UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

____________________________________

FORM 10-Q

______________________________________________________


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

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


☐			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 ~~April 30,~~October 31, 2023
Class B Stock, par value $100 per share			~~42,010,587~~31,625,983

Table of Contents

Federal Home Loan Bank of San Francisco

Form 10-Q

Index

PART I.

FINANCIAL INFORMATION

Item 1.

Financial Statements

Statements of Condition (Unaudited)

Statements of Income (Unaudited)

Statements of Comprehensive Income/(Loss) (Unaudited)

Statements of Capital Accounts (Unaudited)

Statements of Cash Flows (Unaudited)

Notes to Financial Statements (Unaudited)

Item 2.

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

Results of Operations

4745

Financial Condition

5357

Liquidity and Capital Resources

6160

Risk Management

6261

Critical Accounting Policies and Estimates

Recently Issued Accounting Guidance and Interpretations

7271

Recent Developments

7271

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Item 4.

Controls and Procedures

PART II.

Item 1.

Item 1A.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

7877

Item 3.

Defaults Upon Senior Securities

7877

Item 4.

Mine Safety Disclosures

Item 5.

Item 6.

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Federal Home Loan Bank of San Francisco

Statements of Condition

(Unaudited)


(In millions-except par value)	(In millions-except par value)	March 31, 2023		December 31, 2022		(In millions-except par value)	September 30, 2023		December 31, 2022
Assets:	Assets:					Assets:
Cash and due from banks	Cash and due from banks	$	17	$	9	Cash and due from banks	$	10	$	9
Interest-bearing deposits	Interest-bearing deposits	3,760		3,677		Interest-bearing deposits	3,777		3,677
Securities purchased under agreements to resell	Securities purchased under agreements to resell	11,100		7,000		Securities purchased under agreements to resell	2,750		7,000
Federal funds sold	Federal funds sold	9,427		4,719		Federal funds sold	5,533		4,719
Trading securities	Trading securities	1		1		Trading securities	1		1
Available-for-sale (AFS) securities, net of allowance for credit losses of $28 and $30, respectively (amortized cost of $13,394 and $12,757, respectively)(a)		13,320		12,713
Held-to-maturity (HTM) securities (fair values of $2,068 and $2,136, respectively)		2,104		2,181
Advances (includes $2,392 and $2,059 at fair value under the fair value option, respectively)		101,541		89,400
Available-for-sale (AFS) securities, net of allowance for credit losses of $34 and $30, respectively (amortized cost of $16,352 and $12,757, respectively)(a)						Available-for-sale (AFS) securities, net of allowance for credit losses of $34 and $30, respectively (amortized cost of $16,352 and $12,757, respectively)(a)	16,279		12,713
Held-to-maturity (HTM) securities (fair values of $1,852 and $2,136, respectively)						Held-to-maturity (HTM) securities (fair values of $1,852 and $2,136, respectively)	1,895		2,181
Advances (includes $2,302 and $2,059 at fair value under the fair value option, respectively)						Advances (includes $2,302 and $2,059 at fair value under the fair value option, respectively)	63,584		89,400
Mortgage loans held for portfolio, net of allowance for credit losses of $1 and $1, respectively	Mortgage loans held for portfolio, net of allowance for credit losses of $1 and $1, respectively	801		815		Mortgage loans held for portfolio, net of allowance for credit losses of $1 and $1, respectively	770		815

Accrued interest receivable	Accrued interest receivable	178		313		Accrued interest receivable	192		313
Derivative assets, net	Derivative assets, net	6		26		Derivative assets, net	6		26
Other assets	Other assets	238		202		Other assets	224		202
Total Assets	Total Assets	$	142,493	$	121,056	Total Assets	$	95,021	$	121,056
Liabilities:	Liabilities:					Liabilities:
Deposits	Deposits	$	1,022	$	989	Deposits	$	768	$	989
Consolidated obligations:	Consolidated obligations:					Consolidated obligations:
Bonds (includes $782 and $2,226 at fair value under the fair value option, respectively)		95,034		75,768
Bonds (includes $605 and $2,226 at fair value under the fair value option, respectively)						Bonds (includes $605 and $2,226 at fair value under the fair value option, respectively)	70,907		75,768
Discount notes	Discount notes	37,356		35,929		Discount notes	14,293		35,929
Total consolidated obligations	Total consolidated obligations	132,390		111,697		Total consolidated obligations	85,200		111,697
Mandatorily redeemable capital stock	Mandatorily redeemable capital stock	95		5		Mandatorily redeemable capital stock	776		5

Borrowings from other Federal Home Loan Banks (FHLBanks)						Borrowings from other Federal Home Loan Banks (FHLBanks)	300		—
Accrued interest payable	Accrued interest payable	508		326		Accrued interest payable	510		326
Affordable Housing Program (AHP) payable	Affordable Housing Program (AHP) payable	123		111		Affordable Housing Program (AHP) payable	132		111
Derivative liabilities, net	Derivative liabilities, net	11		2		Derivative liabilities, net	14		2
Other liabilities	Other liabilities	272		203		Other liabilities	669		203
Total Liabilities	Total Liabilities	134,421		113,333		Total Liabilities	88,369		113,333
Commitments and Contingencies (Note 13)	Commitments and Contingencies (Note 13)					Commitments and Contingencies (Note 13)
Capital:	Capital:					Capital:
Capital stock—Class B—Putable ($100 par value) issued and outstanding:	Capital stock—Class B—Putable ($100 par value) issued and outstanding:					Capital stock—Class B—Putable ($100 par value) issued and outstanding:
40 shares and 38 shares, respectively		4,007		3,758
25 shares and 38 shares, respectively						25 shares and 38 shares, respectively	2,485		3,758
Unrestricted retained earnings	Unrestricted retained earnings	3,356		3,262		Unrestricted retained earnings	3,406		3,262
Restricted retained earnings	Restricted retained earnings	770		732		Restricted retained earnings	816		732
Total Retained Earnings	Total Retained Earnings	4,126		3,994		Total Retained Earnings	4,222		3,994
Accumulated other comprehensive income/(loss) (AOCI)	Accumulated other comprehensive income/(loss) (AOCI)	(61)		(29)		Accumulated other comprehensive income/(loss) (AOCI)	(55)		(29)
Total Capital	Total Capital	8,072		7,723		Total Capital	6,652		7,723
Total Liabilities and Capital	Total Liabilities and Capital	$	142,493	$	121,056	Total Liabilities and Capital	$	95,021	$	121,056

(a)At ~~March 31,~~September 30, 2023, and December 31, 2022, ~~$864~~$799 million and $435 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 March 31,			Three Months Ended September 30,				Nine Months Ended September 30,

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

Advances	Advances		$	1,163		$	39	Advances	$	867	$	345	$	3,184	$	501

Interest-bearing deposits	Interest-bearing deposits		50			—		Interest-bearing deposits	61		14		167		17
Securities purchased under agreements to resell	Securities purchased under agreements to resell		92			1		Securities purchased under agreements to resell	50		51		252		65
Federal funds sold	Federal funds sold		130			3		Federal funds sold	123		72		414		96

AFS securities	AFS securities		190			54		AFS securities	246		109		645		247
HTM securities	HTM securities		24			7		HTM securities	25		17		74		34
Mortgage loans held for portfolio	Mortgage loans held for portfolio		7			17		Mortgage loans held for portfolio	9		8		21		38
Total Interest Income	Total Interest Income		1,656			121		Total Interest Income	1,381		616		4,757		998
Interest Expense:	Interest Expense:							Interest Expense:
Consolidated obligations:	Consolidated obligations:							Consolidated obligations:
Bonds	Bonds		920			12		Bonds	963		143		3,008		205
Discount notes	Discount notes		435			6		Discount notes	218		310		1,050		399
Deposits	Deposits		13			—		Deposits	16		5		45		7
Borrowings from other Federal Home Loan Banks			1			—

Borrowings from other FHLBanks								Borrowings from other FHLBanks	—		1		2		1
Mandatorily redeemable capital stock								Mandatorily redeemable capital stock	13		—		15		—
Total Interest Expense	Total Interest Expense		1,369			18		Total Interest Expense	1,210		459		4,120		612
Net Interest Income	Net Interest Income		287			103		Net Interest Income	171		157		637		386
Provision for/(reversal of) credit losses	Provision for/(reversal of) credit losses		(1)			(3)		Provision for/(reversal of) credit losses	7		9		7		9
Net Interest Income After Provision for/(Reversal of) Credit Losses	Net Interest Income After Provision for/(Reversal of) Credit Losses		288			106		Net Interest Income After Provision for/(Reversal of) Credit Losses	164		148		630		377
Other Income/(Loss):	Other Income/(Loss):							Other Income/(Loss):

Net gain/(loss) on advances and consolidated obligation bonds held under fair value option	Net gain/(loss) on advances and consolidated obligation bonds held under fair value option		1			(21)		Net gain/(loss) on advances and consolidated obligation bonds held under fair value option	(12)		(20)		(27)		(53)
Net gain/(loss) on derivatives	Net gain/(loss) on derivatives		(34)			8		Net gain/(loss) on derivatives	15		(1)		(6)		(13)
Private-label residential mortgage-backed securities (PLRMBS) trust settlement	Private-label residential mortgage-backed securities (PLRMBS) trust settlement		—			28		Private-label residential mortgage-backed securities (PLRMBS) trust settlement	—		—		—		28

Standby letters of credit fees	Standby letters of credit fees		5			4		Standby letters of credit fees	4		4		15		11
Other, net	Other, net		2			(1)		Other, net	—		(1)		3		(4)
Total Other Income/(Loss)	Total Other Income/(Loss)		(26)			18		Total Other Income/(Loss)	7		(18)		(15)		(31)
Other Expense:	Other Expense:							Other Expense:
Compensation and benefits	Compensation and benefits		27			24		Compensation and benefits	26		24		78		70
Other operating expense	Other operating expense		14			12		Other operating expense	17		15		48		40
Federal Housing Finance Agency	Federal Housing Finance Agency		2			2		Federal Housing Finance Agency	2		2		7		5
Office of Finance	Office of Finance		2			1		Office of Finance	2		1		5		4

Other, net	Other, net		—			(1)		Other, net	8		(1)		10		(2)
Total Other Expense	Total Other Expense		45			38		Total Other Expense	55		41		148		117
Income/(Loss) Before Assessment	Income/(Loss) Before Assessment		217			86		Income/(Loss) Before Assessment	116		89		467		229
AHP Assessment			22			8
AHP assessment								AHP assessment	13		9		48		23
Net Income/(Loss)	Net Income/(Loss)		$	195		$	78	Net Income/(Loss)	$	103	$	80	$	419	$	206

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

Table of Contents

Federal Home Loan Bank of San Francisco

Statements of Comprehensive Income/(Loss)

(Unaudited)


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

(In millions)	(In millions)		2023			2022		(In millions)	2023		2022		2023		2022
Net Income/(Loss)	Net Income/(Loss)		$	195		$	78	Net Income/(Loss)	$	103	$	80	$	419	$	206
Other Comprehensive Income/(Loss):	Other Comprehensive Income/(Loss):							Other Comprehensive Income/(Loss):
Net unrealized gain/(loss) on AFS securities	Net unrealized gain/(loss) on AFS securities		(32)			(149)		Net unrealized gain/(loss) on AFS securities	(35)		(88)		(25)		(317)

Net change in pension and postretirement benefits								Net change in pension and postretirement benefits	(1)		—		(1)		(2)

Total other comprehensive income/(loss)	Total other comprehensive income/(loss)		(32)			(149)		Total other comprehensive income/(loss)	(36)		(88)		(26)		(319)
Total Comprehensive Income/(Loss)	Total Comprehensive Income/(Loss)		$	163		$	(71)	Total Comprehensive Income/(Loss)	$	67	$	(8)	$	393	$	(113)

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

Table of Contents

Federal Home Loan Bank of San Francisco

Statements of Capital Accounts

(Unaudited)


	Capital Stock Class B—Putable			Retained Earnings								Total Capital
(In millions)	Shares	Par Value		Restricted		Unrestricted		Total		AOCI
Balance, June 30, 2022	28	$	2,754	$	692	$	3,198	$	3,890	$	100	$	6,744
Comprehensive income/(loss)				16		64		80		(88)		(8)
Issuance of capital stock	23	2,296										2,296
Repurchase of capital stock	(18)	(1,724)										(1,724)
Capital stock reclassified from/(to) mandatorily redeemable capital stock, net	—	(4)										(4)

Cash dividends paid on capital stock (6.00%)						(40)		(40)				(40)
Balance, September 30, 2022	33	$	3,322	$	708	$	3,222	$	3,930	$	12	$	7,264

Balance, June 30, 2023	26	$	2,600	$	795	$	3,387	$	4,182	$	(19)	$	6,763
Comprehensive income/(loss)				21		82		103		(36)		67
Issuance of capital stock	3	246										246
Repurchase of capital stock	(4)	(360)										(360)
Capital stock reclassified from/(to) mandatorily redeemable capital stock, net	—	(1)										(1)

Cash dividends paid on capital stock (7.75%)						(63)		(63)				(63)
Balance, September 30, 2023	25	$	2,485	$	816	$	3,406	$	4,222	$	(55)	$	6,652


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

Balance, December 31, 2021	Balance, December 31, 2021	21	$	2,061	$	708	$	3,124	$	3,832	$	331	$	6,224	Balance, December 31, 2021	21	$	2,061	$	708	$	3,124	$	3,832	$	331	$	6,224
Comprehensive income/(loss)	Comprehensive income/(loss)				—		78		78		(149)		(71)		Comprehensive income/(loss)				16		190		206		(319)		(113)
Issuance of capital stock	Issuance of capital stock	9	875										875		Issuance of capital stock	54	5,385										5,385
Repurchase of capital stock	Repurchase of capital stock	(8)	(807)										(807)		Repurchase of capital stock	(41)	(4,088)										(4,088)
Capital stock reclassified from/(to) mandatorily redeemable capital stock, net	Capital stock reclassified from/(to) mandatorily redeemable capital stock, net	(1)	(32)										(32)		Capital stock reclassified from/(to) mandatorily redeemable capital stock, net	(1)	(36)										(36)
Transfers from restricted retained earnings	Transfers from restricted retained earnings				(16)		16		—				—		Transfers from restricted retained earnings				(16)		16		—				—
Cash dividends paid on capital stock (6.00%)	Cash dividends paid on capital stock (6.00%)						(35)		(35)				(35)		Cash dividends paid on capital stock (6.00%)						(108)		(108)				(108)

Balance, March 31, 2022		21	$	2,097	$	692	$	3,183	$	3,875	$	182	$	6,154
Balance, September 30, 2022															Balance, September 30, 2022	33	$	3,322	$	708	$	3,222	$	3,930	$	12	$	7,264

Balance, December 31, 2022	Balance, December 31, 2022	38	$	3,758	$	732	$	3,262	$	3,994	$	(29)	$	7,723	Balance, December 31, 2022	38	$	3,758	$	732	$	3,262	$	3,994	$	(29)	$	7,723
Comprehensive income/(loss)	Comprehensive income/(loss)				38		157		195		(32)		163		Comprehensive income/(loss)				84		335		419		(26)		393
Issuance of capital stock	Issuance of capital stock	22	2,205										2,205		Issuance of capital stock	28	2,768										2,768
Repurchase of capital stock	Repurchase of capital stock	(18)	(1,761)										(1,761)		Repurchase of capital stock	(28)	(2,789)										(2,789)
Capital stock reclassified from/(to) mandatorily redeemable capital stock, net	Capital stock reclassified from/(to) mandatorily redeemable capital stock, net	(2)	(195)										(195)		Capital stock reclassified from/(to) mandatorily redeemable capital stock, net	(13)	(1,252)										(1,252)

Cash dividends paid on capital stock (7.00%)							(63)		(63)				(63)
Balance, March 31, 2023		40	$	4,007	$	770	$	3,356	$	4,126	$	(61)	$	8,072
Cash dividends paid on capital stock (7.26%)															Cash dividends paid on capital stock (7.26%)						(191)		(191)				(191)
Balance, September 30, 2023															Balance, September 30, 2023	25	$	2,485	$	816	$	3,406	$	4,222	$	(55)	$	6,652

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

Table of Contents

Federal Home Loan Bank of San Francisco

Statements of Cash Flows

(Unaudited)


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

(In millions)	(In millions)	2023		2022			(In millions)	2023		2022
Cash Flows from Operating Activities:	Cash Flows from Operating Activities:						Cash Flows from Operating Activities:
Net Income/(Loss)	Net Income/(Loss)	$	195	$	78		Net Income/(Loss)	$	419	$	206
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)	59		25			Depreciation and amortization/(accretion)	(10)		255
Provision for/(reversal of) credit losses	Provision for/(reversal of) credit losses	(1)		(3)			Provision for/(reversal of) credit losses	7		9

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	(1)		21			Change in net fair value adjustment on advances and consolidated obligation bonds held under the fair value option	27		53
Change in net derivatives and hedging activities	Change in net derivatives and hedging activities	(311)		568			Change in net derivatives and hedging activities	393		1,334
PLRMBS trust settlement	PLRMBS trust settlement	—		(28)			PLRMBS trust settlement	—		(28)
Other adjustments, net	Other adjustments, net	1		2			Other adjustments, net	4		5
Net change in:	Net change in:						Net change in:
Accrued interest receivable	Accrued interest receivable	132		6			Accrued interest receivable	116		(34)
Other assets	Other assets	(39)		7			Other assets	(28)		22
Accrued interest payable	Accrued interest payable	176		(4)			Accrued interest payable	178		61
Other liabilities	Other liabilities	40		(25)			Other liabilities	38		(33)
PLRMBS contingent liability	PLRMBS contingent liability	—		(41)			PLRMBS contingent liability	—		(41)
Total adjustments	Total adjustments	56		528			Total adjustments	725		1,603
Net cash provided by/(used in) operating activities	Net cash provided by/(used in) operating activities	251		606			Net cash provided by/(used in) operating activities	1,144		1,809
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	27		(325)			Interest-bearing deposits	122		(1,901)
Securities purchased under agreements to resell	Securities purchased under agreements to resell	(4,100)		2,000			Securities purchased under agreements to resell	4,250		3,500
Federal funds sold	Federal funds sold	(4,708)		(2,228)			Federal funds sold	(814)		(7,298)

Trading securities:	Trading securities:						Trading securities:
Proceeds from maturities and paydowns	Proceeds from maturities and paydowns	—		250			Proceeds from maturities and paydowns	—		251

AFS securities:	AFS securities:						AFS securities:

Proceeds from sales							Proceeds from sales	—		28
Proceeds from maturities and paydowns	Proceeds from maturities and paydowns	80		345			Proceeds from maturities and paydowns	206		1,157
Purchases	Purchases	(439)		—			Purchases	(3,706)		(4,332)
HTM securities:	HTM securities:						HTM securities:
Proceeds from maturities and paydowns	Proceeds from maturities and paydowns	77		340			Proceeds from maturities and paydowns	285		763

Advances:	Advances:						Advances:
Repaid	Repaid	646,350		117,731			Repaid	1,140,925		1,096,765
Originated	Originated	(658,252)		(121,347)			Originated	(1,115,365)		(1,146,306)
Mortgage loans held for portfolio:	Mortgage loans held for portfolio:						Mortgage loans held for portfolio:
Principal collected	Principal collected	13		74			Principal collected	44		159

Other investing activities, net							Other investing activities, net	(2)		(2)
Net cash provided by/(used in) investing activities	Net cash provided by/(used in) investing activities	(20,952)		(3,160)			Net cash provided by/(used in) investing activities	25,945		(57,216)

Table of Contents

Federal Home Loan Bank of San Francisco

Statements of Cash Flows (continued)

(Unaudited)


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

(In millions)	(In millions)	2023		2022			(In millions)	2023		2022
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	10		323			Net change in deposits and other financing activities	(124)		243

Net change in borrowings from other FHLBanks							Net change in borrowings from other FHLBanks	300		2,320
Net (payments)/proceeds on derivative contracts with financing elements	Net (payments)/proceeds on derivative contracts with financing elements	3		(4)			Net (payments)/proceeds on derivative contracts with financing elements	14		(11)
Net proceeds from issuance of consolidated obligations:	Net proceeds from issuance of consolidated obligations:						Net proceeds from issuance of consolidated obligations:
Bonds	Bonds	51,508		7,488			Bonds	73,250		25,062
Discount notes	Discount notes	48,764		24,379			Discount notes	105,878		174,394
Payments for matured and retired consolidated obligations:	Payments for matured and retired consolidated obligations:						Payments for matured and retired consolidated obligations:
Bonds	Bonds	(32,468)		(1,013)			Bonds	(78,243)		(11,283)
Discount notes	Discount notes	(47,384)		(28,624)			Discount notes	(127,470)		(136,521)
Proceeds from issuance of capital stock	Proceeds from issuance of capital stock	2,205		875			Proceeds from issuance of capital stock	2,768		5,385
Payments for repurchase/redemption of mandatorily redeemable capital stock	Payments for repurchase/redemption of mandatorily redeemable capital stock	(105)		(28)			Payments for repurchase/redemption of mandatorily redeemable capital stock	(481)		(35)
Payments for repurchase of capital stock	Payments for repurchase of capital stock	(1,761)		(807)			Payments for repurchase of capital stock	(2,789)		(4,088)
Cash dividends paid	Cash dividends paid	(63)		(35)			Cash dividends paid	(191)		(108)

Net cash provided by/(used in) financing activities	Net cash provided by/(used in) financing activities	20,709		2,554			Net cash provided by/(used in) financing activities	(27,088)		55,358
Net increase/(decrease) in cash and due from banks	Net increase/(decrease) in cash and due from banks	8		—			Net increase/(decrease) in cash and due from banks	1		(49)
Cash and due from banks at beginning of the period	Cash and due from banks at beginning of the period	9		55			Cash and due from banks at beginning of the period	9		55
Cash and due from banks at end of the period	Cash and due from banks at end of the period	$	17	$	55		Cash and due from banks at end of the period	$	10	$	6
Supplemental Disclosures:	Supplemental Disclosures:						Supplemental Disclosures:
Interest paid	Interest paid	$	1,203	$	17		Interest paid	$	4,134	$	373
AHP payments		10		13
AHP payments, net							AHP payments, net	27		29
Supplemental Disclosures of Noncash Investing and Financing Activities:	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 HTM securities to AFS securities	2		17
Transfers of capital stock to mandatorily redeemable capital stock	Transfers of capital stock to mandatorily redeemable capital stock	195		32			Transfers of capital stock to mandatorily redeemable capital stock	1,252		36

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

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Federal Home Loan Bank of San Francisco

Notes to Financial Statements

Note 1 — Basis of Presentation and Significant Accounting Policies

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

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

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

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Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

Note 2 — Recently Issued and Adopted Accounting Guidance

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

Accounting Standards Update (ASU)

Description

Effective Date

Effect on the Financial Statements or Other Significant Matters

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

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

This guidance became effective beginning March 2020 through December 31, 2024.

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

Troubled Debt Restructurings and Vintage Disclosures

(ASU 2022-02)

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

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

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

Note 3 — Investments

The Bank makes short-term investments in interest-bearing deposits, securities purchased under agreements to resell, and Federal 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 March 31, 2023, and December 31, 2022, none of these investments were with counterparties rated below BBB. These may differ from any internal ratings of the investments by the Bank, if applicable.sold.

Federal funds sold are unsecured loans that are generally transacted on an overnight term. Finance Agency regulations include a limit on the amount of unsecured credit the Bank may extend to a counterparty. At ~~March 31,~~

~~Table of Contents~~

~~Federal Home Loan Bank of San Francisco~~

~~Notes to Financial Statements (continued)~~

September 30, 2023, and December 31, 2022, all investments in interest-bearing deposits and Federal funds sold were repaid or expected to be repaid according to the relevant contractual terms. No allowance for credit losses was recorded for these assets at ~~March 31,~~September 30, 2023, and December 31, 2022. Carrying values of interest-bearing

Table of Contents

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

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

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

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 PLRMBS that are supported by underlying mortgage loans. The Bank is prohibited by Finance Agency regulations from purchasing certain higher risk securities, such as equity securities and debt instruments that are not investment quality at the time of purchase.

Trading Securities. The estimated fair value of trading securities that were MBS - other U.S. obligations was $1 million as of ~~March 31,~~September 30, 2023, and December 31, 2022. The unrealized net gain/(loss) on trading securities held at ~~March 31,~~September 30, 2023 and 2022, were de minimis amounts.

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


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

U.S. obligations – Treasury notes		$	4,062	$	—	$	16	$	—	$	4,078
U.S. Treasury obligations												U.S. Treasury obligations	$	4,034	$	—	$	10	$	—	$	4,044

MBS:	MBS:											MBS:
Government Sponsored Enterprises (GSEs) – multifamily	Government Sponsored Enterprises (GSEs) – multifamily	8,173		—		—		(81)		8,092		Government Sponsored Enterprises (GSEs) – multifamily	11,218		—		7		(65)		11,160

PLRMBS	PLRMBS	1,159		(28)		45		(26)		1,150		PLRMBS	1,100		(34)		34		(25)		1,075

Total MBS	Total MBS	9,332		(28)		45		(107)		9,242		Total MBS	12,318		(34)		41		(90)		12,235
Total	Total	$	13,394	$	(28)	$	61	$	(107)	$	13,320	Total	$	16,352	$	(34)	$	51	$	(90)	$	16,279


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

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


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



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



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

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

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Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

December 31, 2022
(In millions)
Amortized
Cost(1)
Allowance for Credit Losses Gross
Unrealized
Gains Gross
Unrealized
Losses Estimated Fair Value
U.S. obligations – Treasury notes $ 4,012 $ — $ 12 $ — $ 4,024
MBS:
GSEs – multifamily 7,562 — 2 (57) 7,507
PLRMBS 1,183 (30) 54 (25) 1,182
Total MBS 8,745 (30) 56 (82) 8,689
Total $ 12,757 $ (30) $ 68 $ (82) $ 12,713

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

At ~~March 31,~~September 30, 2023, the amortized cost of the Bank’s MBS classified as AFS included premiums of ~~$50~~$58 million, discounts of ~~$140~~$180 million, and previous credit losses related to the prior methodology of evaluating credit losses of ~~$341~~$320 million for PLRMBS. At December 31, 2022, the amortized cost of the Bank’s MBS classified as AFS included premiums of $52 million, discounts of $113 million, and previous credit losses related to the prior methodology of evaluating credit losses of $351 million for PLRMBS.

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


March 31, 2023
September 30, 2023														September 30, 2023
		Less Than 12 Months				12 Months or More				Total					Less Than 12 Months				12 Months or More				Total
(In millions)	(In millions)	Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses		(In millions)	Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses

MBS – GSEs – multifamily	MBS – GSEs – multifamily	$	6,917	$	64	$	941	$	17	$	7,858	$	81	MBS – GSEs – multifamily	$	5,684	$	27	$	3,361	$	38	$	9,045	$	65

PLRMBS	PLRMBS	183		7		187		19		370		26		PLRMBS	62		2		285		23		347		25

Total	Total	$	7,100	$	71	$	1,128	$	36	$	8,228	$	107	Total	$	5,746	$	29	$	3,646	$	61	$	9,392	$	90


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

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



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

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


September 30, 2023
(In millions)
Year of Contractual Maturity	Amortized Cost		Estimated Fair Value





U.S. Treasury obligations – Due after 1 year through 5 years	$	4,034	$	4,044
MBS	12,318		12,235
Total	$	16,352	$	16,279


December 31, 2022
(In millions)
Year of Contractual Maturity	Amortized Cost		Estimated Fair Value


U.S. Treasury obligations – Due after 1 year through 5 years	$	4,012	$	4,024



MBS	8,745		8,689
Total	$	12,757	$	12,713

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

Table of Contents

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

March 31, 2023
(In millions)
Year of Contractual Maturity Amortized
Cost Estimated
Fair Value
U.S. obligations – Treasury notes – Due after 1 year through 5 years $ 4,062 $ 4,078
MBS 9,332 9,242
Total $ 13,394 $ 13,320

December 31, 2022
(In millions)
Year of Contractual Maturity Amortized
Cost Estimated
Fair Value
U.S. obligations – Treasury notes – Due after 1 year through 5 years $ 4,012 $ 4,024
MBS 8,745 8,689
Total $ 12,757 $ 12,713

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


March 31, 2023
September 30, 2023										September 30, 2023
(In millions)	(In millions)	Amortized Cost(1)		Gross Unrecognized Holding Gains(2)		Gross Unrecognized Holding Losses(2)		Estimated Fair Value		(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	$	67	$	—	$	(2)	$	65	MBS – Other U.S. obligations – single-family	$	54	$	—	$	(2)	$	52
MBS – GSEs:	MBS – GSEs:									MBS – GSEs:

MBS – GSEs – single-family	MBS – GSEs – single-family	709		1		(18)		692		MBS – GSEs – single-family	637		1		(28)		610

MBS – GSEs – multifamily	MBS – GSEs – multifamily	1,181		—		(6)		1,175		MBS – GSEs – multifamily	1,074		—		(5)		1,069
Subtotal MBS – GSEs	Subtotal MBS – GSEs	1,890		1		(24)		1,867		Subtotal MBS – GSEs	1,711		1		(33)		1,679

PLRMBS	PLRMBS	147		—		(11)		136		PLRMBS	130		—		(9)		121

Total	Total	$	2,104	$	1	$	(37)	$	2,068	Total	$	1,895	$	1	$	(44)	$	1,852


December 31, 2022
(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	$	72	$	—	$	(2)	$	70
MBS – GSEs:


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



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



PLRMBS	155		—		(12)		143

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

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

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

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

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

~~Table of Contents~~

~~Federal Home Loan Bank of San Francisco~~

~~Notes to Financial Statements (continued)~~

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

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 ~~March 31,~~September 30, 2023 and 2022. The Bank recorded no allowance for credit losses associated with HTM securities during the three and nine months ended ~~March 31,~~September 30, 2023 and 2022.


		Three Months Ended			Three Months Ended			Nine Months Ended
(In millions)	(In millions)		March 31, 2023			March 31, 2022			(In millions)	September 30, 2023		September 30, 2022		September 30, 2023		September 30, 2022
Balance, beginning of the period	Balance, beginning of the period		$	30		$	17		Balance, beginning of the period	$	28	$	17	$	30	$	17
(Charge-offs)/recoveries	(Charge-offs)/recoveries		(1)			—			(Charge-offs)/recoveries	(1)		(1)		(3)		(1)
Provision for/(reversal of) credit losses	Provision for/(reversal of) credit losses		(1)			(3)			Provision for/(reversal of) credit losses	7		9		7		9
Balance, end of the period	Balance, end of the period		$	28		$	14		Balance, end of the period	$	34	$	25	$	34	$	25

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

Table of Contents

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

AFS and HTM Securities (Excluding PLRMBS) – The Bank’s AFS and HTM securities are principally U.S. obligations and MBS issued by Ginnie Mae, Freddie Mac, and Fannie Mae that are backed by single-family or multifamily mortgage loans. The Bank only purchases securities considered investment quality. Excluding PLRMBS investments, at ~~March 31,~~September 30, 2023, and December 31, 2022, 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 ~~March 31,~~September 30, 2023, and December 31, 2022, 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 and substantially all of these securities are highly rated. In the case of U.S. obligations, they carry an explicit government guarantee. In the case of GSE securities, they are purchased under an assumption that the issuers’ obligation to pay principal and interest on those securities will be honored, taking into account their status as GSEs. As a result, no allowance for credit losses was recorded on these AFS securities at ~~March 31,~~September 30, 2023, and December 31, 2022.

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

~~Table of Contents~~

~~Federal Home Loan Bank of San Francisco~~

~~Notes to Financial Statements (continued)~~

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 ~~March 31,~~September 30, 2023, and December 31, 2022, approximately 3% and 4%, respectively, 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;

•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 reflect management’s expectations and include a base case housing price forecast for near- and long-term horizons.

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

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

Table of Contents

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

credit loss amount for PLRMBS classified as Level 3 as of ~~March 31,~~September 30, 2023, uses significant inputs and assumptions that include, based on unpaid principal balance, the weighted average percentage of prepayment rates of ~~10.1%~~10.9%; default rates of ~~5.8%~~10.0%; and loss severities of ~~56.9%~~46.4%. The weighted average percentage of the related current credit enhancement for these securities, based on unpaid principal balance, was ~~8.7%~~8.6% as of ~~March 31,~~September 30, 2023. 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 total net accretion recognized in interest income associated with PLRMBS with previous credit losses related to the prior methodology of evaluating credit losses totaled $11 million and $14 million for the three months ended March 31, 2023 and 2022, respectively. Accretion of yield adjustments resulting from improvement of expected cash flows that are recognized over the remaining life of the securities totaled $7 million and $8 million for the three months ended March 31, 2023 and 2022, 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~~There were no transfers 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 before 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 did not transfer any PLRMBS from ~~its~~the Bank’s HTM portfolio to its AFS portfolio during the three months ended ~~March 31,~~September 30, 2023. The Bank transferred PLRMBS from its HTM

~~Table~~ portfolio to its AFS portfolio with an amortized cost and fair value at the time of ~~Contents~~

~~Federal Home Loan~~the transfer of $2 million during the nine months ended September 30, 2023.The fair value of the transferred PLRMBS was lower than their amortized cost by a de minimis amount. The Bank transferred PLRMBS from its HTM portfolio to its AFS portfolio with an amortized cost and fair value at the time of ~~San Francisco~~

~~Notes to Financial Statements (continued)~~

the transfer of $1 million during the three months ended September 30, 2022. The fair value of the transferred PLRMBS was lower than their amortized cost by a de minimis amount. The Bank transferred PLRMBS from its HTM portfolio to its AFS portfolio with an amortized cost of ~~$16~~$17 million and fair value of ~~$19~~$20 million at the time of the transfer during the ~~three~~nine months ended ~~March 31,~~September 30, 2022.

For the Bank’s PLRMBS, the Bank recorded a ~~reversal of~~provision for credit losses of ~~$1 million and $3~~$7 million during the three and nine months ended ~~March 31, 2023,~~September 30, 2023. The Bank recorded a provision for credit losses of $9 million during the three and ~~March 31, 2022, respectively,~~nine months ended September 30, 2022. The provisions were recorded largely ~~as a result~~because of ~~improvements~~declines in the fair values, the present value of expected cash flows of certain PLRMBS, and decreased expectations of the performance of loan collateral underlying ~~collateral on certain~~these securities.

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

Note 4 — Advances

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

Redemption Terms. The ~~Bank had~~following table presents advances outstanding by redemption term and weighted-average interest rate at ~~interest rates ranging from 0.21% to 8.57% at March 31,~~September 30, 2023, and ~~0.21% to 8.57% at~~ December 31, ~~2022, as summarized below.~~2022.

(Dollars in millions) March 31, 2023 December 31, 2022
Redemption Term
Amount
Outstanding(1)
Weighted
Average
Interest Rate
Amount
Outstanding(1)
Weighted
Average
Interest Rate
Overdrawn demand and overnight deposit accounts $ — 4.65 % $ 2 4.15 %
Within 1 year(2)
64,758 4.87 71,050 4.34
After 1 year through 2 years 22,750 3.99 7,634 3.30
After 2 years through 3 years 5,433 3.60 4,036 2.22
After 3 years through 4 years 4,284 2.62 3,391 2.05
After 4 years through 5 years 3,702 3.73 2,815 3.24
After 5 years 1,092 3.58 1,189 3.50
Total par value 102,019 4.45 % 90,117 4.03 %
Valuation adjustments for hedging activities (453) (670)
Valuation adjustments under fair value option (25) (47)
Total $ 101,541 $ 89,400

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Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)


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

Total	$	63,584			$	89,400

(1)Carrying amounts exclude accrued interest receivable of ~~$103~~$104 million and $241 million at ~~March 31,~~September 30, 2023, and December 31, 2022, respectively.

(2)Advances outstanding with redemption terms within three months totaled ~~$45.6~~$15.7 billion and $46.3 billion at ~~March 31,~~September 30, 2023, and December 31, 2022, respectively.

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 borrower’s decision to repay the advance prior to its maturity date, which is required by Finance Agency regulations. In addition, for certain advances with full or partial prepayment symmetry, the Bank may charge the borrower a prepayment fee or pay the borrower a prepayment credit depending on certain circumstances, such as movements in interest rates, when the advance is prepaid. In November 2018, the Bank discontinued offering advances with partial prepayment symmetry. The Bank had advances with full prepayment symmetry outstanding totaling ~~$39.9~~$40.5 billion at ~~March 31,~~September 30, 2023, and $19.2 billion at December 31, 2022. The Bank had advances with partial prepayment symmetry outstanding totaling ~~$0.7~~$0.5 billion at ~~March 31,~~September 30, 2023, and $1.0 billion at December 31, 2022. Some advances may be repaid on ~~pertinent~~specified call dates without prepayment fees (callable advances). The Bank had callable advances outstanding totaling ~~$9.2~~$4.6 billion at ~~March 31,~~September 30, 2023, and $9.8 billion at December 31, 2022.

The Bank had putable advances totaling ~~$1.4~~$1.5 billion at ~~March 31,~~September 30, 2023, and $0.8 billion at December 31, 2022. 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.

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~~Federal Home Loan Bank of San Francisco~~

~~Notes to Financial Statements (continued)~~

The following table summarizes advances at ~~March 31,~~September 30, 2023, and December 31, 2022, 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
(In millions) March 31, 2023 December 31, 2022 March 31, 2023 December 31, 2022
Overdrawn demand and overnight deposit accounts $ — $ 2 $ — $ 2
Within 1 year 65,078 71,370 65,608 71,850
After 1 year through 2 years 22,760 7,634 23,250 7,634
After 2 years through 3 years 5,433 4,046 4,983 3,836
After 3 years through 4 years 4,284 3,391 4,284 3,391
After 4 years through 5 years 3,712 2,825 2,802 2,215
After 5 years 752 849 1,092 1,189
Total par value $ 102,019 $ 90,117 $ 102,019 $ 90,117

~~Concentration Risk.~~ The following tables present the concentration in advances to the top 10 borrowers and their affiliates at March 31, 2023, and March 31, 2022. The tables also present the interest income from these advances before the impact of interest rate exchange agreements hedging these advances for the three months ended March 31, 2023 and 2022.

March 31, 2023
(In millions)
Name of Borrower Advances
Outstanding Percentage of
Total
Advances
Outstanding
Interest
Income from
Advances(1)
Percentage of
Total Interest
Income from
Advances
First Republic Bank(2)
$ 28,100 28 % $ 176 18 %
MUFG Union Bank, National Association(3)
11,050 11 36 4
Western Alliance Bank 11,000 11 27 3
City National Bank 8,850 9 115 12
Pacific Western Bank 5,450 5 25 3
First Technology Federal Credit Union(4)
4,458 4 38 4
Bank of the West(5)
2,600 3 66 7
Wells Fargo National Bank West 2,000 2 24 2
First Foundation Bank 2,000 2 12 1
Luther Burbank Savings Bank(4)
1,702 2 9 1
Subtotal 77,210 77 528 55
Others 24,809 23 443 45
Total par value $ 102,019 100 % $ 971 100 %


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

1514

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Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

March 31, 2022
(In millions)
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(3)
$ 4,050 20 % $ 13 18 %
First Republic Bank(2)
3,700 18 9 13
First Technology Federal Credit Union(4)
1,800 9 8 12
Silvergate Bank 800 4 — —
Wescom Central Credit Union 760 4 1 2
Luther Burbank Savings 752 4 3 4
Bank of Hope 700 3 1 2
Pacific Western Bank 629 3 — —
Pacific Premier Bank 600 3 — —
Banc of California, NA 561 3 3 4
Subtotal 14,352 71 38 55
Others 6,121 29 30 45
Total par value $ 20,473 100 % $ 68 100 %
Concentration Risk. The following tables present the concentration in advances to the top 10 borrowers and their affiliates at September 30, 2023 and 2022. The tables also present the interest income from these advances before the impact of interest rate exchange agreements hedging these advances for the three and nine months ended September 30, 2023 and 2022.


September 30, 2023
(Dollars in millions)	September 30, 2023				Three Months Ended September 30, 2023				Nine Months Ended September 30, 2023

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


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

Name of Borrower	Advances Outstanding		Percentage of Total Advances Outstanding		Interest Income from Advances(1)		Percentage of Total Interest Income from Advances		Interest Income from Advances(1)		Percentage of Total Interest Income from Advances
Silicon Valley Bank(6)	$	13,500	20	%	$	18	5	%	$	20	4	%
First Republic Bank (subsequently acquired by JPMorgan Chase, National Association)(2)	11,000		17		65		20		94		18
MUFG Union Bank, National Association(5)	7,950		12		46		14		81		15
Western Alliance Bank	4,000		6		19		6		25		5
First Technology Federal Credit Union(3)	3,737		6		22		7		41		8
Bank of the West(7)	2,500		4		1		—		1		—
City National Bank	2,050		3		7		2		7		1
Wells Fargo National Bank West	2,000		3		2		1		2		—
Pacific Western Bank(8)	1,370		2		1		—		4		1
Luther Burbank Savings(3)(4)	1,202		2		5		2		12		2
Subtotal	49,309		75		186		57		287		54
Others	17,089		25		147		43		248		46
Total par value	$	66,398	100	%	$	333	100	%	$	535	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.

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Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

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

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

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

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

~~(4) An officer or director of the member is a Bank director.~~

~~(5) On February 1, 2023, BMO Harris, a nonmember, announced that it completed its acquisition of Bank of the West.~~

(6) On March 10, 2023, Silicon Valley Bank was closed by the California ~~Department of Financial Protection and Innovation (DFPI)~~DFPI and the ~~Federal Deposit Insurance Corporation (FDIC)~~FDIC was named as receiver. ~~On March 14, 2023, the~~The FDIC ~~transferred~~created Silicon Valley Bridge Bank, N.A., whereby all of the deposits and substantially all ~~of the~~ assets of Silicon Valley Bank were transferred to the bridge bank. As of March 31, 2023, Silicon Valley Bridge Bank, ~~National Association. The~~N.A., had prepaid all outstanding advances to ~~Silicon Valley Bank were not transferred to Silicon Valley Bridge Bank, and were repaid by Silicon Valley~~the Bank. On March 26, 2023, the FDIC entered into a purchase and assumption agreement for all the deposits and loans of Silicon Valley Bridge Bank, N.A., with ~~First-Citizens~~First Citizens Bank and Trust ~~Company, a nonmember. At March 31, 2023,~~Company. Silicon Valley Bank ~~had~~is no longer a member of the Bank.

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

(8) On July 25, 2023, Pacific Western Bank and Banc of California, N.A., announced the signing of a definitive agreement to combine in a merger transaction. Under the terms of the agreement, PacWest Bancorp will merge into Banc of California, Inc., and Banc of California, N.A., will merge into Pacific Western Bank. The merger transaction is subject to regulatory and shareholder approval. On October 19, 2023, it was announced that the merger approval was received from the regulatory agencies. At September 30, 2023, total advances outstanding to Banc of California, N.A., were $811 million. There were no advances outstanding ~~from the~~to Pacific Western Bank ~~compared to $15.0~~at September 30, 2023. At September 30, 2022, there were $1.4 billion inand $731 million of advances outstanding to ~~Silicon Valley~~Pacific Western Bank ~~at yearend 2022.~~and Banc of California, N.A., respectively.

Credit Risk Exposure and Security Terms. The Bank manages its credit exposure related to advances through an integrated approach that ~~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.~~loss.

In addition, the Bank lends to member financial institutions that have their principal place of business in Arizona, California, or Nevada, in accordance with federal law and 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;

~~Table of Contents~~

~~Federal Home Loan Bank of San Francisco~~

~~Notes to Financial Statements (continued)~~

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

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

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

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

Table of Contents

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

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

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 ~~March 31,~~September 30, 2023, the Bank expects to collect all amounts due according to the contractual terms. Therefore, no allowance for credit losses on advances was deemed necessary by the Bank as of ~~March 31,~~September 30, 2023, and December 31, 2022.

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

(In millions) March 31, 2023 December 31, 2022
Par value of advances:
Fixed rate:
Due within 1 year $ 42,646 $ 47,621
Due after 1 year 37,246 18,050
Total fixed rate 79,892 65,671
Adjustable rate:
Due within 1 year 22,112 23,431
Due after 1 year 15 1,015
Total adjustable rate 22,127 24,446
Total par value $ 102,019 $ 90,117

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 March 31, 2023, or December 31, 2022. The Bank has generally elected to account for certain advances with embedded features under

~~Table of Contents~~

~~Federal Home Loan Bank of San Francisco~~

~~Notes to Financial Statements (continued)~~

~~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 before original maturity. The Bank records prepayment fees net of any associated fair value adjustments related to prepaid advances that were in hedging relationships. The net amount of prepayment fees received was $95 million for the three months ended March 31, 2023. The net amount of prepayment fees paid was $2 million for the three months ended March 31, 2022.


(In millions)	September 30, 2023		December 31, 2022
Par value of advances:
Fixed rate:
Due within 1 year	$	18,779	$	47,621
Due after 1 year	32,320		18,050
Total fixed rate	51,099		65,671
Adjustable rate:
Due within 1 year	13,458		23,431
Due after 1 year	—		1,015
Total adjustable rate	13,458		24,446
Total par value	$	64,557	$	90,117

Note 5 — Mortgage Loans Held for Portfolio

The following table presents information as of ~~March 31,~~September 30, 2023, and December 31, 2022, on mortgage loans held for portfolio, all of which are secured by one- to four-unit residential properties and single-unit homes.


(In millions)	(In millions)	March 31, 2023		December 31, 2022		(In millions)	September 30, 2023		December 31, 2022
Fixed rate medium-term mortgage loans	Fixed rate medium-term mortgage loans	$	13	$	14	Fixed rate medium-term mortgage loans	$	13	$	14
Fixed rate long-term mortgage loans	Fixed rate long-term mortgage loans	749		761		Fixed rate long-term mortgage loans	718		761
Subtotal	Subtotal	762		775		Subtotal	731		775
Unamortized premiums	Unamortized premiums	42		43		Unamortized premiums	42		43
Unamortized discounts	Unamortized discounts	(2)		(2)		Unamortized discounts	(2)		(2)
Mortgage loans held for portfolio(1)	Mortgage loans held for portfolio(1)	802		816		Mortgage loans held for portfolio(1)	771		816
Less: Allowance for credit losses	Less: Allowance for credit losses	(1)		(1)		Less: Allowance for credit losses	(1)		(1)
Total mortgage loans held for portfolio, net	Total mortgage loans held for portfolio, net	$	801	$	815	Total mortgage loans held for portfolio, net	$	770	$	815

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

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

Payment Status of Mortgage Loans. Payment status is the key credit quality indicator for conventional mortgage loans and allows the Bank to monitor the migration of past due loans. A past due loan is one where the borrower has failed to make a scheduled full payment of principal and interest within 30 days of its due date. Other delinquency statistics include nonaccrual loans and loans in process of foreclosure. The following tables present the payment ~~status for mortgage loans and other delinquency statistics for the Bank’s mortgage loans at March 31, 2023, and December 31, 2022.~~

March 31, 2023
(Dollars in millions) Origination Year
Payment Status 2019 to 2023 Prior to 2019
Amortized Cost(1)
30 – 59 days delinquent $ 2 $ 6 $ 8
60 – 89 days delinquent 1 1 2
90 days or more delinquent 4 14 18
Total past due 7 21 28
Total current loans 358 416 774
Total mortgage loans held for portfolio $ 365 $ 437 $ 802
In process of foreclosure, included above(2)
$ 2
Nonaccrual loans(3)
$ 18
Serious delinquencies as a percentage of total mortgage loans outstanding(4)
2.22 %

1817

Table of Contents

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

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


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

Serious delinquencies as a percentage of total mortgage loans outstanding(4)					2.13		%


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

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

(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 ~~March 31,~~September 30, 2023, and December 31, 2022, $6$5 million and $7 million, respectively, of mortgage loans on nonaccrual status did not have an associated allowance for credit losses because these loans were either previously charged off to the expected recoverable value or the fair value of the underlying collateral, including any credit enhancements, is greater than the amortized cost of the loans.

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

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

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Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

averages. The Bank also incorporates associated credit enhancements, if any, to determine its estimate of expected credit losses.

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

At both ~~March 31,~~September 30, 2023 and 2022, the allowance for credit losses on the mortgage loan portfolio was $1 million. 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 ~~March 31,~~September 30, 2023 and ~~2022, respectively.~~

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~~Federal Home Loan Bank of San Francisco~~

~~Notes to Financial Statements (continued)~~

2022.

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

Note 6 — Deposits

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

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


		March 31, 2023				December 31, 2022					September 30, 2023		December 31, 2022
(Dollars in millions)	(Dollars in millions)	Amount Outstanding		Weighted Average Interest Rate		Amount Outstanding		Weighted Average Interest Rate		(Dollars in millions)	Amount Outstanding			Amount Outstanding
Interest-bearing deposits:	Interest-bearing deposits:									Interest-bearing deposits:
Adjustable rate	Adjustable rate	$	1,014	4.65	%	$	983	4.15	%	Adjustable rate	$	758		$	983
Fixed rate	Fixed rate	2		4.40		—		—		Fixed rate	5			—
Total interest-bearing deposits	Total interest-bearing deposits	1,016				983				Total interest-bearing deposits	763			983
Non-interest-bearing deposits	Non-interest-bearing deposits	6				6				Non-interest-bearing deposits	5			6
Total	Total	$	1,022			$	989			Total	$	768		$	989

Note 7 — Consolidated Obligations

Consolidated obligations, consisting of bonds and discount notes, are jointly issued by the Federal Home Loan Banks (FHLBanks) through the Office of Finance, which serves as the FHLBanks’ agent. As provided by the Federal Home Loan Bank Act of 1932, as amended (FHLBank Act) or by regulations governing the operations of the FHLBanks, all FHLBanks have joint and several liability for all FHLBank consolidated obligations. For a discussion of the joint and several liability regulation, see “Item 8. Financial Statements and Supplementary Data –

Table of Contents

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

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

~~Table of Contents~~

~~Federal Home Loan Bank of San Francisco~~

~~Notes to Financial Statements (continued)~~

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


(Dollars in millions)	(Dollars in millions)	March 31, 2023				December 31, 2022				(Dollars in millions)	September 30, 2023				December 31, 2022
Contractual Maturity	Contractual Maturity	Amount Outstanding		Weighted Average Interest Rate		Amount Outstanding		Weighted Average Interest Rate		Contractual Maturity	Amount Outstanding		Weighted Average Interest Rate		Amount Outstanding		Weighted Average Interest Rate
Within 1 year	Within 1 year	$	62,616	4.62	%	$	58,301	4.05	%	Within 1 year	$	51,360	5.03	%	$	58,301	4.05	%
After 1 year through 2 years	After 1 year through 2 years	23,046		4.12		8,268		2.30		After 1 year through 2 years	11,120		3.63		8,268		2.30
After 2 years through 3 years	After 2 years through 3 years	4,080		1.26		2,317		1.26		After 2 years through 3 years	6,003		1.54		2,317		1.26
After 3 years through 4 years	After 3 years through 4 years	3,888		1.11		5,473		0.99		After 3 years through 4 years	1,760		1.33		5,473		0.99
After 4 years through 5 years	After 4 years through 5 years	1,142		2.97		1,255		1.47		After 4 years through 5 years	822		2.45		1,255		1.47
After 5 years	After 5 years	1,182		2.01		1,293		1.73		After 5 years	856		2.25		1,293		1.73
Total par value	Total par value	95,954		4.16	%	76,907		3.47	%	Total par value	71,921		4.37	%	76,907		3.47	%
Unamortized premiums	Unamortized premiums	—				1				Unamortized premiums	—				1
Unamortized discounts	Unamortized discounts	(10)				(5)				Unamortized discounts	(7)				(5)
Valuation adjustments for hedging activities	Valuation adjustments for hedging activities	(869)				(1,083)				Valuation adjustments for hedging activities	(964)				(1,083)
Fair value option valuation adjustments	Fair value option valuation adjustments	(41)				(52)				Fair value option valuation adjustments	(43)				(52)
Total	Total	$	95,034			$	75,768			Total	$	70,907			$	75,768

The Bank’s participation in consolidated obligation bonds outstanding includes callable ~~bonds of $23.8 billion at March 31, 2023, and $19.7 billion at December 31, 2022.~~bonds. When a callable bond for which the Bank is the primary obligor is issued, the Bank may simultaneously enter into an interest rate swap (wherein the Bank pays a variable rate and receives a fixed rate) with a call feature that mirrors the call option embedded in the bond (a sold callable option in a swap). The ~~Bank had notional amounts of interest rate exchange agreements hedging callable bonds of $22.2 billion at March 31, 2023, and $18.1 billion at December 31, 2022. 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 ~~March 31,~~September 30, 2023, and December 31, 2022, was as follows:


(In millions)	(In millions)	March 31, 2023		December 31, 2022		(In millions)	September 30, 2023		December 31, 2022
Par value of consolidated obligation bonds:	Par value of consolidated obligation bonds:					Par value of consolidated obligation bonds:
Non-callable	Non-callable	$	72,169	$	57,164	Non-callable	$	44,814	$	57,164
Callable	Callable	23,785		19,743		Callable	27,107		19,743
Total par value	Total par value	$	95,954	$	76,907	Total par value	$	71,921	$	76,907

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

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Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)


(In millions)	(In millions)					(In millions)
Earlier of Contractual Maturity or Next Call Date	Earlier of Contractual Maturity or Next Call Date	March 31, 2023		December 31, 2022		Earlier of Contractual Maturity or Next Call Date	September 30, 2023		December 31, 2022
Within 1 year	Within 1 year	$	78,409	$	73,049	Within 1 year	$	66,665	$	73,049
After 1 year through 2 years	After 1 year through 2 years	17,154		3,310		After 1 year through 2 years	4,770		3,310
After 2 years through 3 years	After 2 years through 3 years	45		187		After 2 years through 3 years	268		187
After 3 years through 4 years	After 3 years through 4 years	298		313		After 3 years through 4 years	170		313
After 4 years through 5 years	After 4 years through 5 years	1		—		After 4 years through 5 years	12		—
After 5 years	After 5 years	47		48		After 5 years	36		48
Total par value	Total par value	$	95,954	$	76,907	Total par value	$	71,921	$	76,907

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


		March 31, 2023				December 31, 2022					September 30, 2023				December 31, 2022
(Dollars in millions)	(Dollars in millions)	Amount Outstanding		Weighted Average Interest Rate (1)		Amount Outstanding		Weighted Average Interest Rate (1)		(Dollars in millions)	Amount Outstanding		Weighted Average Interest Rate (1)		Amount Outstanding		Weighted Average Interest Rate (1)
Par value	Par value	$	37,668	4.70	%	$	36,159	4.13	%	Par value	$	14,406	5.18	%	$	36,159	4.13	%
Unamortized discounts	Unamortized discounts	(312)				(230)				Unamortized discounts	(113)				(230)
Total	Total	$	37,356			$	35,929			Total	$	14,293			$	35,929

(1)Represents yield to maturity excluding concession fees.

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

(In millions) March 31, 2023 December 31, 2022
Par value of consolidated obligations:
Bonds:
Fixed rate $ 34,856 $ 25,632
Adjustable rate 60,275 48,997
Step-up 823 2,278
Total bonds, par value 95,954 76,907
Discount notes, par value 37,668 36,159
Total consolidated obligations, par value $ 133,622 $ 113,066

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 March 31, 2023, or December 31, 2022. 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.


(In millions)	September 30, 2023		December 31, 2022

Par value of consolidated obligation bonds:
Fixed rate	$	37,598	$	25,632
Adjustable rate	33,675		48,997
Step-up	648		2,278



Total consolidated obligation bonds, par value	$	71,921	$	76,907

2221

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Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

Note 8 — Accumulated Other Comprehensive Income/(Loss)

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


(In millions)	(In millions)	Net Unrealized Gain/(Loss) on AFS Securities		Pension and Postretirement Benefits		Total AOCI		(In millions)	Net Unrealized Gain/(Loss) on AFS Securities		Pension and Postretirement Benefits		Total AOCI
Balance, December 31, 2021		$	340	$	(9)	$	331
Balance, June 30, 2022								Balance, June 30, 2022	$	111	$	(11)	$	100
Other comprehensive income/(loss):	Other comprehensive income/(loss):							Other comprehensive income/(loss):

Net change in fair value	Net change in fair value	(149)				(149)		Net change in fair value	(88)				(88)

Net current period other comprehensive income/(loss)	Net current period other comprehensive income/(loss)	(149)		—		(149)		Net current period other comprehensive income/(loss)	(88)		—		(88)
Balance, March 31, 2022		$	191	$	(9)	$	182
Balance, September 30, 2022								Balance, September 30, 2022	$	23	$	(11)	$	12

Balance, December 31, 2022		$	(14)	$	(15)	$	(29)
Balance, June 30, 2023								Balance, June 30, 2023	$	(4)	$	(15)	$	(19)
Other comprehensive income/(loss):	Other comprehensive income/(loss):							Other comprehensive income/(loss):

Net change in pension and postretirement benefits								Net change in pension and postretirement benefits			(1)		(1)

Net change in fair value	Net change in fair value	(32)				(32)		Net change in fair value	(35)				(35)

Net current period other comprehensive income/(loss)	Net current period other comprehensive income/(loss)	(32)		—		(32)		Net current period other comprehensive income/(loss)	(35)		(1)		(36)
Balance, March 31, 2023		$	(46)	$	(15)	$	(61)
Balance, September 30, 2023								Balance, September 30, 2023	$	(39)	$	(16)	$	(55)

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


(In millions)	Net Unrealized Gain/(Loss) on AFS Securities		Pension and Postretirement Benefits		Total AOCI












Balance, December 31, 2021	$	340	$	(9)	$	331
Other comprehensive income/(loss):
Net change in pension and postretirement benefits			(2)		(2)

Net change in fair value	(317)				(317)



Net current period other comprehensive income/(loss)	(317)		(2)		(319)

Balance, September 30, 2022	$	23	$	(11)	$	12

Balance, December 31, 2022	$	(14)	$	(15)	$	(29)
Other comprehensive income/(loss):
Net change in pension and postretirement benefits			(1)		(1)
Net change in fair value	(25)				(25)



Net current period other comprehensive income/(loss)	(25)		(1)		(26)
Balance, September 30, 2023	$	(39)	$	(16)	$	(55)

Note 9 — Capital

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

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

March 31, 2023 December 31, 2022
(Dollars in millions) Required Actual Required Actual
Risk-based capital $ 1,095 $ 8,228 $ 898 $ 7,757
Total regulatory capital $ 5,700 $ 8,228 $ 4,842 $ 7,757
Total regulatory capital ratio 4.00 % 5.77 % 4.00 % 6.41 %
Leverage capital $ 7,125 $ 12,342 $ 6,053 $ 11,636
Leverage ratio 5.00 % 8.66 % 5.00 % 9.61 %

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Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)


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

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

For information on the Bank’s membership capital stock requirement and activity-based capital stock requirement, see “Item 8. Financial Statements and Supplementary Data – Note 11 – Capital – Capital Requirements” in the Bank’s 2022 Form 10-K.

Mandatorily Redeemable Capital Stock. The Bank had mandatorily redeemable capital stock totaling ~~$95~~$776 million outstanding to ~~five~~six institutions at ~~March 31,~~September 30, 2023, and $5 million outstanding to three institutions at December 31, 2022. These amounts have been classified as a liability on the Bank’s Statements of Condition. The ~~change~~changes in mandatorily redeemable capital stock for the three and nine months ended ~~March 31,~~September 30, 2023 and 2022 ~~was~~were as follows:


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

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

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


(In millions)
Contractual Year of Redemption	September 30, 2023		December 31, 2022


Year 3	$	1	$	—
Year 4	2		1
Year 5	772		3
Past contractual redemption date because of remaining activity(1)	1		1
Total	$	776	$	5

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

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Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

Three Months Ended
(In millions) March 31, 2023 March 31, 2022
Balance at the beginning of the period $ 5 $ 3
Reclassified from/(to) capital during the period 195 32
Repurchase/redemption of mandatorily redeemable capital stock (105) (28)
Balance at the end of the period $ 95 $ 7

~~Cash dividends~~If activity-based stock becomes excess stock as a result of an activity no longer remaining outstanding, the Bank may repurchase those shares, at its sole discretion, subject to the statutory and regulatory restrictions on ~~mandatorily redeemable capital~~excess stock ~~were recorded as interest expense of de minimis amounts for the three months ended March 31, 2023 and 2022.~~

~~The following table presents mandatorily redeemable capital stock amounts by contractual redemption period at March 31, 2023, and December 31, 2022.~~

(In millions)
Contractual Redemption Period March 31, 2023 December 31, 2022
After 3 years through 4 years $ 4 $ 1
After 4 years through 5 years 90 3
Past contractual redemption date because of remaining activity(1)
1 1
Total $ 95 $ 5

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

redemption. The Bank’s mandatorily redeemable capital stock is discussed more fully in “Item 8. Financial Statements and Supplementary Data – Note 11 – Capital” in the Bank’s 2022 Form 10-K.

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

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

The Bank satisfies its retained earnings requirement with both restricted retained earnings (i.e., amounts related to the Joint Capital Enhancement (JCE) Agreement) and unrestricted retained earnings. ~~The JCE Agreement is intended to enhance the capital position of each FHLBank.~~ In accordance with the JCE Agreement, each FHLBank is required to reclassify an amount equal to 20% of its net income each quarter to a separate restricted retained earnings account until the balance of the account, calculated as of the last day of each calendar quarter, equals at least 1% of that FHLBank's average balance of outstanding consolidated obligations for the calendar quarter. Under the JCE Agreement, these restricted retained earnings will not be available to pay dividends. The JCE Agreement also 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 $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 2023. The Bank’s restricted retained earnings totaled $770 million and $732 million at March 31, 2023, and December 31, 2022, respectively. The

~~Table of Contents~~

~~Federal Home Loan Bank of San Francisco~~

~~Notes to Financial Statements (continued)~~

~~Bank’s unrestricted retained earnings totaled $3.4 billion and $3.3 billion at March 31, 2023, and December 31, 2022, respectively.~~

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

Dividend Payments – Finance Agency rules state that FHLBanks may declare and pay dividends only from previously retained earnings or current net earnings and may not declare or pay dividends based on projected or anticipated earnings. For information on dividend payments, see “Item 8. Financial Statements and Supplementary Data – Note 11 – Capital” in the Bank’s 2022 Form 10-K.

In addition, Finance Agency rules do not permit the Bank to pay dividends in the form of capital stock if its excess stock exceeds 1% of its total assets. Excess stock is defined as the aggregate of the capital stock held by each shareholder in excess of its minimum capital stock requirement, as established by the Bank’s capital plan. Excess stock totaled ~~$136~~$118 million, or ~~0.10%~~0.12% of total assets as of ~~March 31,~~September 30, 2023. Excess stock totaled $157 million, or 0.13% of total assets as of December 31, 2022.

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

Table of Contents

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

In the first ~~quarter~~nine months of 2023, the Bank paid dividends at an annualized rate of 7.26%, totaling $206 million, including $191 million in dividends on capital stock and $15 million in dividends on mandatorily redeemable capital stock. In the first nine months of 2022, the Bank paid dividends at an annualized rate of 6.00%, totaling ~~$35~~$108 million, including ~~$35~~$108 million in dividends on capital stock and a de minimis amount in dividends on mandatorily redeemable capital stock.

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

On ~~April 27,~~October 26, 2023, the Bank’s board of directors declared a quarterly cash dividend on the capital stock outstanding during the ~~first~~third quarter of 2023 at an annualized rate of ~~7.00%~~8.25%, totaling ~~$67~~$68 million. The Bank recorded the dividend on ~~April 27,~~October 26, 2023, and expects to pay the dividend on ~~May 11,~~November 9, 2023.

Excess Stock – The Bank’s capital plan provides that the Bank may repurchase some or all of a shareholder’s excess stock at the Bank’s discretion, subject to certain statutory and regulatory requirements. The Bank may also repurchase all of a member’s excess stock at a member’s request, at the Bank’s discretion, subject to certain statutory and regulatory requirements. For information on excess stock, see “Item 8. Financial Statements and Supplementary Data – Note 11 – Capital” in the Bank’s 2022 Form 10-K. ~~The Bank repurchased $1.9 billion and $0.8 billion in excess stock during the first quarter of 2023 and 2022, 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 ~~first~~third quarter of 2023 and 2022, the Bank redeemed a de minimis amount in mandatorily redeemable capital stock, for which the five-year redemption period had expired, at its $100 par value per share. The stock was redeemed on the scheduled redemption dates or, for stock that was not excess stock on its scheduled redemption date because of outstanding activity with the Bank, on the first available repurchase date after the stock was no longer required to support outstanding activity with the Bank.

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

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~~Federal Home Loan Bank of San Francisco~~

~~Notes to Financial Statements (continued)~~


		March 31, 2023				December 31, 2022					September 30, 2023				December 31, 2022
(Dollars in millions)	(Dollars in millions)	Capital Stock Outstanding		Percentage of Total Capital Stock Outstanding		Capital Stock Outstanding		Percentage of Total Capital Stock Outstanding		(Dollars in millions)	Capital Stock Outstanding		Percentage of Total Capital Stock Outstanding		Capital Stock Outstanding		Percentage of Total Capital Stock Outstanding
JPMorgan Chase, National Association(1)										JPMorgan Chase, National Association(1)	$	713	22	%	$	—	—	%
First Republic Bank(1)	First Republic Bank(1)	$	759	19	%	$	379	10	%	First Republic Bank(1)	—		—		379		10
Silicon Valley Bank(2)	Silicon Valley Bank(2)	—		—		418		11		Silicon Valley Bank(2)	—		—		418		11
Subtotal	Subtotal	759		19		797		21		Subtotal	713		22		797		21
Others	Others	3,343		81		2,966		79		Others	2,548		78		2,966		79
Total	Total	$	4,102	100	%	$	3,763	100	%	Total	$	3,261	100	%	$	3,763	100	%

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

(2) On March 10, 2023, the FDIC was appointed as receiver for Silicon Valley Bank. On March 14, 2023, the FDIC transferred all of the deposits and substantially all of the assets of Silicon Valley Bank to Silicon Valley Bridge Bank, National Association. The ~~advances~~FDIC created Silicon Valley Bridge Bank, N.A., whereby all of the deposits and ~~capital stock held by~~substantially all assets of Silicon Valley Bank were ~~not~~ transferred to the bridge bank. As of March 31, 2023, Silicon Valley Bridge Bank, ~~and were repaid and redeemed, respectively.~~N.A., had prepaid all outstanding advances to the Bank. On March 26, 2023, the FDIC entered into a purchase and assumption agreement for all the deposits and loans of Silicon Valley Bridge Bank, N.A., with ~~First-Citizens~~First Citizens Bank and Trust ~~Company,~~Company. Silicon Valley Bank is no longer a ~~nonmember.~~member of the Bank.

Table of Contents

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

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 two business segments. For purposes of segment reporting, adjusted net interest income includes income and expense associated with net settlements from economic hedges that are recorded in “Net gain/(loss) on derivatives” in other income/(loss), excludes interest income and expense associated with changes in fair value 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.” 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 10 – Segment Information” in the Bank’s 2022 Form 10-K.

The following table presents the Bank’s adjusted net interest income by operating segment and reconciles total adjusted net interest income to ~~income~~income/(loss) before the AHP assessment for the three and nine months ended ~~March 31,~~September 30, 2023 and 2022.

~~Table of Contents~~

~~Federal Home Loan Bank of San Francisco~~

~~Notes to Financial Statements (continued)~~


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

Three Months Ended:
March 31, 2023		$	240	$	53	$	293	$	10	$	(5)	$	—	$	288	$	(26)	$	45	$	217
March 31, 2022		31		68		99		(7)		—		—		106		18		38		86

(1) The mortgage-related business includes total accretion or amortization associated with other-than-temporarily impaired PLRMBS, which are recognized in interest income, totaling ~~$11~~$8 million and $14 million for the three months ended ~~March 31,~~September 30, 2023 and 2022, respectively, and $27 million and $43 million for the nine months ended September 30, 2023 and 2022, respectively. The mortgage-related business includes a provision for/(reversal of) credit losses that totaled ~~$(1)~~$7 million and ~~$(3)~~$9 million for the three months ended ~~March 31,~~September 30, 2023 and 2022, ~~respectively.~~respectively, and $7 million and $9 million for the nine months ended September 30, 2023 and 2022.

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

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

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

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


(In millions)	(In millions)	Advances- Related Business		Mortgage- Related Business		Total Assets		(In millions)	Advances- Related Business		Mortgage- Related Business		Total Assets
March 31, 2023		$	130,303	$	12,190	$	142,493
September 30, 2023								September 30, 2023	$	80,065	$	14,956	$	95,021
December 31, 2022	December 31, 2022	109,330		11,726		121,056		December 31, 2022	109,330		11,726		121,056

Table of Contents

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

Note 11 — Derivatives and Hedging Activities

General. The Bank may enter into interest rate swaps (including callable, putable, and basis swaps) and cap and floor agreements (collectively, interest rate exchange agreements or derivatives). 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 accounting policies for derivatives, see “Item 8. Financial Statements and Supplementary Data – Note 14 – Derivatives and Hedging Activities” ~~in the Bank’s 2022 Form 10-K. For more information related to the Bank’s accounting policies for derivatives, see~~and “Item 8. Financial Statements and Supplementary Data – Note 1 – Summary of Significant Accounting Policies” in the Bank’s 2022 Form 10-K.

~~Table of Contents~~

~~Federal Home Loan Bank of San Francisco~~

~~Notes to Financial Statements (continued)~~

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,~~September 30, 2023, and December 31, 2022. For purposes of this disclosure, the derivative values include the fair value of derivatives and related accrued interest.


		March 31, 2023						December 31, 2022							September 30, 2023						December 31, 2022
(In millions)	(In millions)	Notional Amount of Derivatives		Derivative Assets		Derivative Liabilities		Notional Amount of Derivatives		Derivative Assets		Derivative Liabilities		(In millions)	Notional Amount of Derivatives		Derivative Assets		Derivative Liabilities		Notional Amount of Derivatives		Derivative Assets		Derivative Liabilities
Derivatives designated as hedging instruments:	Derivatives designated as hedging instruments:													Derivatives designated as hedging instruments:
Interest rate swaps	Interest rate swaps	$	88,096	$	696	$	916	$	69,204	$	799	$	1,062	Interest rate swaps	$	91,782	$	981	$	995	$	69,204	$	799	$	1,062
Derivatives not designated as hedging instruments:	Derivatives not designated as hedging instruments:													Derivatives not designated as hedging instruments:
Interest rate swaps	Interest rate swaps	101,535		38		107		47,589		50		133		Interest rate swaps	25,229		63		109		47,589		50		133

Total derivatives before netting and collateral adjustments	Total derivatives before netting and collateral adjustments	$	189,631	734		1,023		$	116,793	849		1,195		Total derivatives before netting and collateral adjustments	$	117,011	1,044		1,104		$	116,793	849		1,195
Netting adjustments and cash collateral(1)	Netting adjustments and cash collateral(1)			(728)		(1,012)				(823)		(1,193)		Netting adjustments and cash collateral(1)			(1,038)		(1,090)				(823)		(1,193)
Total derivative assets and total derivative liabilities	Total derivative assets and total derivative liabilities			$	6	$	11			$	26	$	2	Total derivative assets and total derivative liabilities			$	6	$	14			$	26	$	2

(1) Amounts represent the application of the netting requirements that allow the Bank to settle positive and negative positions, and also cash collateral, including accrued interest, held or placed with the same clearing agents or counterparty. Cash collateral posted, including accrued interest, was ~~$585~~$472 million and $694 million at ~~March 31,~~September 30, 2023, and December 31, 2022, respectively. Cash collateral received, including accrued interest, was ~~$300~~$420 million and $324 million at ~~March 31,~~September 30, 2023, and December 31, 2022, 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 ~~March 31,~~September 30, 2023 and 2022.


		Three Months Ended March 31, 2023						Three Months Ended September 30, 2023
		Interest Income/(Expense)								Interest Income/(Expense)
(In millions)	(In millions)	Advances		AFS Securities		Consolidated Obligation Bonds			(In millions)	Advances		AFS Securities		Consolidated Obligation Bonds
Total interest income/(expense) presented in the Statements of Income	Total interest income/(expense) presented in the Statements of Income	$	1,163	$	190	$	(920)		Total interest income/(expense) presented in the Statements of Income	$	867	$	246	$	(963)
Gain/(loss) on fair value hedging relationships	Gain/(loss) on fair value hedging relationships								Gain/(loss) on fair value hedging relationships
Derivatives(1)	Derivatives(1)	$	(301)	$	(149)	$	84		Derivatives(1)	$	237	$	450	$	(106)
Hedged items	Hedged items	189		232		(214)			Hedged items	(74)		(357)		(46)
Net gain/(loss) on fair value hedging relationships		(112)		83		(130)
Net amortization of basis adjustments on discontinued hedging relationships		(8)		(25)		—
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	$	(120)	$	58	$	(130)		Net gain/(loss) on derivatives and hedging activities recorded in net interest income	163		93		(152)

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Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)


		Three Months Ended March 31, 2022							Three Months Ended September 30, 2022
		Interest Income/(Expense)							Interest Income/(Expense)
(In millions)	(In millions)	Advances		AFS Securities		Consolidated Obligation Bonds		(In millions)	Advances		AFS Securities		Consolidated Obligation Bonds
Total interest income/(expense) presented in the Statements of Income	Total interest income/(expense) presented in the Statements of Income	$	39	$	54	$	(12)	Total interest income/(expense) presented in the Statements of Income	$	345	$	109	$	(143)
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)	$	320	$	429	$	(436)	Derivatives(1)	$	314	$	507	$	(391)
Hedged items	Hedged items	(340)		(439)		460		Hedged items	(301)		(515)		354
Net gain/(loss) on fair value hedging relationships		(20)		(10)		24
Net amortization of basis adjustments on discontinued 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	$	(27)	$	(37)	$	24	Net gain/(loss) on derivatives and hedging activities recorded in net interest income	13		(8)		(37)



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



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

(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 ~~March 31,~~September 30, 2023, and December 31, 2022.


		March 31, 2023						December 31, 2022							September 30, 2023						December 31, 2022
(In millions)	(In millions)	Advances		AFS Securities		Consolidated Obligation Bonds		Advances		AFS Securities		Consolidated Obligation Bonds		(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)	$	44,708	$	12,234	$	(30,791)	$	34,535	$	11,574	$	(21,976)	Amortized cost of hedged asset/(liability)(1)	$	40,460	$	15,252	$	(34,134)	$	34,535	$	11,574	$	(21,976)
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	$	(526)	$	(1,164)	$	869	$	(740)	$	(1,410)	$	1,083	Active hedging relationships included in amortized cost	$	(982)	$	(1,747)	$	964	$	(740)	$	(1,410)	$	1,083
Discontinued hedging relationships included in amortized cost	Discontinued hedging relationships included in amortized cost	73		705		—		70		740		—		Discontinued hedging relationships included in amortized cost	61		649		—		70		740		—
Total amount of fair value hedging basis adjustments	Total amount of fair value hedging basis adjustments	$	(453)	$	(459)	$	869	$	(670)	$	(670)	$	1,083	Total amount of fair value hedging basis adjustments	$	(921)	$	(1,098)	$	964	$	(670)	$	(670)	$	1,083

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

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

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Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

Three Months Ended
(In millions) March 31, 2023 March 31, 2022
Derivatives not designated as hedging instruments Gain/(Loss) Gain/(Loss)
Economic hedges:
Interest rate swaps $ (28) $ 8
Net interest settlements (5) —
Total net gain/(loss) related to derivatives not designated as hedging instruments (33) 8
Price alignment amount(1)
(1) —
Net gain/(loss) on derivatives $ (34) $ 8
The following table presents the components of net gain/(loss) on derivatives as presented in the Statements of Income for the three and nine months ended September 30, 2023 and 2022.


	Three Months Ended				Nine Months Ended
(In millions)	September 30, 2023		September 30, 2022		September 30, 2023		September 30, 2022
Derivatives not designated as hedging instruments	Gain/(Loss)		Gain/(Loss)		Gain/(Loss)		Gain/(Loss)



Economic hedges:
Interest rate swaps	$	13	$	23	$	(5)	$	4

Net interest settlements	3		(24)		2		(17)

Total net gain/(loss) related to derivatives not designated as hedging instruments	16		(1)		(3)		(13)
Price alignment amount(1)	(1)		—		(3)		—
Net gain/(loss) on derivatives	$	15	$	(1)	$	(6)	$	(13)

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

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

For cleared derivatives, the clearing house is the Bank’s counterparty. The requirement that the Bank post initial margin and settle variation margin through a clearing agent to the clearing house exposes the Bank to institutional credit risk if ~~the~~its futures commission merchant, or clearing agent, fails to meet its obligations. The use of a clearing house, or central counterparty, lowers overall credit risk exposure because it employs standard valuation and initial and variation margin processes and is specifically designed to withstand remote but plausible ~~counterparty~~futures commission merchant default credit events. Variation margin is ~~posted or collected~~settled for changes in the value of the portfolio, and initial margin is posted for changes in risk profile of the portfolio. The Bank analyzed 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 clearing house or clearing agent insolvency and under applicable clearing house rules upon a non-insolvency-based event of default of the clearing house or clearing agent. Based on this analysis, the Bank presents a net derivative receivable or payable for all of its transactions through a particular clearing agent with a particular clearing house.

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 ~~March 31,~~September 30, 2023, was ~~$555~~$454 million, for which the Bank posted cash collateral of ~~$556~~$454 million in the ordinary course of business.

Table of Contents

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

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

~~Table of Contents~~

~~Federal Home Loan Bank of San Francisco~~

~~Notes to Financial Statements (continued)~~

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

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

March 31, 2023
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(1)
Derivative Assets
Uncleared $ 727 $ (723) $ 4 $ — $ 4
Cleared 7 (5) 2 (864) 866
Total $ 6 $ 870
Derivative Liabilities
Uncleared $ 986 $ (980) $ 6 $ — $ 6
Cleared 37 (32) 5 — 5
Total $ 11 $ 11


		December 31, 2022
		Derivative Instruments Meeting Netting Requirements											September 30, 2023				December 31, 2022
(In millions)	(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(1)		(In millions)	Derivative Assets		Derivative Liabilities		Derivative Assets		Derivative Liabilities
Derivative Assets
Derivative instruments meeting netting requirements												Derivative instruments meeting netting requirements
Gross recognized amount												Gross recognized amount
Uncleared	Uncleared	$	834	$	(829)	$	5	$	—	$	5	Uncleared	$	1,035	$	1,073	$	834	$	1,188
Cleared	Cleared	15		6		21		(435)		456		Cleared	9		31		15		7
Total						$	26			$	461
Derivative Liabilities
Total gross recognized amount												Total gross recognized amount	1,044		1,104		849		1,195
Gross amount of netting adjustments and cash collateral												Gross amount of netting adjustments and cash collateral
Uncleared	Uncleared	$	1,188	$	(1,186)	$	2	$	—	$	2	Uncleared	(1,029)		(1,065)		(829)		(1,186)
Cleared	Cleared	7		(7)		—		—		—		Cleared	(9)		(25)		6		(7)
Total						$	2			$	2
Total gross amounts of netting adjustments and cash collateral												Total gross amounts of netting adjustments and cash collateral	(1,038)		(1,090)		(823)		(1,193)
Total derivative assets and total derivative liabilities												Total derivative assets and total derivative liabilities	$	6	$	14	$	26	$	2

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

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

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

(1) Any over-collateralization at the Bank’s individual clearing agent and/or counterparty level is not included in the determination of the net amount. At ~~March 31,~~September 30, 2023, the Bank had additional net credit exposure of $6$793 million due to instances where non-cash collateral to a counterparty exceeded the Bank’s net derivative position. There was no such additional net credit exposure at December 31, 2022.

Note 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 ~~March 31,~~September 30, 2023, and December 31, 2022. 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

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Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

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 ~~March 31,~~September 30, 2023, and December 31, 2022. 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.


		March 31, 2023													September 30, 2023
(In millions)	(In millions)	Carrying Value(1)		Estimated Fair Value		Level 1		Level 2		Level 3		Netting Adjustments and Cash Collateral(2)		(In millions)	Carrying Value(1)		Estimated Fair Value		Level 1		Level 2		Level 3		Netting Adjustments and Cash Collateral(2)
Assets	Assets													Assets
Cash and due from banks	Cash and due from banks	$	17	$	17	$	17	$	—	$	—	$	—	Cash and due from banks	$	10	$	10	$	10	$	—	$	—	$	—
Interest-bearing deposits	Interest-bearing deposits	3,760		3,760		3,760		—		—		—		Interest-bearing deposits	3,777		3,777		3,777		—		—		—
Securities purchased under agreements to resell	Securities purchased under agreements to resell	11,100		11,100		—		11,100		—		—		Securities purchased under agreements to resell	2,750		2,750		—		2,750		—		—
Federal funds sold	Federal funds sold	9,427		9,427		—		9,427		—		—		Federal funds sold	5,533		5,533		—		5,533		—		—
Trading securities	Trading securities	1		1		—		1		—		—		Trading securities	1		1		—		1		—		—
AFS securities	AFS securities	13,320		13,320		—		12,170		1,150		—		AFS securities	16,279		16,279		—		15,204		1,075		—
HTM securities	HTM securities	2,104		2,068		—		1,932		136		—		HTM securities	1,895		1,852		—		1,731		121		—
Advances	Advances	101,541		101,354		—		101,354		—		—		Advances	63,584		63,407		—		63,407		—		—
Mortgage loans held for portfolio	Mortgage loans held for portfolio	801		689		—		689		—		—		Mortgage loans held for portfolio	770		633		—		633		—		—

Accrued interest receivable	Accrued interest receivable	178		178		—		178		—		—		Accrued interest receivable	192		192		—		192		—		—
Derivative assets, net(2)	Derivative assets, net(2)	6		6		—		734		—		(728)		Derivative assets, net(2)	6		6		—		1,044		—		(1,038)
Other assets(3)	Other assets(3)	16		16		16		—		—		—		Other assets(3)	16		16		16		—		—		—
Liabilities	Liabilities													Liabilities
Deposits	Deposits	1,022		1,022		—		1,022		—		—		Deposits	768		768		—		768		—		—
Consolidated obligations:	Consolidated obligations:													Consolidated obligations:
Bonds	Bonds	95,034		94,704		—		94,704		—		—		Bonds	70,907		70,584		—		70,584		—		—
Discount notes	Discount notes	37,356		37,355		—		37,355		—		—		Discount notes	14,293		14,286		—		14,286		—		—
Total consolidated obligations	Total consolidated obligations	132,390		132,059		—		132,059		—		—		Total consolidated obligations	85,200		84,870		—		84,870		—		—
Mandatorily redeemable capital stock	Mandatorily redeemable capital stock	95		95		95		—		—		—		Mandatorily redeemable capital stock	776		776		776		—		—		—

Borrowings from other FHLBanks														Borrowings from other FHLBanks	300		300		—		300		—		—
Accrued interest payable	Accrued interest payable	508		508		—		508		—		—		Accrued interest payable	510		510		—		510		—		—
Derivative liabilities, net(2)	Derivative liabilities, net(2)	11		11		—		1,023		—		(1,012)		Derivative liabilities, net(2)	14		14		—		1,104		—		(1,090)

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Notes to Financial Statements (continued)


		December 31, 2022													December 31, 2022
		Carrying Value(1)		Estimated Fair Value		Level 1		Level 2		Level 3		Netting Adjustments and Cash Collateral(2)			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	$	9	$	9	$	9	$	—	$	—	$	—	Cash and due from banks	$	9	$	9	$	9	$	—	$	—	$	—
Interest-bearing deposits	Interest-bearing deposits	3,677		3,677		3,677		—		—		—		Interest-bearing deposits	3,677		3,677		3,677		—		—		—
Securities purchased under agreements to resell	Securities purchased under agreements to resell	7,000		7,000		—		7,000		—		—		Securities purchased under agreements to resell	7,000		7,000		—		7,000		—		—
Federal funds sold	Federal funds sold	4,719		4,719		—		4,719		—		—		Federal funds sold	4,719		4,719		—		4,719		—		—
Trading securities	Trading securities	1		1		—		1		—		—		Trading securities	1		1		—		1		—		—
AFS securities	AFS securities	12,713		12,713		—		11,531		1,182		—		AFS securities	12,713		12,713		—		11,531		1,182		—
HTM securities	HTM securities	2,181		2,136		—		1,993		143		—		HTM securities	2,181		2,136		—		1,993		143		—
Advances	Advances	89,400		89,183		—		89,183		—		—		Advances	89,400		89,183		—		89,183		—		—
Mortgage loans held for portfolio	Mortgage loans held for portfolio	815		695		—		695		—		—		Mortgage loans held for portfolio	815		695		—		695		—		—
Accrued interest receivable	Accrued interest receivable	313		313		—		313		—		—		Accrued interest receivable	313		313		—		313		—		—
Derivative assets, net(2)	Derivative assets, net(2)	26		26		—		849		—		(823)		Derivative assets, net(2)	26		26		—		849		—		(823)
Other assets(3)	Other assets(3)	15		15		15		—		—		—		Other assets(3)	15		15		15		—		—		—
Liabilities	Liabilities			—										Liabilities
Deposits	Deposits	989		989		—		989		—		—		Deposits	989		989		—		989		—		—
Consolidated obligations:	Consolidated obligations:			—										Consolidated obligations:
Bonds	Bonds	75,768		75,396		—		75,396		—		—		Bonds	75,768		75,396		—		75,396		—		—
Discount notes	Discount notes	35,929		35,916		—		35,916		—		—		Discount notes	35,929		35,916		—		35,916		—		—
Total consolidated obligations	Total consolidated obligations	111,697		111,312		—		111,312		—		—		Total consolidated obligations	111,697		111,312		—		111,312		—		—
Mandatorily redeemable capital stock	Mandatorily redeemable capital stock	5		5		5		—		—		—		Mandatorily redeemable capital stock	5		5		5		—		—		—

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

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

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

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

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

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

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

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

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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 ~~March 31,~~September 30, 2023:

•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 2022 Form 10-K. There have been no significant changes in these valuation methodologies and primary inputs during the three and nine months ended ~~March 31,~~September 30, 2023.

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

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

Table of Contents

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)


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


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

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

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

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

Table of Contents

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

March 31, 2023
Fair Value Measurement Using:
Netting Adjustments
and Cash Collateral(1)
(In millions) Level 1 Level 2 Level 3 Total
Recurring fair value measurements – Assets:
Trading securities:
MBS – Other U.S. obligations $ — $ 1 $ — $ — $ 1
AFS securities:
U.S. obligations – Treasury notes — 4,078 — — 4,078
MBS:
GSEs – multifamily — 8,092 — — 8,092
PLRMBS — — 1,150 — 1,150
Subtotal AFS MBS — 8,092 1,150 — 9,242
Total AFS securities — 12,170 1,150 — 13,320
Advances(2)
— 2,392 — — 2,392
Derivative assets, net: interest rate-related — 734 — (728) 6
Other assets 16 — — — 16
Total recurring fair value measurements – Assets $ 16 $ 15,297 $ 1,150 $ (728) $ 15,735
Recurring fair value measurements – Liabilities:
Consolidated obligation bonds(3)
$ — $ 782 $ — $ — $ 782
Derivative liabilities, net: interest rate-related — 1,023 — (1,012) 11
Total recurring fair value measurements – Liabilities $ — $ 1,805 $ — $ (1,012) $ 793
Nonrecurring fair value measurements – Assets:(4)
Impaired mortgage loans held for portfolio $ — $ — $ 16 $ — $ 16
Total nonrecurring fair value measurements – Assets $ — $ — $ 16 $ — $ 16

~~Table of Contents~~

~~Federal Home Loan Bank of San Francisco~~

~~Notes to Financial Statements (continued)~~


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

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

AFS securities:	AFS securities:														AFS securities:
U.S. obligations – Treasury notes		—		4,024		—		—				4,024
U.S. Treasury obligations															U.S. Treasury obligations		—				4,024				—				—				4,024
MBS:	MBS:														MBS:
GSEs – multifamily	GSEs – multifamily	—		7,507		—		—				7,507			GSEs – multifamily		—				7,507				—				—				7,507
PLRMBS	PLRMBS	—		—		1,182		—				1,182			PLRMBS		—				—				1,182				—				1,182
Subtotal AFS MBS	Subtotal AFS MBS	—		7,507		1,182		—				8,689			Subtotal AFS MBS		—				7,507				1,182				—				8,689
Total AFS securities	Total AFS securities	—		11,531		1,182		—				12,713			Total AFS securities		—				11,531				1,182				—				12,713
Advances(2)	Advances(2)	—		2,059		—		—				2,059			Advances(2)		—				2,059				—				—				2,059
Derivative assets, net: interest rate-related	Derivative assets, net: interest rate-related	—		849		—		(823)				26			Derivative assets, net: interest rate-related		—				849				—				(823)				26
Other assets	Other assets	15		—		—		—				15			Other assets		15				—				—				—				15
Total recurring fair value measurements – Assets	Total recurring fair value measurements – Assets	$	15	$	14,440	$	1,182	$	(823)			$	14,814		Total recurring fair value measurements – Assets		$	15			$	14,440			$	1,182			$	(823)			$	14,814
Recurring fair value measurements – Liabilities:	Recurring fair value measurements – Liabilities:														Recurring fair value measurements – Liabilities:
Consolidated obligation bonds(3)	Consolidated obligation bonds(3)	$	—	$	2,226	$	—	$	—			$	2,226		Consolidated obligation bonds(3)		$	—			$	2,226			$	—			$	—			$	2,226
Derivative liabilities, net: interest rate-related	Derivative liabilities, net: interest rate-related	—		1,195		—		(1,193)				2			Derivative liabilities, net: interest rate-related		—				1,195				—				(1,193)				2
Total recurring fair value measurements – Liabilities	Total recurring fair value measurements – Liabilities	$	—	$	3,421	$	—	$	(1,193)			$	2,228		Total recurring fair value measurements – Liabilities		$	—			$	3,421			$	—			$	(1,193)			$	2,228
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	$	—	$	—	$	20	$	—			$	20		Impaired mortgage loans held for portfolio		$	—			$	—			$	20			$	—			$	20
Total nonrecurring fair value measurements – Assets	Total nonrecurring fair value measurements – Assets	$	—	$	—	$	20	$	—			$	20		Total nonrecurring fair value measurements – Assets		$	—			$	—			$	20			$	—			$	20

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

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

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

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

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

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Notes to Financial Statements (continued)


		Three Months Ended				Three Months Ended
(In millions)		March 31, 2023		March 31, 2022
								September 30, 2023		September 30, 2022
Balance, beginning of the period	Balance, beginning of the period	$	1,182	$	1,608		Balance, beginning of the period	$	1,119	$	1,327
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	11		14			Interest income	8		14
(Provision for)/reversal of credit losses	(Provision for)/reversal of credit losses	1		3			(Provision for)/reversal of credit losses	(7)		(9)
Other income/(loss)		—		28

Unrealized gain/(loss) included in AOCI	Unrealized gain/(loss) included in AOCI	(11)		(33)			Unrealized gain/(loss) included in AOCI	(9)		(39)
Settlements	Settlements	(33)		(177)			Settlements	(36)		(56)
Transfers of HTM securities to AFS securities	Transfers of HTM securities to AFS securities	—		16			Transfers of HTM securities to AFS securities	—		1
Balance, end of the period	Balance, end of the period	$	1,150	$	1,459		Balance, end of the period	$	1,075	$	1,238
Total amount of unrealized gain/(loss) for the period included in AOCI relating to assets held at the end of the period		$	(11)	$	(33)
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		$	12	$	17
Total amount of unrealized gain/(loss) for the period included in AOCI relating to instruments held at the end of the period							Total amount of unrealized gain/(loss) for the period included in AOCI relating to instruments held at the end of the period	$	(9)	$	(39)
Total amount of gain/(loss) for the period included in earnings attributable to the change in unrealized gains/losses relating to assets and liabilities still held at the end of the period							Total amount of gain/(loss) for the period included in earnings attributable to the change in unrealized gains/losses relating to assets and liabilities still held at the end of the period	$	1	$	5


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

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

For more information on the Bank’s election of the fair value option, see “Item 8. Financial Statements and Supplementary Data – Note 15 – Fair Value” in the Bank’s 2022 Form 10-K.

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

Table of Contents

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

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

The following table ~~summarizes~~presents the ~~activity related to financial assets~~net gain/(loss) recognized in earnings on advances and ~~liabilities for which the Bank elected the~~consolidated obligation bonds held under fair value option ~~during~~for the three and nine months ended ~~March 31,~~September 30, 2023 and 2022:

Three Months Ended
March 31, 2023 March 31, 2022
(In millions) Advances Consolidated
Obligation Bonds Advances Consolidated
Obligation Bonds
Balance, beginning of the period $ 2,059 $ 2,226 $ 1,772 $ 627
New transactions elected for fair value option 550 30 10 1,325
Maturities and terminations (238) (1,485) (144) —
Net gain/(loss) on advances and net (gain)/loss on consolidated obligation bonds from changes in fair value recognized in earnings 18 17 (49) (28)
Change in accrued interest 3 (6) — —
Balance, end of the period $ 2,392 $ 782 $ 1,589 $ 1,924

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~~Federal Home Loan Bank of San Francisco~~

~~Notes to Financial Statements (continued)~~


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

For instruments for which the fair value option has been elected, the related contractual interest income and contractual interest expense are recorded as part of net interest income on the Statements of Income. The remaining changes in fair value for instruments for which the fair value option has been elected are recorded as net gains/ (losses) on financial instruments held under the fair value option in the Statements of Income. For advances and consolidated obligations recorded under the fair value option, the Bank determined that none of the remaining changes in fair value were related to instrument-specific credit risk for the three and nine months ended ~~March 31,~~September 30, 2023 ~~2022,~~ and ~~2021.~~2022. 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 ~~March 31,~~September 30, 2023, and December 31, 2022:


		March 31, 2023						December 31, 2022							September 30, 2023						December 31, 2022
(In millions)	(In millions)	Principal Balance		Fair Value		Fair Value Over/(Under) Principal Balance		Principal Balance		Fair Value		Fair Value Over/(Under) Principal Balance		(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)	$	2,417	$	2,392	$	(25)	$	2,106	$	2,059	$	(47)	Advances(1)	$	2,354	$	2,302	$	(52)	$	2,106	$	2,059	$	(47)
Consolidated obligation bonds	Consolidated obligation bonds	823		782		(41)		2,278		2,226		(52)		Consolidated obligation bonds	648		605		(43)		2,278		2,226		(52)

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

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 ~~March 31,~~September 30, 2023, 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

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Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

was ~~$1.5~~$1.2 trillion at ~~March 31,~~September 30, 2023, and ~~$1.2 trillion at~~ December 31, 2022. The par value of the Bank’s participation in consolidated obligations was ~~$133.6~~$86.3 billion at ~~March 31,~~September 30, 2023, and $113.1 billion at December 31, 2022.

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 2022 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 ~~March 31,~~September 30, 2023, and December 31, 2022, were as follows:


		March 31, 2023						December 31, 2022							September 30, 2023						December 31, 2022
(In millions)	(In millions)	Expire Within One Year		Expire After One Year		Total		Expire Within One Year		Expire After One Year		Total		(In millions)	Expire Within One Year		Expire After One Year		Total		Expire Within One Year		Expire After One Year		Total
Standby letters of credit outstanding	Standby letters of credit outstanding	$	11,855	$	10,483	$	22,338	$	16,591	$	6,049	$	22,640	Standby letters of credit outstanding	$	9,870	$	8,447	$	18,317	$	16,591	$	6,049	$	22,640

Commitments to issue consolidated obligation discount notes, par	Commitments to issue consolidated obligation discount notes, par	—		—		—		300		—		300		Commitments to issue consolidated obligation discount notes, par	—		—		—		300		—		300
Commitments to issue consolidated obligation bonds, par	Commitments to issue consolidated obligation bonds, par	—		—		—		2,385		—		2,385		Commitments to issue consolidated obligation bonds, par	229		—		229		2,385		—		2,385

Standby letters of credit are generally issued for a fee on behalf of members to support their obligations to third parties. If the Bank is required to make a payment for a beneficiary’s drawing under a letter of credit, the amount is immediately due and payable by the member to the Bank and is charged to the member’s demand deposit account with the Bank. The Bank monitors the creditworthiness of members that have standby letters of credit. The value of the Bank’s obligations related to standby letters of credit is recorded in other liabilities and amounted to ~~$71~~$56 million and $34 million at ~~March 31,~~September 30, 2023, and December 31, ~~2022.~~2022, 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 ~~March 31,~~September 30, 2023, and December 31, 2022.

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

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 ~~March 31,~~September 30, 2023, the Bank had pledged total collateral of ~~$1.4~~$1.3 billion, including securities with a carrying value of ~~$864~~$799 million, all of which may be repledged, and cash collateral, including accrued interest, of ~~$585~~$472 million to counterparties and the clearing house that had market risk exposure to the Bank related to derivatives. As of December 31, 2022, the Bank had pledged total collateral of $1.1 billion, including securities with a carrying value of $435 million, all of which may be repledged, and cash collateral, including accrued interest, of $694 million to counterparties and the clearing house that had market risk exposure to the Bank related to derivatives.

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

Note 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.

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Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)


(In millions)	(In millions)	March 31, 2023		December 31, 2022		(In millions)	September 30, 2023		December 31, 2022
Assets:	Assets:					Assets:
Advances	Advances	$	8,575	$	7,269	Advances	$	6,519	$	7,269
Mortgage loans held for portfolio	Mortgage loans held for portfolio	79		80		Mortgage loans held for portfolio	76		80
Accrued interest receivable	Accrued interest receivable	8		9		Accrued interest receivable	9		9
Liabilities:	Liabilities:					Liabilities:
Deposits	Deposits	$	18	$	11	Deposits	$	17	$	11
Capital:	Capital:					Capital:
Capital Stock	Capital Stock	$	260	$	215	Capital Stock	$	228	$	215


		Three Months Ended			Three Months Ended				Nine Months Ended

(In millions)	(In millions)		March 31, 2023			March 31, 2022		(In millions)	September 30, 2023		September 30, 2022		September 30, 2023		September 30, 2022
Interest Income:	Interest Income:							Interest Income:

Advances	Advances		$	69		$	13	Advances	$	70	$	32	$	214	$	63
Mortgage loans held for portfolio	Mortgage loans held for portfolio		1			—		Mortgage loans held for portfolio	1		1		2		1

All transactions with members, nonmembers, and their affiliates are entered into in the ordinary course of business. As of ~~March 31,~~September 30, 2023, and December 31, 2022, 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 2022 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 de minimis amounts at March 31, 2023, and December 31, 2022, 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 ~~three~~nine months ended ~~March 31,~~September 30, 2023 and 2022, the Bank extended overnight loans to other FHLBanks for ~~$1.3~~$2.6 billion and ~~$0.7~~$2.4 billion, respectively. The amount of interest income for these advances was de minimis for the nine months ended September 30, 2023 and 2022. During the ~~three~~nine months ended ~~March 31,~~September 30, 2023 and 2022, the Bank borrowed ~~$3.6~~$5.5 billion and ~~$20 million,~~$10.1 billion, respectively, from other FHLBanks. ~~The impact to net interest income~~Interest expense related to these ~~transactions~~borrowings was ~~$(1)~~$2 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2023 and was de minimis for the ~~three~~nine months ended ~~March 31,~~September 30, 2022.

~~MPF Mortgage Loans~~. The Bank pays a transaction services fee to the FHLBank Chicago 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. Prior to 2022, the Bank paid a membership fee to the FHLBank of Chicago for its participation in the MPF Program. For the three months ended March 31, 2023 and 2022, the Bank recorded a de minimis amount in transaction services fee expense to the FHLBank Chicago, which was recorded in the Statements of Income as other expense.

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~~Note 15 — Subsequent Events~~

On May 1, 2023, the California DFPI closed First Republic Bank, appointed the FDIC as receiver, and the FDIC and JPMorgan Chase, National Association, a nonmember, reported that they are entering into a purchase and assumption agreement for all the deposits and substantially all of the assets of First Republic Bank, including $28.1 billion in advances outstanding from the Bank. The May 1, 2023 advances outstanding balance is unchanged compared to the outstanding balance at March 31, 2023. Upon assumption of the advances outstanding by JPMorgan Chase, National Association, the Bank will transfer $759 million of capital stock of the Bank, held by First Republic Bank, to JPMorgan Chase, National Association, and reclassify that capital stock to mandatorily redeemable as a liability in the Bank’s Statements of Condition. Additionally, as of May 1, 2023, First Republic Bank had $179.1 million in letters of credit outstanding compared to $161.9 million outstanding as of March 31, 2023. These advances outstanding and letters of credit are fully collateralized and are not expected to result in any credit loss to the Bank.

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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 stock, future credit losses, future classification of securities, and reform legislation. The Bank cautions that by their nature, forward-looking statements involve risk or uncertainty that could cause actual results to differ materially from those expressed or implied in these forward-looking statements or could affect the extent to which a particular objective, projection, estimate, or prediction is realized. These risks and uncertainties include, among others, the following:

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

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

•the timing and volume of market activity;

•natural disasters, pandemics or other widespread public health emergencies, terrorist attacks, civil unrest, geopolitical instability or conflicts (including the ongoing hostilities in ~~Russia~~Eastern Europe and ~~Ukraine)~~the Middle East), 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;

•changes in the Bank’s capital stock requirements;

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

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

•the withdrawal of one or more large members;

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

•changes in Bank members’ demand for Bank advances;

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

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

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

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

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

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

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

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

•changes in key Bank personnel;

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•~~changes in key Bank personnel;~~

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

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

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

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Quarterly Overview

Net income for the ~~first~~third quarter of 2023 was ~~$195~~$103 million, an increase of $23 million compared with net income of ~~$78~~$80 million for the ~~first~~third quarter of 2022. The ~~$117~~$23 million increase in net income for the ~~first~~third quarter of 2023, relative to the prior-year period, was primarily attributable to an increase ~~in net interest income for the quarter~~ of ~~$184~~$25 million ~~partially offset by a decline~~ in other income/(loss) and an increase of ~~$44 million.~~$14 million in net interest income. These increases in income were partially offset by an increase of $14 million in other expense.

The ~~$184~~$25 million change in other income/(loss) primarily resulted from an increase of $16 million in net fair value gains on interest rate swaps classified as economic hedges and a decrease of $8 million in fair value losses on financial instruments carried at fair value. The $14 million increase in net interest income ~~for the quarter was primarily attributable to~~reflected higher yields on higher average balances of advances and investments, partially offset by higher interest costs on greater funding levels and higher ~~funding levels.~~ dividends paid on mandatorily redeemable capital stock classified as interest expense.

The $14 million increase in ~~net interest income was also attributable to the increase of $97 million in net advance prepayment fees.~~

~~The $44 million decline in~~ other ~~income/(loss) for the quarter was~~expense primarily ~~attributable to~~reflected an increase of ~~$42~~$8 million in ~~net losses from derivatives, mainly attributable~~charitable contributions to ~~interest rate swaps economically hedging advances prepaid during the quarter, partially offset~~fund downpayment assistance grants to middle-income homebuyers, delivered by ~~an increase of $22 million in net fair value gains associated with~~participating member financial instruments carried at fair value. The decline in other income/(loss) was also attributable to $28 million in settlement proceeds received in the first quarter of 2022 from the final resolution of putback litigation (to which the Bank was not a party). There was no similar activity during the first quarter of 2023.institutions.

At ~~March 31,~~September 30, 2023, total assets were ~~$142.5~~$95.0 billion, ~~an increase~~a decrease of ~~$21.4~~$26.1 billion from $121.1 billion at December 31, 2022. Advances increased to $101.5 billion at March 31, 2023, from $89.4 billion at December 31, 2022, an increase of $12.1 billion, as member demand for advances continued to increase. During the quarter, advance balances reached higher levels than the balance at March 31, 2023. Total investments increased by $9.4 billion to $39.7 billion at March 31, 2023, from $30.3 billion at December 31, 2022, primarily attributable to ~~liquidity management in connection with advances growth. The increase in investments was largely the result~~a decrease of ~~increases of $4.7~~$25.8 billion in ~~federal funds sold, $4.1~~advances to $63.6 billion at September 30, 2023, from $89.4 billion at December 31, 2022. The net decrease of $0.1 billion in total investments since December 31, 2022, to $30.2 billion at September 30, 2023, primarily resulted from a decrease of $4.3 billion in securities purchased under agreements to resell, ~~and $0.5~~largely offset by an increase of $3.3 billion in mortgage-backed ~~securities.~~securities and a $0.8 billion increase in Federal funds sold.

As of ~~March 31,~~September 30, 2023, the Bank ~~complied with~~exceeded all regulatory capital requirements. The Bank exceeded its 4.0% regulatory requirement with a regulatory capital ratio of ~~5.8%~~7.9% at ~~March 31,~~September 30, 2023. The ~~decline~~increase in the regulatory capital ratio from 6.4% at December 31, 2022, ~~was~~ mainly ~~attributable to an increase~~resulted from the decrease in total ~~assets.~~assets during 2023. The Bank also exceeded its risk-based capital requirement of ~~$1.1~~$1.3 billion with ~~$8.2~~$7.5 billion in permanent capital. Total retained earnings increased to ~~$4.1~~$4.2 billion as of ~~March 31,~~September 30, 2023, from $4.0 billion at yearend 2022.

On ~~April 27,~~October 26, 2023, the Bank’s board of directors declared a quarterly cash dividend on the average capital stock outstanding during the ~~first~~third quarter of 2023 at an annualized rate of ~~7.00%.~~ ~~The quarterly dividend~~ 8.25%, an increase from the 7.75% rate ~~is consistent with~~paid for the ~~Bank's~~prior quarter. In addition, the Board approved an updated framework and dividend philosophy ~~of endeavoring~~to reflect changes in the current interest rate environment and business conditions. Under this approach, the Bank will endeavor to pay a quarterly dividend atrate that is equal to or greater than the current market rate for a ~~rate between 5%~~highly rated investment (e.g., SOFR) and ~~7% annualized.~~that is sustainable under current and projected earnings while maintaining appropriate levels of capital. The ~~quarterly~~third quarter of 2023 dividend ~~will total~~is ~~$67~~$68 million, and the Bank expects to pay the dividend on ~~May 11,~~November 9, 2023.

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

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

On March 10, 2023, Silicon Valley Bank was closed by the California Department of Financial Protection and Innovation (DFPI) and the Federal Deposit Insurance Corporation (FDIC) was appointed as receiver. The FDIC created Silicon Valley Bridge Bank, N.A., whereby all of the deposits and substantially all assets of Silicon Valley Bank were transferred to the bridge bank. As of March 31, 2023, Silicon Valley Bridge Bank, N.A., ~~has~~had prepaid all outstanding advances to the Bank. On March 26, 2023, the FDIC entered into a purchase and assumption agreement for all the deposits and loans of Silicon Valley Bridge Bank, N.A., with ~~First-Citizens~~First Citizens Bank and Trust Company.

~~On March 8, 2023, Silvergate Capital Corporation,~~ Silicon Valley Bank is no longer a member of the ~~parent company of Silvergate Bank, announced its intent to wind down the operations of and voluntarily liquidate Silvergate~~ Bank. ~~As of March 1, 2023, Silvergate Bank had no advances outstanding from the Bank, a reduction of $4.3 billion from yearend 2022.~~

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To fund the liquidity needs of FHLBank members, the FHLBanks, including the Bank, experienced a significant increase of debt issuance in the quarter. If the advances outstanding to these and other institutions are not replaced when repaid, the decrease in advances may result in a reduction of the Bank’s total assets, capital, and net income. The timing and magnitude of the impact of a decrease in the amount of advances would depend on a number of factors, including: the amount and the period over which the advances were prepaid or repaid; the amount and timing of any corresponding decreases in activity-based capital stock; the profitability of the advances; the timing and severity of declines in interest rates for comparable instruments; the extent to which consolidated obligations mature as the advances are prepaid or repaid; and the Bank’s ability to extinguish consolidated obligations or transfer them to other FHLBanks and the associated costs. A decrease in advances could also affect the rate of dividends paid to the Bank’s shareholders and the Bank’s ability to redeem or repurchase its capital stock.

On May 1, 2023, the California DFPI closed First Republic Bank and appointed the FDIC as receiver, and the FDIC and JPMorgan Chase, National Association (“JPMorgan”), a nonmember, ~~reported that they are entering~~entered into a purchase and assumption agreement for all the deposits and substantially all of the assets of First Republic Bank, including $28.1 billion in advances outstanding from the Bank. ~~The May 1,~~At September 30, 2023, JPMorgan, had $26.4 billion of advances outstanding ~~balance is unchanged compared to~~from the Bank, assumed from First Republic Bank, that represented approximately 41% of the Bank's total advances outstanding. At December 31, 2022, First Republic Bank had $14.0 billion of advances outstanding ~~balance~~from the Bank. Additionally, at ~~March~~September 30, 2023, JPMorgan had $179 million in letters of credit outstanding from the Bank, assumed from First Republic Bank. At December 31, ~~2023.~~2022, First Republic Bank had $670 million in letters of credit outstanding. Upon assumption of the advances outstanding by JPMorgan, ~~Chase, National Association,~~ the Bank ~~will transfer~~transferred $759 million of capital stock of the Bank, held by First Republic Bank, to JPMorgan ~~Chase, National Association,~~ and ~~reclassify~~reclassified that capital stock toas mandatorily redeemable as a liability in the Bank’s Statements of Condition. ~~Additionally, as of May 1,~~At October 31, 2023, ~~First Republic~~JPMorgan had $25.1 billion in advances outstanding from the Bank, had ~~$179.1~~$179 million in letters of credit outstanding, ~~compared to $161.9~~and held $677 million ~~outstanding as~~ of ~~March 31, 2023.~~the Bank’s capital stock. These advances outstanding and letters of credit are fully collateralized and are not expected to result in any credit loss to the Bank. JPMorgan was the Bank’s largest borrower and shareholder as of September 30, 2023.

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

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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)	March 31, 2023			December 31, 2022			September 30, 2022			June 30, 2022			March 31, 2022			(Dollars in millions)	September 30, 2023			June 30, 2023			March 31, 2023			December 31, 2022			September 30, 2022
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	$	142,493		$	121,056		$	108,507		$	87,602		$	56,129		Total Assets	$	95,021		$	114,877		$	142,493		$	121,056		$	108,507
Advances	Advances	101,541			89,400			65,658			43,221			20,246			Advances	63,584			70,537			101,541			89,400			65,658
Mortgage Loans Held for Portfolio, Net	Mortgage Loans Held for Portfolio, Net	801			815			834			863			914			Mortgage Loans Held for Portfolio, Net	770			785			801			815			834
Investments(1)	Investments(1)	39,712			30,291			41,661			43,153			34,629			Investments(1)	30,235			43,139			39,712			30,291			41,661
Consolidated Obligations:(2)	Consolidated Obligations:(2)																Consolidated Obligations:(2)
Bonds	Bonds	95,034			75,768			35,446			26,076			28,702			Bonds	70,907			79,855			95,034			75,768			35,446
Discount Notes	Discount Notes	37,356			35,929			62,046			53,132			19,744			Discount Notes	14,293			24,795			37,356			35,929			62,046

Mandatorily Redeemable Capital Stock																	Mandatorily Redeemable Capital Stock	776			843			95			5			5
Capital Stock —Class B —Putable	Capital Stock —Class B —Putable	4,007			3,758			3,322			2,754			2,097			Capital Stock —Class B —Putable	2,485			2,600			4,007			3,758			3,322
Unrestricted Retained Earnings	Unrestricted Retained Earnings	3,356			3,262			3,222			3,198			3,183			Unrestricted Retained Earnings	3,406			3,387			3,356			3,262			3,222
Restricted Retained Earnings	Restricted Retained Earnings	770			732			708			692			692			Restricted Retained Earnings	816			795			770			732			708
Accumulated Other Comprehensive Income/(Loss) (AOCI)	Accumulated Other Comprehensive Income/(Loss) (AOCI)	(61)			(29)			12			100			182			Accumulated Other Comprehensive Income/(Loss) (AOCI)	(55)			(19)			(61)			(29)			12
Total Capital	Total Capital	8,072			7,723			7,264			6,744			6,154			Total Capital	6,652			6,763			8,072			7,723			7,264
Selected Operating Results for the Quarter	Selected Operating Results for the Quarter																Selected Operating Results for the Quarter
Net Interest Income	Net Interest Income	$	287		$	181		$	157		$	126		$	103		Net Interest Income	$	171		$	179		$	287		$	181		$	157
Provision for/(Reversal of) Credit Losses	Provision for/(Reversal of) Credit Losses	(1)			6			9			3			(3)			Provision for/(Reversal of) Credit Losses	7			1			(1)			6			9
Other Income/(Loss)	Other Income/(Loss)	(26)			—			(18)			(31)			18			Other Income/(Loss)	7			4			(26)			—			(18)
Other Expense	Other Expense	45			45			41			38			38			Other Expense	55			48			45			45			41
Affordable Housing Program Assessment	Affordable Housing Program Assessment	22			13			9			6			8			Affordable Housing Program Assessment	13			13			22			13			9
Net Income/(Loss)	Net Income/(Loss)	$	195		$	117		$	80		$	48		$	78		Net Income/(Loss)	$	103		$	121		$	195		$	117		$	80
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)	0.88		%	0.62		%	0.63		%	0.67		%	0.78		%	Net Interest Margin(3)	0.68		%	0.55		%	0.88		%	0.62		%	0.63		%

Return on Average Assets	Return on Average Assets	0.60			0.40			0.32			0.25			0.59			Return on Average Assets	0.41			0.36			0.60			0.40			0.32
Return on Average Equity	Return on Average Equity	10.14			6.24			4.52			2.85			4.91			Return on Average Equity	6.17			6.52			10.14			6.24			4.52
Annualized Dividend Rate	Annualized Dividend Rate	7.00			7.00			6.00			6.00			6.00			Annualized Dividend Rate	7.75			7.00			7.00			7.00			6.00
Dividend Payout Ratio(4)	Dividend Payout Ratio(4)	32.00			45.97			49.98			69.80			44.63			Dividend Payout Ratio(4)	62.12			53.53			32.00			45.97			49.98
Average Equity to Average Assets Ratio	Average Equity to Average Assets Ratio	5.93			6.47			7.16			8.81			11.91			Average Equity to Average Assets Ratio	6.63			5.57			5.93			6.47			7.16
Selected Other Data at Quarter End	Selected Other Data at Quarter End																Selected Other Data at Quarter End
Regulatory Capital Ratio(5)	Regulatory Capital Ratio(5)	5.77			6.41			6.69			7.59			10.65			Regulatory Capital Ratio(5)	7.87			6.64			5.77			6.41			6.69
Duration Gap (in months)	Duration Gap (in months)	0.9			0.9			1.0			0.9			1.1			Duration Gap (in months)	1.2			1.1			0.9			0.9			1.0

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

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(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 ~~March 31,~~September 30, 2023, and through the filing date of this report, does not believe that it is probable that it will be asked to do so. The par value of the outstanding consolidated obligations of all FHLBanks at the dates indicated was as follows:


	Par Value (In millions)
~~March 31,~~September 30, 2023	$	1,229,875
June 30, 2023	1,340,166
March 31, 2023	1,477,668
December 31, 2022	1,181,743
September 30, 2022	1,031,910
~~June 30, 2022~~	~~882,481~~
~~March 31, 2022~~	~~699,530~~

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

~~Table of Contents~~

(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 with previous credit losses related to the prior methodology of evaluating credit losses,~~ less interest paid on consolidated obligations, deposits, mandatorily redeemable capital stock, and other borrowings. The ~~Average Balance Sheets table~~tables that ~~follows presents~~follow present the average balances of interest-earning asset categories and the sources that funded those interest-earning assets (liabilities and capital) for the three and nine months ended ~~March 31,~~September 30, 2023 and 2022, together with the related interest income and expense. ItThese tables also ~~presents~~present the average rates on total interest-earning assets and the average costs of total funding sources.

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


Average Balance Sheets	Average Balance Sheets															Average Balance Sheets

		Three Months Ended															Three Months Ended
		March 31, 2023							March 31, 2022								September 30, 2023							September 30, 2022
(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	$	4,383		$	50	4.60	%	$	1,322		$	—	0.16	%	Interest-bearing deposits	$	4,497		$	61	5.38	%	$	2,299		$	14	2.28	%
Securities purchased under agreements to resell	Securities purchased under agreements to resell	7,991			92		4.65		2,125			1		0.11		Securities purchased under agreements to resell	3,742			50		5.27		8,937			51		2.28
Federal funds sold	Federal funds sold	11,529			130		4.57		9,256			3		0.12		Federal funds sold	9,209			123		5.30		12,901			72		2.22
Trading securities:	Trading securities:															Trading securities:
Mortgage-backed securities (MBS)	Mortgage-backed securities (MBS)	1			—		2.79		2			—		1.78		Mortgage-backed securities (MBS)	1			—		3.12		1			—		2.10
Other investments		—			—		—		47			—		2.04

Available-for-sale (AFS) securities:(1)	Available-for-sale (AFS) securities:(1)															Available-for-sale (AFS) securities:(1)
MBS(2)(3)(4)	MBS(2)(3)(4)	8,841			141		6.47		9,228			54		2.35		MBS(2)(3)(4)	10,803			189		6.91		8,372			88		4.17
Other investments(3)	Other investments(3)	4,012			49		4.99		452			—		0.34		Other investments(3)	4,030			57		5.61		3,730			21		2.29
Held-to-maturity (HTM) securities:	Held-to-maturity (HTM) securities:															Held-to-maturity (HTM) securities:
MBS	MBS	2,134			24		4.49		2,997			7		1.03		MBS	1,937			25		5.22		2,526			17		2.56

Mortgage loans held for portfolio(5)	Mortgage loans held for portfolio(5)	809			7		3.49		943			17		7.27		Mortgage loans held for portfolio(5)	778			9		4.26		850			8		4.10
Advances(3)(6)	Advances(3)(6)	91,743			1,163		5.14		26,859			39		0.59		Advances(3)(6)	64,221			867		5.36		58,513			345		2.34
Loans to other FHLBanks	Loans to other FHLBanks	21			—		4.63		8			—		0.15		Loans to other FHLBanks	14			—		5.30		16			—		2.36
Total interest-earning assets	Total interest-earning assets	131,464			1,656		5.11		53,239			121		0.92		Total interest-earning assets	99,232			1,381		5.52		98,145			616		2.49
Other assets(7)	Other assets(7)	366			—				707			—				Other assets(7)	978			—				387			—
Total Assets	Total Assets	$	131,830		$	1,656			$	53,946		$	121			Total Assets	$	100,210		$	1,381			$	98,532		$	616
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)	$	83,204		$	920	4.48	%	$	25,170		$	12	0.20	%	Bonds(3)	$	73,093		$	963	5.23	%	$	28,402		$	143	2.01	%
Discount notes	Discount notes	38,692			435		4.56		20,702			6		0.12		Discount notes	16,711			218		5.17		61,417			310		2.00
Deposits and other borrowings	Deposits and other borrowings	1,150			13		4.76		1,117			—		0.11		Deposits and other borrowings	1,267			16		5.33		921			5		2.15
Mandatorily redeemable capital stock	Mandatorily redeemable capital stock	113			—		0.36		4			—		6.25		Mandatorily redeemable capital stock	803			13		6.24		5			—		5.79
Borrowings from other FHLBanks	Borrowings from other FHLBanks	114			1		4.65		—			—		0.08		Borrowings from other FHLBanks	22			—		5.20		65			1		2.74
Total interest-bearing liabilities	Total interest-bearing liabilities	123,273			1,369		4.51		46,993			18		0.16		Total interest-bearing liabilities	91,896			1,210		5.23		90,810			459		2.01
Other liabilities(7)	Other liabilities(7)	742			—				530			—				Other liabilities(7)	1,668			—				668			—
Total Liabilities	Total Liabilities	124,015			1,369				47,523			18				Total Liabilities	93,564			1,210				91,478			459
Total Capital	Total Capital	7,815			—				6,423			—				Total Capital	6,646			—				7,054			—
Total Liabilities and Capital	Total Liabilities and Capital	$	131,830		$	1,369			$	53,946		$	18			Total Liabilities and Capital	$	100,210		$	1,210			$	98,532		$	459
Net Interest Income	Net Interest Income				$	287						$	103			Net Interest Income				$	171						$	157
Net Interest Spread(8)	Net Interest Spread(8)						0.60	%						0.76	%	Net Interest Spread(8)						0.29	%						0.48	%
Net Interest Margin(9)	Net Interest Margin(9)						0.88	%						0.78	%	Net Interest Margin(9)						0.68	%						0.63	%
Interest-earning Assets/Interest-bearing Liabilities	Interest-earning Assets/Interest-bearing Liabilities	106.65		%					113.29		%					Interest-earning Assets/Interest-bearing Liabilities	107.98		%					108.08		%

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

(2)Interest income on AFS securities includes accretion of yield adjustments on certain PLRMBS (resulting from improvement in expected cash flows) with previous credit losses related to the prior methodology of evaluating credit losses, totaling $7$5 million and $8$9 million for the three months ended ~~March 31,~~September 30, 2023 and 2022, respectively.

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


		Three Months Ended									Three Months Ended
		March 31, 2023									September 30, 2023
(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	$	(8)	$	(25)	$	—	$	(33)	(Amortization)/accretion of hedging activities	$	(6)	$	(25)	$	—	$	(31)
Net gain/(loss) on derivatives and hedged items	Net gain/(loss) on derivatives and hedged items	(217)		(6)		(5)		(228)		Net gain/(loss) on derivatives and hedged items	16		18		1		35
Net interest settlements on derivatives	Net interest settlements on derivatives	105		89		(125)		69		Net interest settlements on derivatives	153		100		(153)		100
Total net interest income/(expense)		$	(120)	$	58	$	(130)	$	(192)
Total effect on net interest income										Total effect on net interest income	$	163	$	93	$	(152)	$	104


		Three Months Ended									Three Months Ended
		March 31, 2022									September 30, 2022
(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	$	(7)	$	(27)	$	—	$	(34)	(Amortization)/accretion of hedging activities	$	(8)	$	(26)	$	—	$	(34)
Net gain/(loss) on derivatives and hedged items	Net gain/(loss) on derivatives and hedged items	1		3		—		4		Net gain/(loss) on derivatives and hedged items	(6)		(4)		—		(10)
Net interest settlements on derivatives	Net interest settlements on derivatives	(21)		(13)		24		(10)		Net interest settlements on derivatives	27		22		(37)		12
Total net interest income/(expense)		$	(27)	$	(37)	$	24	$	(40)
Total effect on net interest income										Total effect on net interest income	$	13	$	(8)	$	(37)	$	(32)

(4)There were no prepayment fees on AFS MBS included in interest income during the three months ended September 30, 2023. Interest income ~~includes~~included net prepayment fees on AFS MBS of ~~$4 million and $4~~$3 million for the three months ended ~~March 31, 2023 and 2022, respectively.~~September 30, 2022.

(5)Nonperforming mortgage loans are included in average balances used to determine average rate. Interest income from retrospective adjustment of the effective yields was $1$3 million and ~~$11~~$3 million for the three months ended ~~March 31,~~September 30, 2023 and 2022, respectively. Interest income includes amortization of upfront loan costs and delivery commitments of ~~$(1)~~$(2) million and $(2) million for the three months ended ~~March 31,~~September 30, 2023 and 2022, respectively.

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

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

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

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

Net interest income in the ~~first~~third quarter of 2023 was ~~$287~~$171 million, a ~~179%~~9% increase from ~~$103~~$157 million in the ~~first~~third quarter of 2022. The following table details the changes in interest income and interest expense for the ~~first~~third quarter of 2023 compared to the ~~first~~third quarter of 2022. Changes in both volume and interest rates influence changes in net interest income, net interest spread, and net interest margin.

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

		Increase/ (Decrease)		Attributable to Changes in(1)					Increase/ (Decrease)		Attributable to Changes in(1)
(In millions)	(In millions)			Average Volume		Average Rate		(In millions)			Average Volume		Average Rate
Interest-earning assets:	Interest-earning assets:							Interest-earning assets:
Interest-bearing deposits	Interest-bearing deposits	$	50	$	4	$	46	Interest-bearing deposits	$	47	$	20	$	27
Securities purchased under agreements to resell	Securities purchased under agreements to resell	91		6		85		Securities purchased under agreements to resell	(1)		(42)		41
Federal funds sold	Federal funds sold	127		1		126		Federal funds sold	51		(26)		77

AFS securities:	AFS securities:							AFS securities:
MBS(2)	MBS(2)	87		(2)		89		MBS(2)	101		31		70
Other investments(2)	Other investments(2)	49		18		31		Other investments(2)	36		2		34

HTM securities: MBS	HTM securities: MBS	17		(3)		20		HTM securities: MBS	8		(5)		13

Mortgage loans held for portfolio	Mortgage loans held for portfolio	(10)		(2)		(8)		Mortgage loans held for portfolio	1		—		1
Advances(2)	Advances(2)	1,124		267		857		Advances(2)	522		37		485
Total interest-earning assets	Total interest-earning assets	1,535		289		1,246		Total interest-earning assets	765		17		748
Interest-bearing liabilities:	Interest-bearing liabilities:							Interest-bearing liabilities:
Consolidated obligations:	Consolidated obligations:							Consolidated obligations:
Bonds(2)	Bonds(2)	908		88		820		Bonds(2)	820		406		414
Discount notes	Discount notes	429		9		420		Discount notes	(92)		(338)		246
Deposits and other borrowings	Deposits and other borrowings	13		—		13		Deposits and other borrowings	11		1		10
Borrowings from other FHLBanks	Borrowings from other FHLBanks	1		1		—		Borrowings from other FHLBanks	(1)		(1)		—

Mandatorily redeemable capital stock								Mandatorily redeemable capital stock	13		13		—
Total interest-bearing liabilities	Total interest-bearing liabilities	1,351		98		1,253		Total interest-bearing liabilities	751		81		670
Net interest income	Net interest income	$	184	$	191	$	(7)	Net interest income	$	14	$	(64)	$	78

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

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

The net interest margin was 8868 basis points for the ~~first~~third quarter of 2023, 105 basis points higher than the net interest margin for the ~~first~~third quarter of 2022, which was ~~78 basis points. The net interest spread was 60 basis points for the first quarter of 2023, 16 basis points lower than the net interest spread for the first quarter of 2022, which was 76~~63 basis points. The increase in net interest margin is primarily the result of an increase in the average rate paid on ~~interest earning~~interest-earning assets to ~~5.11%~~5.52% for the three months ended ~~March 31,~~September 30, 2023, compared to ~~0.92%~~2.49% for the three months ended ~~March 31,~~September 30, 2022. Although ~~significantly~~ higher interest rates were the primary ~~factor affecting~~cause for the interest income increase, the higher average balances of advances and investments were also a contributing factor. These effects were partially offset by an increase in costs of interest-bearing liabilities from higher funding levels. The net interest spread was 29 basis points for the third quarter of 2023, 19 basis points lower than the net interest spread for the third quarter of 2022, which was 48 basis points. The decrease in net interest spread was primarily a result of an increase in costs of interest-bearing liabilities from higher funding levels, ~~and costs.~~which were partially offset by higher yields on interest-earning assets that primarily resulted from higher interest rates on growing advance balances.

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

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

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

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


Other Income/(Loss)	Other Income/(Loss)					Other Income/(Loss)

		Three Months Ended					Three Months Ended
(In millions)	(In millions)	March 31, 2023		March 31, 2022		(In millions)	September 30, 2023		September 30, 2022
Other Income/(Loss):	Other Income/(Loss):					Other Income/(Loss):

Net gain/(loss) on advances and consolidated obligation bonds held under fair value option	Net gain/(loss) on advances and consolidated obligation bonds held under fair value option	$	1	$	(21)	Net gain/(loss) on advances and consolidated obligation bonds held under fair value option	$	(12)	$	(20)
Net gain/(loss) on derivatives	Net gain/(loss) on derivatives	(34)		8		Net gain/(loss) on derivatives	15		(1)
Private-label residential mortgage-backed securities trust settlement		—		28

Standby letters of credit fees	Standby letters of credit fees	5		4		Standby letters of credit fees	4		4
Other, net	Other, net	2		(1)		Other, net	—		(1)
Total Other Income/(Loss)	Total Other Income/(Loss)	$	(26)	$	18	Total Other Income/(Loss)	$	7	$	(18)

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 ~~March 31,~~September 30, 2023 and 2022.


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

		Three Months Ended					Three Months Ended
(In millions)	(In millions)	March 31, 2023		March 31, 2022		(In millions)	September 30, 2023		September 30, 2022
Advances	Advances	$	18	$	(49)	Advances	$	(10)	$	(42)
Consolidated obligation bonds	Consolidated obligation bonds	(17)		28		Consolidated obligation bonds	(2)		22
Total	Total	$	1	$	(21)	Total	$	(12)	$	(20)

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

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 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.

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 ~~first~~third quarter of 2023 and 2022.

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

		Three Months Ended													Three Months Ended
(In millions)	(In millions)	March 31, 2023						March 31, 2022						(In millions)	September 30, 2023						September 30, 2022
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	$	(20)	$	10	$	(10)	$	45	$	(8)	$	37	Elected for fair value option	$	7	$	14	$	21	$	35	$	(3)	$	32
Not elected for fair value option	Not elected for fair value option	(45)		8		(37)		18		5		23		Not elected for fair value option	(3)		9		6		22		1		23
Consolidated obligation bonds:	Consolidated obligation bonds:													Consolidated obligation bonds:
Elected for fair value option	Elected for fair value option	16		(14)		2		(23)		1		(22)		Elected for fair value option	2		(7)		(5)		(19)		(6)		(25)
Not elected for fair value option	Not elected for fair value option	16		(9)		7		(32)		1		(31)		Not elected for fair value option	2		(9)		(7)		(20)		(3)		(23)
Consolidated obligation discount notes:	Consolidated obligation discount notes:													Consolidated obligation discount notes:
Not elected for fair value option	Not elected for fair value option	5		—		5		(1)		1		—		Not elected for fair value option	5		(4)		1		2		(13)		(11)
MBS:	MBS:													MBS:
Not elected for fair value option	Not elected for fair value option	—		—		—		1		—		1		Not elected for fair value option	—		—		—		3		—		3

Price alignment amount(1)	Price alignment amount(1)	(1)		—		(1)		—		—		—		Price alignment amount(1)	(1)		—		(1)		—		—		—
Total	Total	$	(29)	$	(5)	$	(34)	$	8	$	—	$	8	Total	$	12	$	3	$	15	$	23	$	(24)	$	(1)

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

During the ~~first~~third quarter of 2023, net ~~losses~~gains on derivatives totaled ~~$34~~$15 million compared to net ~~gains~~losses of $8$1 million in the ~~first~~third quarter of 2022. These amounts included ~~expense~~income of $5$3 million and expense of ~~a de minimis amount~~$24 million resulting from net settlements on derivative instruments used in economic hedges in the ~~first~~third quarter of 2023 and 2022, respectively. Excluding the impact of income or expense from net settlements on derivative instruments used in economic hedges, the net gains or losses on economic hedges were primarily associated with the effects of changes in market interest rates, interest rate spreads, interest rate volatility, and other market factors during the period.

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

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

Other Expense. During the third quarter of 2023, other expenses totaled $55 million, compared to $41 million in the third quarter of 2022. The increase primarily reflected an increase of $8 million in charitable contributions to fund downpayment assistance grants to middle-income homebuyers, delivered by participating member financial institutions.

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

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

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

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

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

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


Average Balance Sheets

	Nine Months Ended
	September 30, 2023							September 30, 2022
(Dollars in millions)	Average Balance			Interest Income/ Expense		Average Rate		Average Balance			Interest Income/ Expense		Average Rate
Assets
Interest-earning assets:
Interest-bearing deposits	$	4,438		$	167	5.03	%	$	1,748		$	17	1.29	%
Securities purchased under agreements to resell	6,819			252		4.94		5,747			65		1.51
Federal funds sold	11,147			414		4.96		10,883			96		1.18
Trading securities:
MBS	1			—		2.93		1			—		1.92
Other investments	—			—		—		16			—		2.04
AFS securities:(1)
MBS(2)(3)(4)	9,770			484		6.62		8,715			220		3.38
Other investments(3)	4,035			161		5.31		2,064			27		1.74
HTM securities:
MBS	2,038			74		4.87		2,751			34		1.64

Mortgage loans held for portfolio(5)	794			21		3.46		892			38		5.74
Advances(3)(6)	81,951			3,184		5.20		43,101			501		1.55
Loans to other FHLBanks	11			—		4.90		12			—		1.48
Total interest-earning assets	121,004			4,757		5.26		75,930			998		1.76
Other assets(7)	606			—				518			—
Total Assets	$	121,610		$	4,757			$	76,448		$	998
Liabilities and Capital
Interest-bearing liabilities:
Consolidated obligations:
Bonds(3)	$	82,240		$	3,008	4.89	%	$	26,549		$	205	1.03	%
Discount notes	29,101			1,050		4.82		41,428			399		1.29
Deposits and other borrowings	1,205			45		5.07		1,107			7		0.90
Mandatorily redeemable capital stock	526			15		3.78		5			—		6.18
Borrowings from other FHLBanks	51			2		4.79		57			1		1.67
Total interest-bearing liabilities	113,123			4,120		4.87		69,146			612		1.18
Other liabilities(7)	1,200			—				564			—
Total Liabilities	114,323			4,120				69,710			612
Total Capital	7,287			—				6,738			—
Total Liabilities and Capital	$	121,610		$	4,120			$	76,448		$	612
Net Interest Income				$	637						$	386
Net Interest Spread(8)						0.39	%						0.57	%
Net Interest Margin(9)						0.70	%						0.68	%
Interest-earning Assets/Interest-bearing Liabilities	106.97		%					109.81		%

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

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

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


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


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

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

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

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

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

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

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

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

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Change in Net Interest Income: Rate/Volume Analysis Nine Months Ended September 30, 2023 Compared to Nine Months Ended September 30, 2022

	Increase/ (Decrease)		Attributable to Changes in(1)
(In millions)			Average Volume		Average Rate
Interest-earning assets:
Interest-bearing deposits	$	150	$	52	$	98
Securities purchased under agreements to resell	187		14		173
Federal funds sold	318		2		316


AFS securities:
MBS(2)	264		30		234
Other investments(2)	134		42		92

HTM securities: MBS	40		(11)		51

Mortgage loans held for portfolio	(17)		(4)		(13)
Advances(2)	2,683		745		1,938

Total interest-earning assets	3,759		870		2,889
Interest-bearing liabilities:
Consolidated obligations:
Bonds(2)	2,803		1,008		1,795
Discount notes	651		(151)		802
Deposits and other borrowings	38		1		37
Borrowings from other FHLBanks	1		—		1
Mandatorily redeemable capital stock	15		15		—
Total interest-bearing liabilities	3,508		873		2,635
Net interest income	$	251	$	(3)	$	254

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

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

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

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

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


Other Income/(Loss)

	Nine Months Ended
(In millions)	September 30, 2023		September 30, 2022
Other Income/(Loss):

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

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


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

	Nine Months Ended
(In millions)	September 30, 2023		September 30, 2022
Advances	$	(11)	$	(117)
Consolidated obligation bonds	(16)		64
Total	$	(27)	$	(53)

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

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Sources of Gains/(Losses) Recorded in Net Gain/(Loss) on Derivatives 2023 Compared to 2022

	Nine Months Ended
(In millions)	September 30, 2023						September 30, 2022
Hedged Item	Gain/(Loss) on Economic Hedges		Income/ (Expense) on Economic Hedges		Total		Gain/(Loss) on Economic Hedges		Income/ (Expense) on Economic Hedges		Total
Advances:
Elected for fair value option	$	8	$	36	$	44	$	102	$	(18)	$	84
Not elected for fair value option	(36)		28		(8)		43		10		53
Consolidated obligation bonds:
Elected for fair value option	14		(28)		(14)		(58)		(4)		(62)
Not elected for fair value option	9		(27)		(18)		(62)		(2)		(64)
Consolidated obligation discount notes:
Not elected for fair value option	—		(7)		(7)		(25)		(3)		(28)
MBS:
Not elected for fair value option	—		—		—		4		—		4




Price alignment amount(1)	(3)		—		(3)		—		—		—
Total	$	(8)	$	2	$	(6)	$	4	$	(17)	$	(13)

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

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

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

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

PLRMBS Trust Settlement – One of the Bank’s PLRMBS investments is held within a trust that has been the subject of litigation by the trustee since 2012. Upon final resolution of the litigation, to which the Bank was not a party, the trustee was required to transmit settlement proceeds to the trust. In the first quarter of 2022, as a result of the distribution of the settlement proceeds to the beneficial owners of the securities in the trust, including the Bank, the Bank recorded settlement proceeds of $28 million as income during the ~~three~~nine months ended ~~March 31,~~September 30, 2022. There was no similar activity during the ~~three~~nine months ended ~~March 31,~~September 30, 2023.

Other Expense. During the first ~~quarter~~nine months of 2023, other expenses totaled ~~$45~~$148 million, compared to ~~$38~~$117 million in the first ~~quarter~~nine months of 2022. The increase was ~~mostly~~ attributable to an increase in compensation and benefits throughout the Bank’s workforce as a result of a comprehensive compensation study in order to retain ~~talent.~~talent and an increase in charitable contributions to fund downpayment assistance grants to middle-income homebuyers, delivered by participating member financial institutions.

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Return on Average Equity. ~~Return on average equity (ROE)~~ROE was ~~10.14% (annualized)~~7.69% for the first ~~quarter~~nine months of 2023, compared to ~~4.91% (annualized)~~4.09% for the first ~~quarter~~nine months of 2022. The increase reflected higher net income for the first ~~quarter~~nine months of 2023, which increased ~~150%, from $78~~103% to $419 million in the first ~~quarter~~nine months of ~~2022 to $195~~2023 from $206 million in the first ~~quarter~~nine months of ~~2023,~~2022, which was partially offset by an increase in average equity ~~from $6.4~~to $7.3 billion in the first ~~quarter~~nine months of ~~2022 to $7.8~~2023 from $6.7 billion in the first ~~quarter~~nine months of ~~2023.~~2022.

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Dividends and Retained Earnings. In the first ~~quarter~~nine months of 2023, the Bank paid dividends at an annualized rate of ~~7.00%~~7.26%, totaling ~~$63~~$206 million, including ~~$63~~$191 million in dividends on capital stock and ~~a de minimis amount~~$15 million in dividends on mandatorily redeemable capital stock. In the first ~~quarter~~nine months of 2022, the Bank paid dividends at an annualized rate of 6.00%, totaling ~~$35~~$108 million, including ~~$35~~$108 million in dividends on capital stock and a de minimis amount in dividends on mandatorily redeemable capital stock.

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

Financial Condition

Total assets were ~~$142.5~~$95.0 billion at ~~March 31,~~September 30, 2023, compared to $121.1 billion at December 31, 2022. Advances ~~increased~~decreased by ~~$12.1~~$25.8 billion, or ~~14%~~29%, to ~~$101.5~~$63.6 billion at ~~March 31,~~September 30, 2023, from $89.4 billion at December 31, 2022. Average ~~total assets~~advances were ~~$131.8~~$64.2 billion for the ~~first~~third quarter of 2023, a ~~144%~~10% increase from ~~$53.9~~$58.5 billion for the ~~first~~third quarter of 2022. Average advances were ~~$91.7~~$82.0 billion for the first nine months of 2023, a 90% increase from $43.1 billion for the first nine months of 2022. Average MBS investments were $12.7 billion for the third quarter of 2023, a ~~242%~~17% increase from ~~$26.9~~$10.9 billion for the ~~first~~third quarter of 2022. Average MBS investments were ~~$11.0~~$11.8 billion for the first ~~quarter~~nine months of 2023, ~~a 10% decrease~~an 3% increase from ~~$12.2~~$11.5 billion for the first ~~quarter~~nine months of 2022.

Advances outstanding at ~~March 31,~~September 30, 2023, included net unrealized losses of ~~$478~~$973 million, of which ~~$453~~$921 million represented unrealized losses on advances hedged in accordance with the accounting for derivative instruments and hedging activities and ~~$25~~$52 million represented unrealized losses on economically hedged advances that are carried at fair value in accordance with the fair value option. Advances outstanding at December 31, 2022, included net unrealized losses of $717 million, of which $670 million represented unrealized losses on advances hedged in accordance with the accounting for derivative instruments and hedging activities and $47 million represented unrealized losses on economically hedged advances that are carried at fair value in accordance with the fair value option. The change in the net unrealized losses on the hedged advances and advances carried at fair value from December 31, 2022, to ~~March 31,~~September 30, 2023, 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.

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

Total liabilities were ~~$134.4~~$88.4 billion at ~~March 31,~~September 30, 2023, ~~an increase~~a decrease of ~~$21.1~~$24.9 billion from $113.3 billion at December 31, 2022, primarily reflecting a ~~$20.7~~$26.5 billion ~~increase~~decrease in consolidated obligations outstanding to ~~$132.4~~$85.2 billion at ~~March 31,~~September 30, 2023, from $111.7 billion at December 31, 2022. Average ~~total liabilities~~consolidated obligations were ~~$124.0~~$89.8 billion for the ~~first~~third quarter of 2023 ~~a 161% increase compared to $47.5~~and $89.8 billion for the ~~first~~third quarter of 2022. Average consolidated obligations were ~~$121.9~~$111.3 billion for the first ~~quarter~~nine months of 2023 and ~~$45.9~~$68.0 billion for the first ~~quarter~~nine months of 2022.

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

Accumulated other comprehensive income/(loss) ~~decreased by $32 million during the first three months of 2023, to $(61)~~was $(55) million at ~~March 31,~~September 30, 2023, ~~from~~compared to $(29) million at December 31, ~~2022,~~2022. The change in accumulated other comprehensive income/(loss) was mainly attributable to ~~lower~~a decrease in the fair values of investment securities classified as AFS, which primarily reflected higher interest rate spreads during the first ~~three~~nine months of 2023, mostly impacting the Bank’s agency MBS portfolio.

Consolidated obligations outstanding at ~~March 31,~~September 30, 2023, included net unrealized gains of ~~$869~~$964 million on consolidated obligation bonds hedged in accordance with the accounting for derivative instruments and hedging activities and unrealized gains of ~~$41~~$43 million on economically hedged consolidated obligation bonds that are carried at fair value in accordance with the fair value option. Consolidated obligations outstanding at December 31, 2022, included net unrealized gains of $1.1 billion on consolidated obligation bonds hedged in accordance with the

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accounting for derivative instruments and hedging activities and unrealized gains of $52 million on economically hedged consolidated obligation bonds that are carried at fair value in accordance with the fair value option. The change in the net unrealized gains on the hedged consolidated obligation bonds and on the consolidated obligation bonds carried at fair value from December 31, 2022, to ~~March 31,~~September 30, 2023, 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 ~~March 31,~~September 30, 2023, and through the filing date of this report, does not believe that it is probable that it will be asked to do so. The par value of the outstanding consolidated obligations of the FHLBanks was ~~$1.5~~$1.2 trillion at ~~March 31,~~September 30, 2023, and ~~$1.2 trillion at~~ December 31, 2022.

LIBOR Transition. ~~Certain Bank assets and derivatives are~~Following the cessation of representative USD LIBOR on June 30, 2023, the Bank’s investments with future rate resets originally indexed to ~~LIBOR.~~LIBOR have been transitioned to alternative fallback rates indexed to SOFR. The Bank recognizes that the ~~impending~~ discontinuation of LIBOR presents risks and challenges that could have an impact on the Bank’s business. The Bank’s Asset and Liability Management Committee has the primary responsibility for driving the transition from LIBOR to SOFR and managing and mitigating the associated risks. For information about the risks to the Bank from the discontinuation of LIBOR, see “Item 1A. Risk Factors” in the Bank’s 2022 Form 10-K. 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 identifies key strategies to manage and mitigate the risks associated with the discontinuation of LIBOR and promotes the use of robust benchmarks, like SOFR, in the Bank’s financial activities. In addition, the Transition Plan prohibits new LIBOR transactions, 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 Bank’s Business Development Committee is responsible for advance product development to facilitate Bank 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.

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 June 30, 2023, in the case of the remaining U.S. dollar LIBOR settings.

The 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.

On March 15, 2022, the Adjustable Interest Rate (LIBOR) Act was signed into law. On a nationwide basis, the legislation provides a statutory fallback mechanism to replace LIBOR with a benchmark rate, selected by the Federal Reserve Board and based on SOFR, including any applicable tenor spread adjustment, for certain contracts that reference LIBOR and contain no fallback provisions or insufficient fallback provisions. On December 16, 2022, the Federal Reserve Board finalized rules to implement the Adjustable Interest Rate (LIBOR) Act by identifying specific benchmark rates based on SOFR that will replace LIBOR in certain financial contracts after June 30, 2023. The final rule provides default rules for certain contracts (covered contracts) that: reference LIBOR, are governed by U.S. law, do not mature on or before the LIBOR replacement date, and lack adequate provisions to identify a

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replacement rate for LIBOR. The final rule identifies separate Board-selected replacement rates for derivatives transactions, covered GSE contracts, and all other covered contracts. The final rule became effective on February 27, 2023.

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 March 31, 2023, and December 31, 2022.

LIBOR-Indexed Financial Instruments
March 31, 2023
(In millions) Due/Terminates through June 30, 2023 Due/Terminates thereafter Total
Assets indexed to LIBOR:
Unpaid principal balance of MBS by contractual maturity(1)
$ 5 $ 2,859 $ 2,864
Notional amount of receive leg LIBOR interest rate swaps by termination date
Cleared 13 177 190
Uncleared 6 — 6
Total $ 24 $ 3,036 $ 3,060

December 31, 2022
(In millions) Due/Terminates through June 30, 2023 Due/Terminates thereafter Total
Assets indexed to LIBOR:
Unpaid principal balance of MBS by contractual maturity(1)
$ 5 $ 2,953 $ 2,958
Notional amount of receive leg LIBOR interest rate swaps by termination date
Cleared 303 182 485
Uncleared 19 — 19
Total $ 327 $ 3,135 $ 3,462
Notional amount of pay leg LIBOR interest rate swaps by termination date - Cleared $ 50 $ 5 $ 55

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

~~All adjustable rate consolidated obligation bonds are indexed to SOFR, totaling $60.3 billion at March 31, 2023, and $49.0 billion at December 31, 2022.~~

~~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.”~~

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Segment Information

The Bank uses an analysis of financial results based on the financial components and adjusted net interest income of two operating segments, the advances-related business and the mortgage-related business, as well as other financial information, to review and assess financial performance and determine financial management strategies related to the operations of these two business segments. For purposes of segment reporting, adjusted net interest income includes income and expense associated with net settlements from economic hedges that are recorded in “Net gain/(loss) on derivatives” in other income/(loss), excludes interest income and expense associated with changes in fair value of the derivative hedging instrument and the hedged item attributable to the hedged risk for designated fair value hedges that are recorded in net interest income, and excludes interest expense that is recorded in “Mandatorily redeemable capital stock.” Affordable Housing Program (AHP) assessments are not included in the segment reporting analysis but are incorporated into the Bank’s overall assessment of financial performance. For a reconciliation of the Bank’s operating segment adjusted net interest income to the Bank’s total net interest income, see “Item 8. Financial Statements – Note 10 – Segment Information.”

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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 increased $21.0 billion to $130.3 billion (91% of total assets) at March 31, 2023, from $109.3 billion (90% of total assets) at December 31, 2022.~~

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 ~~$240~~$128 million in the ~~first~~third quarter of 2023, an increase of ~~$209~~$42 million, or ~~674%~~49%, compared to ~~$31~~$86 million in the ~~first~~third quarter of 2022. This quarterly increase was primarily a result of an improvement in spreads on advances-related assets and higher balances of advances and other credit products and also included a $97 million increase in net prepayment fee income, resulting from higher advance prepayments relative to the prior year, pursuant to the contractual terms of the underlying advance agreements.

~~Adjusted net interest income for this segment represented 82% and 31% of total adjusted net interest income for the first quarters of 2023 and 2022, respectively.~~

~~Advances –~~ The par value of advances outstanding increased by $11.9 billion, or 13%, to $102.0 billion at March 31, 2023, from $90.1 billion at December 31, 2022. Average advances outstanding were $91.7 billion for the first quarter of 2023, a 242% increase from $26.9 billion for the first quarter of 2022. Outstanding balances of advances may significantly increase and decrease from period to period because of a member’s liquidity and financial strategies; therefore, yearend balances may vary significantly from average balances for the year.

The Bank had a high concentration of advances and capital with certain institutions and their affiliates. Advances outstanding to the Bank’s top 10 borrowers and their affiliates increased by $13.3 billion to $77.2 billion, or 76% of total advances outstanding at March 31, 2023, from $63.9 billion, or 71% of total advances outstanding at December 31, 2022. (See “Item 1. Financial Statements – Note 5 – Advances – Concentration Risk” for further information.)

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

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On March 10, 2023, Silicon Valley Bank was closed by the California DFPI and FDIC was named as receiver. On March 14, 2023, the FDIC transferred all of the deposits and substantially all of the assets of Silicon Valley Bank to Silicon Valley Bridge Bank, N.A. The advances to Silicon Valley Bank were not transferred to Silicon Valley Bridge Bank, and were repaid by Silicon Valley Bank. On March 26, 2023, the FDIC entered into a purchase and assumption agreement for all the deposits and loans of Silicon Valley Bridge Bank, N.A. with First-Citizens Bank and Trust Company, a nonmember. At March 31, 2023, Silicon Valley Bank had no advances outstanding from the Bank, compared to $15.0 billion in advances outstanding to Silicon Valley Bank at yearend 2022.

On February 1, 2023, BMO Harris, a nonmember, announced that it completed the acquisition of Bank of the West. Bank of the West held $2.6 billion and $4.3 billion of the Bank’s total advances at March 31, 2023 and December 31, 2022, respectively. As of March 31, 2023, Bank of the West was no longer a member of the Bank.

On December 1, 2022, U.S. Bancorp, a nonmember, announced that it completed its acquisition of Union Bank and expects to complete the systems integration of Union Bank in the first half of 2023. Union Bank held $11.1 billion and $4.3 billion of the Bank’s advances at March 31, 2023, and December 31, 2022, respectively. If Union Bank is no longer a member of the Bank or U.S. Bancorp does not become a member of the Bank, the Bank’s total advances may be reduced.

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

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

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

		March 31, 2023				December 31, 2022					September 30, 2023				December 31, 2022
(Dollars in millions)	(Dollars in millions)	Par Value		Percentage of Total Par Value		Par Value		Percentage of Total Par Value		(Dollars in millions)	Par Value		Percentage of Total Par Value		Par Value		Percentage of Total Par Value

Adjustable – SOFR	Adjustable – SOFR	$	5,090	5	%	2,690		3	%	Adjustable – SOFR	$	2,165	2	%	2,690		3	%
Adjustable – SOFR, callable at borrower’s option	Adjustable – SOFR, callable at borrower’s option	8,850		9		9,500		11		Adjustable – SOFR, callable at borrower’s option	4,250		7		9,500		11

Subtotal adjustable rate advances	Subtotal adjustable rate advances	13,940		14		12,190		14		Subtotal adjustable rate advances	6,415		9		12,190		14
Fixed	Fixed	39,228		39		45,471		50		Fixed	10,019		16		45,471		50
Fixed – amortizing	Fixed – amortizing	56		—		60		—		Fixed – amortizing	60		—		60		—
Fixed – with PPS(1)	Fixed – with PPS(1)	727		1		965		1		Fixed – with PPS(1)	523		1		965		1
Fixed – with FPS(1)	Fixed – with FPS(1)	38,191		37		18,035		20		Fixed – with FPS(1)	38,666		60		18,035		20

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

Fixed – putable at Bank’s option with FPS(1)	Fixed – putable at Bank’s option with FPS(1)	1,350		1		800		1		Fixed – putable at Bank’s option with FPS(1)	1,491		2		800		1

Subtotal fixed rate advances	Subtotal fixed rate advances	79,892		78		65,671		72		Subtotal fixed rate advances	51,099		80		65,671		72
Daily variable rate	Daily variable rate	8,187		8		12,256		14		Daily variable rate	7,043		11		12,256		14
Total par value	Total par value	$	102,019	100	%	$	90,117	100	%	Total par value	$	64,557	100	%	$	90,117	100	%

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

~~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 $28.4 billion and $19.4 billion as of March 31, 2023, and December 31, 2022, respectively.

As of March 31, 2023, and December 31, 2022, the Bank had $4.1 billion and $4.0 billion, respectively, of non-MBS investments classified as AFS with fixed rates of interest. No such investments had variable rates of interest at either March 31, 2023, or December 31, 2022.

~~Borrowings –~~ Total liabilities (primarily consolidated obligations) funding the advances-related business increased to $122.2 billion at March 31, 2023, from $101.6 billion at December 31, 2022. 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 March 31, 2023, the notional amount of interest rate exchange agreements associated with the advances-related business totaled $172.9 billion, of which $55.4 billion were hedging advances, $57.7 billion were hedging consolidated obligations, $4.3 billion were hedging non-MBS investments, and $55.5 billion were offsetting derivatives. At December 31, 2022, the notional amount of interest rate exchange agreements associated with the advances-related business totaled $100.3 billion, of which $48.0 billion were hedging advances, $46.7 billion were

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hedging consolidated obligations, $4.3 billion were hedging non-MBS investments, and $1.3 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.

The current range of the Federal funds rate, established by the Federal Open Market Committee (FOMC), is 4.75% to 5.00%. At its March 2023 meeting, the FOMC raised the target range of the Federal funds rate by 0.25%, anticipating that ongoing increases in the target range will be appropriate to return inflation to 2% over time. Interest rate changes have and are expected to continue to increase the volatility of reported earnings. In addition, the FOMC is expected to continue reducing its holdings of U.S. Treasury securities, agency debt, and agency MBS to reduce the size of the Federal Reserve’s balance sheet. The following table presents a comparison of selected market interest rates as of the selected dates.

Selected Market Interest Rates
Market Instrument March 31, 2023 December 31, 2022 March 31, 2022 December 31, 2021
Federal Reserve target range for overnight Federal funds 4.75-5.00 % 4.25-4.50 % 0.25-0.50 % 0.00-0.25 %
Secured Overnight Financing Rate 4.87 4.30 0.29 0.05
3-month Treasury bill 4.76 4.34 0.50 0.04
2-year Treasury note 4.06 4.43 2.34 0.73
5-year Treasury note 3.61 4.01 2.46 1.26

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” and “MPF” are registered trademarks of the FHLBank of Chicago.) Adjusted net interest income for this segment is derived primarily from the difference, or spread, between the yield on the MBS investments and mortgage loans and the cost of the consolidated obligations funding those assets, including the net settlements from associated interest rate exchange agreements. ~~Assets associated with this segment were $12.2 billion (9% of total assets) at March 31, 2023, and $11.7 billion at December 31, 2022 (10% of total assets).~~

Adjusted net interest income for this segment was ~~$53~~$44 million in the ~~first~~third quarter of 2023, a decrease of ~~$15~~$4 million, or ~~22%~~8%, from ~~$68~~$48 million in the ~~first~~third quarter of 2022. This quarterly decrease was primarily a result of lower earnings on mortgage-related products ~~a decline in retrospective adjustment of the effective yields on mortgage loans,~~ and ~~current expected credit loss reversals.~~

~~Adjusted net interest~~lower accretion-related income, ~~for this segment represented 18% and 69% of total adjusted net interest income for the first quarter of 2023 and 2022, respectively.~~partially offset by higher MBS balances.

MBS Investments – The Bank’s MBS portfolio was ~~$11.3~~$14.1 billion at ~~March 31,~~September 30, 2023, compared with $10.9 billion at December 31, 2022. During the first ~~quarter~~nine months of 2023, the Bank’s MBS portfolio increased primarily as a result of ~~$439 million~~$4.2 billion in purchases, ~~and a $207 million increase in basis adjustments,~~ partially offset by ~~$159~~$493 million in principal ~~repayments and $36 million of fair value losses.~~repayments. Average MBS investments were ~~$11.0~~$12.7 billion in the ~~first~~third quarter of 2023, ~~a decrease~~an increase of ~~$1.2~~$1.8 billion from ~~$12.2~~$10.9 billion in the first quarter of 2022. 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.”third

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~~Interest rate payment terms~~quarter of 2022. Average MBS investments were $11.8 billion for ~~MBS classified as trading, AFS, and held-to-maturity (HTM) at March 31,~~the first nine months of 2023, ~~and December 31, 2022, are shown in~~an increase of $0.3 billion from $11.5 billion for the ~~following table:~~

MBS: Interest Rate Payment Terms
(In millions) March 31, 2023 December 31, 2022
Fair value of trading securities:
Adjustable rate $ 1 $ 1
Total trading securities $ 1 $ 1
Amortized cost of AFS securities:
Fixed rate $ 8,486 $ 7,881
Adjustable rate 846 864
Total AFS securities $ 9,332 $ 8,745
Amortized cost of HTM securities:
Fixed rate $ 248 $ 265
Adjustable rate 1,856 1,916
Total HTM securities $ 2,104 $ 2,181
first nine months of 2022.

Mortgage Loans – Mortgage loan balances ~~decreased to $801~~were $770 million at ~~March 31,~~September 30, 2023, a decrease of $45 million from $815 million at December 31, ~~2022, a decrease of $14 million.~~2022. Average mortgage loans were ~~$809~~$778 million in the ~~first~~third quarter of 2023, a decrease of ~~$134~~$72 million from ~~$943~~$850 million in the third quarter of 2022. Average mortgage loans were $794 million in the first ~~quarter~~nine months of 2023, a decrease of $98 million from $892 million in the first nine months of 2022.

At March 31, 2023, and December 31, 2022, 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 “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Risk Management – Credit Risk – MPF Program.” Mortgage loan balances at March 31, 2023, and December 31, 2022, were as follows:

Mortgage Loan Balances by MPF Product Type
(In millions) March 31, 2023 December 31, 2022
MPF Plus $ 82 $ 85
MPF Original 680 690
Subtotal 762 775
Unamortized premiums 42 43
Unamortized discounts (2) (2)
Mortgage loans held for portfolio 802 816
Less: Allowance for credit losses (1) (1)
Mortgage loans held for portfolio, net $ 801 $ 815

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 2022 Form 10-K.

~~Borrowings –~~ Total consolidated obligations funding the mortgage-related business increased $0.5 billion to $12.2 billion at March 31, 2023, from $11.7 billion at December 31, 2022. 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.”

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The notional amount of derivative instruments associated with the mortgage-related business totaled $16.7 billion at March 31, 2023, of which $8.6 billion were associated with MBS, $8.1 billion were hedging or were associated with consolidated obligations funding the mortgage portfolio, and $24 million were offsetting derivatives. The notional amount of derivative instruments associated with the mortgage-related business totaled $16.5 billion at December 31, 2022, of which $8.2 billion were associated with MBS and $8.3 billion were hedging or were associated with consolidated obligations funding the mortgage portfolio, and $36 million were offsetting derivatives.

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

Liquidity and Capital Resources

The Bank’s financial strategies are designed to enable the Bank to expand and contract its assets, liabilities, and capital 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 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, which may be amended from time to time, that each FHLBank maintain sufficient liquidity at least equal to its anticipated cash outflows, assuming no new consolidated obligation issuance, renewal of all maturing advances, a specified percentage drawdown on letters of credit balances, and certain 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 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.~~month ends. The Bank is also required to perform an annual liquidity stress test and report the results to the Finance Agency.

In addition to the Finance Agency’s guidelines on contingent 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).

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

For more information, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources – Liquidity” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Risk Management – Liquidity Risk” in the Bank’s 2022 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,~~September 30, 2023, the Bank had no advance commitments and ~~$22.3~~$18.3 billion in standby letters of credit outstanding. At December 31, 2022, the Bank had no advance commitments and $22.6 billion in standby letters of credit outstanding.

For additional information, see “Item 8. Financial Statements and Supplementary Data – Note 16 – Commitments and Contingencies.”

Capital

~~Regulatory~~On July 29, 2022, the Bank’s board of directors approved proposed amendments to the Bank’s capital plan remain subject to review and approval by the Finance Agency. In connection with the Finance Agency’s review, the proposed amendments are subject to change and there can be no assurance that any amendments will be adopted. If the amendments are approved by the Finance Agency as proposed, a revised plan will become effective at a future date to be determined by the Bank. Because these proposed amendments were still under review at the Finance Agency in April 2023, the Bank used the existing membership stock calculation methodology based on membership asset value as outlined in the Bank’s Capital ~~Requirements~~Plan.

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

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

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

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borrower’s pledged eligible collateral must meet or exceed the total amount of the borrower’s outstanding advances, other extensions of credit, and certain other borrower obligations and liabilities.

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

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

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

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

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

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

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

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


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

March 31, 2023
September 30, 2023										September 30, 2023
		All Members and Nonmembers	Members and Nonmembers with Credit Outstanding								All Members and Nonmembers	Members and Nonmembers with Credit Outstanding
(Dollars in millions)	(Dollars in millions)					Collateral Borrowing Capacity(2)				(Dollars in millions)					Collateral Borrowing Capacity(3)
Member or Nonmember Credit Quality Rating(1)	Member or Nonmember Credit Quality Rating(1)	Number	Number	Credit Outstanding(1)		Total		Used		Member or Nonmember Credit Quality Rating(1)	Number	Number	Credit Outstanding(2)		Total		Used
1-3	1-3	244	159	$	49,883	$	162,011	31	%	1-3	245	159	$	68,512	$	178,505	38	%
4-6	4-6	74	47	74,223		110,967		67		4-6	75	46	14,219		48,824		29
7-10	7-10	6	3	86		287		30		7-10	9	3	51		192		27
Subtotal	Subtotal	324	209	124,192		273,265		45		Subtotal	329	208	82,782		227,521		36
Community development financial institutions (CDFIs)	Community development financial institutions (CDFIs)	7	6	102		154		66		Community development financial institutions (CDFIs)	8	6	111		166		67
Housing associates	Housing associates	2	1	102		148		69		Housing associates	2	—	—		—		—
Total	Total	333	216	$	124,396	$	273,567	45	%	Total	339	214	$	82,893	$	227,687	36	%

December 31, 2022
All Members and
Nonmembers Members and Nonmembers with Credit Outstanding
(Dollars in millions)
Collateral Borrowing Capacity(2)
Member or Nonmember
Credit Quality Rating Number
Credit
Outstanding(1)
Total Used
1-3 257 172 $ 98,702 $ 323,212 31 %
4-6 65 33 13,891 31,536 44
7-10 4 3 8 51 16
Subtotal 326 208 112,601 354,799 32
CDFIs 7 6 100 151 66
Housing associates 2 1 95 102 93
Total 335 215 $ 112,796 $ 355,052 32 %

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December 31, 2022
	All Members and Nonmembers	Members and Nonmembers with Credit Outstanding
(Dollars in millions)					Collateral Borrowing Capacity(3)
Member or Nonmember Credit Quality Rating(1)		Number	Credit Outstanding(2)		Total		Used
1-3	257	172	$	98,702	$	323,212	31	%
4-6	65	33	13,891		31,536		44
7-10	4	3	8		51		16
Subtotal	326	208	112,601		354,799		32
CDFIs	7	6	100		151		66
Housing associates	2	1	95		102		93
Total	335	215	$	112,796	$	355,052	32	%

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

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

~~(2)~~(3)Collateral borrowing capacity does not represent any commitment to lend on the part of the Bank.

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

March 31, 2023
September 30, 2023							September 30, 2023
(Dollars in millions) Unused Borrowing Capacity	(Dollars in millions) Unused Borrowing Capacity	Number of Members and Nonmembers with Credit Outstanding	Credit Outstanding(1)		Collateral Borrowing Capacity(2)		(Dollars in millions) Unused Borrowing Capacity	Number of Members and Nonmembers with Credit Outstanding	Credit Outstanding(1)		Collateral Borrowing Capacity(2)
0% – 10%	0% – 10%	13	$	53,614	$	56,534	0% – 10%	7	$	27,265	$	27,556
11% – 25%	11% – 25%	11	6,412		8,061		11% – 25%	6	2,566		2,947
26% – 50%	26% – 50%	28	24,451		36,276		26% – 50%	26	15,512		27,060
More than 50%	More than 50%	164	39,919		172,696		More than 50%	175	37,550		170,124
Total	Total	216	$	124,396	$	273,567	Total	214	$	82,893	$	227,687


December 31, 2022
(Dollars in millions) Unused Borrowing Capacity	Number of Members and Nonmembers with Credit Outstanding	Credit Outstanding(1)		Collateral Borrowing Capacity(2)
0% – 10%	11	$	6,637	$	7,319
11% – 25%	11	5,644		7,380
26% – 50%	22	15,509		24,465
More than 50%	171	85,006		315,888
Total	215	$	112,796	$	355,052

(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 March 31, 2023,~~largely consists of agency pools and ~~December 31, 2022.~~collateralized mortgage obligations, agency debt, and U.S. Treasury securities.

Composition of Securities Collateral Pledged
by Members and by Nonmembers with Credit Outstanding
(In millions) March 31, 2023 December 31, 2022
Securities Type with Current Credit Ratings Current Par Borrowing
Capacity Current Par Borrowing
Capacity
U.S. Treasury (bills, notes, bonds) $ 3,176 $ 2,934 $ 3,004 $ 2,688
Agency (notes, subordinated debt, structured notes, indexed amortization notes, and Small Business Administration pools) 5,841 5,167 8,617 7,622
Agency pools and collateralized mortgage obligations 32,538 26,855 79,360 64,153
Private-label commercial MBS – publicly registered investment-grade-rated senior tranches 18 13 392 244
PLRMBS – private label investment-grade-rated senior tranches 749 403 762 409
Municipal Bonds – investment-grade-rated 17 12 17 12
Term deposits with the Bank 3 3 — —
Total $ 42,342 $ 35,387 $ 92,152 $ 75,128

~~With respect to loan collateral, most~~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 specific identification with

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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:~~if 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~~associate. Other considerations for delivery of pledged collateral may include the borrower’s ~~creditworthiness; or the Bank is concerned about the~~creditworthiness, satisfactory maintenance of its collateral, orand the status of the Bank’s priority of ~~its~~ security interest.

As of ~~March 31,~~September 30, 2023, of the loan collateral pledged to the Bank, ~~14%~~26% was pledged by 2021 institutions by specific identification, ~~55%~~41% was pledged by 112 institutions under a blanket lien with detailed reporting, and ~~31%~~33% was pledged by ~~134~~139 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.

As of ~~March 31,~~September 30, 2023, the Bank’s maximum borrowing capacities as a percentage of the assigned market value of mortgage loan collateral pledged under a blanket lien with detailed reporting were as follows: 84% for first lien residential mortgage loans, 81% for multifamily mortgage loans, 81% for commercial mortgage loans, and 69% for second lien residential mortgage loans. The maximum borrowing capacity for small business, small agribusiness, 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 ~~March 31,~~September 30, 2023, and December 31, 2022.


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

(In millions)	(In millions)	March 31, 2023				December 31, 2022				(In millions)	September 30, 2023				December 31, 2022
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	$	267,745	$	152,276	$	265,972	$	180,564	First lien residential mortgage loans	$	167,951	$	112,586	$	265,972	$	180,564
Second lien residential mortgage loans and home equity lines of credit	Second lien residential mortgage loans and home equity lines of credit	14,064		5,721		15,423		7,381		Second lien residential mortgage loans and home equity lines of credit	13,861		6,484		15,423		7,381
Multifamily mortgage loans	Multifamily mortgage loans	61,912		28,375		60,989		36,809		Multifamily mortgage loans	51,331		32,041		60,989		36,809
Commercial mortgage loans	Commercial mortgage loans	84,601		50,846		92,413		54,341		Commercial mortgage loans	81,391		50,589		92,413		54,341
Loan participations(1)	Loan participations(1)	837		312		871		306		Loan participations(1)	1,287		480		871		306
Small business, small farm, and small agribusiness loans	Small business, small farm, and small agribusiness loans	2,675		650		2,180		523		Small business, small farm, and small agribusiness loans	1,579		403		2,180		523
Other	Other	—		—		2		—		Other	—		—		2		—
Total	Total	$	431,834	$	238,180	$	437,850	$	279,924	Total	$	317,400	$	202,583	$	437,850	$	279,924

(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.~~collateral by members and by nonmembers. 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 ~~March 31,~~September 30, 2023, and December 31, 2022, the unpaid principal balance of these loans totaled ~~$5.0~~$4.5 billion and $5.2 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.

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

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

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


Investment Credit Exposure	Investment Credit Exposure															Investment Credit Exposure

(In millions)	(In millions)															(In millions)
March 31, 2023
September 30, 2023																September 30, 2023
		Carrying Value															Carrying Value
		Credit Rating(1)															Credit Rating(1)
Investment Type	Investment Type	AAA		AA		A		BBB		Below Investment Grade		Unrated		Total		Investment Type	AAA		AA		A		BBB		Below Investment Grade		Unrated		Total

U.S. obligations – Treasury securities	U.S. obligations – Treasury securities	$	—	$	4,078	$	—	$	—	$	—	$	—	$	4,078	U.S. obligations – Treasury securities	$	—	$	4,044	$	—	$	—	$	—	$	—	$	4,044

MBS:	MBS:															MBS:

Other U.S. obligations – single-family	Other U.S. obligations – single-family	—		68		—		—		—		—		68		Other U.S. obligations – single-family	—		55		—		—		—		—		55
MBS – GSEs:	MBS – GSEs:															MBS – GSEs:

GSEs – single-family(2)	GSEs – single-family(2)	4		702		2		—		1		—		709		GSEs – single-family(2)	4		629		2		—		2		—		637

GSEs – multifamily	GSEs – multifamily	—		9,273		—		—		—		—		9,273		GSEs – multifamily	—		12,234		—		—		—		—		12,234
Total MBS – GSEs	Total MBS – GSEs	4		9,975		2		—		1		—		9,982		Total MBS – GSEs	4		12,863		2		—		2		—		12,871

PLRMBS	PLRMBS	—		20		34		51		696		496		1,297		PLRMBS	—		17		25		49		597		517		1,205
Total MBS	Total MBS	4		10,063		36		51		697		496		11,347		Total MBS	4		12,935		27		49		599		517		14,131
Total securities	Total securities	4		14,141		36		51		697		496		15,425		Total securities	4		16,979		27		49		599		517		18,175
Interest-bearing deposits	Interest-bearing deposits	—		823		2,937		—		—		—		3,760		Interest-bearing deposits	—		—		3,777		—		—		—		3,777
Securities purchased under agreements to resell(3)	Securities purchased under agreements to resell(3)	—		9,200		—		—		—		1,900		11,100		Securities purchased under agreements to resell(3)	—		1,000		—		—		—		1,750		2,750
Federal funds sold(4)	Federal funds sold(4)	—		2,839		6,188		400		—		—		9,427		Federal funds sold(4)	—		1,363		4,095		—		—		75		5,533
Total investments	Total investments	$	4	$	27,003	$	9,161	$	451	$	697	$	2,396	$	39,712	Total investments	$	4	$	19,342	$	7,899	$	49	$	599	$	2,342	$	30,235

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(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 ~~March 31,~~September 30, 2023, by S&P because of extraordinary expenses incurred during bankruptcy of the security's sponsor.

(3)Unrated counterparties for these investments were broker-dealers, ~~approved by the Office of Finance,~~ qualifying for limited trading programs authorized by the Bank. ~~The securities purchased under agreements~~

(4)Includes unsecured investment credit exposure to ~~resell with the broker-dealers were fully guaranteed by the U.S. government.~~a member.

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.

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


Unsecured Investment Credit Exposure by Investment Type	Unsecured Investment Credit Exposure by Investment Type						Unsecured Investment Credit Exposure by Investment Type

		Carrying Value(1)				Carrying Value(1)
(In millions)	(In millions)	March 31, 2023		December 31, 2022			(In millions)	September 30, 2023		December 31, 2022
Interest-bearing deposits	Interest-bearing deposits	$	3,760	$	3,677		Interest-bearing deposits	$	3,777	$	3,677

Federal funds sold	Federal funds sold	9,427		4,719			Federal funds sold	5,533		4,719
Total	Total	$	13,187	$	8,396		Total	$	9,310	$	8,396

(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 ~~March 31,~~September 30, 2023, and December 31, 2022.

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 ~~March 31,~~September 30, 2023, ~~68%~~59% of the Bank’s total unsecured investments were to U.S. branches and agency offices of foreign commercial banks. At ~~March 31,~~September 30, 2023, all of the unsecured investments held by the Bank had overnight maturities.

Ratings of Unsecured Investment Credit Exposure by Domicile of Counterparty
(In millions)
March 31, 2023
Carrying Value(1)

Credit Rating(2)
Domicile of Counterparty AA A BBB Total
Domestic $ 898 $ 2,587 $ 400 $ 3,885
U.S. subsidiaries of foreign commercial banks — 350 — 350
Total domestic and U.S. subsidiaries of foreign commercial banks 898 2,937 400 4,235
U.S. branches and agency offices of foreign commercial banks:
Australia — 1,646 — 1,646
Canada 2,064 — — 2,064
Finland 700 — — 700
France — 250 — 250
Germany — 1,646 — 1,646
Netherlands — 1,646 — 1,646
United Kingdom — 1,000 — 1,000
Total U.S. branches and agency offices of foreign commercial banks 2,764 6,188 — 8,952
Total unsecured credit exposure $ 3,662 $ 9,125 $ 400 $ 13,187

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Ratings of Unsecured Investment Credit Exposure by Domicile of Counterparty

(In millions)
September 30, 2023
	Carrying Value(1)
	Credit Rating(2)
Domicile of Counterparty	AA		A		Unrated (3)		Total
Domestic	$	—	$	3,427	$	75	$	3,502
U.S. subsidiaries of foreign commercial banks	—		350		—		350
Total domestic and U.S. subsidiaries of foreign commercial banks	—		3,777		75		3,852
U.S. branches and agency offices of foreign commercial banks:
Australia	—		995		—		995

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

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



United Kingdom	—		900		—		900
Total U.S. branches and agency offices of foreign commercial banks	1,363		4,095		—		5,458
Total unsecured credit exposure	$	1,363	$	7,872	$	75	$	9,310

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

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

The Bank’s MBS investments include PLRMBS, all of which were AAA-rated at the time of purchase, and agency residential MBS, which are backed by Fannie Mae, Freddie Mac, or Ginnie Mae. Some of the PLRMBS were issued by or purchased from members, former members, or their affiliates. The Bank has investment credit limits and terms for these investments that do not differ for members and nonmembers. Regulatory policy limits total MBS investments, ~~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 ~~March 31,~~September 30, 2023, the Bank’s MBS portfolio was

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~~143%~~ 202% 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.~~

At ~~March 31,~~September 30, 2023, PLRMBS representing ~~10%~~7% of the amortized cost of the Bank’s MBS portfolio were labeled Alt-A by the issuer. These PLRMBS are generally collateralized by mortgage loans that are considered less risky than subprime loans but more risky than prime loans. These loans are generally made to borrowers with credit scores that are high enough to qualify for a prime mortgage loan, but the loans may not meet standard underwriting guidelines for documentation requirements, property type, or loan-to-value ratios.

As of ~~March 31,~~September 30, 2023, the Bank’s investment in MBS had gross unrealized losses totaling ~~$144~~$134 million, ~~$37~~$34 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.

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

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

The Bank has exposure to MBS with interest rates indexed to LIBOR. The following tables present the unpaid principal balance of adjustable rate MBS by interest rate index and the unpaid principal balance of LIBOR-indexed MBS for LIBOR tenors that cease or will no longer be representative immediately after June 30, 2023, by redemption term at March 31, 2023, and December 31, 2022. 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 MBS by Interest Rate Index
(In millions)
Interest Rate Index March 31, 2023 December 31, 2022
LIBOR(1)
$ 2,864 $ 2,958
Constant maturity Treasury 55 51
Total adjustable rate investment securities(2)
$ 2,919 $ 3,009

LIBOR-Indexed MBS by Redemption Term
(In millions)
Redemption Term March 31, 2023 December 31, 2022
Due through June 30, 2023 $ 5 $ 5
Due thereafter(2)
2,859 2,953
Total LIBOR-Indexed investment securities $ 2,864 $ 2,958

~~(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.”~~

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

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

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

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

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

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

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

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Credit Exposure to Derivative Dealer Counterparties	Credit Exposure to Derivative Dealer Counterparties											Credit Exposure to Derivative Dealer Counterparties

(In millions)	(In millions)											(In millions)
March 31, 2023
September 30, 2023												September 30, 2023
Counterparty Credit Rating(1)	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		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:	Asset positions with credit exposure:											Asset positions with credit exposure:
Uncleared derivatives	Uncleared derivatives											Uncleared derivatives

A	A	$	2,490	$	17	$	(17)	$	—	$	—	A	$	3,921	$	65	$	(63)	$	—	$	2

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

A	A	1,035		(48)		48		—		—		A	8,419		(201)		202		—		1
BBB	BBB	8,535		(274)		277		—		3		BBB	9,791		(242)		245		—		3
Cleared derivatives(2)	Cleared derivatives(2)	158,777		(30)		27		864		861		Cleared derivatives(2)	81,853		(22)		16		799		793
Total derivative positions with credit exposure to nonmember counterparties	Total derivative positions with credit exposure to nonmember counterparties	170,837		$	(335)	$	335	$	864	$	864	Total derivative positions with credit exposure to nonmember counterparties	103,984		$	(400)	$	400	$	799	$	799

Derivative positions without credit exposure	Derivative positions without credit exposure	18,794										Derivative positions without credit exposure	13,027
Total notional	Total notional	$	189,631									Total notional	$	117,011


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

A	$	6,115	$	38	$	(35)	$	—	$	3

Cleared derivatives(2)	89,148		7		14		435		456
Liability positions with credit exposure:
Uncleared derivatives

A	11,246		(356)		358		—		2


Total derivative positions with credit exposure to nonmember counterparties	106,509		$	(311)	$	337	$	435	$	461


Derivative positions without credit exposure	10,284
Total notional	$	116,793

(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 clearing house, which was rated AA- with a ~~Stable CreditWatch~~stable outlook by S&P at ~~March 31,~~September 30, 2023, and December 31, 2022.

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

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LIBOR-Indexed Interest Rate Swaps by Interest Rate Index
Notional Amount of Interest Rate Swaps by Interest Rate Index										Notional Amount of Interest Rate Swaps by Interest Rate Index

(In millions)	(In millions)	March 31, 2023				December 31, 2022				(In millions)	September 30, 2023				December 31, 2022
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(1)	Fixed(1)	$	94,047	$	95,584	$	58,910	$	57,883	Fixed(1)	$	65,487	$	51,524	$	58,910	$	57,883
LIBOR	LIBOR	—		196		55		504		LIBOR	—		—		55		504
SOFR	SOFR	95,499		93,074		57,577		57,523		SOFR	51,514		64,710		57,577		57,523
Overnight Index Swap – Effective Federal Funds Rate	Overnight Index Swap – Effective Federal Funds Rate	85		777		251		883		Overnight Index Swap – Effective Federal Funds Rate	10		777		251		883
Total notional amount	Total notional amount	$	189,631	$	189,631	$	116,793	$	116,793	Total notional amount	$	117,011	$	117,011	$	116,793	$	116,793

~~The following tables present the notional amount of interest rate swaps with~~(1) Includes derivatives indexed to LIBOR ~~exposure for LIBOR tenors~~ that ~~cease or will no longer be representative immediately after~~had their last reset dates prior to June 30, 2023, by termination date broken out by the pay or receive leg and further bifurcated by cleared and uncleared derivative transactions at March 31, 2023, and December 31, 2022. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Financial Condition” for more informati~~on on the LIBOR transition and on SOFR as an alternative market benchmark.~~

LIBOR-Indexed Interest Rate Swaps by Termination Date
March 31, 2023
(In millions) Receive Leg
Termination Date Cleared Uncleared
Terminates through June 30, 2023 $ 13 $ 6
Terminates thereafter(1)
177 —
Total Notional Amount $ 190 $ 6

December 31, 2022
(In millions) Pay Leg Receive Leg
Termination Date Cleared Cleared Uncleared
Terminates through June 30, 2023 $ 50 $ 303 $ 19
Terminates thereafter(1)
5 182 —
Total Notional Amount $ 55 $ 485 $ 19

~~(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.”~~2023.

Critical Accounting Policies and Estimates

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

In the Bank’s 2022 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

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mortgage loans for the accounting of amortization of premiums and accretion of discounts and credit losses previously recorded before the adoption of accounting guidance related to the measurement of credit losses on MBS and mortgage loans.

There have been no significant changes in the judgments and assumptions made during the first ~~three~~nine months of 2023 in applying the Bank’s critical accounting policies. These policies and the judgments, estimates, and assumptions are also described in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates” and “Item 8. Financial Statements and Supplementary Data – Note 1 – Summary of Significant Accounting Policies” in the Bank’s 2022 Form 10-K and in “Item 8. Financial Statements and Supplementary Data – Note 12 – Fair Value.”

Recently Issued Accounting Guidance and Interpretations

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

Recent Developments

~~Federal Reserve~~Allocation of Net Income to Fund Discretionary Community Investment Programs. Each year, the Bank ~~Term Funding Program.~~ ~~On March 12,~~is required by the FHLBank Act to dedicate a minimum of 10% of the previous year’s net income to its Affordable Housing Program (AHP). In 2023, ~~in response~~the board of directors of the Bank voted to ~~prevailing concerns about the ability of banks~~voluntarily allocate up to ~~meet the needs of all their depositors, the Federal Reserve Board (Federal Reserve) announced the implementation of a Bank Term Funding Program (BTFP) as~~ an additional ~~source~~5% (15% total) of ~~liquidity~~ its annual net income to funding economic development and homeownership grant programs and special purpose credit programs that enrich people’s lives and revitalize communities. In 2023, the Bank announced funding commitments of $10 million to the newly-created Middle-Income Downpayment assistance matching grant pilot program, an additional $2 million to the Empowering Black Homeownership matching grant program, and an increase of $2.5 million to its annual Access to Housing and Economic Assistance

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for ~~eligible borrowers, including any U.S. federally insured depository institution or U.S. branch or agency~~Development (AHEAD) economic development grant program, which will enable AHEAD to award a total of a foreign bank that is eligible for primary credit with the Federal Reserve. The BTFP offers loans with terms of up to one year secured by eligible collateral owned by eligible borrowers as of March 12, 2023. Eligible borrowers can request loans under the BTFP until at least March 11, 2024. The BTFP is subject to $25 billion$4 million in credit protection by the U.S. Department of Treasury. Given the BTFP’s recent implementation and lingering market uncertainty resulting from recent insolvencies of certain regional depository institutions, it is difficult to predict the impact of this new program on the Bank’s business, financial condition and results of operations. However, the BTFP is likely to provide an alternative funding source with favorable termsgrants for the ~~Bank’s depository institution members~~2023 program. The Bank continues to evaluate funding other programs meeting community needs for affordable housing, funding for businesses, and ~~could reduce their demand for the Bank’s advances during the term~~community development.

Annual Designation of ~~the BTFP, which, in turn, could have a negative impact on the Bank’s advances balances.~~

~~Finance Agency Proposed Rule on Fair Lending, Fair Housing,~~Member Director and ~~Equitable Housing Finance Plans.~~Independent Director Positions. On ~~April 26,~~June 5, 2023, the Finance Agency ~~published a proposed rule that would require~~designated one member director position for Arizona, six for California, and one for Nevada, effective January 1, 2024, the FHLBanks to comply with fair housing and fair lending laws and prohibitions on unfair or deceptive acts or practices. The fair housing and fair lending laws would be the Fair Housing Act, the Equal Credit Opportunity Act, and those acts’ implementing regulations. Further, the proposed rule would givesame allocation of positions as for 2023. In addition, the Finance Agency ~~enforcement authority.~~designated seven independent director positions for the Bank for 2024, the same number of positions as for 2023. One of the California member director positions, the Nevada member director position, and two of the independent director positions (neither of which is designated as a public interest director position), all with current terms ending on December 31, 2023, will be filled through an election of the members located in California (for the California member director position), an election of the members located in Nevada (for the Nevada member director position) and an election of all members of the Bank (for the two independent director positions). The ~~proposal is open for public comment through June 26, 2023,~~elections will be held in the fourth quarter of 2023. The California member director position, the Nevada member director position, and the ~~Bank is evaluating the potential impact~~two independent director positions will each have a four-year term that begins on January 1, 2024.

Finance Agency’s Review and Analysis of the ~~proposed rule~~Federal Home Loan Bank System “FHLBank System at 100: Focusing on the Future.” Beginning in the fall of 2022, the Finance Agency undertook a review and analysis of the FHLBank System, through a series of public listening sessions, regional roundtable discussions, and receipt of comments from stakeholders. This review covered such areas as the FHLBanks’ mission and purpose in a changing marketplace; their organization, operational efficiency, and effectiveness; their role in promoting affordable, sustainable, equitable, and resilient housing and community investment; their role in addressing the unique needs of rural and financially vulnerable communities; member products, services, collateral requirements; and membership eligibility and requirements. The Finance Agency has stated that its review and analysis will culminate in a written report expected to (i) summarize the feedback received; (ii) identify actions the Finance Agency plans to take; and (iii) outline any recommendations for consideration by Congress. To the extent the Finance Agency’s actions or recommendations result in changes to supervisory expectations, stakeholder perceptions or the Bank’s business model that impact the Bank’s ability to execute on the Bank’s mission of providing liquidity to the Bank’s members and support for affordable housing and community development, the Bank’s business, results of operations, reputation, and the value of membership in the Bank ~~and its operations.~~may be negatively impacted. For a further discussion of related risks, see “Item 1A. Risk Factors” in the Bank’s 2022 Form 10-K.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk

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

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

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

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business 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~~“Total Bank 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 ~~March 31,~~September 30, 2023.

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 as of ~~March 31,~~September 30, 2023, and December 31, 2022.

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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, 2023

December 31, 2022

Interest Rate Scenario(1)

September 30, 2023

December 31, 2022

+200 basis-point change above current rates

–2.8

+200 basis-point change above current rates

–2.8

+100 basis-point change above current rates

–1.4

+100 basis-point change above current rates

–1.4

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

+1.2

+1.3

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

+1.3

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

+2.1

+2.3

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

+2.4

+2.3

(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 ~~March 31,~~September 30, 2023, are comparable with the estimates as of December 31, 2022. ~~The increase in interest rates from yearend resulted in a larger absolute downward rate shocks for all term points.~~ Compared to yearend, interest rates as of ~~March 31,~~September 30, 2023 have increased 68141 basis points for the one-month Treasury bill, ~~decreased 35~~increased 64 basis points for the five-year Treasury note, and ~~decreased 34~~increased 74 basis ~~points~~point for the 10-year Treasury note.

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The Bank’s Risk Management Policy provides guidelines for the payment of dividends and the repurchase of excess stock based on the ratio of the Bank’s estimated market value of total capital to par value of capital stock. If this ratio at the end of any quarter is: (i) less than 100% but greater than or equal to 90%, any dividend would be limited to an annualized rate no greater than the daily average of the Federal funds effective rate for the applicable quarter (subject to certain conditions), and any excess stock repurchases would not exceed $500 million (subject to certain conditions); (ii) less than 90% but greater than or equal to 70%, any dividend and any excess stock repurchases would be subject to the same limitations and conditions as in (i) above, except that any excess stock repurchases would not exceed 4% of the Bank’s outstanding capital stock as of the repurchase date; and (iii) less than 70%, the Bank would not pay a dividend, not repurchase excess stock (but continue to redeem excess stock as provided in the Bank’s capital plan), limit the acquisition of certain assets, and review the Bank’s risk policies. A decision by the board of directors to declare or not declare any dividend or repurchase any excess stock is a discretionary matter and is subject to the requirements and restrictions of the FHLBank Act and applicable requirements under the regulations governing the operations of the FHLBanks. The ratio of the Bank’s estimated market value of total capital to par value of capital stock was ~~198%~~227% as of ~~March 31,~~September 30, 2023.

Net Interest Income as a Percent of Capital – The adjusted net interest income as a percent of capital is a non-GAAP measure used by the Bank to assess ~~financial performance.~~the impact of interest rate changes on the Bank’s projected economic earnings. The measurement is based on current period economic earnings that exclude the effects of unrealized net gains or losses resulting from the Bank’s derivatives and associated hedged items and from financial instruments carried at fair value, which will generally reverse through changes in future valuations and settlements of contractual interest cash flows over the remaining contractual terms to maturity or by the call or put date of the assets and liabilities held under the fair value option, hedged assets and liabilities, and derivatives. Economic earnings also exclude the interest expense on mandatorily redeemable capital stock.

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

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

		2023			2022				September 30, 2023			December 31, 2022
(Dollars in millions)	(Dollars in millions)	Amount (In millions)		Duration Gap(1) (In months)	Amount (In millions)		Duration Gap(1) (In months)	(Dollars in millions)	Amount (In millions)		Duration Gap(1) (In months)	Amount (In millions)		Duration Gap(1) (In months)
Assets	Assets	$	142,493	1.5	$	121,056	1.8	Assets	$	95,021	2.0	$	121,056	1.8
Liabilities	Liabilities	134,421		0.6	113,333		0.9	Liabilities	88,369		0.8	113,333		0.9
Net	Net	$	8,072	0.9	$	7,723	0.9	Net	$	6,652	1.2	$	7,723	0.9

(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~~the total Bank 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

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

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

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~~business through selected funding and hedging strategies. The total carrying value of MBS and mortgage loans at ~~March 31,~~September 30, 2023, was ~~$12.1~~$14.9 billion, including ~~$11.3~~$14.1 billion in MBS and ~~$802~~$771 million in mortgage loans. The total carrying value of MBS and mortgage loans at December 31, 2022, was $11.7 billion, including $10.9 billion in MBS and $816 million in mortgage loans. Floating rate securities, and fixed rate multifamily securities that have been converted to floating rate through the use of interest rate swaps, were ~~$10.8~~$14.1 billion, or ~~89%~~95%, of MBS and mortgage loans at ~~March 31,~~September 30, 2023, and $10.3 billion, or 88%, of MBS and mortgage loans at December 31, 2022. 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 ~~$1.3 billion,~~$771 million, or ~~11%~~5%, of MBS and mortgage loans, at ~~March 31,~~September 30, 2023, and $1.4 billion, or 12%, of MBS and mortgage loans at December 31, 2022.

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.

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

~~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)

March 31, 2023

December 31, 2022

Interest Rate Scenario(1)

September 30, 2023

December 31, 2022

+200 basis-point change

–0.4

–0.5

+200 basis-point change

–0.5

+100 basis-point change

–0.2

+100 basis-point change

–0.2

–100 basis-point change(2)

+0.1

–100 basis-point change(2)

+0.2

+0.1

–200 basis-point change(2)

–0.1

+0.1

–200 basis-point change(2)

+0.2

+0.1

(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~~mortgage portfolio’s estimates of the sensitivity of the market value of capital to changes in interest rates ~~attributable to~~as of September 30, 2023, are comparable with the ~~mortgage-related business from~~estimates as of December 31, 2022, to March 31, 2023, 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.2022.

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

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ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

The senior management of the Federal Home Loan Bank of San Francisco (Bank) is responsible for establishing and maintaining a system of disclosure controls and procedures designed to ensure that information required to be disclosed by the Bank in the reports filed or submitted under the Securities Exchange Act of 1934 (1934 Act) is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. The Bank’s disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Bank in the reports that it files or submits under the 1934 Act is accumulated and communicated to the Bank’s management, including its principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. In designing and evaluating the Bank’s disclosure controls and procedures, the Bank’s management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and the Bank’s management necessarily is required to apply its judgment in evaluating the cost-benefit relationship of controls and procedures.

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

Internal Control Over Financial Reporting

During the three months ended ~~March 31,~~September 30, 2023, 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.

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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

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

We have a high concentration of advances and capital with certain institutions and their affiliates, and a loss or change of business activities with any of these institutions could adversely affect our results of operations, financial condition, or ability to pay dividends or redeem or repurchase capital stock.

We have a high concentration of advances and capital with certain institutions and their affiliates. All of the institutions may prepay or repay advances as they come due. If no other advances or investments are made to replace the prepaid and repaid advances of these institutions, it would result in a significant reduction of our total assets. Mergers and acquisitions have been announced involving certain of the Bank’s members, including some of the Bank’s larger borrowers. Events affecting the financial services industry have resulted in significant changes in the liquidity of some of the industry’s largest regional financial institutions, some of which have experienced significant deposit outflows and financial difficulties, resulting in the liquidation or receivership of some of the Bank’s larger borrowers. If other advances are not made to replace the advances of these members, the Bank’s total advances may be significantly reduced. The reduction in advances could result in a reduction of capital as the Bank repurchases the resulting excess stock, at our discretion, or redeems the excess stock after the expiration of the relevant five-year redemption period. Such a reduction in assets and capital could reduce our net income.

Additional information regarding concentration risk is set forth in “Item 2. Management Discussion and Analysis of Financial Condition and Results of Operations – Segment Information – Advances-Related Business” and “Item 1. Financial Statements – Note 4 – Advances – Concentration Risk.”

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

Not applicable.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

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

The foregoing description of the amendments to Mr. Amato’s employment agreement does not purport to be complete and is qualified in its entirety by reference to Amendment No. 3 to his employment agreement, which is incorporated herein by reference as Exhibit 10.1.

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~~ITEM 5. OTHER INFORMATION~~

~~Allocation of Net Income to Fund Discretionary Community Investment Programs.~~ Each year, the Bank is required by the FHLBank Act to dedicate a minimum of 10% of the previous year’s net income to its Affordable Housing Program (AHP). In 2023, the board of directors of the Bank voted to voluntarily allocate up to an additional 5% (15% total) of its annual net income to funding economic development and homeownership grant programs and special purpose credit programs that enrich people’s lives and revitalize communities. Recently, the Bank announced an increase of $2.5 million to its annual AHEAD economic development grant program, which will enable it to award a total of $4 million in grants for the 2023 program. The Bank is currently evaluating other programs meeting community needs in affordable housing as well as business and community development, including allocating up to $10.0 million to a newly-created middle-income down-payment assistance grant program.

~~Executive Incentive Plan for 2022.~~ Recently, the Federal Housing Finance Agency (Finance Agency) informed the Bank of its non-objection to the board of directors previously-approved 2023 performance goals, qualifiers, and award scales under the Bank's Executive Incentive Plan (EIP). The EIP is an incentive plan established by the board of directors for senior executive officers (excluding the chief audit executive) under which participants are eligible to receive an annual total incentive award (Annual Award) for the achievement of performance goals for designated performance periods.

Under the EIP, any Annual Award for the 2023 performance period would vest in two parts: 50% of the Annual Award (Year-End Award) would vest on the last day of 2023 subject to, among other things, the achievement of the 2023 performance goals and 2023 qualifiers and the participant receiving a satisfactory performance rating for the 2023 performance period; and the remaining 50% of the Annual Award would vest at the end of a 3-year deferral period (Deferred Award) subject to, among other things, the satisfaction of the 2023 qualifiers and the participant receiving a satisfactory performance rating for the 3-year deferral period.

Performance goals and qualifiers are the factors established annually by the board of directors for each performance period and taken into consideration in determining the amount of an Annual Award. Under the EIP, the 2023 performance period goals for the Year-End Award and Deferred Award are as follows: Business and Financial; Risk Management; Community Investment; and Diversity, Equity, and Inclusion and People.

The 2023 qualifiers under the EIP are: (i) no submission of material information to a regulatory or a reporting agency is significantly past due; (ii) the Bank makes sufficient progress, as determined by the Board, in the timely remediation of significant examination, monitoring, and other supervisory findings; (iii) no material risk management deficiency exists at the Bank; (iv) no operational errors or omissions result in material revisions to the financial results, information submitted to the Finance Agency, or data used to determine incentive payouts; and (v) the Bank has sufficient capital to pay dividends and the ability to repurchase member stock.

For 2023, the achievement levels are: Minimum (the minimum level of performance that must be achieved for any awards to be paid); Meets (performance that is expected under the Bank’s EIP); and Maximum (a most optimistic level of performance that substantially exceeds expected performance). If the total weighted achievement level of the Bank’s performance goals and individual goals is between Minimum and Maximum, the range of Annual Awards for the participants (other than the chief executive officer) as a percentage of base salary would be 40% to 85%, and for the chief executive officer, 50% to 100%.

~~First Republic Bank Receivership.~~ On May 1, 2023, the California DFPI closed First Republic Bank, appointed the FDIC as receiver, and the FDIC and JPMorgan Chase, National Association, a nonmember, reported that they are entering into a purchase and assumption agreement for all the deposits and substantially all of the assets of First Republic Bank, including $28.1 billion in advances outstanding from the Bank. The May 1, 2023 advances outstanding balance is unchanged compared to the outstanding balance at March 31, 2023. Upon assumption of the advances outstanding by JPMorgan Chase, National Association, the Bank will transfer $759 million of capital stock of the Bank, held by First Republic Bank, to JPMorgan Chase, National Association, and reclassify that

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capital stock to mandatorily redeemable as a liability in the Bank’s Statements of Condition. See “Management’s Discussion and Analysis – Overview” for more information on the receivership of First Republic Bank.

ITEM 6. EXHIBITS


Exhibit No.						Description

~~10.1~~1 0.1						~~Executive Incentive Plan,~~ Employment Agreement by and among the Federal Home Loan Bank of San Francisco and Joseph E. Amato, dated October 7, 2020, as amended and restated May 28, 2021; Appendices I-III, as approved December 23, 2016; Appendix IV, as approved December 1, 2017; Appendix V, as approved December 7, 2018; Appendix VI, as approved January 31, 2020; Appendix VII, as approved May 28, 2021; Appendix VIII, as approved December 10, 2021; and Appendix IX, as approved March 31, 2023.

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 ~~May 5,~~November 3, 2023.


			Federal Home Loan Bank of San Francisco

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

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

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

8179


(In millions)
Contractual Redemption Period	March 31, 2023		December 31, 2022



After 3 years through 4 years	$	4	$	1
After 4 years through 5 years	90		3
Past contractual redemption date because of remaining activity(1)	1		1
Total	$	95	$	5


LIBOR-Indexed Financial Instruments

March 31, 2023
(In millions)	Due/Terminates through June 30, 2023		Due/Terminates thereafter		Total
Assets indexed to LIBOR:

Unpaid principal balance of MBS by contractual maturity(1)	$	5	$	2,859	$	2,864
Notional amount of receive leg LIBOR interest rate swaps by termination date
Cleared	13		177		190
Uncleared	6		—		6
Total	$	24	$	3,036	$	3,060


Selected Market Interest Rates

Market Instrument	March 31, 2023		December 31, 2022		March 31, 2022		December 31, 2021
Federal Reserve target range for overnight Federal funds	4.75-5.00	%	4.25-4.50	%	0.25-0.50	%	0.00-0.25	%
Secured Overnight Financing Rate	4.87		4.30		0.29		0.05
3-month Treasury bill	4.76		4.34		0.50		0.04

2-year Treasury note	4.06		4.43		2.34		0.73
5-year Treasury note	3.61		4.01		2.46		1.26


MBS: Interest Rate Payment Terms

(In millions)	March 31, 2023		December 31, 2022
Fair value of trading securities:

Adjustable rate	$	1	$	1
Total trading securities	$	1	$	1
Amortized cost of AFS securities:
Fixed rate	$	8,486	$	7,881
Adjustable rate	846		864
Total AFS securities	$	9,332	$	8,745
Amortized cost of HTM securities:
Fixed rate	$	248	$	265
Adjustable rate	1,856		1,916
Total HTM securities	$	2,104	$	2,181


LIBOR-Indexed MBS by Redemption Term
(In millions)
Redemption Term	March 31, 2023		December 31, 2022



Due through June 30, 2023	$	5	$	5
Due thereafter(2)	2,859		2,953
Total LIBOR-Indexed investment securities	$	2,864	$	2,958