank also has procedures to assess the mortgage loan quality and documentation standards of institutions that pledge mortgage loan collateral. In addition, the Bank has collateral policies and restricted lending procedures in place to help manage its exposure to institutions that experience difficulty in meeting their capital requirements or other standards of creditworthiness. These credit and collateral policies balance the Bank’s dual goals of meeting the needs of members and housing associates as a reliable source of liquidity and mitigating credit risk by adjusting credit and collateral terms in view of deterioration in creditworthiness. The Bank has never experienced a credit loss on an advance.

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

In addition, the total amount of advances made available to each member or housing associate may be limited by the financing availability assigned by the Bank, which is generally expressed as a percentage of the member’s or

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~~housing associate’s assets, which the Bank can change from time to time. The amount of financing availability is generally determined by the creditworthiness of the member or housing associate.~~

When a nonmember financial institution acquires some or all of the assets and liabilities of a member, including outstanding advances and Bank capital stock, the Bank may allow the advances to remain outstanding, at its discretion. The nonmember borrower is required to meetFor more information on the Bank’s ~~applicable~~management of credit ~~collateral,~~risk on its advances, see “Item 7. Management’s Discussion and ~~capital stock requirements, including requirements regarding creditworthiness~~Analysis of Financial Condition and ~~collateral borrowing capacity.~~Results of Operations – Risk Management – Credit Risk – Advances” in the Bank’s 2021 Form 10-K.

The following tables present a summary of the status of the credit outstanding and overall collateral borrowing capacity of the Bank’s member and nonmember borrowers as of ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020.~~2021.

Member and Nonmember Credit Outstanding and Collateral Borrowing Capacity
by Credit Quality Rating
(Dollars in millions)
September 30, 2021

All Members and
Nonmembers Members and Nonmembers with Credit Outstanding

Collateral Borrowing Capacity(2)
Member or Nonmember
Credit Quality Rating Number Number
Credit
Outstanding(1)
Total Used
1-3 253 128 $ 28,693 $ 200,896 14 %
4-6 73 32 9,140 30,929 30
7-10 3 2 20 39 51
Subtotal 329 162 37,853 231,864 16
Community development financial institutions (CDFIs) 7 7 117 130 90
Housing associates 2 — — — —
Total 338 169 $ 37,970 $ 231,994 16 %

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December 31, 2020
Member and Nonmember Credit Outstanding and Collateral Borrowing Capacity by Credit Quality Rating										Member and Nonmember Credit Outstanding and Collateral Borrowing Capacity by Credit Quality Rating

(Dollars in millions)										(Dollars in millions)
March 31, 2022										March 31, 2022
		All Members and Nonmembers	Members and Nonmembers with Credit Outstanding								All Members and Nonmembers	Members and Nonmembers with Credit Outstanding
						Collateral Borrowing Capacity(2)									Collateral Borrowing Capacity(2)
Member or Nonmember Credit Quality Rating	Member or Nonmember Credit Quality Rating	Number	Number	Credit Outstanding(1)		Total		Used		Member or Nonmember Credit Quality Rating	Number	Number	Credit Outstanding(1)		Total		Used
1-3	1-3	236	164	$	37,225	$	188,637	20	%	1-3	257	126	$	27,617	$	220,653	13	%
4-6	4-6	95	59	12,508		50,199		25		4-6	64	30	8,740		28,049		31
7-10	7-10	4	2	32		34		94		7-10	3	2	11		50		22
Subtotal	Subtotal	335	225	49,765		238,870		21		Subtotal	324	158	36,368		248,752		15
CDFIs		7	7	103		116		89
Community development financial institutions (CDFIs)										Community development financial institutions (CDFIs)	7	7	121		144		84
Housing associates	Housing associates	2	—	—		—		—		Housing associates	2	—	—		—		—
Total	Total	344	232	$	49,868	$	238,986	21	%	Total	333	165	$	36,489	$	248,896	15	%


December 31, 2021
	All Members and Nonmembers	Members and Nonmembers with Credit Outstanding
					Collateral Borrowing Capacity(2)
Member or Nonmember Credit Quality Rating	Number	Number	Credit Outstanding(1)		Total		Used
1-3	260	127	$	26,398	$	213,172	12	%
4-6	64	32	7,158		33,733		21
7-10	3	2	20		37		54
Subtotal	327	161	33,576		246,942		14
CDFIs	7	7	112		135		83
Housing associates	2	—	—		—		—
Total	336	168	$	33,688	$	247,077	14	%

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

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


Member and Nonmember Credit Outstanding and Collateral Borrowing Capacity by Unused Borrowing Capacity

(Dollars in millions)
March 31, 2022
Unused Borrowing Capacity	Number of Members and Nonmembers with Credit Outstanding	Credit Outstanding(1)		Collateral Borrowing Capacity(2)
0% – 10%	4	$	449	$	485
11% – 25%	10	1,142		1,312
26% – 50%	15	1,479		2,359
More than 50%	136	33,419		244,740
Total	165	$	36,489	$	248,896

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Member and Nonmember Credit Outstanding and Collateral Borrowing Capacity
by Unused Borrowing Capacity
(Dollars in millions)
September 30, 2021
Unused Borrowing Capacity Number of Members and Nonmembers with
Credit Outstanding
Credit
Outstanding(1)
Collateral
Borrowing
Capacity(2)
0% – 10% 4 $ 456 $ 468
11% – 25% 7 659 828
26% – 50% 14 1,605 2,414
More than 50% 144 35,250 228,284
Total 169 $ 37,970 $ 231,994


December 31, 2020
December 31, 2021							December 31, 2021
Unused Borrowing Capacity	Unused Borrowing Capacity	Number of Members and Nonmembers with Credit Outstanding	Credit Outstanding(1)		Collateral Borrowing Capacity(2)		Unused Borrowing Capacity	Number of Members and Nonmembers with Credit Outstanding	Credit Outstanding(1)		Collateral Borrowing Capacity(2)
0% – 10%	0% – 10%	18	$	1,417	$	1,511	0% – 10%	5	$	467	$	512
11% – 25%	11% – 25%	3	116		137		11% – 25%	8	895		1,079
26% – 50%	26% – 50%	27	9,858		18,210		26% – 50%	15	1,837		3,032
More than 50%	More than 50%	184	38,477		219,128		More than 50%	140	30,489		242,454
Total	Total	232	$	49,868	$	238,986	Total	168	$	33,688	$	247,077

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

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

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

Securities pledged as collateral are assigned borrowing capacities that reflect the securities’ market valuations and market liquidation risks. The following table presents the securities collateral pledged by all members and by nonmembers with credit outstanding at ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020.~~2021.


Composition of Securities Collateral Pledged by Members and by Nonmembers with Credit Outstanding	Composition of Securities Collateral Pledged by Members and by Nonmembers with Credit Outstanding									Composition of Securities Collateral Pledged by Members and by Nonmembers with Credit Outstanding

(In millions)	(In millions)	September 30, 2021				December 31, 2020				(In millions)	March 31, 2022				December 31, 2021
Securities Type with Current Credit Ratings	Securities Type with Current Credit Ratings	Current Par		Borrowing Capacity		Current Par		Borrowing Capacity		Securities Type with Current Credit Ratings	Current Par		Borrowing Capacity		Current Par		Borrowing Capacity
U.S. Treasury (bills, notes, bonds)	U.S. Treasury (bills, notes, bonds)	$	424	$	402	$	195	$	190	U.S. Treasury (bills, notes, bonds)	$	1,986	$	1,852	$	659	$	631
Agency (notes, subordinated debt, structured notes, indexed amortization notes, and Small Business Administration pools)	Agency (notes, subordinated debt, structured notes, indexed amortization notes, and Small Business Administration pools)	3,774		3,628		4,236		4,120		Agency (notes, subordinated debt, structured notes, indexed amortization notes, and Small Business Administration pools)	4,522		4,121		4,192		3,978
Agency pools and collateralized mortgage obligations	Agency pools and collateralized mortgage obligations	17,420		16,460		16,399		15,758		Agency pools and collateralized mortgage obligations	18,656		16,799		17,571		16,553

Private-label commercial MBS – publicly registered investment-grade-rated senior tranches	Private-label commercial MBS – publicly registered investment-grade-rated senior tranches	4		3		3		3		Private-label commercial MBS – publicly registered investment-grade-rated senior tranches	7		5		4		3

PLRMBS – private label investment-grade-rated senior tranches	PLRMBS – private label investment-grade-rated senior tranches	325		204		18		12		PLRMBS – private label investment-grade-rated senior tranches	314		189		311		194

Term deposits with the Bank	Term deposits with the Bank	66		66		16		16		Term deposits with the Bank	1		1		18		18

Total	Total	$	22,013	$	20,763	$	20,867	$	20,099	Total	$	25,486	$	22,967	$	22,755	$	21,377

With respect to loan collateral, most borrowers may choose to pledge loan collateral by specific identification or under a blanket lien. Insurance companies, CDFIs, and housing associates are required to pledge loan collateral by

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

The Bank may require certain borrowers to deliver pledged loan collateral to the Bank for one or more reasons, including the following: the borrower is a de novo institution (chartered within the last three years), an insurance company, a CDFI, or a housing associate; the Bank is concerned about the borrower’s creditworthiness; or the Bank is concerned about the maintenance of its collateral or the priority of its security interest.

As of ~~September 30, 2021,~~March 31, 2022, of the loan collateral pledged to the Bank, ~~15%~~13% was pledged by 2221 institutions by specific identification, 56% was pledged by ~~117~~116 institutions under a blanket lien with detailed reporting, and ~~29%~~31% was pledged by ~~129~~127 institutions under a blanket lien with summary reporting. For each borrower that pledges loan collateral, the Bank conducts loan collateral field reviews once every six months or every one, two, or three years, depending on the risk profile of the borrower and the types of collateral pledged by the borrower.

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As of ~~September 30, 2021,~~March 31, 2022, the Bank’s maximum borrowing capacities as a percentage of the assigned market value of mortgage loan collateral pledged under a blanket lien with detailed reporting were as follows: 85% for first lien residential mortgage loans, 81% for multifamily mortgage loans, 81% for commercial mortgage loans, and 70% for second lien residential mortgage loans. The maximum borrowing capacity for small business, small agribusiness, and small farm loans was 50% of the unpaid principal balance, although most of these loans are pledged under blanket lien with summary reporting, with a maximum borrowing capacity of 25%. The highest borrowing capacities are available to borrowers that pledge under a blanket lien with detailed reporting because the detailed loan information allows the Bank to assess the value of the collateral more precisely and because additional collateral is pledged under the blanket lien that may not receive borrowing capacity but may be liquidated to repay advances in the event of default. The Bank may review and change the maximum borrowing capacity for any type of loan collateral at any time.

The following table presents the mortgage loan collateral pledged by all members and by nonmembers with credit outstanding at ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020.~~2021.


Composition of Loan Collateral Pledged by Members and by Nonmembers with Credit Outstanding	Composition of Loan Collateral Pledged by Members and by Nonmembers with Credit Outstanding									Composition of Loan Collateral Pledged by Members and by Nonmembers with Credit Outstanding

(In millions)	(In millions)	September 30, 2021				December 31, 2020				(In millions)	March 31, 2022				December 31, 2021
Loan Type	Loan Type	Unpaid Principal Balance		Borrowing Capacity		Unpaid Principal Balance		Borrowing Capacity		Loan Type	Unpaid Principal Balance		Borrowing Capacity		Unpaid Principal Balance		Borrowing Capacity
First lien residential mortgage loans	First lien residential mortgage loans	$	165,890	$	130,066	$	167,058	$	131,671	First lien residential mortgage loans	$	176,532	$	137,698	$	175,319	$	140,994
Second lien residential mortgage loans and home equity lines of credit	Second lien residential mortgage loans and home equity lines of credit	13,828		6,479		15,349		6,441		Second lien residential mortgage loans and home equity lines of credit	13,340		6,750		13,659		6,653
Multifamily mortgage loans	Multifamily mortgage loans	39,989		27,515		43,324		28,376		Multifamily mortgage loans	46,659		31,773		41,239		28,517
Commercial mortgage loans	Commercial mortgage loans	71,626		46,250		78,886		48,637		Commercial mortgage loans	74,613		48,635		73,750		48,394
Loan participations(1)	Loan participations(1)	657		200		3,783		2,591		Loan participations(1)	988		377		1,064		383
Small business, small farm, and small agribusiness loans	Small business, small farm, and small agribusiness loans	3,077		721		4,820		1,171		Small business, small farm, and small agribusiness loans	2,743		696		3,157		759

Other										Other	21		—		—		—
Total	Total	$	295,067	$	211,231	$	313,220	$	218,887	Total	$	314,896	$	225,929	$	308,188	$	225,700

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

The Bank holds a security interest in subprime residential mortgage loans pledged as collateral. Subprime loans are defined as loans with a borrower FICO score of 660 or less at origination, or if the original FICO score is not available, as loans with a current borrower FICO score of 660 or less. At ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020,~~2021, the unpaid principal balance of these loans totaled $5$4.7 billion and $5$5.4 billion, respectively. The Bank reviews and assigns borrowing capacities to subprime mortgage loans as it does for all other types of loan collateral, taking into account the known credit attributes in the pricing of the loans. All advances, including those made to borrowers

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pledging subprime mortgage loans, are required to be fully collateralized. The Bank limits the amount of borrowing capacity that may be supported by subprime collateral.

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

~~The Bank monitors~~For more information on the Bank’s management of credit risk on its investments, ~~for substantive changes~~see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Risk Management – Credit Risk – Investments” in relevant market conditions and any declines in fair value. For securities in an unrealized loss position because of factors other than movements in interest rates, such as widening of mortgage asset spreads, the Bank considers whether it expects to recover the entire amortized cost basis of the security by comparing the expectations of the present value of the cash flows to be collected from the security with the amortized cost basis of the security. If the Bank’s ~~expectations of the present value of the cash flows to be collected is less than the amortized cost basis, the difference is considered the credit loss.~~

When the fair value of an individual investment security falls below its amortized cost, the Bank evaluates whether an allowance for credit losses is necessary on the security. The Bank recognizes an allowance for credit losses when it determines that it will be unable to recover the entire amortized cost basis of the security and the fair value of the investment security is less than its amortized cost. The Bank considers its intent to hold the security and whether it is more likely than not that the Bank will be required to sell the security before its anticipated recovery of the remaining cost basis, and other factors. The Bank generally views changes in the fair value of the securities caused by movements in interest rates to be temporary.2021 Form 10-K.

The following ~~tables present~~table presents the Bank’s investment credit exposure at ~~the dates indicated,~~March 31, 2022, based on the lowest of the long-term credit ratings provided by Moody’s, S&P, or Fitch Ratings (Fitch) ratings.

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Investment Credit Exposure
(In millions)
September 30, 2021
Carrying Value

Credit Rating(1)
Investment Type AAA AA A BBB Below Investment Grade Unrated Total
U.S. obligations – Treasury securities $ — $ 3,114 $ — $ — $ — $ — $ 3,114
MBS:
Other U.S. obligations – single-family:
Ginnie Mae — 137 — — — — 137
GSEs – single-family:
Freddie Mac — 250 — — — — 250
Fannie Mae(2)
6 873 4 — 2 — 885
Subtotal 6 1,123 4 — 2 — 1,135
GSEs – multifamily:
Freddie Mac — 2,126 — — — — 2,126
Fannie Mae — 8,156 — — — — 8,156
Subtotal — 10,282 — — — — 10,282
Total GSEs 6 11,405 4 — 2 — 11,417
PLRMBS:
Prime — 18 22 39 128 97 304
Alt-A — 21 36 41 1,016 520 1,634
Total PLRMBS — 39 58 80 1,144 617 1,938
Total MBS 6 11,581 62 80 1,146 617 13,492
Total securities 6 14,695 62 80 1,146 617 16,606
Interest-bearing deposits — — 1,125 — — — 1,125
Securities purchased under agreements to resell — 5,500 1,000 — — — 6,500
Federal funds sold — 1,400 4,383 350 — — 6,133
Total investments $ 6 $ 21,595 $ 6,570 $ 430 $ 1,146 $ 617 $ 30,364

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(In millions)
December 31, 2020
Carrying Value

Credit Rating(1)
Investment Type AA A BBB Below Investment Grade Unrated Total
U.S. obligations – Treasury securities $ 9,240 $ — $ — $ — $ — $ 9,240
MBS:
Other U.S. obligations – single-family:
Ginnie Mae 264 — — — — 264
GSEs – single-family:
Freddie Mac 511 — — — — 511
Fannie Mae(2)
1,222 4 — 3 — 1,229
Subtotal 1,733 4 — 3 — 1,740
GSEs – multifamily:
Freddie Mac 2,695 — — — — 2,695
Fannie Mae 8,755 — — — — 8,755
Subtotal 11,450 — — — — 11,450
Total GSEs 13,183 4 — 3 — 13,190
PLRMBS:
Prime 22 26 53 162 104 367
Alt-A 31 49 33 1,298 548 1,959
Total PLRMBS 53 75 86 1,460 652 2,326
Total MBS 13,500 79 86 1,463 652 15,780
Total securities 22,740 79 86 1,463 652 25,020
Interest-bearing deposits 1 1,077 — — — 1,078
Securities purchased under agreements to resell 6,000 1,250 — — — 7,250
Federal funds sold — 1,880 — — — 1,880
Total investments $ 28,741 $ 4,286 $ 86 $ 1,463 $ 652 $ 35,228


Investment Credit Exposure

(In millions)
March 31, 2022
	Carrying Value
	Credit Rating(1)
Investment Type	AAA		AA		A		BBB		Below Investment Grade		Unrated		Total




U.S. obligations – Treasury securities	$	—	$	545	$	—	$	—	$	—	$	—	$	545



MBS:
Other U.S. obligations – single-family:
Ginnie Mae	—		101		—		—		—		—		101
GSEs – single-family:
Freddie Mac	—		180		—		—		—		—		180
Fannie Mae(2)	5		732		3		—		2		—		742
Subtotal	5		912		3		—		2		—		922
GSEs – multifamily:
Freddie Mac	—		1,758		—		—		—		—		1,758
Fannie Mae	—		7,457		—		—		—		—		7,457
Subtotal	—		9,215		—		—		—		—		9,215
Total GSEs	5		10,127		3		—		2		—		10,137
PLRMBS:
Prime	—		13		22		24		111		94		264
Alt-A	—		20		29		31		830		471		1,381
Total PLRMBS	—		33		51		55		941		565		1,645
Total MBS	5		10,261		54		55		943		565		11,883
Total securities	5		10,806		54		55		943		565		12,428
Interest-bearing deposits	—		—		1,125		—		—		—		1,125
Securities purchased under agreements to resell	—		12,500		1,000		—		—		—		13,500
Federal funds sold	—		2,120		5,344		112		—		—		7,576
Total investments	$	5	$	25,426	$	7,523	$	167	$	943	$	565	$	34,629

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

(2)The Bank has one security guaranteed by Fannie Mae but rated BB at ~~September 30, 2021, and December~~March 31, ~~2020,~~2022, by S&P because of extraordinary expenses incurred during bankruptcy of the security's sponsor.

For all securities in its AFS and HTM portfolios, for Federal funds sold, and for securities purchased under agreements to resell, the Bank does not intend to sell any security and it is not more likely than not that the Bank will be required to sell any security before its anticipated recovery of the remaining amortized cost basis.

The Bank invests in short-term unsecured interest-bearing deposits, short-term unsecured Federal funds sold, and securities purchased under agreements to resell with member and nonmember counterparties, all of which are highly rated.

The Bank actively monitors its credit exposures and the credit quality of its counterparties, including an assessment of each counterparty’s financial performance, capital adequacy, likelihood of parental or sovereign support, and the current market perceptions of the counterparties. The Bank may also consider general macroeconomic and market conditions and political stability when establishing limits on unsecured investments with U.S. branches and agency offices of foreign commercial banks. As a result of deteriorating financial condition or concerns about adverse economic or market developments, the Bank may reduce limits or terms on unsecured investments or suspend a counterparty.

Finance Agency regulations limit the amount of unsecured credit that an individual FHLBank may extend to a single counterparty. In addition, the FHLBanks are prohibited by Finance Agency regulation from investing in financial instruments issued by non-U.S. entities other than those issued by U.S. branches and agency offices of foreign commercial banks.

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Under Finance Agency regulations, the total amount of unsecured credit that an FHLBank may extend to a group of affiliated counterparties for term extensions of unsecured credit and overnight Federal funds sales, combined, may not exceed 30% of the FHLBank’s total capital. These limits on affiliated counterparty groups are in addition to the limits on extensions of unsecured credit applicable to any single counterparty within the affiliated group.

~~The~~ following table presents the unsecured credit exposure with counterparties by investment type at ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020.~~2021.

Unsecured Investment Credit Exposure by Investment Type

Carrying Value(1)
(In millions) September 30, 2021 December 31, 2020
Interest-bearing deposits $ 1,125 $ 1,077
Federal funds sold 6,133 1,880
Total $ 7,258 $ 2,957

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Unsecured Investment Credit Exposure by Investment Type

	Carrying Value(1)
(In millions)	March 31, 2022		December 31, 2021
Interest-bearing deposits	$	1,125	$	1,125


Federal funds sold	7,576		5,348
Total	$	8,701	$	6,473

(1)Excludes unsecured investment credit exposure to U.S. government agencies and instrumentalities, government-sponsored enterprises, and supranational entities and does not include related accrued interest as of ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020.~~2021.

The following table presents the credit ratings of the unsecured investment credit exposures presented by the domicile of the counterparty or the domicile of the counterparty’s parent for U.S. branches and agency offices of foreign commercial banks, based on the lowest of the credit ratings provided by Moody’s, S&P, or Fitch ratings. This table does not reflect the foreign sovereign government’s credit rating. At ~~September 30, 2021, 80%~~March 31, 2022, 86% of the Bank’s total unsecured investments were to U.S. branches and agency offices of foreign commercial banks. At ~~September 30, 2021,~~March 31, 2022, all of the unsecured investments held by the Bank had overnight maturities.


Ratings of Unsecured Investment Credit Exposure by Domicile of Counterparty	Ratings of Unsecured Investment Credit Exposure by Domicile of Counterparty									Ratings of Unsecured Investment Credit Exposure by Domicile of Counterparty

(In millions)	(In millions)									(In millions)
September 30, 2021
March 31, 2022										March 31, 2022
		Carrying Value(1)									Carrying Value(1)
		Credit Rating(2)									Credit Rating(2)
Domicile of Counterparty	Domicile of Counterparty	AA		A		BBB		Total		Domicile of Counterparty	AA		A		BBB		Total
Domestic	Domestic	$	—	$	1,125	$	350	$	1,475	Domestic	$	—	$	1,125	$	112	$	1,237

U.S. branches and agency offices of foreign commercial banks:	U.S. branches and agency offices of foreign commercial banks:									U.S. branches and agency offices of foreign commercial banks:
Australia	Australia	—		1,400		—		1,400		Australia	—		1,420		—		1,420

Canada	Canada	1,400		1,400		—		2,800		Canada	1,420		1,520		—		2,940
Finland										Finland	700		—		—		700

Germany										Germany	—		1,000		—		1,000

Netherlands										Netherlands	—		1,404		—		1,404

Netherlands		—		113		—		113

Sweden		—		920		—		920

United Kingdom		—		550		—		550
Total U.S. branches and agency offices of foreign commercial banks	Total U.S. branches and agency offices of foreign commercial banks	1,400		4,383		—		5,783		Total U.S. branches and agency offices of foreign commercial banks	2,120		5,344		—		7,464
Total unsecured credit exposure	Total unsecured credit exposure	$	1,400	$	5,508	$	350	$	7,258	Total unsecured credit exposure	$	2,120	$	6,469	$	112	$	8,701

(2)Does not reflect changes in ratings, outlook, or watch status occurring after ~~September 30, 2021.~~March 31, 2022. These ratings represent the lowest rating available for each unsecured investment owned by the Bank, based on the ratings provided by Fitch, Moody’s, or S&P. The Bank’s internal rating may differ from this rating.

The Bank’s MBS investments include PLRMBS, all of which were AAA-rated at the time of purchase, and agency residential MBS, which are backed by Fannie Mae, Freddie Mac, or Ginnie Mae. Some of the PLRMBS were issued by or purchased from members, former members, or their affiliates. The Bank has investment credit limits and terms for these investments that do not differ for members and nonmembers. Regulatory policy limits total MBS investments, including unpaid principal balance, unamortized premiums and discounts, and net charge-offs, to three times the Bank’s regulatory capital at the time of purchase. At ~~September 30, 2021,~~March 31, 2022, the Bank’s MBS portfolio was

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~~207%~~ 194% of Bank regulatory capital (as determined in accordance with regulations governing the operations of the FHLBanks). The Bank has not purchased any PLRMBS since the first quarter of 2008.

The Bank executes all MBS investments without preference to the status of the counterparty or the issuer of the investment as a nonmember, member, or affiliate of a member. When the Bank executes non-MBS investments with members, the Bank may give consideration to their secured credit availability and the Bank’s advances price levels.

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At ~~September 30, 2021,~~March 31, 2022, PLRMBS representing 11% of the amortized cost of the Bank’s MBS portfolio were labeled Alt-A by the issuer. These PLRMBS are generally collateralized by mortgage loans that are considered less risky than subprime loans but more risky than prime loans. These loans are generally made to borrowers with credit scores that are high enough to qualify for a prime mortgage loan, but the loans may not meet standard underwriting guidelines for documentation requirements, property type, or loan-to-value ratios.

As of ~~September 30, 2021,~~March 31, 2022, the Bank’s investment in MBS had gross unrealized losses totaling ~~$10~~$22 million, $6$9 million of which were related to PLRMBS. These gross unrealized losses were primarily due to illiquidity in the MBS market and market expectations of the credit performance of loan collateral underlying these securities, which caused these assets to be valued at discounts to their amortized cost.

For its agency MBS, the Bank expects to recover the entire amortized cost basis of these securities because the Bank determined that the strength of the issuers’ guarantees through direct obligations or support from the U.S. government is sufficient to protect the Bank from losses. As a result, the Bank determined that, as of ~~September 30, 2021,~~March 31, 2022, all of the gross unrealized losses on its agency MBS are temporary.

If conditions in the housing and mortgage markets and general business and economic conditions deteriorate, the fair value of MBS may decline further, and the Bank may experience additional credit losses on ~~additional~~ PLRMBS in future ~~periods, as well as further impairment of PLRMBS that were identified as other-than-temporarily impaired prior to January 1, 2020.~~periods. Additional credit losses could adversely affect the Bank’s earnings and retained earnings and its ability to pay dividends and repurchase capital stock. The Bank cannot predict whether it will be required to record an allowance for credit losses on its PLRMBS in the future.

The Bank has exposure to investment securities with interest rates indexed to LIBOR. The following tables present the unpaid principal balance of adjustable rate investment securities by interest rate index and the unpaid principal balance of LIBOR-indexed investments for LIBOR tenors that cease or will no longer be representative immediately after June 30, 2023, by redemption term at ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020.~~2021. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Financial Condition” for more information on the LIBOR transition and on SOFR as an alternative market benchmark.


Adjustable Rate Investment Securities by Interest Rate Index	Adjustable Rate Investment Securities by Interest Rate Index			Adjustable Rate Investment Securities by Interest Rate Index
(In millions)	(In millions)	MBS			(In millions)			MBS
Interest Rate Index	Interest Rate Index	September 30, 2021				December 31, 2020			Interest Rate Index	March 31, 2022		December 31, 2021
LIBOR(1)	LIBOR(1)	$	4,404			$	5,744		LIBOR(1)	$	3,696	$	4,110

Constant maturity Treasury	Constant maturity Treasury	78				101			Constant maturity Treasury	61		64
Other		—				1

Total adjustable rate investment securities(2)	Total adjustable rate investment securities(2)	$	4,482			$	5,846		Total adjustable rate investment securities(2)	$	3,757	$	4,174

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LIBOR-Indexed Investment Securities by Redemption Term	LIBOR-Indexed Investment Securities by Redemption Term					LIBOR-Indexed Investment Securities by Redemption Term
(In millions)	(In millions)	MBS				(In millions)	MBS
Redemption Term	Redemption Term	September 30, 2021		December 31, 2020		Redemption Term	March 31, 2022		December 31, 2021

Due in 2022		$	—	$	1

Due through June 30, 2023	Due through June 30, 2023	19		98		Due through June 30, 2023	$	10	$	12
Due thereafter(2)	Due thereafter(2)	4,385		5,645		Due thereafter(2)	3,686		4,098
Total LIBOR-Indexed investment securities	Total LIBOR-Indexed investment securities	$	4,404	$	5,744	Total LIBOR-Indexed investment securities	$	3,696	$	4,110

(1)Certain MBS with multiple indices where LIBOR is the majority index are included in this amount.

(2)For more information on the Bank’s Transition Plan, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Financial Condition.”

Derivative Counterparties. The Bank has adopted credit policies and exposure limits for uncleared derivatives counterparty credit exposure. Interest rate exchange agreements may be either ~~entered into directly with~~uncleared or cleared at a counterparty (uncleared derivatives) or executed either with an executing dealer or on a swap execution facility and then cleared through a futures commission merchant or clearing agent with a derivatives clearing organization (cleared derivatives).clearinghouse.

Uncleared Derivatives – The Bank selects only highly rated derivative dealers and major banks (derivative dealer counterparties) that meet the Bank’s eligibility criteria to act as counterparties for its uncleared derivative activities.

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In addition, for all uncleared derivative transactions, the Bank has entered into master netting agreements and bilateral credit support agreements with all ~~active~~its derivative dealer counterparties that provide for delivery of margin ~~at specified levels~~ to limit the Bank’s net unsecured credit exposure to these counterparties. Under these policies and agreements, the amount of unsecured credit exposure to an individual derivative dealer counterparty is set at zero (subject to a minimum transfer amount).

The Bank is subject to the risk of potential nonperformance by ~~the counterparties to~~its counterparty in a derivative ~~agreements.~~transaction. A counterparty generally must deliver or return margin to the Bank if the total unsecured exposure to that counterparty exceeds the minimum transfer amount. As a result of these risk mitigation initiatives, the Bank does not anticipate any credit losses on its uncleared derivative transactions with counterparties as of ~~September 30, 2021.~~March 31, 2022.

Cleared Derivatives – In a cleared derivatives transaction, the Bank is subject to nonperformance by the clearinghouse and its futures commission merchant or clearing agent. The requirement that the Bank post initial and variation margin through a clearing agent to the clearinghouse exposes the Bank to institutional credit risk if the clearing agent fails to meet its obligations. The use of a clearinghouse, or central counterparty, lowers overall credit risk exposure because it employs standard valuation and initial and variation margin processes and is specifically designed to withstand remote but plausible counterparty default credit events. Variation margin is posted or collected for changes in the value of the portfolio, and initial margin is posted for changes in risk profile of the portfolio. Because of an increase in market values of cleared derivatives during the first ~~nine months~~quarter of 2022 and the first quarter of 2021, there was an increase in variation margin collected on cleared derivatives that resulted in an increase in net cash provided by operating activities reported on the Statements of Cash Flows. Because of a decline in market values of cleared derivatives during the first nine months of 2020, there was an increase in variation margin posted on cleared derivatives that resulted in an increase in net cash used in operating activities reported on the Statements of Cash Flows. The Bank does not anticipate any credit losses on its cleared derivatives as of ~~September 30, 2021.~~March 31, 2022.

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

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


Credit Exposure to Derivative Dealer Counterparties

(In millions)
March 31, 2022
Counterparty Credit Rating(1)	Notional Amount		Net Fair Value of Derivatives Before Collateral		Cash Collateral Pledged to/ (from) Counterparty		Noncash Collateral Pledged to/ (from) Counterparty		Net Credit Exposure to Counterparties
Asset positions with credit exposure:
Uncleared derivatives

A	$	6,195	$	20	$	(18)	$	—	$	2


Liability positions with credit exposure:
Uncleared derivatives

A	3,625		(162)		165		—		3
BBB	4,683		(188)		195		—		7
Cleared derivatives(2)	42,695		(22)		26		251		255
Total derivative positions with credit exposure to nonmember counterparties	57,198		$	(352)	$	368	$	251	$	267


Derivative positions without credit exposure	5,646
Total notional	$	62,844

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Credit Exposure to Derivative Dealer Counterparties
(In millions)
September 30, 2021
Counterparty Credit Rating(1)
Notional Amount Net Fair Value of Derivatives Before Collateral Cash Collateral Pledged
to/ (from) Counterparty Noncash Collateral Pledged
to/ (from) Counterparty Net Credit
Exposure to Counterparties
Asset positions with credit exposure:
Uncleared derivatives
A $ 46 $ 1 $ (1) $ — $ —
Liability positions with credit exposure:
Uncleared derivatives
A 50 (1) 1 — —
Cleared derivatives(2)
59,380 (9) 20 284 295
Total derivative positions with credit exposure to nonmember counterparties 59,476 $ (9) $ 20 $ 284 $ 295
Derivative positions without credit exposure 16,089
Total notional $ 75,565


December 31, 2020
December 31, 2021												December 31, 2021
Counterparty Credit Rating(1)	Counterparty Credit Rating(1)	Notional Amount		Net Fair Value of Derivatives Before Collateral		Cash Collateral Pledged to/ (from) Counterparty		Non-cash Collateral Pledged to/ (from) Counterparty		Net Credit Exposure to Counterparties		Counterparty Credit Rating(1)	Notional Amount		Net Fair Value of Derivatives Before Collateral		Cash Collateral Pledged to/ (from) Counterparty		Non-cash Collateral Pledged to/ (from) Counterparty		Net Credit Exposure to Counterparties
Asset positions with credit exposure:	Asset positions with credit exposure:											Asset positions with credit exposure:
Uncleared derivatives	Uncleared derivatives											Uncleared derivatives

A	A	$	91	$	3	$	(3)	$	—	$	—	A	$	1,500	$	9	$	(9)	$	—	$	—

Liability positions with credit exposure:	Liability positions with credit exposure:											Liability positions with credit exposure:
Uncleared derivatives	Uncleared derivatives											Uncleared derivatives

A	A	101		(4)		4		—		—		A	42		(1)		1		—		—

Cleared derivatives(2)	Cleared derivatives(2)	71,417		(12)		13		379		380		Cleared derivatives(2)	45,235		(7)		15		252		260
Total derivative positions with credit exposure to nonmember counterparties	Total derivative positions with credit exposure to nonmember counterparties	71,609		(13)		14		379		380		Total derivative positions with credit exposure to nonmember counterparties	46,777		$	1	$	7	$	252	$	260
Member institutions(3)		1		—		—		—		—
Total		71,610		$	(13)	$	14	$	379	$	380

Derivative positions without credit exposure	Derivative positions without credit exposure	7,035										Derivative positions without credit exposure	16,839
Total notional	Total notional	$	78,645									Total notional	$	63,616

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

(2)Represents derivative transactions cleared with LCH Ltd, the Bank’s clearinghouse, which was rated AA- with a Stable CreditWatch by S&P at ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020.~~

~~(3)Member institutions include mortgage delivery commitments with members.~~2021.

The Bank primarily executes overnight index swap (OIS) derivatives indexed to SOFR and the Effective Federal Funds Rate (EFFR) to manage interest rate risk. The following table presents the notional amount of interest rate swaps by interest rate index broken out by the pay or receive leg at ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020.~~2021.

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LIBOR-Indexed Interest Rate Swaps by Interest Rate Index	LIBOR-Indexed Interest Rate Swaps by Interest Rate Index									LIBOR-Indexed Interest Rate Swaps by Interest Rate Index

(In millions)	(In millions)	September 30, 2021				December 31, 2020				(In millions)	March 31, 2022				December 31, 2021
Interest Rate Index	Interest Rate Index	Pay Leg		Receive Leg		Pay Leg		Receive Leg		Interest Rate Index	Pay Leg		Receive Leg		Pay Leg		Receive Leg
Fixed	Fixed	$	34,345	$	40,371	$	47,425	$	24,640	Fixed	$	23,674	$	38,620	$	25,846	$	37,220
LIBOR	LIBOR	374		2,363		2,578		9,647		LIBOR	426		1,332		337		1,533
SOFR	SOFR	32,547		26,315		20,481		32,609		SOFR	37,734		21,344		35,887		22,526
OIS - EFFR	OIS - EFFR	7,749		5,966		7,380		10,968		OIS - EFFR	460		998		996		1,787
Total notional amount	Total notional amount	$	75,015	$	75,015	$	77,864	$	77,864	Total notional amount	$	62,294	$	62,294	$	63,066	$	63,066

The following tables present the notional amount of interest rate swaps with LIBOR exposure for LIBOR tenors that cease or will no longer be representative immediately after June 30, 2023, by termination date broken out by the pay or receive leg and further bifurcated by cleared and uncleared derivative transactions at ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020.~~2021. As of ~~September 30,~~March 31, 2022, and December 31, 2021, interest rate caps and floors indexed to LIBOR ~~totaling $550 million were due to terminate after June 30, 2023. As of December 31, 2020, interest rate caps and floors indexed to LIBOR totaling $230 million were due to terminate in 2021 and~~ totaling $550 million were due to terminate after June 30, 2023. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Financial Condition” for more information on the LIBOR transition and on SOFR as an alternative market benchmark.


LIBOR-Indexed Interest Rate Swaps by Termination Date	LIBOR-Indexed Interest Rate Swaps by Termination Date									LIBOR-Indexed Interest Rate Swaps by Termination Date
(In millions)	(In millions)									(In millions)
September 30, 2021
March 31, 2022										March 31, 2022
		Pay Leg				Receive Leg					Pay Leg				Receive Leg
Termination Date	Termination Date	Cleared		Uncleared		Cleared		Uncleared		Termination Date	Cleared		Uncleared		Cleared		Uncleared

Terminates in 2021		$	—	$	—	$	453	$	21

Terminates in 2022	Terminates in 2022	210		35		517		112		Terminates in 2022	$	35	$	35	$	398	$	73
Terminates through June 30, 2023	Terminates through June 30, 2023	50		—		309		23		Terminates through June 30, 2023	56		—		309		20
Terminates thereafter(1)	Terminates thereafter(1)	79		—		641		287		Terminates thereafter(1)	300		—		522		10
Total Notional Amount	Total Notional Amount	$	339	$	35	$	1,920	$	443	Total Notional Amount	$	391	$	35	$	1,229	$	103

December 31, 2020
Pay Leg Receive Leg
Termination Date Cleared Uncleared Cleared Uncleared
Terminates in 2021 $ 1,523 $ 238 $ 6,852 $ 213
Terminates in 2022 559 35 887 112
Terminates through June 30, 2023 100 — 369 22
Terminates thereafter(1)
28 95 798 394
Total Notional Amount $ 2,210 $ 368 $ 8,906 $ 741

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December 31, 2021
	Pay Leg				Receive Leg
Termination Date	Cleared		Uncleared		Cleared		Uncleared


Terminates in 2022	$	210	$	35	$	517	$	112
Terminates through June 30, 2023	52		—		309		23
Terminates thereafter(1)	40		—		562		10
Total Notional Amount	$	302	$	35	$	1,388	$	145

(1)For more information on the Bank’s Transition Plan, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Financial Condition.”

Critical Accounting Policies and Estimates

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

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operations significantly. Although the Bank believes these judgments, estimates, and assumptions to be reasonably accurate, actual results may differ.

In the Bank’s ~~2020~~2021 Form 10-K, the following accounting policies and estimates were identified as critical because they require the Bank to make subjective or complex judgments about matters that are inherently uncertain and because of the likelihood that materially different amounts would be reported under different conditions or using different assumptions. These policies and estimates are: accounting for derivatives; estimating fair values of investments classified as trading and AFS, derivatives and associated hedged items carried at fair value in accordance with the accounting for derivative instruments and associated hedging activities, and financial instruments carried at fair value under the fair value option; and estimating the prepayment speeds on MBS and mortgage loans for the accounting of amortization of premiums and accretion of discounts and credit losses previously recorded prior to the adoption of accounting guidance related to the measurement of credit losses on MBS and mortgage loans.

There have been no significant changes in the judgments and assumptions made during the first ~~nine~~three months of ~~2021~~2022 in applying the Bank’s critical accounting policies. These policies and the judgments, estimates, and assumptions are also described in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates” and “Item 8. Financial Statements and Supplementary Data – Note 1 – Summary of Significant Accounting Policies” in the Bank’s ~~2020~~2021 Form 10-K and in “Item 1. Financial Statements – Note 12 – Fair Value.”

Recently Issued Accounting Guidance and Interpretations

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

Recent Developments

~~FHLBank Membership.~~ ~~On September 9, 2021,~~There are no recent developments for the ~~Finance Agency published~~first quarter of 2022 that are expected to have a Supervisory Letter on FHLBank membership issues covering five issues, including: (i) requirements for de novo community development financial institutions, (ii) automatic transfer of membership, (iii) large non-member institutions merging with small members, (iv) applicant’s compliance with the “financial condition” requirement, and (v) the definition of insurance company. The supervisory letter is intended to provide uniform guidance to the FHLBanks in the event other FHLBanks encounter similar circumstances. The Bank continues to evaluate the supervisory letter and its effect on Bank membership.

~~Fair Housing and Fair Lending Enforcement.~~ On July 9, 2021, the Finance Agency published a Policy Statement on Fair Lending to communicate the Finance Agency’s general position on monitoring and information gathering, supervisory examinations, and administrative enforcement related to the Equal Credit Opportunity Act, the Fair Housing Act, and the Federal Housing Enterprises Financial Safety and Soundness Act. The Policy Statement became effective on the date of publication.

On August 12, 2021, the Finance Agency and the U.S. Department of Housing and Urban Development announced they had entered into a memorandum of understanding regarding fair housing and fair lending enforcement. Under the memorandum of understanding, the two agencies will focus on enhancing their enforcement of the Fair Housing Act, and their oversight of Fannie Mae, Freddie Mac, and the FHLBanks.

~~The Bank continues to monitor these actions and guidance as they evolve and to evaluate their potential~~material effect on the ~~Bank.~~

~~Annual Designation~~financial condition or results of ~~Member Director and Independent Director Positions.~~ On June 2, 2021, the Finance Agency designated one member director position for Arizona, six for California, and one for Nevada, effective January 1, 2022, the same allocation of positions as for 2021. In addition, the Finance Agency designated seven independent director positions for the Bank for 2022, the same number of positions as for 2021. Two of the

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California member director positions, and two of the independent director positions, all with current terms ending on December 31, 2021, will be filled through an election of the members located in California (for the two California member director positions), and an election of all members of the Bank (for the two independent director positions). The elections will be held in the fourth quarter of 2021. The two California member director positions and the two independent director positions will each have a four-year termoperations or that ~~begins on January 1, 2022.~~

~~Off-Balance Sheet Arrangements and Aggregate Contractual Commitments~~

~~Off-Balance Sheet Arrangements and Other Commitments~~

In accordance with regulations governing the operations of the FHLBanks, each FHLBank, including the Bank, is jointly and severally liable for the FHLBank System’s consolidated obligations issued under Section 11(a) of the FHLBank Act, and in accordance with the FHLBank Act, each FHLBank, including the Bank, is jointly and severally liable for consolidated obligations issued under Section 11(c) of the FHLBank Act. The joint and several liability regulation authorizes the Finance Agency to require any FHLBank to repay all or a portion of the principal or interest on consolidated obligations for which another FHLBank is the primary obligor.

The par value of the outstanding consolidated obligations of the FHLBanks was $641.4 billion at September 30, 2021, and $746.7 billion at December 31, 2020. The par value of the Bank’s participation in consolidated obligations was $46.9 billion at September 30, 2021, and $60.6 billion at December 31, 2020. The Bank had committedare otherwise material to the ~~issuance of $235 million in consolidated obligations at September 30, 2021. The Bank had no commitments to issue consolidated obligations at December 31, 2020.~~

In addition, in the ordinary course of business, the Bank engages in financial transactions that, in accordance with U.S. GAAP, are not recorded on the Bank’s Statements of Condition or may be recorded on the Bank’s Statements of Condition in amounts that are different from the full contract or notional amount of the transactions. For example, the Bank routinely enters into commitments to extend advances and issues standby letters of credit. These commitments and standby letters of credit may represent future cash requirements of the Bank, although the standby letters of credit usually expire without being drawn upon. Standby letters of credit are subject to the same underwriting and collateral requirements as advances made by the Bank. At September 30, 2021, the Bank had no advance commitments and $15.5 billion in standby letters of credit outstanding. At December 31, 2020, the Bank had no advance commitments and $19.4 billion in standby letters of credit outstanding.

~~For additional information, see “Item 1. Financial Statements – Note 13 – Commitments and Contingencies.”~~

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is defined as the risk to the Bank’s market value of capital and future earnings (excluding the impact of any cumulative net gains or losses on derivatives and associated hedged items and on financial instruments carried

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at fair value) as a result of movements in market interest rates, interest rate spreads, interest rate volatility, and other market factors (market rate factors). This profile reflects the Bank’s objective of maintaining a conservative asset-liability mix and its commitment to providing value to its members through products and dividends without subjecting their investments in Bank capital stock to significant market risk.

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

Market risk identification and measurement are primarily accomplished through market value of capital sensitivity analyses and projected earnings and adjusted return on capital sensitivity analyses. The Risk Appetite Framework approved by the Bank’s board of directors establishes market risk limits and market risk measurement standards at the total Bank level as well as at the business segment level. Additional guidelines approved by the Bank’s Enterprise Risk Committee apply to the Bank’s two business segments, the advances-related business and the

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mortgage-related business. These guidelines provide limits that are monitored at the segment level and are consistent with the Bank’s Risk Appetite Framework. Market risk is managed for each business segment on a daily basis, as discussed below in “Segment Market Risk.” Compliance with Bank limits and guidelines is reviewed by the Bank’s board of directors on a regular basis, along with a corrective action plan if applicable.

Total Bank Market Risk

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

The Bank’s market value of capital sensitivity risk limits for the potential adverse impact of an instantaneous parallel shift of a plus or minus 100-basis-point change in interest rates from current rates (base case) is no worse than a 3.0% change in the estimated market value of capital. In addition, the risk limits for the potential adverse impact of an instantaneous plus or minus 100-basis-point change in interest rates measured from interest rates that are 200 basis points above or below the base case is no worse than 4.0% of the estimated market value of capital. In the case where a market risk sensitivity compliance metric cannot be estimated with a parallel shift in interest rates because of prevailing low interest rates, the sensitivity metric is not reported. The Bank’s measured market value of capital sensitivity was within the limits as of ~~September 30, 2021.~~March 31, 2022.

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

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

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

Market Value of Capital Sensitivity
Estimated Percentage Change in Market Value of Bank Capital
for Various Changes in Interest Rates
Interest Rate Scenario(1)
September 30, 2021 December 31, 2020
+200 basis-point change above current rates –2.1 % –3.0 %
+100 basis-point change above current rates –0.8 –1.3
–100 basis-point change below current rates(2)
+1.4 +4.9
–200 basis-point change below current rates(2)
+4.5 +5.2

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

Interest Rate Scenario(1)

March 31, 2022

December 31, 2021

+200 basis-point change above current rates

–2.7

–2.3

+100 basis-point change above current rates

–1.2

–0.9

–100 basis-point change below current rates(2)

+0.9

+0.5

–200 basis-point change below current rates(2)

+1.0

+4.9

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

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

The Bank’s estimates of the sensitivity of the market value of capital to changes in interest rates as of ~~September 30, 2021,~~March 31, 2022, are comparable with the estimates as of December 31, ~~2020,~~2021, with the exception of the declining ~~100~~200 basis-point rate scenario. The increase in ~~intermediate~~intermediate- and long-term interest rates in the first quarter of ~~2021~~2022 resulted in a larger absolute down ~~100~~200 basis-point rate shock relative to yearend. ~~Interest~~Compared to yearend, interest rates ~~continue to remain at historically~~

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~~low levels,~~have increased ranging from 47 basis points for the one-month Treasury bill, ~~to 153~~116 basis points for the five-year Treasury note, and 83 basis points for the ten-year Treasury note.

The Bank’s Risk Management Policy provides guidelines for the payment of dividends and the repurchase of excess capital stock based on the ratio of the Bank’s estimated market value of total capital to par value of capital stock. If this ratio at the end of any quarter is: (i) less than 100% but greater than or equal to 90%, any dividend would be limited to an annualized rate no greater than the daily average of the Federal funds effective rate for the applicable quarter (subject to certain conditions), and any excess capital stock repurchases would not exceed $500 million (subject to certain conditions); (ii) less than 90% but greater than or equal to 70%, any dividend and any excess capital stock repurchases would be subject to the same limitations and conditions as in (i) above, except that any excess capital stock repurchases would not exceed 4% of the Bank’s outstanding capital stock as of the repurchase date; and (iii) less than 70%, the Bank would not pay a dividend, not repurchase excess capital stock (but continue to redeem excess capital stock as provided in the Bank’s capital plan), limit the acquisition of certain assets, and review the Bank’s risk policies. A decision by the board of directors to declare or not declare any dividend or repurchase any excess capital stock is a discretionary matter and is subject to the requirements and restrictions of the FHLBank Act and applicable requirements under the regulations governing the operations of the FHLBanks. The ratio of the Bank’s estimated market value of total capital to par value of capital stock was ~~292%~~299% as of ~~September 30, 2021.~~March 31, 2022.

Adjusted Return on Capital – The adjusted return on capital is a non-GAAP measure used by the Bank to assess financial performance. The adjusted return on capital is based on current period economic earnings that exclude the effects of unrealized net gains or losses resulting from the Bank’s derivatives and associated hedged items and from financial instruments carried at fair value, which will generally reverse through changes in future valuations and settlements of contractual interest cash flows over the remaining contractual terms to maturity or by the call or put date of the assets and liabilities held under the fair value option, hedged assets and liabilities, and derivatives. Economic earnings also exclude the interest expense on mandatorily redeemable capital stock and the 20% of net income allocated to the Bank’s restricted retained earnings account in accordance with the FHLBanks’ Joint Capital Enhancement (JCE) Agreement. Economic earnings exclude these amounts in order to more accurately reflect the amount of earnings that may be available to be paid as dividends to shareholders. With the decline in consolidated obligations outstanding in 2020, the Bank ceased contributions to restricted retained earnings in the fourth quarter of 2020, in accordance with the JCE Agreement; and no further allocations of net income into restricted retained earnings are required until such time as the allocation requirement exceeds the balance of restricted retained earnings. Additionally, the JCE Agreement provides that amounts in restricted retained earnings in excess of 150% of the Bank’s restricted retained earnings minimum (i.e., 1% of the Bank’s total consolidated obligations calculated as of the last day of each calendar quarter) may be released from restricted retained earnings. As a result of the Bank exceeding this threshold, the Bank reclassified $18 from restricted retained earnings to unrestricted retained earnings during the third quarter of 2021.stock.

The Bank’s Risk Appetite Framework incorporates a limit on the sensitivity of projected financial performance to projected adverse changes in the adjusted return on capital. The Bank’s adjusted return on capital sensitivity limit to the potential adverse impact of an instantaneous parallel shift of a plus or minus 200-basis-point change in interest rates from current rates (base case) to no worse than –120 basis points from the base case projected adjusted return on capital. Given the current low interest rate environment, in the downward shift interest rates were limited to non-negative rates. With the indicated interest rate shifts, the adjusted return on capital for the projected 12-month horizon would be expected to decrease by 2089 basis points in the –200 basis-points scenario, well within the limit of –120 basis points.

Duration Gap – Duration gap is the difference between the estimated durations (market value sensitivity) of assets and liabilities (including the impact of interest rate exchange agreements) and reflects the extent to which estimated

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maturity and repricing cash flows for assets and liabilities are matched. The Bank monitors duration gap analysis at the total Bank level and does not have a risk limit.

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Total Bank Duration Gap Analysis	Total Bank Duration Gap Analysis							Total Bank Duration Gap Analysis

		September 30, 2021			December 31, 2020				March 31, 2022			December 31, 2021
		Amount (In millions)		Duration Gap(1) (In months)	Amount (In millions)		Duration Gap(1) (In months)
(Dollars in millions)								(Dollars in millions)	Amount (In millions)		Duration Gap(1) (In months)	Amount (In millions)		Duration Gap(1) (In months)
Assets	Assets	$	54,459	3	$	68,634	4	Assets	$	56,129	3.2	$	54,121	3.4
Liabilities	Liabilities	48,085		3	62,440		3	Liabilities	49,975		2.1	47,897		3.0
Net	Net	$	6,374	—	$	6,194	1	Net	$	6,154	1.1	$	6,224	0.4

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

Segment Market Risk. The financial performance and interest rate risks of each business segment are managed within prescribed guidelines and policy limits.

Advances-Related Business – Interest rate risk arises from the advances-related business primarily through the use of shareholder-contributed capital and retained earnings to fund fixed rate investments of targeted amounts and maturities. In general, advances result in very little net interest rate risk for the Bank because most fixed rate advances with original maturities greater than three months and all advances with embedded options are simultaneously hedged with an interest rate swap or option with terms to offset the advance. The interest rate swap or option generally is maintained as a hedge for the life of the advance. These hedged advances effectively create a pool of variable rate assets, which, in combination with the strategy of raising debt swapped to variable rate liabilities, creates an advances portfolio with low net interest rate risk.

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

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

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

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

~~Table of Contents~~

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

The Bank manages the interest rate risk and market risk of the mortgage-related segment through its investment in low-risk assets and selected funding and hedging strategies. The total carrying value of MBS and mortgage loans at ~~September 30, 2021,~~March 31, 2022, was ~~$14.6~~$12.8 billion, including ~~$13.5~~$11.9 billion in MBS and ~~$1.1~~$0.9 billion in mortgage loans. The total carrying value of MBS and mortgage loans at December 31, ~~2020,~~2021, was ~~$17.7~~$14.0 billion, including ~~$15.8~~$13.0 billion in MBS and ~~$1.9~~$1.0 billion in mortgage loans. Floating rate securities, and fixed rate multifamily securities that have been converted to floating rate through the use of interest rate swaps, were ~~$12.6~~$11.2 billion, or ~~86%~~87%, of MBS and mortgage loans at ~~September 30, 2021,~~March 31, 2022, and ~~$14.2~~$12.2 billion, or ~~80%~~87%, of MBS and mortgage loans at December 31, ~~2020.~~2021. Intermediate and long-term fixed rate assets, whose interest rate and market risks have been partially offset through the use of fixed rate callable debt, fixed rate non-callable debt, and certain interest rate swaps, were ~~$2.0~~$1.6 billion, or ~~14%~~13%, of MBS and mortgage loans, at ~~September 30, 2021,~~March 31, 2022, and ~~$3.5~~$1.8 billion, or ~~20%~~13%, of MBS and mortgage loans at December 31, ~~2020.~~

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

At least monthly, the Bank reviews the estimated market risk profile of the entire portfolio of mortgage assets and related funding and hedging transactions. The Bank then considers rebalancing strategies to modify the estimated mortgage portfolio market risk profile. Periodically, the Bank performs more in-depth analyses, which include an analysis of the impacts of non-parallel shifts in the yield curve and assessments of the impacts of unanticipated mortgage prepayment behavior. Based on these analyses, the Bank may take actions to rebalance the mortgage portfolio’s market risk profile. These rebalancing strategies may include entering into new funding and hedging transactions, forgoing or modifying certain funding or hedging transactions normally executed with new mortgage purchases, or terminating certain funding and hedging transactions for the mortgage asset portfolio.

The Bank manages the estimated interest rate risk associated with mortgage assets, including mortgage prepayment risk, through a combination of debt issuance and derivatives. The Bank may obtain funding through callable and non-callable FHLBank System debt and may execute derivative transactions to achieve principal cash flow patterns and market value sensitivities for the liabilities and derivatives that provide a significant offset to the interest rate and mortgage prepayment risks associated with the mortgage assets. Debt issued to finance mortgage assets may be fixed rate debt, callable fixed rate debt, adjustable rate debt, or callable adjustable rate debt. Derivatives may be used as temporary hedges of anticipated debt issuance or long-term hedges of debt used to finance the mortgage assets. The derivatives used to hedge the interest rate risk of fixed rate mortgage assets generally may be callable and non-callable pay-fixed interest rate swaps. Derivatives may also be used to offset the interest rate cap risk embedded in adjustable rate MBS.2021.

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

Table of Contents

The following table presents results of the estimated market value of capital sensitivity analysis attributable to the mortgage-related business as of ~~September 30, 2021,~~March 31, 2022 and December 31, ~~2020.~~2021.

~~Table of Contents~~

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

Interest Rate Scenario(1)

September 30, 2021

December 31, 2020

Interest Rate Scenario(1)

2022

2021

+200 basis-point change

–0.6

–1.3

+200 basis-point change

–0.8

–0.5

+100 basis-point change

–0.1

–0.4

+100 basis-point change

–0.3

–0.1

–100 basis-point change(2)

+0.1

+2.8

–100 basis-point change(2)

0.0

–0.2

–200 basis-point change(2)

+2.6

+2.9

–200 basis-point change(2)

–0.3

+2.6

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

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

The explanations for the changes in Bank’s estimates of the sensitivity of the market value of capital to changes in interest rates attributable to the mortgage-related business from December 31, ~~2020,~~2021, to ~~September 30, 2021,~~March 31, 2022, are the same as the explanations for the sensitivity of the market value of capital attributable to all of the Bank’s assets, liabilities, and associated interest rate exchange agreements.

For more information on quantitative and qualitative disclosures about the Bank’s market risk, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Risk Management – Market Risk” in the Bank’s 2021 Form 10-K. For a discussion of risk factors related to the COVID-19 pandemic, see “Part I. Item 1A. Risk Factors” in the Bank’s ~~2020~~2021 Form 10-K.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

The senior management of the Federal Home Loan Bank of San Francisco (Bank) is responsible for establishing and maintaining a system of disclosure controls and procedures designed to ensure that information required to be disclosed by the Bank in the reports filed or submitted under the Securities Exchange Act of 1934 (1934 Act) is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. The Bank’s disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Bank in the reports that it files or submits under the 1934 Act is accumulated and communicated to the Bank’s management, including its principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. In designing and evaluating the Bank’s disclosure controls and procedures, the Bank’s management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and the Bank’s management necessarily is required to apply its judgment in evaluating the cost-benefit relationship of controls and procedures.

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

Table of Contents

Internal Control Over Financial Reporting

During the three months ended ~~September 30, 2021,~~March 31, 2022, there were no changes in the Bank’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Bank’s internal control over financial reporting.

~~Table of Contents~~

Consolidated Obligations

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

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

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

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

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

ITEM 1A. RISK FACTORS

For a discussion of other risk factors, see “Part I. Item 1A. Risk Factors” in the Bank’s ~~2020~~2021 Form 10-K. There have been no material changes from the risk factors disclosed in the “Part I. Item 1A. Risk Factors” section of the Bank’s ~~2020~~2021 Form 10-K.

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

Not applicable.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

On November 3, 2021, the Bank appointed Kitty Payne as senior vice president and Controller. Effective November 8, 2021, Ms. Payne will also be appointed as the Bank’s principal accounting officer. Until the effective date of Ms. Payne’s appointment as Controller, Ludmila (Lucy) Sheftel served as the Bank’s Acting Controller whereupon Ms. Sheftel became the Bank’s Deputy Controller; and until the effective date of Ms. Payne’s appointment as the Bank’s principal accounting officer, Ms. Sheftel will continue to serve as the Bank’s principal accounting officer.

Ms. Payne, age 51, has served as Chief Financial Officer of Commercial Bank of California since 2019. From 2018 to 2019, Ms. Payne served as the Corporate Controller of Advanced Air, LLC. Before joining Advanced Air, LLC, Ms. Payne was the Chief Accounting Officer at Fidelity Bank (acquired by Ameris Bank in 2019) from 2014 to 2018, an executive vice president at Capital Bank from 2010 to 2013, and Chief Financial Officer at First National Bank of the South from 1999 to 2010. Ms. Payne is a certified public accountant and was employed with KPMG LLP, serving as a senior manager (tax) from 1996 to 1999, and prior to that, senior accountant (audit) from 1992 to 1996. Ms. Payne has no direct or indirect material interest in any transaction required to be disclosed pursuant to Item 404(a) of Regulation S-K. There are no family relationships between Ms. Payne and any of the Bank’s directors or executive officers.None.

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ITEM 6. EXHIBITS


Exhibit No.						Description

~~10.1~~						~~Senior Officer Corporate Severance Policy, as amended and restated on July 30, 2021~~

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

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

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

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

101.INS						Inline XBRL Instance Document - The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.

101.SCH						Inline XBRL Taxonomy Extension Schema Document

101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB						Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document

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

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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, on ~~November 5, 2021.~~May 6, 2022.


			Federal Home Loan Bank of San Francisco

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

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

			/S/ LK~~UDMILA~~ITTY ~~V. S~~P~~HEFTEL~~AYNE
			~~Ludmila V. Sheftel~~Kitty Payne ~~Managing Director~~Senior Vice President and ~~Deputy~~ Controller (Principal accounting officer)

9578


	As Reported		Overstatement/(Understatement)
Year ended December 31, 2020:
Net gain/(loss) on derivatives	$	(152)	$	1
Income/(loss) before assessments	373		1
Three months ended March 31, 2021:
Net gain/(loss) on derivatives	$	18	$	(18)
Income/(loss) before assessments	104		(18)
Three months ended June 30, 2021:
Net gain/(loss) on derivatives	$	(8)	$	4
Income/(loss) before assessments	62		4
Six months ended June 30, 2021:
Net gain/(loss) on derivatives	$	10	$	(14)
Income/(loss) before assessments	166		(14)


September 30, 2021				Current
	Prepayment Rates	Default Rates	Loss Severities	Credit Enhancement
Collateral Type at Origination	Weighted Average % (1)	Weighted Average % (1)	Weighted Average % (1)	Weighted Average % (1)
Prime	15.8	4.0	86.5	13.1
Alt-A	10.9	8.1	49.5	7.5
Total	11.3	7.8	52.9	8.1



	September 30, 2021				Three Months Ended September 30, 2021				Nine Months Ended September 30, 2021
Name of Borrower	Advances Outstanding		Percentage of Total Advances Outstanding		Interest Income from Advances(1)		Percentage of Total Interest Income from Advances		Interest Income from Advances(1)		Percentage of Total Interest Income from Advances
First Republic Bank	$	7,700	35	%	$	28	29	%	$	103	32	%
MUFG Union Bank, National Association	4,075		18		24		25		83		25
First Technology Federal Credit Union	1,776		8		7		7		21		6
Luther Burbank Savings	752		3		3		3		11		3
Banc of California, National Association	411		2		3		3		8		3
Subtotal	14,714		66		65		67		226		69
Others	7,593		34		32		33		103		31
Total par value	$	22,307	100	%	$	97	100	%	$	329	100	%



	September 30, 2020				Three Months Ended September 30, 2020				Nine Months Ended September 30, 2020
Name of Borrower	Advances Outstanding		Percentage of Total Advances Outstanding		Interest Income from Advances(1)		Percentage of Total Interest Income from Advances		Interest Income from Advances(1)		Percentage of Total Interest Income from Advances
First Republic Bank	$	13,510	37	%	$	62	35	%	$	201	28	%
MUFG Union Bank, National Association	4,925		13		36		21		141		19
CIT Bank, National Association	2,550		7		4		2		20		3
First Technology Federal Credit Union	1,975		5		11		6		34		5
Luther Burbank Savings	962		3		5		3		16		2
Subtotal	23,922		65		118		67		412		57
Others	12,968		35		57		33		310		43
Total par value	$	36,890	100	%	$	175	100	%	$	722	100	%


	Net Unrealized Gain/(Loss) on AFS Securities		Net Non-Credit-Related OTTI Loss on AFS Securities		Net Non-Credit-Related OTTI Loss on HTM Securities		Pension and Postretirement Benefits		Total AOCI









Balance, December 31, 2019	$	21	$	268	$	(1)	$	(14)	$	274
Other comprehensive income/(loss) before reclassifications:
Net change in pension and postretirement benefits							(1)		(1)

Net change in fair value	(138)		—						(138)
Accretion of non-credit loss					1				1


Net current period other comprehensive income/(loss)	(138)		—		1		(1)		(138)
Adoption of ASU 2016-13, as amended(1)	268		(268)						—
Balance, September 30, 2020	$	151	$	—	$	—	$	(15)	$	136

Balance, December 31, 2020	$	244	$	—	$	—	$	(14)	$	230
Other comprehensive income/(loss) before reclassifications:
Net change in pension and postretirement benefits							(3)		(3)
Net change in fair value	92		—						92



Net current period other comprehensive income/(loss)	92		—		—		(3)		89
Balance, September 30, 2021	$	336	$	—	$	—	$	(17)	$	319


	September 30, 2021				December 31, 2020
Name of Institution	Capital Stock Outstanding		Percentage of Total Capital Stock Outstanding		Capital Stock Outstanding		Percentage of Total Capital Stock Outstanding
First Republic Bank	$	239	11	%	$	354	16	%





Others	2,018		89		1,932		84
Total	$	2,257	100	%	$	2,286	100	%


	Advances- Related Business(1)		Mortgage- Related Business(2)		Adjusted Net Interest Income(1)		Amortization of Basis Adjustments and (Gain)/Loss on Fair Value Hedges(1)(3)		Income/(Expense) on Economic Hedges(4)		Interest Expense on Mandatorily Redeemable Capital Stock(5)		Net Interest Income After Provision for/(Reversal of) Credit Losses		Other Income/ (Loss)		Other Expense		Income/(Loss) Before AHP Assessment
Three months ended:
September 30, 2021	$	42	$	62	$	104	$	—	$	(16)	$	—	$	120	$	(3)	$	38	$	79
September 30, 2020	63		53		116		—		(34)		1		149		70		40		179
Nine months ended:
September 30, 2021	$	143	$	200	$	343	$	(7)	$	(61)	$	—	$	411	$	(50)	$	116	$	245
September 30, 2020	198		140		338		77		(52)		5		308		79		119		268


	Three Months Ended September 30, 2020
	Interest Income/(Expense)
	Advances		AFS Securities		Consolidated Obligation Bonds
Total interest income/(expense) presented in the Statements of Income	$	88	$	67	$	(47)
Gain/(loss) on fair value hedging relationships
Derivatives(1)	$	22	$	54	$	(1)
Hedged items	(111)		(89)		8
Net gain/(loss) on fair value hedging relationships	(89)		(35)		7
Net amortization of gain on discontinued fair value hedging relationships	(1)		(23)		—
Net gain/(loss) on derivatives and hedging activities recorded in net interest income	$	(90)	$	(58)	$	7



	Nine Months Ended September 30, 2021
	Interest Income/(Expense)
	Advances		AFS Securities		Consolidated Obligation Bonds
Total interest income/(expense) presented in the Statements of Income	$	167	$	168	$	(49)
Gain/(loss) on fair value hedging relationships
Derivatives(1)	$	97	$	299	$	(17)
Hedged items	(260)		(349)		60
Net gain/(loss) on fair value hedging relationships	(163)		(50)		43
Net amortization of gain on discontinued fair value hedging relationships	(15)		(81)		—
Net gain/(loss) on derivatives and hedging activities recorded in net interest income	$	(178)	$	(131)	$	43


Variable Rate Consolidated Obligation Bonds by Interest Rate Index
(In millions)	Amount Outstanding
Interest Rate Index	September 30, 2021		December 31, 2020
LIBOR	$	300	$	6,798
SOFR	6,515		30,915

Total par value	$	6,815	$	37,713


Regulatory Capital Requirements

	September 30, 2021						December 31, 2020
(Dollars in millions)	Required			Actual			Required			Actual
Risk-based capital	$	1,109		$	6,059		$	1,404		$	5,966
Total regulatory capital	$	2,178		$	6,059		$	2,745		$	5,966
Total regulatory capital ratio	4.00		%	11.12		%	4.00		%	8.69		%
Leverage capital	$	2,723		$	9,088		$	3,432		$	8,949
Leverage ratio	5.00		%	16.69		%	5.00		%	13.04		%