UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
x☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2017March 31, 2022
OR
o☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

Commission File Number: 000-51999

FEDERAL HOME LOAN BANK OF DES MOINES
(Exact name of registrant as specified in its charter)
Federally chartered corporation
of the United States
42-6000149
(State or other jurisdiction of incorporation or organization)
42-6000149
(I.R.S. employer identification number)
Financial Center
666 Walnut Street
Des Moines, IA
(Address of principal executive offices)


50309
(Zip code)

909 Locust Street
Des Moines, IA
(Address of principal executive offices)
50309
(Zip code)
Registrant’s telephone number, including area code: (515) 281-1000
(515) 412-2100
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered


Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
x☒ Yes o ☐No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
x☒ Yes o ☐No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of large accelerated filer, accelerated filer, smaller reporting company, and emerging growth company in Rule 12b-2 of the Exchange Act.
Large accelerated filer☐Accelerated filer☐
Non-accelerated filer☒Smaller reporting company☐
Large accelerated filer o
Accelerated filer o
Non-accelerated filer x
Smaller reporting company o
Emerging growth companyo
☐


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


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

o☐ Yes x ☒No
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Shares outstanding as of April 30, 2022
Class B Stock, par value $10036,648,873
Shares outstanding as of October 31, 2017
Class B Stock, par value $10057,074,826




Table of Contents
Part I - Financial Information
Table of Contents
Part I - Financial Information
Item 1.
3
Statements of Condition
3
Statements of Income
4
Statements of Comprehensive Income
5
Statements of Capital
6
Statements of Cash Flows
87
Condensed Notes to the Unaudited Financial Statements
109
Background Information
109
Note 1 - Basis of Presentation
119
Note 2 - Recently Adopted and Issued Accounting Guidance
129
Note 3 - Trading SecuritiesInvestments
1510
Note 4 - Available-for-Sale SecuritiesAdvances
16
Note 5 - Held-to-Maturity Securities
19
Note 6 - Other-Than-Temporary Impairment
21
Note 7 - Advances
22
Note 8 - Mortgage Loans Held for Portfolio
2319
Note 9 - Allowance for Credit Losses
24
Note 106 - Derivatives and Hedging Activities
2922
Note 117 - Consolidated Obligations
3327
Note 128 - Capital
3429
Note 139 - Fair Value
3831
Note 1410 - Commitments and Contingencies
4539
Note 1511 - Activities with Stockholders
4640
Note 1612 - Activities with Other FHLBanks
4741
Note 1713 - Subsequent Events
4841
Item 2.
4942
Item 3.
9073
Item 4.
9074
Part II - Other Information
Item 1.
9175
Item 1A.
9275
Item 2.
9375
Item 3.
9375
Item 4.
9375
Item 5.
75
Item 6.
76
Other Information
9377
Item 6.
Exhibits
94
Signatures
95


Table of Contents
PART I - FINANCIAL INFORMATION


ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)


FEDERAL HOME LOAN BANK OF DES MOINES
STATEMENTS OF CONDITION
(dollars and shares in millions, except capital stock par value)
(Unaudited)
 September 30,
2017		 December 31,
2016		March 31,
2022		December 31,
2021
ASSETS    ASSETS
Cash and due from banks $218
 $223
Cash and due from banks$71 $295 
Interest-bearing deposits 1
 2
Securities purchased under agreements to resell 5,500
 5,925
Federal funds sold 6,770
 5,095
Investment securities    
Trading securities (Note 3) 1,792
 2,553
Available-for-sale securities (Note 4) 21,459
 22,969
Held-to-maturity securities (fair value of $3,880 and $4,706) (Note 5) 3,819
 4,674
Interest-bearing deposits (Note 3)Interest-bearing deposits (Note 3)947 416 
Securities purchased under agreements to resell (Note 3)Securities purchased under agreements to resell (Note 3)10,750 12,450 
Federal funds sold (Note 3)Federal funds sold (Note 3)6,200 4,690 
Investment securities (Note 3)Investment securities (Note 3)
Trading securitiesTrading securities2,335 1,169 
Available-for-sale securities (amortized cost of $13,106 and $13,301)Available-for-sale securities (amortized cost of $13,106 and $13,301)13,133 13,389 
Held-to-maturity securities (fair value of $1,298 and $1,405)Held-to-maturity securities (fair value of $1,298 and $1,405)1,256 1,328 
Total investment securities 27,070
 30,196
Total investment securities16,724 15,886 
Advances (Note 7) 117,514
 131,601
Mortgage loans held for portfolio, net of allowance for credit losses of $2 and $2 (Notes 8 and 9) 7,031
 6,913
Loans to other FHLBanks

 —
 200
Advances (Note 4)Advances (Note 4)44,773 44,111 
Mortgage loans held for portfolio, net of allowance for credit losses of $3 and $1 (Note 5)Mortgage loans held for portfolio, net of allowance for credit losses of $3 and $1 (Note 5)7,702 7,578 
Accrued interest receivable 239
 197
Accrued interest receivable99 84 
Derivative assets, net (Note 10) 119
 191
Other assets 83
 62
Derivative assets, net (Note 6)Derivative assets, net (Note 6)346 221 
Other assets, netOther assets, net125 121 
TOTAL ASSETS $164,545
 $180,605
TOTAL ASSETS$87,737 $85,852 
LIABILITIES    LIABILITIES
Deposits    Deposits
Interest-bearing $861
 $1,021
Interest-bearing$1,713 $1,718 
Non-interest-bearing 73
 92
Non-interest-bearing95 129 
Total deposits 934
 1,113
Total deposits1,808 1,847 
Consolidated obligations (Note 11)    
Discount notes 52,976
 80,947
Consolidated obligations (Note 7)Consolidated obligations (Note 7)
Discount notes (includes $20,363 and $22,348 at fair value held under fair value option)Discount notes (includes $20,363 and $22,348 at fair value held under fair value option)36,743 22,348 
Bonds 102,294
 89,898
Bonds42,463 55,205 
Total consolidated obligations 155,270
 170,845
Total consolidated obligations79,206 77,553 
Mandatorily redeemable capital stock (Note 12) 422
 664
Mandatorily redeemable capital stock (Note 8)Mandatorily redeemable capital stock (Note 8)18 29 
Accrued interest payable 227
 180
Accrued interest payable97 97 
Affordable Housing Program payable 137
 116
Affordable Housing Program payable126 131 
Derivative liabilities, net (Note 10) 3
 76
Derivative liabilities, net (Note 6)Derivative liabilities, net (Note 6)6 3 
Other liabilities 54
 210
Other liabilities531 354 
TOTAL LIABILITIES 157,047
 173,204
TOTAL LIABILITIES81,792 80,014 
Commitments and contingencies (Note 14) 
 
CAPITAL (Note 12)    
Capital stock - Class B putable ($100 par value); 56 and 59 issued and outstanding shares 5,624
 5,917
Additional capital from merger —
 52
Commitments and contingencies (Note 10)Commitments and contingencies (Note 10)00
CAPITAL (Note 8)CAPITAL (Note 8)
Capital stock - Class B putable ($100 par value); 36 and 34 issued and outstanding sharesCapital stock - Class B putable ($100 par value); 36 and 34 issued and outstanding shares3,523 3,364 
Retained earnings    Retained earnings
Unrestricted 1,463
 1,219
Unrestricted1,773 1,773 
Restricted 311
 231
Restricted628 617 
Total retained earnings 1,774
 1,450
Total retained earnings2,401 2,390 
Accumulated other comprehensive income (loss) 100
 (18)Accumulated other comprehensive income (loss)21 84 
TOTAL CAPITAL 7,498
 7,401
TOTAL CAPITAL5,945 5,838 
TOTAL LIABILITIES AND CAPITAL $164,545
 $180,605
TOTAL LIABILITIES AND CAPITAL$87,737 $85,852 
The accompanying notes are an integral part of these financial statements.
3

Table of Contents
FEDERAL HOME LOAN BANK OF DES MOINES
STATEMENTS OF INCOME
(dollars in millions)
(Unaudited)
  For the Three Months Ended For the Nine Months Ended
  September 30, September 30,
  2017 2016 2017 2016
INTEREST INCOME        
Advances $451
 $237
 $1,164
 $594
Prepayment fees on advances, net —
 1
 1
 6
Interest-bearing deposits —
 1
 1
 2
Securities purchased under agreements to resell 14
 4
 30
 13
Federal funds sold 26
 5
 53
 13
Trading securities 12
 13
 35
 39
Available-for-sale securities 98
 63
 266
 176
Held-to-maturity securities 20
 19
 60
 59
Mortgage loans held for portfolio 59
 56
 176
 176
Total interest income 680
 399

1,786
 1,078
INTEREST EXPENSE        
Consolidated obligations - Discount notes 163
 98
 396
 320
Consolidated obligations - Bonds 338
 177
 877
 428
Deposits 1
 1
 3
 1
Mandatorily redeemable capital stock 4
 6
 13
 15
Total interest expense 506
 282

1,289
 764
NET INTEREST INCOME 174
 117

497
 314
Provision (reversal) for credit losses on mortgage loans 1
 1
 1
 2
NET INTEREST INCOME AFTER PROVISION (REVERSAL) FOR CREDIT LOSSES 173
 116

496
 312
OTHER INCOME (LOSS)        
Net gains (losses) on trading securities 1
 (2) 10
 51
Net gains (losses) on derivatives and hedging activities (2) (3) 1
 (76)
Gains on litigation settlements, net —
 —
 21
 337
Other, net 5
 —
 13
 7
Total other income (loss) 4
 (5)
45
 319
OTHER EXPENSE        
Compensation and benefits 12
 13
 39
 39
Contractual services 2
 1
 8
 7
Professional fees 5
 4
 15
 8
Other operating expenses 6
 5
 16
 14
Federal Housing Finance Agency 3
 2
 8
 6
Office of Finance 1
 2
 5
 5
Other, net 1
 1
 2
 3
Total other expense 30
 28

93
 82
NET INCOME BEFORE ASSESSMENTS 147
 83

448

549
Affordable Housing Program assessments 15
 9
 46
 56
NET INCOME $132
 $74

$402

$493
For the Three Months Ended
March 31,
20222021
INTEREST INCOME
Advances$111 $131 
Interest-bearing deposits1 — 
Securities purchased under agreements to resell1 1 
Federal funds sold3 1 
Trading securities7 12 
Available-for-sale securities30 36 
Held-to-maturity securities6 7 
Mortgage loans held for portfolio53 53 
Total interest income212 241 
INTEREST EXPENSE
Consolidated obligations - Discount notes14 5 
Consolidated obligations - Bonds99 126 
Total interest expense113 131 
NET INTEREST INCOME99 110 
Provision (reversal) for credit losses on mortgage loans2 (1)
NET INTEREST INCOME AFTER PROVISION (REVERSAL) FOR CREDIT LOSSES97 111 
OTHER INCOME (LOSS)
Net gains (losses) on trading securities(41)(22)
Net gains (losses) on financial instruments held under fair value option22 — 
Net gains (losses) on derivatives16 17 
Standby letter of credit fees2 3 
Other, net1 4 
Total other income (loss)— 2 
OTHER EXPENSE
Compensation and benefits18 21 
Contractual services5 4 
Professional fees3 4 
Other operating expenses4 5 
Federal Housing Finance Agency3 2 
Office of Finance2 2 
Other, net2 2 
Total other expense37 40 
NET INCOME BEFORE ASSESSMENTS60 73 
Affordable Housing Program assessments6 7 
NET INCOME$54 $66 
The accompanying notes are an integral part of these financial statements.

4
Table of Contents

FEDERAL HOME LOAN BANK OF DES MOINES
STATEMENTS OF COMPREHENSIVE INCOME
(dollars in millions)
(Unaudited)
  For the Three Months Ended For the Nine Months Ended
  September 30, September 30,
  2017 2016 2017 2016
Net income $132
 $74
 $402
 $493
Other comprehensive income (loss)        
Net unrealized gains (losses) on available-for-sale securities 12
 46
 117
 45
Pension and postretirement benefits (1) —
 1
 —
Total other comprehensive income (loss) 11
 46

118

45
TOTAL COMPREHENSIVE INCOME (LOSS) $143
 $120

$520

$538
For the Three Months Ended
March 31,
20222021
Net income$54 $66 
Other comprehensive income (loss)
Net unrealized gains (losses) on available-for-sale securities(61)52 
Pension and postretirement benefits(2)— 
Total other comprehensive income (loss)(63)52 
TOTAL COMPREHENSIVE INCOME (LOSS)$(9)$118 
The accompanying notes are an integral part of these financial statements.







5
Table of Contents

FEDERAL HOME LOAN BANK OF DES MOINES
STATEMENTS OF CAPITAL
(dollars and shares in millions)
(Unaudited)

 Capital Stock Class B (putable) Additional Capital from Merger
 Shares Par Value 
BALANCE, DECEMBER 31, 201547
 $4,714
 $194
Comprehensive income (loss)—
 —
 —
Proceeds from issuance of capital stock48
 4,792
 —
Repurchases/redemptions of capital stock(31) (3,116) —
Net shares reclassified (to) from mandatorily redeemable capital stock(7) (732) —
Cash dividends on capital stock—
 —
 (102)
BALANCE, SEPTEMBER 30, 201657
 $5,658
 $92
      
BALANCE, DECEMBER 31, 201659
 $5,917
 $52
Comprehensive income (loss)—
 —
 —
Proceeds from issuance of capital stock43
 4,364
 —
Repurchases/redemptions of capital stock(46) (4,617) —
Net shares reclassified (to) from mandatorily redeemable capital stock—
 (40) —
Cash dividends on capital stock—
 —
 (52)
BALANCE, SEPTEMBER 30, 201756
 $5,624
 $—
Capital Stock Class B (putable)Retained EarningsAccumulated Other Comprehensive Income (Loss)Total
Capital
SharesPar ValueUnrestrictedRestrictedTotal
BALANCE, DECEMBER 31, 202034 $3,341 $1,775 $576 $2,351 $48 $5,740 
Comprehensive income (loss)— — 53 13 66 52 118 
Proceeds from issuance of capital stock7 719 — — — — 719 
Repurchases/redemptions of capital stock(6)(525)— — — — (525)
Cash dividends on capital stock— — (40)— (40)— (40)
BALANCE, MARCH 31, 202135 $3,535 $1,788 $589 $2,377 $100 $6,012 
BALANCE, DECEMBER 31, 202134 $3,364 $1,773 $617 $2,390 $84 $5,838 
Comprehensive income (loss)— — 43 11 54 (63)(9)
Proceeds from issuance of capital stock10 987 — — — — 987 
Repurchases/redemptions of capital stock(8)(827)— — — — (827)
Net shares reclassified (to) from mandatorily redeemable capital stock— (1)— — — — (1)
Cash dividends on capital stock— — (43)— (43)— (43)
BALANCE, MARCH 31, 202236 $3,523 $1,773 $628 $2,401 $21 $5,945 
The accompanying notes are an integral part of these financial statements.

FEDERAL HOME LOAN BANK OF DES MOINES
STATEMENTS OF CAPITAL (continued from previous page)
(dollars and shares in millions)
(Unaudited)
6
  Retained Earnings Accumulated Other Comprehensive Income (Loss) 
Total
Capital
  Unrestricted Restricted Total  
BALANCE, DECEMBER 31, 2015 $700
 $101
 $801
 $(84) $5,625
Comprehensive income (loss) 394
 99
 493
 45
 538
Proceeds from issuance of capital stock —
 —
 —
 —
 4,792
Repurchases/redemptions of capital stock —
 —
 —
 —
 (3,116)
Net shares reclassified (to) from mandatorily redeemable capital stock —
 —
 —
 —
 (732)
Cash dividends on capital stock —
 —
 —
 —
 (102)
BALANCE, SEPTEMBER 30, 2016 $1,094
 $200
 $1,294
 $(39) $7,005
           
BALANCE, DECEMBER 31, 2016 $1,219
 $231
 $1,450
 $(18) $7,401
Comprehensive income (loss) 322
 80
 402
 118
 520
Proceeds from issuance of capital stock —
 —
 —
 —
 4,364
Repurchases/redemptions of capital stock —
 —
 —
 —
 (4,617)
Net shares reclassified (to) from mandatorily redeemable capital stock —
 —
 —
 —
 (40)
Cash dividends on capital stock (78) —
 (78) —
 (130)
BALANCE, SEPTEMBER 30, 2017 $1,463
 $311
 $1,774
 $100
 $7,498
Table of Contents
The accompanying notes are an integral part of these financial statements.


FEDERAL HOME LOAN BANK OF DES MOINES
STATEMENTS OF CASH FLOWS
(dollars in millions)
(Unaudited)
  For the Nine Months Ended
  September 30,
  2017 2016
OPERATING ACTIVITIES    
Net income $402
 $493
Adjustments to reconcile net income to net cash provided by (used in) operating activities    
Depreciation and amortization 30
 37
Net (gains) losses on trading securities (10) (51)
Net change in derivatives and hedging activities —
 5
Other adjustments 7
 (5)
Net change in:    
Accrued interest receivable (85) (64)
Other assets (2) (1)
Accrued interest payable 46
 62
Other liabilities (11) 42
Total adjustments (25) 25
Net cash provided by (used in) operating activities 377
 518
INVESTING ACTIVITIES    
Net change in:    
Interest-bearing deposits 40
 (366)
Securities purchased under agreements to resell 425
 525
Federal funds sold (1,675) (2,365)
Premises, software, and equipment (25) (7)
Loans to other FHLBanks 200
 —
Trading securities    
Proceeds from maturities of long-term 771
 1,617
Purchases of long-term —
 (1,597)
Available-for-sale securities    
Proceeds from sales and maturities of long-term 1,962
 1,902
Purchases of long-term (402) (3,465)
Held-to-maturity securities    
Proceeds from sales and maturities of long-term 844
 1,178
Purchases of long-term —
 (64)
Advances    
Principal collected 211,223
 134,568
Originated or purchased (197,191) (171,179)
Mortgage loans held for portfolio    
Principal collected 790
 931
Originated or purchased (925) (988)
Proceeds from sales of foreclosed assets 7
 10
Net cash provided by (used in) investing activities 16,044
 (39,300)
For the Three Months Ended
March 31,
20222021
OPERATING ACTIVITIES
Net income$54 $66 
Adjustments to reconcile net income to net cash provided by (used in) operating activities
Depreciation and amortization/(accretion)9 18 
Net (gains) losses on trading securities41 22 
Net (gains) losses on financial instruments held under fair value option(22)— 
Net change in derivatives and hedging activities667 248 
Other adjustments, net2 13 
Net change in:
Accrued interest receivable(18)(12)
Other assets2 (4)
Accrued interest payable— 8 
Other liabilities(13)(5)
Total adjustments668 288 
Net cash provided by (used in) operating activities722 354 
INVESTING ACTIVITIES
Net change in:
Interest-bearing deposits(674)108 
Securities purchased under agreements to resell1,700 1,300 
Federal funds sold(1,510)(3,400)
Trading securities
Proceeds from maturities and paydowns91 2,105 
Purchases(1,298)(600)
Available-for-sale securities
Proceeds from maturities and paydowns899 585 
Purchases(791)(18)
Held-to-maturity securities
Proceeds from maturities and paydowns71 135 
Advances
Repaid34,229 24,171 
Originated(35,437)(25,419)
Mortgage loans held for portfolio
Principal collected330 811 
Purchased(467)(489)
Other investing activities, net(4)— 
Net cash provided by (used in) investing activities(2,861)(711)
The accompanying notes are an integral part of these financial statements.

7
Table of Contents
FEDERAL HOME LOAN BANK OF DES MOINES
STATEMENTS OF CASH FLOWS (continued from previous page)
(dollars in millions)
(Unaudited)
  For the Nine Months Ended
  September 30,
  2017 2016
FINANCING ACTIVITIES    
Net change in deposits (171) (77)
Net payments on derivative contracts with financing elements (3) (4)
Net proceeds from issuance of consolidated obligations    
Discount notes 162,882
 209,409
Bonds 53,241
 77,918
Payments for maturing and retiring consolidated obligations    
Discount notes (190,878) (223,948)
Bonds (40,832) (26,667)
Proceeds from issuance of capital stock 4,364
 4,792
Payments for repurchases/redemptions of capital stock (4,617) (3,116)
Net payments for repurchases/redemptions of mandatorily redeemable capital stock (282) (160)
Cash dividends paid (130) (102)
Net cash provided by (used in) financing activities (16,426) 38,045
Net increase (decrease) in cash and due from banks (5) (737)
Cash and due from banks at beginning of the period 223
 982
Cash and due from banks at end of the period $218
 $245
     
SUPPLEMENTAL DISCLOSURES    
Cash Transactions:    
Interest paid $1,747
 $1,200
Affordable Housing Program payments 25
 14
Non-Cash Transactions:    
Capitalized interest on reverse mortgage investment securities 43
 20
Mortgage loan charge-offs 1
 2
Transfers of mortgage loans to other assets 5
 6
Capital stock reclassified to (from) mandatorily redeemable capital stock, net 40
 732
For the Three Months Ended
March 31,
20222021
FINANCING ACTIVITIES
Net change in deposits7 75 
Net proceeds from issuance of consolidated obligations
Discount notes83,926 67,278 
Bonds8,734 15,897 
Payments for maturing and retiring consolidated obligations
Discount notes(69,521)(70,724)
Bonds(21,336)(13,030)
Proceeds from issuance of capital stock987 719 
Payments for repurchases/redemptions of capital stock(827)(525)
Net payments for repurchases/redemptions of mandatorily redeemable capital stock(12)(16)
Cash dividends paid(43)(40)
Net cash provided by (used in) financing activities1,915 (366)
Net increase (decrease) in cash and due from banks(224)(723)
Cash and due from banks at beginning of the period295 978 
Cash and due from banks at end of the period$71 $255 
SUPPLEMENTAL DISCLOSURES
Cash Transactions:
Interest paid$116 $154 
Affordable Housing Program payments11 9 
Non-Cash Transactions:
Capitalized interest on reverse mortgage investment securities4 6 
Traded but not settled investment security purchases473 — 
The accompanying notes are an integral part of these financial statements.

8
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FEDERAL HOME LOAN BANK OF DES MOINES
CONDENSED NOTES TO THE UNAUDITED FINANCIAL STATEMENTS


Background Information


The Federal Home Loan Bank of Des Moines (the Bank) is a federally chartered corporation organized on October 31, 1932, that is exempt from all federal, state, and local taxation (except real property taxes and certain employer payroll taxes) and is one of 11 district Federal Home Loan Banks (FHLBanks). The FHLBanks are government-sponsored enterprises (GSEs) and were created under the authority of the Federal Home Loan Bank Act of 1932 (FHLBank Act). With the passage of the Housing and Economic Recovery Act of 2008 (Housing Act), the Federal Housing Finance Agency (Finance Agency) was established and became the new independent federal regulator of Federal National Mortgage Association (Fannie Mae) and Federal Home Loan Mortgage Corporation (Freddie Mac) (collectively, Enterprises), as well as the FHLBanks and FHLBanks’ Office of Finance, effective July 30, 2008. The Finance Agency’s mission is in order to ensure that the Enterprises and FHLBanks operate in a safe and sound manner so that they serve as a reliable source of liquidity and funding for housing finance and community investment. The Finance Agency establishes policies and regulations governing the operations of the Enterprises and FHLBanks. Each FHLBank operates as a separate entity with its own management, employees, and board of directors.

The FHLBanks are government-sponsored enterprises (GSEs) that serve the public by enhancing the availability of funds for residential mortgages and targeted community development. The Bank is regulated by the Federal Housing Finance Agency (Finance Agency).

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

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

The Bank’s current and former members own all of the outstanding capital stock of the Bank. Former members own capital stock (included in mandatorily redeemable capital stock) to support business transactions still carried on the Bank’s Statements of Condition. All stockholders, including current and former members, may receive dividends on their capital stock investment to the extent declared by the Bank’s Board of Directors.





Note 1 — Basis of Presentation


The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information. Accordingly, they do not include all of the disclosures required by GAAP for annual financial statements and should be read in conjunction with the audited financial statements for the year ended December 31, 2016,2021, which are contained in the Bank’s 20162021 Annual Report on Form 10-K filed with the SECSecurities and Exchange Commission (SEC) on March 21, 2017 (20169, 2022 (2021 Form 10-K).


In the opinion of management, the unaudited financial information is complete and reflects all adjustments, consisting of normal recurring adjustments, necessary for a fair statement of results for the interim periods. The preparation of financial statements in accordance with GAAP requires management to make assumptions and estimates that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from these estimates. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year ending December 31, 2017.2022.


FHLB Des Moines Headquarters. On June 22, 2017, a storm pipe broke at the Bank’s headquarters causing significant water damage to the Bank’s office space and rendering it totally uninhabitable. From June 23 through July 14 of this year, the Bank utilized its back-up data center, and employees worked out of a business recovery center located in Urbandale, Iowa, additional leased space in downtown Des Moines, and remotely. On July 17, 2017, the Bank resumed use of its primary data center at its headquarters, which was not damaged. However, as a result of the water damage, the estimated time to complete repairs, and the Bank’s plan to relocate its headquarters to a building in downtown Des Moines that it purchased in April of 2017, the Bank terminated its lease with Wells Fargo Financial, an affiliate of Wells Fargo Bank effective September 30, 2017. The Bank entered into a nine month lease agreement with Wells Fargo Financial effective September 30, 2017 to lease approximately 1,200 square feet of the former headquarters to support general business functions. In addition, in July and August 2017, the Bank amended the Bank’s lease at 666 Walnut St., Des Moines, Iowa to lease additional space for the Bank’s temporary headquarters. The Bank expects to remain at this location until its recently purchased building at 909 Locust St., Des Moines, Iowa is ready for occupancy, which is currently anticipated for late 2018. Through the date of this filing, there have been no material disruptions to the Bank’s operations or to its ability to serve its members.

The Bank incurred immaterial expenses related to damages caused by the storm drain break during the second and third quarters of 2017 primarily related to the write-off of equipment and lease costs related to back-up office space. The Bank anticipates that insurance, less applicable deductibles, will cover the majority of the costs incurred to maintain operations and repair or replace damaged Bank property and assets. The Bank does not expect any material expenses to be incurred during the fourth quarter.

SIGNIFICANT ACCOUNTING POLICIES


There have been no material changes to the Bank’s significant accounting policies during the ninethree months ended September 30, 2017, with the exception of one policy noted below which was updated in the first quarter 2017 Form 10-Q. March 31, 2022. Descriptions of all significant accounting policies are included in “Note 1 -— Summary of Significant Accounting Policies” in the 20162021 Form 10-K.


Derivatives. All derivatives are recognized on the Statements of Condition at their fair values and reported as either derivative assets or derivative liabilities, net of cash collateral, including initial margin, and accrued interest received from or pledged to clearing agents and/or counterparties. The fair values of derivatives are netted by clearing agent and/or counterparty when the netting requirements have been met. If these netted amounts are positive, they are classified as a derivative asset and, if negative, they are classified as a derivative liability. Cash flows associated with derivatives are reflected as cash flows from operating activities in the Statements of Cash Flows unless the derivative meets the criteria to be a financing derivative.

The Bank utilizes one Derivative Clearing Organization (Clearinghouse), CME Clearing, for all cleared derivative transactions. Effective January 3, 2017, CME Clearing made certain amendments to its rulebook changing the legal characterization of variation margin payments to be daily settlement payments, which are a component of the derivative fair value, rather than collateral. Initial margin is considered cash collateral.




Note 2 — Recently Adopted and Issued Accounting Guidance


ADOPTED ACCOUNTING GUIDANCETroubled Debt Restructurings and Vintage Disclosures (ASU 2022-02)

Contingent Put and Call Options in Debt Instruments


On March 14, 2016,31, 2022, the Financial Accounting Standards Board (FASB) issued amendments to clarifyguidance eliminating the accounting requirements for assessing whether contingent call (put) optionstroubled debt restructurings by creditors that can acceleratehave adopted the payment of principal on debt instruments are clearlycurrent expected credit losses methodology, while enhancing the disclosure requirements for certain loan refinancings and closely relatedrestructurings by creditors made to their debt hosts. Theborrowers experiencing financial difficulty. Additionally, this guidance requires entities to apply only the four-step decision sequence when assessing whether the economic characteristicsdisclosure of current-period gross write-offs by year of origination for financing receivables and risks of call (put) options are clearly and closely related to the economic characteristics and risks of their debt hosts. Consequently, when a call (put) option is contingently exercisable, an entity does not have to assess whether the event that triggers the ability to exercise a call (put) option is related to interest rates or credit risks.net investment in leases. This guidance becamebecomes effective for the Bank for the interim and annual periods beginning on January 1, 2017. The adoption of this guidance did not have an effect on the Bank’s financial conditions, results of operations, or cash flows.
ISSUED ACCOUNTING GUIDANCE
Targeted Improvements to Accounting for Hedging Activities
On August 28, 2017, the FASB issued amended guidance to improve the financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial statements. This guidance requires that, for fair value hedges, the entire change in the fair value of the hedging instrument included in the assessment of hedge effectiveness be presented in the same income statement line that is used to present the earnings effect of the hedged item. For cash flow hedges, the entire change in the fair value of the hedging instrument included in the assessment of hedge effectiveness must be recorded in other comprehensive income (OCI). In addition, the amendments include certain targeted improvements to the assessment of hedge effectiveness and permit, among other things, the following:
Measurement of the change in fair value of the hedged item on the basis of the benchmark rate component of the contractual coupon cash flows determine at hedge inception.
Measurement of the hedged item in a partial-term fair value hedge of interest-rate risk by assuming the hedged item has a term that reflects only the designated cash flows being hedged.
Consideration only of how changes in the benchmark interest rate affect a decision to settle a prepayable instrument before its schedule maturity in calculating the change in the fair value of the hedged item attributable to interest-rate risk.
For a cash flow hedge of interest-rate risk of a variable-rate financial instrument, an entity could designate as the hedge risk the variability in cash flows attributable to the contractually specified interest-rate.
This guidance becomes effective for the Bank for interim and annual periods beginning on January 1, 2019, and early2023. Early adoption is permitted. For all cash flow hedges existing on the date of adoption, this guidance should be applied through a cumulative-effect adjustment to accumulated other comprehensive income (AOCI) with a corresponding adjustment to retained earnings as of the beginning of the year of adoption. The amended presentation and disclosure guidance is required only prospectively. The Bank does not intend to adopt this guidance early. The Bank is in the process of evaluating this guidance and its effect on the Bank’s financial condition, results of operations, andor cash flows has not yet been determined.
Premium Amortization on Purchased Callable Debt Securities


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

On March 30, 2017,28, 2022, the FASB issued guidance expanding the current last-of-layer method to apply fair value hedging by allowing multiple hedged layers of a single closed portfolio under the method. To reflect that expansion, the last-of-layer method is renamed “the portfolio layer method”. Among other things, this guidance (i) expands the scope of the portfolio layer method to include non-prepayable assets, (ii) specifies eligible hedging instruments in a single-layer hedge, (iii) provides additional guidance on the accounting for and disclosure of hedge basis adjustments under the portfolio layer method, and (iv) specifies how hedge basis adjustments should be considered when determining credit losses for the amortization period for certain purchased callable debt securities held at a premium. Specifically, this guidance requiresassets included in the premium to be amortized to the earliest call date.closed portfolio. This guidance does not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity. This guidance affects all entities that hold investments in callable debt securities that have an amortized cost basis in excess of the amount that is repayable by the issuer at the earliest call date (that is, at a premium). This guidance isbecomes effective for the Bank for interim and annual periods beginning on January 1, 2019, and early2023. Early adoption is permitted. This guidance should be applied using a modified retrospective method through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. The Bank is indoes not currently utilize the process of evaluatinglast-of-layer hedging method and therefore this guidance but its effectis not expected to have any impact on the Bank’s financial condition, results of operations, andor cash flows has not yet been determined.flows.



Reference Rate Reform (ASU 2020-04)
Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost


On March 10, 2017,12, 2020, the FASB issued temporary guidance to ease the potential burden in accounting for reference rate reform related to the transition from LIBOR. The guidance provides optional expedients and exceptions for applying GAAP to transactions affected by reference rate reform, if certain criteria are met. These transactions include contract modifications, hedging relationships, and the sale/transfer of held-to-maturity (HTM) debt securities. This guidance became effective immediately and remains in effect until December 31, 2022. The Bank continues to evaluate the impact of the guidance to improveand anticipates electing the presentationapplicable optional expedients as reference rate activities occur. The effect, if any, of net periodic pension cost and net periodic postretirement benefit cost. This guidance requires entities to disaggregate the service cost component from the other components of net benefit cost. The guidance also provides explicit guidance on how to present the service cost component and the other components of net benefit cost in the income statement and allows only the service cost component of net benefit cost to be eligible for capitalization. This guidance is effective for the Bank for interim and annual periods beginning on January 1, 2018, and early adoption is permitted. This guidance should be applied retrospectively for the presentation of the service cost component and the other components of net periodic pension cost and net periodic postretirement benefit cost in the income statement and prospectively, on and after the effective date, for the capitalization of the service cost component of net periodic pension cost and net periodic postretirement benefit in assets. The Bank has evaluated this guidance and its effectthese activities on the Bank’s financial condition, results of operations, or cash flows is not expected to be material.

Classification of Certain Cash Receipts and Cash Payments

On August 26, 2016, the FASB issued amendments to clarify guidancedepends on the classificationnature of certain cash receiptsthe transactions and paymentsmarket conditions at the time any election is made.

Note 3 — Investments

The Bank makes short-term investments in the statementinterest-bearing deposits, securities purchased under agreements to resell, and federal funds sold, and makes other investments in debt securities, which are classified as either trading, available-for-sale (AFS), or HTM.

INTEREST-BEARING DEPOSITS, SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL, AND FEDERAL FUNDS SOLD

The Bank invests in interest-bearing deposits, securities purchased under agreements to resell, and federal funds sold to provide short-term liquidity. These investments are generally transacted with counterparties that have received a credit rating of cash flows. This guidance is intendedtriple-B or greater (investment grade) by a nationally recognized statistical rating organization (NRSRO). At March 31, 2022 and December 31, 2021, none of these investments were with counterparties rated below triple-B; however, as of March 31, 2022, approximately six percent were secured securities purchased under agreements to reduce existing diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. This guidance is effective forresell with unrated counterparties. At December 31, 2021, the Bank for interim and annual periods beginningheld no unrated investments. These NRSRO ratings may differ from any internal ratings of the investments by the Bank.

Federal funds sold are unsecured loans that are generally transacted on January 1, 2018, and early adoption is permitted. This guidance should be applied usingan overnight term. Finance Agency regulations include a retrospective transition method to each period presented. The Bank does not intend to adopt this guidance early. The adoption of this guidance will have no effectlimit on the Bank’s financial condition, resultsamount of operations, or cash flows.
Measurement of Credit Losses on Financial Instruments

On June 16, 2016,unsecured credit the FASB issued amended guidance for the accounting of credit losses on financial instruments. The amendments require entitiesBank may extend to measure expected credit losses based on relevant information about past events, including historical experience, current conditions,a counterparty. At March 31, 2022 and reasonable and supportable forecasts that affect the collectability of the reported amount. An entity must use judgment in determining the relevant information and estimation methods that are appropriate in its circumstances. The new guidance requires a financial asset, or a group of financial assets, measured at amortized cost to be presented at the net amount expected to be collected. The guidance also requires, among other things, the following:
The statement of income to reflect the measurement of credit losses for newly recognized financial assets, as well as the expected increases or decreases of expected credit losses that have taken place during the period.

Entities to determine theDecember 31, 2021, no allowance for credit losses was recorded for interest-bearing deposits and federal funds sold, as all assets were repaid or expected to be repaid according to their contractual terms. The carrying values of interest-bearing deposits and federal funds sold exclude accrued interest receivable of less than $1 million at both March 31, 2022 and December 31, 2021.

Securities purchased financial assets with a more-than-insignificantunder agreements to resell are secured, short-term, and are structured such that they are evaluated regularly to determine if the market value of the underlying securities decreases below the market value required as collateral (i.e. subject to collateral maintenance provisions). If so, the counterparty must place an equivalent amount of credit deterioration since origination (PCD assets)additional securities as collateral or remit an equivalent amount of cash, generally by the next business day. Based upon the collateral held as security and collateral maintenance provisions with its counterparties, the Bank determined that are measured at amortized cost in a similar manner to other financial assets measured at amortized cost. The initialno allowance for credit losses is requiredwas needed for its securities purchased under agreements to be addedresell at March 31, 2022 and December 31, 2021. The carrying value of securities purchased under agreements to the purchase priceresell excludes accrued interest receivable of the assets acquired.less than $1 million at both March 31, 2022 and December 31, 2021.


Entities to record credit losses relating to available-for-sale (AFS)
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DEBT SECURITIES

The Bank invests in debt securities, through an allowance for credit losses. The amendments limit the allowance for credit losses to the amount by which fair value is below amortized cost.

Public entities to further disaggregate the current disclosure of credit quality indicators in relation to the amortized cost of financing receivables by the year of origination (i.e., vintage).

This guidance is effective for the Bank for interim and annual periods beginning on January 1, 2020. Early application is permittedare classified as of the interim and annual reporting periods beginning after December 15, 2018. This guidance should be applied using a modified-retrospective approach, through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. In addition, entities are required to use a prospective transition approach for PCD assets upon adoption and for debt securities for which an other-than-temporary impairment had been recognized before the effective date. The Bank does not intend to adopt the new guidance early. While the Bank is in the process of evaluating this guidance, the Bank expects the adoption of the guidance may result in an increase in the allowance for credit losses, including an allowance for debt securities, given the requirement to assess losses for the entire estimated life of the financial asset. The effect on the Bank’s financial condition, results of operations, and cash flows will depend upon the composition of financial assets held by the Bank at the adoption date as well as the economic conditions and forecasts at that time.

Leases

On February 25, 2016, the FASB issued guidance which requires recognition of lease assets and lease liabilities on the statement of condition and disclosure of key information about leasing arrangements. Specifically, this guidance requires a lessee, of operatingeither trading, AFS, or finance leases, to recognize on the statement of condition a liability to make lease payments and a right-of-use asset representing its right to use the underlying asset for the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election not to recognize lease assets and lease liabilities. Under previous GAAP, a lessee was not required to recognize lease assets and lease liabilities arising from operating leases on the statement of condition. While this guidance does not fundamentally change lessor accounting, some changes have been made to align that guidance with the lessee guidance and other areas within GAAP.

This guidance becomes effective for the Bank for the interim and annual periods beginning on January 1, 2019, and early application is permitted. This guidance requires lessors and lessees to recognize and measure leases at the beginning of the earliest period presented in the financial statements using a modified retrospective approach. The Bank does not intend to adopt this new guidance early. Upon adoption, the Bank expects to report higher assets and liabilities as a result of recording right-of-use assets and lease liabilities on its statements of condition.HTM. The Bank is in the process of evaluating this guidance, but its effect on the Bank’s financial condition, results of operations, or cash flows has not yet been determined.

Recognitionprohibited by Finance Agency regulations from purchasing certain higher-risk securities, such as equity securities and Measurement of Financial Assets and Financial Liabilities

On January 5, 2016, the FASB issued amended guidance on certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. This guidance includes, but is not limited to, the following:

Requires an entity to present separately in OCI the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments.

Requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (that is, securities or loans and receivables) on the statements of condition or the accompanying notes to the financial statements.

Eliminates the requirement for public entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financialdebt instruments measured at amortized cost on the statements of condition.

This guidance becomes effective for the Bank for the interim and annual periods beginning on January 1, 2018, and early adoption is only permitted for certain provisions. The amendments, in general, should be applied by means of a cumulative-effect adjustment to the statements of condition as of the beginning of the period of adoption. While this guidance will affect the Bank’s disclosures, the Bank does not expect the requirement to present the instrument-specific credit risk in OCI to have any effect on its financial condition, results of operations, or cash flows.

Revenue from Contracts with Customers

On May 28, 2014, the FASB issued guidance on revenue from contracts with customers. This guidance outlines a single comprehensive model for recognizing revenue arising from contracts with customers and supersedes most current revenue recognition guidance. In addition, this guidance amends the existing requirements for the recognition of a gain or loss on the transfer of non-financial assets that are not in a contract with a customer. This guidance applies to all contracts with customers except thoseinvestment quality. Exceptions are allowed for certain investments targeted at low-income persons or communities, and instruments that are withinexperience credit deterioration after their purchase by the scope of certain other standards, such as financial instruments, certain guarantees, insurance contracts, and lease contracts. The guidance provides entities with the option of using either of the following adoption methods: a full retrospective method, retrospectively to each prior reporting period presented; or a modified retrospective method, retrospectively with the cumulative effect of initially applying this guidance recognized at the date of initial application.Bank.


On August 12, 2015, the FASB issued an amendment to defer the effective date of this guidance issued in May 2014 by one year. In 2016, the FASB has issued additional amendments to clarify certain aspects of the new revenue guidance. However, these amendments do not change the core principle in the new revenue standard.


This guidance is effective for the Bank for interim and annual periods beginning on January 1, 2018. Early application is permitted only as of the interim and annual reporting periods beginning after December 15, 2016. The Bank does not intend to adopt this new guidance early. Given that the majority of the Bank’s financial instruments and other contractual rights that generate revenue are covered by other U.S. GAAP, the effect of this guidance on the Bank’s financial condition, results of operations, and cash flows is not expected to be material.

Note 3 — Trading Securities

MAJOR SECURITY TYPES


Trading securities by major security type were as follows (dollars in millions):
March 31, 2022December 31, 2021
Non-mortgage-backed securities
U.S. Treasury obligations1
$1,780 $496 
Other U.S. obligations1
92 102 
GSE and Tennessee Valley Authority obligations55 60 
Other2
190 201 
     Total non-mortgage-backed securities2,117 859 
Mortgage-backed securities
GSE multifamily218 310 
Total fair value$2,335 $1,169 

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

2    Consists of taxable municipal bonds.


Net Gains (Losses) on Trading Securities

The following table summarizes the components of “Net gains (losses) on trading securities” as presented on the Statements of Income (dollars in millions):
For the Three Months Ended
March 31,
20222021
Net unrealized gains (losses) on trading securities held at period-end$(40)$(22)
Net gains (losses) on trading securities no longer held at period-end(1)— 
Net gains (losses) on trading securities$(41)$(22)


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 September 30,
2017		 December 31,
2016
Non-mortgage-backed securities   
Other U.S. obligations1
$203
 $216
GSE and Tennessee Valley Authority obligations861
 1,611
Other2
274
 273
     Total non-mortgage-backed securities1,338
 2,100
Mortgage-backed securities   
GSE multifamily454
 453
Total fair value$1,792
 $2,553
AFS Securities

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

2Consists of taxable municipal bonds.


NET GAINS (LOSSES) ON TRADING SECURITIES

The Bank did not sell any trading securities during the three and nine months ended September 30, 2017 and 2016. During the three and nine months ended September 30, 2017, the Bank recorded net holding gains of $1 million and $10 million on its trading securities compared to net holding losses of $2 million and net holding gains of $51 million for the same periods in 2016.


Note 4 — Available-for-Sale Securities

MAJOR SECURITY TYPES

AFS securities by major security type were as follows (dollars in millions):
March 31, 2022
Amortized
Cost1
Gross
Unrealized
Gains		Gross
Unrealized
Losses
Fair
Value
Non-mortgage-backed securities
Other U.S. obligations2
$1,046 $5 $(1)$1,050 
GSE and Tennessee Valley Authority obligations559 19 — 578 
State or local housing agency obligations492 — (3)489 
Other3
265 9 — 274 
Total non-mortgage-backed securities2,362 33 (4)2,391 
Mortgage-backed securities
U.S. obligations single-family2
2,717 9 (1)2,725 
GSE single-family251 3 — 254 
GSE multifamily7,776 16 (29)7,763 
Total mortgage-backed securities10,744 28 (30)10,742 
Total$13,106 $61 $(34)$13,133 

1    Amortized cost includes adjustments made to the cost basis of an investment for accretion, amortization, and/or fair value hedge accounting adjustments, and excludes accrued interest receivable of $23 million at March 31, 2022.

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

3    Consists primarily of taxable municipal bonds.



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 September 30, 2017
 
Amortized
Cost1
 Gross
Unrealized
Gains		 Gross
Unrealized
Losses		 

Fair
Value
Non-mortgage-backed securities       
Other U.S. obligations2
$3,204
 $7
 $(4) $3,207
GSE and Tennessee Valley Authority obligations1,248
 27
 —
 1,275
State or local housing agency obligations962
 —
 (1) 961
Other3
273
 8
 —
 281
Total non-mortgage-backed securities5,687
 42
 (5) 5,724
Mortgage-backed securities       
Other U.S. obligations single-family2
3,831
 12
 (1) 3,842
GSE single-family1,046
 9
 —
 1,055
GSE multifamily10,792
 52
 (6) 10,838
Total mortgage-backed securities15,669
 73
 (7) 15,735
Total$21,356
 $115
 $(12) $21,459
AFS securities by major security type were as follows (dollars in millions):


December 31, 2021
Amortized
Cost1
Gross
Unrealized
Gains		Gross
Unrealized
Losses
Fair
Value
Non-mortgage-backed securities
Other U.S. obligations2
$1,152 $5 $(1)$1,156 
GSE and Tennessee Valley Authority obligations953 30 — 983 
State or local housing agency obligations492 — (4)488 
Other3
277 11 — 288 
Total non-mortgage-backed securities2,874 46 (5)2,915 
Mortgage-backed securities
U.S. obligations single-family2
2,890 19 — 2,909 
GSE single-family273 4 — 277 
GSE multifamily7,264 42 (18)7,288 
Total mortgage-backed securities10,427 65 (18)10,474 
Total$13,301 $111 $(23)$13,389 
 December 31, 2016
 
Amortized
Cost1
 Gross
Unrealized
Gains		 Gross
Unrealized
Losses		 

Fair
Value
Non-mortgage-backed securities       
Other U.S. obligations2
$3,537
 $5
 $(13) $3,529
GSE and Tennessee Valley Authority obligations1,341
 11
 (1) 1,351
State or local housing agency obligations1,010
 —
 (1) 1,009
Other3
272
 6
 —
 278
Total non-mortgage-backed securities6,160
 22
 (15) 6,167
Mortgage-backed securities       
Other U.S. obligations single-family2
3,852
 2
 (16) 3,838
GSE single-family1,257
 7
 (3) 1,261
GSE multifamily11,714
 30
 (41) 11,703
Total mortgage-backed securities16,823
 39
 (60) 16,802
Total$22,983
 $61
 $(75) $22,969


1Amortized cost includes adjustments made to the cost basis of an investment for accretion, amortization, and/or fair value hedge accounting adjustments.

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

3Consists of taxable municipal bonds and/or Private Export Funding Corporation (PEFCO) bonds.

1    Amortized cost includes adjustments made to the cost basis of an investment for accretion, amortization, and/or fair value hedge accounting adjustments, and excludes accrued interest receivable of $28 million at December 31, 2021.



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

3    Consists primarily of taxable municipal bonds.


Unrealized Losses

The following tables summarizetable summarizes AFS securities with unrealized losses by major security type and length of time that individual securities have been in a continuous unrealized loss position (dollars in millions). In cases where the gross unrealized losses for an investment category are less than $1 million, the losses are not reported.
March 31, 2022
Less than 12 Months12 Months or MoreTotal
Fair
Value		Unrealized
Losses		Fair
Value		Unrealized
Losses		Fair
Value		Unrealized
Losses
Non-mortgage-backed securities
Other U.S. obligations1
$53 $— $95 $(1)$148 $(1)
State or local housing agency obligations2 — 452 (3)454 (3)
Total non-mortgage-backed securities55 — 547 (4)602 (4)
Mortgage-backed securities
U.S. obligations single-family1
527 (1)81 — 608 (1)
GSE single-family9 — — — 9 — 
GSE multifamily1,636 (21)2,864 (8)4,500 (29)
Total mortgage-backed securities2,172 (22)2,945 (8)5,117 (30)
Total$2,227 $(22)$3,492 $(12)$5,719 $(34)

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



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 September 30, 2017
 Less than 12 Months 12 Months or More Total
 Fair
Value		 
Unrealized
Losses
 Fair
Value		 
Unrealized
Losses
 Fair
Value		 
Unrealized
Losses
Non-mortgage-backed securities           
Other U.S. obligations1
$179
 $(1) $2,173
 $(3) $2,352
 $(4)
State or local housing agency obligations38
 —
 621
 (1) 659
 (1)
Total non-mortgage-backed securities217
 (1) 2,794
 (4) 3,011
 (5)
Mortgage-backed securities           
Other U.S. obligations single-family1
—
 —
 914
 (1) 914
 (1)
GSE single-family—
 —
 57
 —
 57
 —
GSE multifamily791
 —
 2,912
 (6) 3,703
 (6)
Total mortgage-backed securities791
 —
 3,883
 (7) 4,674
 (7)
Total$1,008
 $(1) $6,677
 $(11) $7,685
 $(12)
The following table summarizes AFS securities with unrealized losses by major security type and length of time that individual securities have been in a continuous unrealized loss position (dollars in millions). In cases where the gross unrealized losses for an investment category are less than $1 million, the losses are not reported.


December 31, 2021
Less than 12 Months12 Months or MoreTotal
Fair
Value		Unrealized
Losses		Fair
Value		Unrealized
Losses		Fair
Value		Unrealized
Losses
Non-mortgage-backed securities
Other U.S. obligations1
$80 $— $115 $(1)$195 $(1)
GSE and Tennessee Valley Authority obligations355 — — — 355 — 
State or local housing agency obligations— — 451 (4)451 (4)
Total non-mortgage-backed securities435 — 566 (5)1,001 (5)
Mortgage-backed securities
U.S. obligations single-family1
89 — 87 — 176 — 
GSE single-family2 — — — 2 — 
GSE multifamily1,831 (3)2,917 (15)4,748 (18)
Total mortgage-backed securities1,922 (3)3,004 (15)4,926 (18)
Total$2,357 $(3)$3,570 $(20)$5,927 $(23)
 December 31, 2016
 Less than 12 Months 12 Months or More Total
 Fair
Value		 
Unrealized
Losses
 Fair
Value		 
Unrealized
Losses
 Fair
Value		 
Unrealized
Losses
Non-mortgage-backed securities           
Other U.S. obligations1
$209
 $—
 $2,972
 $(12) $3,181
 $(12)
GSE and Tennessee Valley Authority obligations—
 —
 126
 (1) 126
 (1)
State or local housing agency obligations354
 (1) 395
 (1) 749
 (2)
Total non-mortgage-backed securities563
 (1) 3,493
 (14) 4,056
 (15)
Mortgage-backed securities           
Other U.S. obligations single-family1
1,123
 (2) 2,076
 (14) 3,199
 (16)
GSE single-family545
 (3) 32
 —
 577
 (3)
GSE multifamily2,713
 (6) 6,315
 (35) 9,028
 (41)
Total mortgage-backed securities4,381
 (11) 8,423
 (49) 12,804
 (60)
Total$4,944
 $(12) $11,916
 $(63) $16,860
 $(75)


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






Contractual Maturity


CONTRACTUAL MATURITY

The following table summarizes AFS securities by contractual maturity. Expected maturities of some securities may differ from contractual maturities as borrowers may have the right to call or prepay obligations with or without call or prepayment fees (dollars in millions):
March 31, 2022December 31, 2021
Year of Contractual MaturityAmortized
Cost		Fair
Value		Amortized
Cost		Fair
Value
Non-mortgage-backed securities
Due in one year or less$78 $79 $422 $422 
Due after one year through five years1,434 1,444 1,538 1,548 
Due after five years through ten years317 322 348 356 
Due after ten years533 546 566 589 
Total non-mortgage-backed securities2,362 2,391 2,874 2,915 
Mortgage-backed securities10,744 10,742 10,427 10,474 
Total$13,106 $13,133 $13,301 $13,389 


14
Table of Contents
  September 30, 2017 December 31, 2016
Year of Contractual Maturity Amortized
Cost		 
Fair
Value
 Amortized
Cost		 
Fair
Value
Non-mortgage-backed securities        
Due in one year or less $200
 $202
 $133
 $134
Due after one year through five years 720
 724
 489
 496
Due after five years through ten years 3,725
 3,734
 4,452
 4,447
Due after ten years 1,042
 1,064
 1,086
 1,090
Total non-mortgage-backed securities 5,687
 5,724
 6,160
 6,167
Mortgage-backed securities 15,669
 15,735
 16,823
 16,802
Total $21,356
 $21,459
 $22,983
 $22,969
HTM Securities




Note 5 — Held-to-Maturity Securities

MAJOR SECURITY TYPES

Held-to-maturity (HTM)HTM securities by major security type were as follows (dollars in millions):
March 31, 2022
Amortized
Cost1
Gross
Unrealized
Gains		Gross
Unrealized
Losses		Fair
Value
Non-mortgage-backed securities
GSE and Tennessee Valley Authority obligations$373 $42 $— $415 
State or local housing agency obligations184 1 (1)184 
Total non-mortgage-backed securities557 43 (1)599 
Mortgage-backed securities
U.S. obligations single-family2
2 — — 2 
GSE single-family693 2 (2)693 
Private-label4 — — 4 
Total mortgage-backed securities699 2 (2)699 
Total$1,256 $45 $(3)$1,298 
 September 30, 2017
 
Amortized
Cost1
 Gross
Unrealized
Gains		 Gross
Unrealized
Losses		 
Fair
Value
Non-mortgage-backed securities       
GSE and Tennessee Valley Authority obligations$394
 $66
 $—
 $460
State or local housing agency obligations473
 2
 (4) 471
Total non-mortgage-backed securities867
 68
 (4) 931
Mortgage-backed securities       
Other U.S. obligations single-family2
17
 —
 —
 17
Other U.S. obligations commercial2
3
 —
 —
 3
GSE single-family2,919
 6
 (9) 2,916
Private-label residential13
 —
 —
 13
Total mortgage-backed securities2,952
 6
 (9) 2,949
Total$3,819
 $74
 $(13) $3,880


December 31, 2021
Amortized
Cost1
Gross
Unrealized
Gains		Gross
Unrealized
Losses		Fair
Value
Non-mortgage-backed securities
GSE and Tennessee Valley Authority obligations$374 $71 $— $445 
State or local housing agency obligations187 1 (1)187 
Total non-mortgage-backed securities561 72 (1)632 
Mortgage-backed securities
U.S. obligations single-family2
2 — — 2 
GSE single-family760 6 — 766 
Private-label5 — — 5 
Total mortgage-backed securities767 6 — 773 
Total$1,328 $78 $(1)$1,405 

 December 31, 2016
 
Amortized
Cost1
 Gross
Unrealized
Gains		 Gross
Unrealized
Losses		 
Fair
Value
Non-mortgage-backed securities       
GSE and Tennessee Valley Authority obligations$397
 $60
 $(1) $456
State or local housing agency obligations688
 1
 (11) 678
Total non-mortgage-backed securities1,085
 61
 (12) 1,134
Mortgage-backed securities       
Other U.S. obligations single-family2
26
 —
 —
 26
Other U.S. obligations commercial2
4
 —
 —
 4
GSE single-family3,543
 4
 (20) 3,527
Private-label residential16
 —
 (1) 15
Total mortgage-backed securities3,589
 4
 (21) 3,572
Total$4,674
 $65
 $(33) $4,706

11    Amortized cost includes adjustments made to the cost basis of an investment for accretion or amortization.

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



UNREALIZED LOSSES

The following tables summarize HTM securities with unrealized losses by major security type and the length of time that individual securities have been in a continuous unrealized loss position (dollars in millions). In cases where the gross unrealized losses for an investment category are less than $1for accretion or amortization and excludes accrued interest receivable of $10 million and $5 million at March 31, 2022 and December 31, 2021.

2    Represents investment securities backed by the losses are not reported.
full faith and credit of the U.S. Government.
 September 30, 2017
 Less than 12 Months 12 Months or More Total
 Fair
Value		 Unrealized
Losses		 Fair
Value		 Unrealized
Losses		 Fair
Value		 Unrealized
Losses
Non-mortgage-backed securities           
State or local housing agency obligations$—
 $—
 $182
 $(4) $182
 $(4)
Total non-mortgage-backed securities—
 —
 182
 (4) 182
 (4)
Mortgage-backed securities           
Other U.S. obligations single-family1
9
 —
 1
 —
 10
 —
Other U.S. obligations commercial1
—
 —
 2
 —
 2
 —
GSE single-family824
 (7) 803
 (2) 1,627
 (9)
Private-label residential—
 —
 9
 —
 9
 —
Total mortgage-backed securities833
 (7) 815
 (2) 1,648
 (9)
Total$833
 $(7) $997
 $(6) $1,830
 $(13)


Contractual Maturity
 December 31, 2016
 Less than 12 Months 12 Months or More Total
 Fair
Value		 Unrealized
Losses		 Fair
Value		 Unrealized
Losses		 Fair
Value		 Unrealized
Losses
Non-mortgage backed securities           
GSE and Tennessee Valley Authority obligations$73
 $(1) $—
 $—
 $73
 $(1)
State or local housing agency obligations291
 (11) 10
 —
 301
 (11)
Total non-mortgage-backed securities364
 (12) 10
 —
 374
 (12)
Mortgage-backed securities           
Other U.S. obligations single-family1
12
 —
 —
 —
 12
 —
Other U.S. obligations commercial1
—
 —
 3
 —
 3
 —
GSE single-family1,918
 (15) 1,224
 (5) 3,142
 (20)
Private-label residential5
 —
 10
 (1) 15
 (1)
Total mortgage-backed securities1,935
 (15) 1,237
 (6) 3,172
 (21)
Total$2,299
 $(27) $1,247
 $(6) $3,546
 $(33)

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


CONTRACTUAL MATURITY


The following table summarizes HTM securities by contractual maturity. Expected maturities of some securities may differ from contractual maturities as borrowers may have the right to call or prepay obligations with or without call or prepayment fees (dollars in millions):
March 31, 2022December 31, 2021
Year of Contractual MaturityAmortized
Cost		Fair
Value		Amortized
Cost		Fair
Value
Non-mortgage-backed securities
Due after one year through five years$256 $272 $257 $287 
Due after five years through ten years194 198 196 204 
Due after ten years107 129 108 141 
Total non-mortgage-backed securities557 599 561 632 
Mortgage-backed securities699 699 767 773 
Total$1,256 $1,298 $1,328 $1,405 


15
Table of Contents
  September 30, 2017 December 31, 2016
Year of Contractual Maturity Amortized
Cost		 
Fair
Value
 Amortized
Cost		 
Fair
Value
Non-mortgage-backed securities        
Due in one year or less $20
 $20
 $11
 $11
Due after one year through five years 72
 72
 62
 62
Due after five years through ten years 343
 377
 367
 399
Due after ten years 432
 462
 645
 662
Total non-mortgage-backed securities 867
 931
 1,085
 1,134
Mortgage-backed securities 2,952
 2,949
 3,589
 3,572
Total $3,819
 $3,880
 $4,674
 $4,706
ALLOWANCE FOR CREDIT LOSSES ON AFS AND HTM SECURITIES


The Bank evaluates AFS and HTM investment securities for credit losses on a quarterly basis. The Bank’s AFS and HTM securities may include, but are not limited to, certificates of deposit, commercial paper, U.S. obligations, GSE and Tennessee Valley Authority (TVA) obligations, state or local housing agency obligations, taxable municipal bonds, and mortgage-backed securities (MBS). The Bank only purchases securities considered investment quality. At both March 31, 2022 and December 31, 2021, over 99 percent of the Bank’s AFS and HTM securities, based on amortized cost, were rated single-A, or above, by an NRSRO, based on the lowest long-term credit rating for each security. These NRSRO ratings may differ from any internal ratings of the securities by the Bank.
Note 6 — Other-Than-Temporary Impairment


The Bank evaluates its individual AFS and HTM securities for impairment by comparing the security’s fair value to its amortized cost. Impairment may exist when the fair value of the investment is less than its amortized cost (i.e. in an unrealized loss position for other-than-temporary impairment (OTTI) on a quarterly basis. As part of its evaluation ofposition). At March 31, 2022 and December 31, 2021, certain AFS securities for OTTI,held by the Bank considers its intent to sell each debt security and whether it is more likely than not that it will be required to sell the security before its anticipated recovery. If either of these conditions is met, the Bank will recognize an OTTI charge to earnings equal to the entire difference between the security’s amortized cost basis and its fair value at the reporting date. For securitieswere in an unrealized loss position that meet neither of these conditions,position. These losses are considered temporary as the Bank performs analyses to determine if any of these securities are other-than-temporarily impaired. The analysis of the Bank’s AFS and HTM investment securities in an unrealized loss position at September 30, 2017 is discussed below:

Other U.S. obligations and GSE and Tennessee Valley Authority obligations. The unrealized losses were due primarily to changes in interest rates and credit spreads, and not to a significant deterioration in the fundamental credit quality of the obligations. The strength of the issuers’ guarantees through direct obligations or support from the U.S. Government was sufficient to protect the Bank from losses based on current expectations. The Bank expects to recover the entire amortized cost basesbasis 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 theireach security's remaining amortized cost bases.basis. In addition, substantially all of these securities are high-quality GSE securities or carry an explicit government guarantee. As such,a result, no allowance for credit losses was recorded on these AFS securities at March 31, 2022 and December 31, 2021.

The Bank evaluates its HTM securities for impairment on a collective, or pooled, basis unless an individual assessment is deemed necessary because the securities do not possess similar risk characteristics. At March 31, 2022 and December 31, 2021, the Bank had no allowance for credit losses recorded on its HTM securities because the securities: (i) were all highly-rated, (ii) had not experienced, nor did not consider these securities to be other-than-temporarily impaired at September 30, 2017.

State or local housing agency obligations. The unrealized losses were due to changes in interest rates, credit spreads,the Bank expect, any payment default on the instruments, and illiquidity(iii) in the credit markets,case of U.S. obligations and not to a significant deterioration in the fundamental credit quality of the obligations. The creditworthiness of the issuersGSE and the strength of the underlying collateralTVA obligations, are high-quality and credit enhancements were sufficient to protect the Bank from losses based on current expectations. The Bank does not intend to sell these securities nor is it more likely than not that it will be required to sell these securities before recovery of their amortized cost bases. Asmay carry an explicit government guarantee such the Bank did not consider these securities to be other-than-temporarily impaired at September 30, 2017.

Private-label residential mortgage-backed securities. On a quarterly basis, the Bank engages other designated FHLBanks to perform cash flow analyses on its private-label mortgage-backed securities (private-label MBS). As of September 30, 2017, the Bank compared the present value of cash flows expected to be collected with respect to its private-label MBS to the amortized cost bases of the securities to determine whether a credit loss existed. At September 30, 2017, the Bank’s cash flow analyses for private-label MBS did not project any credit losses. The Bank does not intend to sell its private-label MBS nor is it more likely than not that the Bank will be required to sell its private-label MBS before recoveryconsiders the risk of their amortized cost bases. As a result, the Bank did not consider any of its private-label MBSnonpayment to be other-than-temporarily impaired at September 30, 2017.
zero.



Note 74 — Advances


CONTRACTUAL MATURITYREDEMPTION TERM


The following table summarizes the Bank’s advances outstanding by contractual maturityredemption term (dollars in millions):
March 31, 2022December 31, 2021
Redemption Term
Amount1
Weighted
Average
Interest
Rate
Amount1
Weighted
Average
Interest
Rate
Overdrawn demand deposit accounts$5 1.53 %$— — %
Due in one year or less13,892 1.28 12,441 1.18 
Due after one year through two years5,993 1.79 7,415 1.72 
Due after two years through three years11,401 1.16 9,956 1.04 
Due after three years through four years3,975 1.01 4,939 0.94 
Due after four years through five years6,613 1.16 6,275 0.95 
Thereafter3,468 2.15 3,113 2.07 
Total par value45,347 1.34 %44,139 1.24 %
Premiums12 14 
Discounts(1)(2)
Fair value hedging adjustments(585)(40)
Total$44,773 $44,111 

1    Excludes accrued interest receivable of $18 million and $13 million at March 31, 2022 and December 31, 2021.



16
  September 30, 2017 December 31, 2016
Year of Contractual Maturity Amount Weighted
Average
Interest
Rate		 Amount Weighted
Average
Interest
Rate
Overdrawn demand deposit accounts $1
 4.33% $1
 3.81%
Due in one year or less 47,049
 1.46
 22,532
 1.13
Due after one year through two years 20,734
 1.52
 29,791
 1.12
Due after two years through three years 9,147
 1.65
 30,023
 0.98
Due after three years through four years 24,354
 1.55
 17,615
 1.00
Due after four years through five years 5,863
 1.75
 17,197
 1.11
Thereafter 10,357
 1.89
 14,378
 1.11
Total par value 117,505
 1.56% 131,537
 1.07%
Premiums 58
   83
  
Discounts (12)   (7)  
Fair value hedging adjustments (37)   (12)  
Total $117,514
   $131,601
  
Table of Contents

The following table summarizes all advances by year of contractual maturityredemption term or next call date for callable advances, and by year of contractual maturityredemption term or next put date for putable advances (dollars in millions):
Redemption Term
or Next Call Date		Redemption Term
or Next Put Date
March 31, 2022December 31, 2021March 31, 2022December 31, 2021
Overdrawn demand deposit accounts$5 $— $5 $— 
Due in one year or less26,288 24,690 14,733 13,270 
Due after one year through two years4,895 6,253 5,986 7,429 
Due after two years through three years5,691 4,429 10,578 9,173 
Due after three years through four years1,352 2,357 3,975 4,889 
Due after four years through five years3,624 3,273 6,613 6,276 
Thereafter3,492 3,137 3,457 3,102 
Total par value$45,347 $44,139 $45,347 $44,139 
  Year of Contractual Maturity
or Next Call Date		 
Year of Contractual Maturity
or Next Put Date
  September 30, 2017 December 31, 2016 September 30, 2017 December 31, 2016
Overdrawn demand deposit accounts $1
 $1
 $1
 $1
Due in one year or less 79,330
 93,471
 47,151
 23,532
Due after one year through two years 19,629
 9,978
 20,695
 28,983
Due after two years through three years 6,598
 15,515
 9,147
 30,023
Due after three years through four years 5,919
 2,734
 24,319
 17,615
Due after four years through five years 3,824
 7,670
 5,841
 17,026
Thereafter 2,204
 2,168
 10,351
 14,357
Total par value $117,505
 $131,537
 $117,505
 $131,537
The Bank offers advances to members and eligible housing associates that may be prepaid on pertinentpredetermined dates (call dates) prior to maturity without incurring prepayment fees (callable advances). Other advances may only be prepaid by payingrequire a prepayment fee to the Bank (prepayment fee)or credit that makes the Bank financially indifferent to the prepayment of the advance. At September 30, 2017 March 31, 2022 andDecember 31, 2016,2021, the Bank had callable advances outstanding totaling $40.4$13.6 billion and $78.5$13.4 billion.


The Bank also offersholds putable advances. With a putable advance, the Bank has the right to terminate the advance from the borrower on the predetermined exercise dates. Generally, these put options are exercised when interest rates increase relative to contractual rates. At September 30, 2017March 31, 2022 andDecember 31, 2016, 2021, the Bank had putable advances outstanding totaling $0.8$1.0 billion and $1.9$1.1 billion.



PREPAYMENT FEES


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

The following table summarizes the Bank’sBank recorded net prepayment fees on advances net (dollars in millions):of $6 million and $17 million for the three months ended March 31, 2022 and 2021.

 For the Three Months Ended For the Nine Months Ended
 September 30, September 30,
 2017 2016 2017 2016
Prepayment fee income$1
 $2
 $2
 $11
Fair value hedging adjustments1
(1) (1) (1) (5)
Prepayment fees on advances, net$—
 $1
 $1
 $6
ADVANCE CONCENTRATIONS

1Represents the amortization/accretion of fair value hedging adjustments on closed advance hedge relationships resulting from advance prepayments.

CREDIT RISK EXPOSURE AND SECURITY TERMS


The Bank’s potential credit risk from advances isare primarily concentrated in commercial banks savings institutions, and insurance companies. At September 30, 2017 and DecemberMarch 31, 2016,2022, the Bank had outstanding advances of $60 billion and $77$4.6 billion to one member thatEquiTrust Life Insurance Company, which represented 10 percent of the total principal amount of outstanding advances. At December 31, 2021, the Bank did not have any members who individually held 10 percent or more of the Bank’s advances, which represents 51 percent and 59 percent of total outstanding advances. For information related to the Bank’s credit risk exposure on advances, refer to “Note 9 — Allowance for Credit Losses.”


ALLOWANCE FOR CREDIT LOSSES
Note 8 — Mortgage Loans Held for Portfolio


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

Effective May 31, 2015, as a part of the merger with the Federal Home Loan Bank of Seattle (Seattle Bank) (the Merger), the Bank acquired mortgage loans previously purchased by the Seattle Bank under the Mortgage Purchase Program (MPP). This program involved investment by the Seattle Bank in single-family mortgage loans that were purchased directly from MPP PFIs. Similar to the MPF program, MPP PFIs generally originated, serviced, and credit enhanced the mortgage loans sold to the Seattle Bank. In 2005, the Seattle Bank ceased entering into new MPP master commitment contracts and therefore all MPP loans acquired by the Bank were originated prior to 2006. The Bank does not currently purchase mortgage loans under this program.


The following tables present information on the Bank’s mortgage loans held for portfolio (dollars in millions):
 September 30, 2017
 MPF MPP Total
Fixed rate, long-term single-family mortgage loans$5,569
 $330
 $5,899
Fixed rate, medium-term1 single-family mortgage loans
1,036
 2
 1,038
Total unpaid principal balance6,605
 332
 6,937
Premiums87
 11
 98
Discounts(6) (1) (7)
Basis adjustments from mortgage loan commitments5
 —
 5
Total mortgage loans held for portfolio6,691
 342
 7,033
Allowance for credit losses(2) —
 (2)
Total mortgage loans held for portfolio, net$6,689
 $342
 $7,031

 December 31, 2016
 MPF MPP Total
Fixed rate, long-term single-family mortgage loans$5,272
 $397
 $5,669
Fixed rate, medium-term1 single-family mortgage loans
1,148
 6
 1,154
Total unpaid principal balance6,420
 403
 6,823
Premiums82
 14
 96
Discounts(8) (1) (9)
Basis adjustments from mortgage loan commitments5
 —
 5
Total mortgage loans held for portfolio6,499
 416
 6,915
Allowance for credit losses(2) —
 (2)
Total mortgage loans held for portfolio, net$6,497
 $416
 $6,913

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

The following tables present the Bank’s mortgage loans held for portfolio by collateral or guarantee type (dollars in millions):
 September 30, 2017
 MPF MPP Total
Conventional mortgage loans$6,104
 $299
 $6,403
Government-insured mortgage loans501
 33
 534
Total unpaid principal balance$6,605
 $332
 $6,937
 December 31, 2016
 MPF MPP Total
Conventional mortgage loans$5,907
 $361
 $6,268
Government-insured mortgage loans513
 42
 555
Total unpaid principal balance$6,420
 $403
 $6,823

For information related to the Bank’s credit risk exposure on mortgage loans held for portfolio, refer to “Note 9 — Allowance for Credit Losses.”

Note 9 — Allowance for Credit Losses

The Bank has established an allowanceevaluates advances for credit losses methodology for each of its financing receivable portfolio segments: advances, standby letters of credit,on a quarterly basis and other extensions of credit to borrowers (collectively, credit products), government-insured mortgage loans held for portfolio, MPF conventional mortgage loans held for portfolio, MPP conventional mortgage loans held for portfolio, and term securities purchased under agreements to resell.


CREDIT PRODUCTS

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



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

Eligible collateral includes (i)includes:

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

•loans and securities issued, insured, or guaranteed by the U.S. Government or any agency thereof, including mortgage-backed securities (MBS)MBS issued or guaranteed by Fannie Mae, Freddie Mac,Federal National Mortgage Association, Federal Home Loan Mortgage Corporation, or Government National Mortgage Association and Federal Family Education Loan Program guaranteed student loans, (iii) Association;

•cash deposited with the Bank,Bank; and (iv)

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

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


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


Borrowers may pledge collateral to the Bank by executing a blanket lien,pledge agreement, specifically assigning collateral, or placing physical possession of collateral with the Bank or its custodians. The Bank perfects its security interest in all pledged collateral by filing Uniform Commercial Code financing statements or by taking possession or control of the collateral. Under the FHLBank Act, any security interest granted to the Bank by its members, or any affiliates of its members, has priority over the claims and rights of any party (including any receiver, conservator, trustee, or similar party having rights of a lien creditor), unless those claims and rights would be entitled to priority under otherwise applicable law and are held by actual purchasers or by parties that have perfected security interests.
Under a blanket lien,pledge agreement, the Bank is granted a security interest in all financial assets of the borrower to fully secure the borrower’s obligation. Other than securities and cash deposits, the Bank does not initially take delivery of collateral pledged byfrom blanket lienpledge agreement borrowers. In the event of a default or a deterioration in the financial condition of a blanket lienpledge agreement borrower, the Bank has the ability to require delivery of pledged collateral sufficient to secure the borrower’s obligation. With respect to non-blanket lienpledge agreement borrowers that are federally insured, the Bank generally requires collateral to be specifically assigned. With respect to non-blanket lienpledge agreement borrowers that are not federally insured (typically insurance companies, CDFIs, and housing associates), the Bank generally takes control of collateral through the delivery of cash, securities, or loans to the Bank or its custodians.


Using a risk-based approach and taking into consideration each borrower’s financial strength, the Bank considers the types and level of collateral to be the primary indicator of credit quality on its credit products.advances. At September 30, 2017March 31, 2022 and December 31, 2016,2021, the Bank had rights to collateral on a borrower-by-borrower basis with an unpaid principal balance or market value, if available,as applicable, in excess of its outstanding extensions of credit.advances.


At September 30, 2017March 31, 2022 and December 31, 2016,2021, none of the Bank’s credit productsadvances were past due, on non-accrual status, or considered impaired. The Bank considers an advance past due for financial reporting purposes if a default of contractual principal or interest exists for a period of 30 days or more. In addition, there were no troubled debt restructurings (TDRs) related to credit productsadvances during the ninethree months ended September 30, 2017March 31, 2022 and 2016.2021.


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The Bank has never experienced a credit loss on its credit products.advances. Based upon the Bank’s collateral and lending policies, the collateral held as security, and the repayment history on credit products,advances, management has determined that there were no probableexpected credit losses on its credit productsadvances as of September 30, 2017March 31, 2022 and December 31, 2016. Accordingly,2021.

Note 5 — Mortgage Loans Held for Portfolio

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

The following table presents information on the Bank’s mortgage loans held for portfolio (dollars in millions):
March 31, 2022December 31, 2021
Fixed rate, long-term single-family mortgage loans$6,483 $6,307 
Fixed rate, medium-term1 single-family mortgage loans
1,129 1,172 
Total unpaid principal balance7,612 7,479 
Premiums95 96 
Discounts(3)(2)
Basis adjustments from mortgage loan purchase commitments1 6 
Total mortgage loans held for portfolio2
7,705 7,579 
Allowance for credit losses(3)(1)
Total mortgage loans held for portfolio, net$7,702 $7,578 

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

2    Excludes accrued interest receivable of $35 million and $34 million at March 31, 2022 and December 31, 2021.


The following table presents the Bank’s mortgage loans held for portfolio by collateral or guarantee type (dollars in millions):
March 31, 2022December 31, 2021
Conventional mortgage loans$7,206 $7,063 
Government-insured mortgage loans406 416 
Total unpaid principal balance$7,612 $7,479 

PAYMENT STATUS OF MORTGAGE LOANS

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


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The following tables present the payment status for conventional mortgage loans (dollars in millions):
March 31, 2022
Origination Year
Prior to 20182018 to 2022Total
Past due 30 - 59 days$22 $18 $40 
Past due 60 - 89 days6 3 9 
Past due 90 - 179 days7 1 8 
Past due 180 days or more14 2 16 
Total past due mortgage loans49 24 73 
Total current mortgage loans2,018 5,200 7,218 
Total amortized cost of mortgage loans1
$2,067 $5,224 $7,291 
December 31, 2021
Origination Year
Prior to 20172017 to 2021Total
Past due 30 - 59 days$19 $17 $36 
Past due 60 - 89 days5 3 8 
Past due 90 - 179 days7 2 9 
Past due 180 days or more16 3 19 
Total past due mortgage loans47 25 72 
Total current mortgage loans1,826 5,257 7,083 
Total amortized cost of mortgage loans1
$1,873 $5,282 $7,155 

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


The following tables present other delinquency statistics for mortgage loans (dollars in millions):
March 31, 2022
Amortized CostConventionalGovernment-InsuredTotal
In process of foreclosure1
$7 $1 $8 
Serious delinquency rate2
— %2 %— %
Past due 90 days or more and still accruing interest3
$— $7 $7 
Non-accrual mortgage loans4
$60 $— $60 

December 31, 2021
Amortized CostConventionalGovernment- InsuredTotal
In process of foreclosure1
$4 $1 $5 
Serious delinquency rate2
— %3 %1 %
Past due 90 days or more and still accruing interest3
$— $11 $11 
Non-accrual mortgage loans4
$86 $— $86 

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

2    Represents mortgage loans that are 90 days or more past due or in the process of foreclosure expressed as a percentage of total mortgage loans. Serious delinquency rate on conventional loans was less than one percent at both March 31, 2022 and December 31, 2021.

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

4    Represents conventional mortgage loans that are 90 days or more past due or for which the collection of interest or principal is doubtful. At March 31, 2022 and December 31, 2021, $48 million and $74 million of conventional mortgage loans on non-accrual status were evaluated individually and do not recorded anyhave a related allowance for credit losses because these loans were either previously charged off to the expected recoverable value and/or the fair value of the underlying collateral is greater than the amortized cost of the loans.


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ALLOWANCE FOR CREDIT LOSSES

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

Conventional Mortgage Loans

Conventional mortgage loans are evaluated collectively when similar risk characteristics exist. Conventional loans that do not share risk characteristics with other pools are evaluated for expected credit losses on an individual basis. The Bank determines its allowances for credit losses on conventional loans through analyses that include consideration of various loan portfolio and collateral-related characteristics, such as past performance, current conditions, and reasonable and supportable forecasts of expected economic conditions.

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

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



At March 31, 2022 and December 31, 2021, the Bank’s allowance for credit losses on conventional mortgage loans was $3 million and $1 million. During the three months ended March 31, 2022, the Bank projected an increase in expected credit losses on collectively evaluated loans due primarily to an upward revision in forecasted mortgage rates and a deceleration in forecasted regional home price appreciation. These increased expected credit losses were coupled with a decline in expected recoveries on individually evaluated loans.
GOVERNMENT-INSURED MORTGAGE LOANS

Government-Insured Mortgage Loans

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

The Bank has never experienced a credit loss on its government-insured mortgage loans. At March 31, 2022 and December 31, 2021, the Bank assessed its servicers and determined there was no expectation that a servicer would fail to remit payments due until paid in full. As a result, the Bank did not establish an allowance for credit losses for its government-insured mortgage loans at September 30, 2017March 31, 2022 and December 31, 2016.2021. Furthermore, none of these mortgage loans have been placed on non-accrual status because of the U.S. Government guarantee or insurance on these loans and the contractual obligation of the loan servicer to repurchase the loans when certain criteria are met.

MPF CONVENTIONAL MORTGAGE LOANS

The Bank’s management of credit risk in the MPF program involves several layers of legal loss protection that are defined in agreements among the Bank and its participating PFIs. For conventional MPF loans, the availability of loss protection may differ slightly depending on the MPF product alternatives selected and credit profile of the loans. The Bank’s loss protection consists of the following loss layers, in order of priority:

Homeowner Equity.


Primary Mortgage Insurance (PMI). At the time
21
Table of origination, PMI is required on all loans with homeowner equity of less than 20 percent of the original purchase price or appraised value, whichever is less and as applicable to the specific loan.Contents

First Loss Account (FLA). For each master commitment, the Bank’s potential loss exposure prior to the PFI’s credit enhancement obligation is estimated and tracked in a memorandum account called the FLA.

Credit Enhancement Obligation of PFI. PFIs have a credit enhancement obligation at the time a mortgage loan is purchased to absorb certain losses in excess of the FLA in order to limit the Bank’s loss exposure to that of an investor in an investment grade MBS. PFIs pledge collateral to secure this obligation.

MPP CONVENTIONAL MORTGAGE LOANS

For conventional MPP loans, the loss protection consists of the following loss layers, in order of priority:

Homeowner Equity.

Primary Mortgage Insurance. At the time of origination, PMI is required on all loans with homeowner equity of less than 20 percent of the original purchase price or appraised value, whichever is less and as applicable to the specific loan.

ALLOWANCE METHODOLOGY

The Bank utilizes an allowance for credit losses to reserve for estimated losses in its conventional MPF and MPP mortgage loan portfolios at the balance sheet date. The measurement of the Bank’s MPF and MPP allowance for credit losses is determined by the following:

reviewing similar conventional mortgage loans for impairment on a collective basis. This evaluation is primarily based on the following factors: (i) current loan delinquencies, (ii) loans migrating to collateral-dependent status, and (iii) actual historical loss severities;

reviewing conventional mortgage loans for impairment on an individual basis; and

estimating additional credit losses in the conventional mortgage loan portfolio. These losses result from other factors that may not be captured in the methodology previously described at the balance sheet date, which include but are not limited to certain quantifiable economic factors, such as unemployment rates and home prices impacting housing markets.

The following table summarizes the allowance for credit losses and the recorded investment of the Bank’s conventional mortgage loan portfolio by impairment methodology (dollars in millions):
 MPF 
MPP1
 Total
Allowance for credit losses, September 30, 2017     
Collectively evaluated for impairment$2
 $—
 $2
      
Allowance for credit losses, December 31, 2016     
Collectively evaluated for impairment$2
 $—
 $2
      
Recorded investment, September 30, 20172
     
Collectively evaluated for impairment$6,169
 $287
 $6,456
Individually evaluated for impairment, without a related allowance41
 22
 63
Total recorded investment$6,210
 $309
 $6,519
      
Recorded investment, December 31, 20162
     
Collectively evaluated for impairment$5,960
 $346
 $6,306
Individually evaluated for impairment, without a related allowance45
 27
 72
Total recorded investment$6,005
 $373
 $6,378

1    The allowance for credit losses on MPP loans was less than $1 million at September 30, 2017 and December 31, 2016.

2    Represents the unpaid principal balance adjusted for accrued interest, unamortized premiums, discounts, basis adjustments, and direct write-downs.

CREDIT QUALITY INDICATORS

Key credit quality indicators for mortgage loans include the migration of past due loans, loans in process of foreclosure, and non-accrual loans. The table below summarizes the Bank’s key credit quality indicators for mortgage loans at September 30, 2017 (dollars in millions):
 September 30, 2017
 MPF MPP  
 Conventional Government Conventional Government Total
Past due 30 - 59 days$44
 $17
 $7
 $3
 $71
Past due 60 - 89 days12
 5
 5
 1
 23
Past due 90 - 179 days10
 6
 2
 —
 18
Past due 180 days or more15
 4
 8
 1
 28
Total past due mortgage loans81
 32
 22
 5
 140
Total current mortgage loans6,129
 483
 287
 30
 6,929
Total recorded investment of mortgage loans1
$6,210
 $515
 $309
 $35
 $7,069
          
In process of foreclosure (included above)2
$10
 $2
 $4
 $—
 $16
Serious delinquency rate3
—% 2% 3% 2% 1%
Past due 90 days or more and still accruing interest4
$—
 $10
 $—
 $1
 $11
Non-accrual mortgage loans5
$29
 $—
 $19
 $—
 $48

1Represents the unpaid principal balance adjusted for accrued interest, unamortized premiums, discounts, basis adjustments, and direct write-downs.

2Includes loans where the decision of foreclosure or similar alternative such as pursuit of deed-in-lieu has been reported. Loans in process of foreclosure are included in past due or current loans depending on their payment status.

3Represents mortgage loans that are 90 days or more past due or in the process of foreclosure expressed as a percentage of the total recorded investment.

4Represents government-insured mortgage loans that are 90 days or more past due.

5Represents conventional mortgage loans that are 90 days or more past due and TDRs.


The table below summarizes the Bank’s key credit quality indicators for mortgage loans at December 31, 2016 (dollars in millions):
 December 31, 2016
 MPF MPP  
 Conventional Government Conventional Government Total
Past due 30 - 59 days$50
 $18
 $11
 $4
 $83
Past due 60 - 89 days17
 7
 5
 2
 31
Past due 90 - 179 days9
 6
 2
 1
 18
Past due 180 days or more22
 5
 12
 2
 41
Total past due mortgage loans98
 36
 30
 9
 173
Total current mortgage loans5,907
 491
 343
 35
 6,776
Total recorded investment of mortgage loans1
$6,005
 $527
 $373
 $44
 $6,949
          
In process of foreclosure (included above)2
$16
 $2
 $7
 $—
 $25
Serious delinquency rate3
1% 2% 4% 7% 1%
Past due 90 days or more and still accruing interest4
$—
 $11
 $—
 $3
 $14
Non-accrual mortgage loans5
$36
 $—
 $24
 $—
 $60

1Represents the unpaid principal balance adjusted for accrued interest, unamortized premiums, discounts, basis adjustments, and direct write-downs.

2Includes loans where the decision of foreclosure or similar alternative such as pursuit of deed-in-lieu has been reported. Loans in process of foreclosure are included in past due or current loans depending on their payment status.

3Represents mortgage loans that are 90 days or more past due or in the process of foreclosure expressed as a percentage of the total recorded investment.

4Represents government-insured mortgage loans that are 90 days or more past due.

5Represents conventional mortgage loans that are 90 days or more past due and TDRs.

INDIVIDUALLY EVALUATED IMPAIRED LOANS

As previously described, the Bank evaluates certain conventional mortgage loans for impairment individually. A loan is considered impaired when, based on current information and events, it is probable that the Bank will be unable to collect all amounts due according to the contractual terms of the loan agreement.

The Bank did not recognize any interest income on impaired loans during the three and nine months ended September 30, 2017 and 2016.

The following table summarizes the average recorded investment of the Bank’s individually evaluated impaired loans (dollars in millions):
 For the Three Months Ended For the Nine Months Ended
 September 30, September 30,
 2017 2016 2017 2016
Impaired loans without an allowance       
Conventional MPF Loans$42
 $32
 $43
 $34
Conventional MPP Loans22
 25
 25
 27
Total$64
 $57
 $68
 $61

TERM SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL

Term securities purchased under agreements to resell are considered collateralized financing agreements and represent short-term investments. The terms of these investments are structured such that if the market value of the underlying securities decreases below the market value required as collateral, the counterparty must place an equivalent amount of additional securities as collateral or remit an equivalent amount of cash. Otherwise, the dollar value of the resale agreement will decrease accordingly. If an agreement to resell is deemed to be impaired, the difference between the fair value of the collateral and the amortized cost of the agreement will be charged to earnings to establish an allowance for credit losses. Based upon the collateral held as security, the Bank determined that no allowance for credit losses was needed for its term securities purchased under agreements to resell at September 30, 2017 and December 31, 2016.

OFF-BALANCE SHEET CREDIT EXPOSURES

At September 30, 2017 and December 31, 2016, the Bank did not record a liability to reflect an allowance for credit losses for off-balance sheet credit exposures. For additional information on the Bank’s off-balance sheet credit exposures, see “Note 14 — Commitments and Contingencies.”

Note 106 — Derivatives and Hedging Activities


NATURE OF BUSINESS ACTIVITY


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


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


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


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


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


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


•manage embedded options in assets and liabilities; and


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


TYPES OF DERIVATIVES AND HEDGED ITEMS


The Bank may use the following derivative instruments:


•interest rate swaps;


•options;


•swaptions;


•interest rate caps and floors; and


•futures/forwards contracts.



The Bank may have the following types of hedged items:


•investment securities;


•advances;
•mortgage loans;
•consolidated obligations; and
•firm commitments.


For additional information on the Bank’s derivative and hedging accounting policy,policies, see “Note 1 — Basis of Presentation” in this Form 10-Q and “Note 1 — Summary of Significant Accounting Policies” in the 20162021 Form 10-K.


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FINANCIAL STATEMENT EFFECT AND ADDITIONAL FINANCIAL INFORMATION


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


The following table summarizes the Bank’s notional amount and the fair value of derivative instruments includingand total derivative assets and liabilities. Total derivative assets and liabilities include the effect of netting adjustments and cash collateral, and variation margin for daily settled contracts.collateral. For purposes of this disclosure, the derivative values include the fair value of derivatives and the related accrued interest(dollars in millions):
March 31, 2022December 31, 2021
Notional
Amount		Derivative
Assets		Derivative
 Liabilities		Notional
Amount		Derivative
Assets		Derivative
 Liabilities
Derivatives designated as hedging instruments (fair value hedges)
Interest rate swaps$41,033 $111 $167 $57,502 $68 $136 
Derivatives not designated as hedging instruments (economic hedges)
Interest rate swaps23,502 2 24 23,664 7 43 
Forward settlement agreements (TBAs)153 2 — 115 — — 
Mortgage loan purchase commitments154 — 2 115 — — 
Total derivatives not designated as hedging instruments23,809 4 26 23,894 7 43 
Total derivatives before netting and collateral adjustments$64,842 115 193 $81,396 75 179 
Netting adjustments and cash collateral1
231 (187)146 (176)
Total derivative assets and derivative liabilities$346 $6 $221 $3 

1     Amounts represent the application of the netting requirements that allow the Bank to net settle positive and negative positions and also cash collateral, including accrued interest, held or placed with the same clearing agent and/or counterparty. At March 31, 2022 and December 31, 2021, cash collateral, including accrued interest, posted by the Bank was $485 million and $342 million. At March 31, 2022 and December 31, 2021, the Bank held cash collateral, including accrued interest, from clearing agents or counterparties of $67 million and $20 million.

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The following tables summarize the net gains (losses) on qualifying and discontinued fair value hedging relationships recorded in net interest income, including the net interest settlements on derivatives, as well as total income (expense) by hedged product recorded on the Statements of Income (dollars in millions):
For the Three Months Ended March 31, 2022
Interest Income (Expense)
AdvancesAFS SecuritiesConsolidated Obligation Bonds
Total interest income (expense) recorded on the Statements of Income1
$111 $30 $(99)
Gains (losses) on fair value hedging relationships
Interest rate contracts
   Derivatives2
$506 $250 $(118)
   Hedged items3
(545)(271)127 
Net gains (losses) on fair value hedging relationships$(39)$(21)$9 
  September 30, 2017 December 31, 2016
  
Notional
Amount
 
Derivative
Assets
 
Derivative
 Liabilities
 
Notional
Amount
 
Derivative
Assets
 
Derivative
 Liabilities
Derivatives designated as hedging instruments (fair value hedges)            
Interest rate swaps $52,381
 $170
 $556
 $51,896
 $183
 $688
Derivatives not designated as hedging instruments (economic hedges)            
Interest rate swaps 1,386
 17
 55
 1,414
 20
 56
Forward settlement agreements (TBAs) 108
 1
 —
 94
 1
 —
Mortgage delivery commitments 114
 —
 —
 102
 —
 —
Total derivatives not designated as hedging instruments 1,608
 18
 55
 1,610
 21
 56
Total derivatives before netting and collateral adjustments $53,989
 188
 611
 $53,506
 204
 744
Netting adjustments, cash collateral, and variation margin for daily settled contracts1
   (69) (608)   (13) (668)
Total derivative assets and derivative liabilities   $119
 $3
   $191
 $76


For the Three Months Ended March 31, 2021
Interest Income (Expense)
AdvancesAFS SecuritiesConsolidated Obligation Bonds
Total interest income (expense) recorded on the Statements of Income1
$131 $36 $(126)
Gains (losses) on fair value hedging relationships
Interest rate contracts
Derivatives2
$199 $173 $(7)
Hedged items3
(253)(203)43 
Net gains (losses) on fair value hedging relationships$(54)$(30)$36 

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

1Amounts represent the application of the netting requirements that allow the Bank to net settle positive and negative positions, cash collateral and the related accrued interest held or placed with the same clearing agent and/or counterparty, and includes fair value adjustments on derivatives for variation margin, which effective January 3, 2017, is characterized as a daily settled contract. Cash collateral posted by the Bank (including accrued interest) was $242 million and $658 million at September 30, 2017 and December 31, 2016. At September 30, 2017 and December 31, 2016 the Bank received cash collateral from clearing agents and/or counterparties of $8 million and $2 million. Variation margin for daily settled contracts was $305 million at September 30, 2017. Variation margin was considered cash collateral prior to January 3, 2017.




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The following tables summarize cumulative fair value hedging adjustments and the related amortized cost of the hedged items (dollars in millions):
March 31, 2022
AdvancesAFS SecuritiesConsolidated Obligation Bonds
Amortized cost of hedged asset/ liability1
$17,603 $6,708 $17,570 
Fair value hedging adjustments
Changes in fair value for active hedging relationships included in amortized cost$(552)$(198)$(117)
Basis adjustments for discontinued hedging relationships included in amortized cost(33)— (4)
Total amount of fair value hedging adjustments$(585)$(198)$(121)

December 31, 2021
AdvancesAFS SecuritiesConsolidated Obligation Bonds
Amortized cost of hedged asset/ liability1
$17,598 $6,547 $34,271 
Fair value hedging adjustments
Changes in fair value for active hedging relationships included in amortized cost$(54)$73 $11 
Basis adjustments for discontinued hedging relationships included in amortized cost14 — (5)
Total amount of fair value hedging adjustments$(40)$73 $6 

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

The following table summarizes the components of “Net gains (losses) on derivatives and hedging activities”derivatives” as presented inon the Statements of Income (dollars in millions):
For the Three Months Ended For the Nine Months EndedFor the Three Months Ended
September 30, September 30,March 31,
2017 
2016

 2017 201620222021
Derivatives designated as hedging instruments (fair value hedges)       
Interest rate swaps$(1) $(7) $9
 $(16)
Derivatives not designated as hedging instruments (economic hedges)       Derivatives not designated as hedging instruments (economic hedges)
Interest rate swaps1
 10
 —
 (45)Interest rate swaps$17 $21 
Forward settlement agreements (TBAs)(1) (2) (2) (5)Forward settlement agreements (TBAs)7 3 
Mortgage delivery commitments1
 1
 2
 4
Mortgage loan purchase commitmentsMortgage loan purchase commitments(7)(3)
Net interest settlements(3) (5) (10) (14)Net interest settlements(1)(4)
Total net gains (losses) related to derivatives not designated as hedging instruments(2) 4
 (10) (60)
Other1
1
 —
 2
 —
Net gains (losses) on derivatives and hedging activities$(2) $(3) $1
 $(76)
Net gains (losses) on derivativesNet gains (losses) on derivatives$16 $17 

1Effective January 3, 2017 consists of price alignment amount on derivatives for variation margin which is characterized as a daily settled contract.

The following tables summarize, by type of hedged item, the gains (losses) on derivatives and the related hedged items in fair value hedging relationships, the net fair value hedge ineffectiveness, and the effect of those derivatives on the Bank’s net interest income (dollars in millions):
  For the Three Months Ended September 30, 2017
Hedged Item Type 
Gains (Losses) on
Derivatives
 
Gains (Losses) on
Hedged Items
 
Net Fair Value
Hedge
Ineffectiveness
 
Effect on
Net Interest
Income1
Available-for-sale investments $9
 $(13) $(4) $(21)
Advances2
 17
 (16) 1
 (14)
Consolidated obligation bonds 1
 1
 2
 (8)
Total $27
 $(28) $(1) $(43)

  For the Three Months Ended September 30, 2016
Hedged Item Type 
Gains (Losses) on
Derivatives
 
Gains (Losses) on
Hedged Items
 
Net Fair Value
Hedge
Ineffectiveness
 
Effect on
Net Interest
Income1
Available-for-sale investments $69
 $(82) $(13) $(36)
Advances2
 95
 (95) —
 (34)
Consolidated obligation bonds (103) 109
 6
 23
Total $61
 $(68) $(7) $(47)

1Represents the net interest settlements on derivatives in fair value hedge relationships and the amortization of the financing element of off-market derivatives, both of which are included in the interest income or interest expense line item of the respective hedged item type. This amortization for off-market derivatives totaled $3 million and $7 million for the three months ended September 30, 2017 and 2016.

2Includes net gains (losses) on fair value hedge firm commitments of forward starting advances.

The following tables summarize, by type of hedged item, the gains (losses) on derivatives and the related hedged items in fair value hedging relationships, the net fair value hedge ineffectiveness, and the effect of those derivatives on the Bank’s net interest income (dollars in millions):
  For the Nine Months Ended September 30, 2017
Hedged Item Type 
Gains (Losses) on
Derivatives
 
Gains (Losses) on
Hedged Items
 
Net Fair Value
Hedge
Ineffectiveness
 
Effect on
Net Interest
Income1
Available-for-sale investments $5
 $5
 $10
 $(74)
Advances2
 25
 (22) 3
 (59)
Consolidated obligation bonds 23
 (27) (4) 18
Total $53
 $(44) $9
 $(115)

  For the Nine Months Ended September 30, 2016
Hedged Item Type 
Gains (Losses) on
Derivatives
 
Gains (Losses) on
Hedged Items
 
Net Fair Value
Hedge
Ineffectiveness
 
Effect on
Net Interest
Income1
Available-for-sale investments $(335) $319
 $(16) $(110)
Advances2
 (83) 84
 1
 (111)
Consolidated obligation bonds 49
 (50) (1) 56
Total $(369) $353
 $(16) $(165)

1Represents the net interest settlements on derivatives in fair value hedge relationships and the amortization of the financing element of off-market derivatives, both of which are included in the interest income or interest expense line item of the respective hedged item type. This amortization for off-market derivatives totaled $12 million and $23 million for the nine months ended September 30, 2017 and 2016.

2Includes net gains (losses) on fair value hedge firm commitments of forward starting advances.


MANAGING CREDIT RISK ON DERIVATIVES


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


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

For uncleared derivatives, the degree of credit risk depends onis impacted by the extent to which master netting arrangements are included in thesethe derivative contracts to mitigate the risk. The Bank requires collateral agreements with collateral delivery thresholds on the majority of its uncleared derivatives.


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Certain of the Bank’s uncleared derivative instruments contain provisions that require the Bank to post additional collateral with its counterparties if there is deterioration in the Bank’s credit rating. If the Bank’s credit rating is lowered by a nationally recognized statistical rating organization (NRSRO),an NRSRO, the Bank may be required to deliver additional collateral on uncleared derivative instruments in net liability positions.positions, unless the collateral delivery threshold is set to zero. The aggregate fair value of allBank had no uncleared derivative instruments with credit-risk related contingent features that were in a net liability position (before cash collateral and related accrued interest) at September 30, 2017 was $3 million, for whichMarch 31, 2022. As such, the Bank was not required to post collateral in the normal course of business. If the Bank’s credit rating had been lowered from its current rating to the next lower rating, the Bank would not have been required to deliver additional collateral to its uncleared derivative counterparties at September 30, 2017.
For cleared derivatives, the Clearinghouse is the Bank’s counterparty. The Bank utilizes one Clearinghouse, CME Clearing, for all cleared derivative transactions. CME Clearing notifies the clearing agent of the required initial margin and daily variation margin requirements, and the clearing agent in turn notifies the Bank.

The Clearinghouse determines initial margin requirements which are considered cash collateral. Generally credit ratings are not factored into the initial margin. However, clearing agents may require additional initial margin to be posted based on credit considerations, including, but not limited to, credit rating downgrades. The Bank utilizes one Clearinghouse for all cleared derivative transactions, CME Clearing. Effective January 3, 2017,was not required to post additional initial margin by its clearing agent, based on credit considerations, at March 31, 2022. Variation margin requirements with CME Clearing made certain amendments to its rulebook changingare based on changes in the legal characteristicsfair value of variation margin payments to becleared derivatives and are legally characterized as daily settlement payments, rather than collateral. Initial margin is considered cash collateral.

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


The Bank has analyzed the enforceability of offsetting rights incorporated in its cleared derivative transactions and has determined that the exercise of those offsetting rights by a non-defaulting party under these transactions should be upheld under applicable law upon an event of default, including a bankruptcy, insolvency, or similar proceeding involving the Clearinghouse or the clearing agent, or both. Based on this analysis, the Bank presents a net derivative receivable or payable for all of its transactions through a particular clearing agent with a particular Clearinghouse. The Clearinghouse determines initial margin requirements and generally credit ratings are not factored into the initial margin. However, clearing agents may require additional initial margin to be posted based on credit considerations, including, but not limited to, credit rating downgrades. The Bank was not required to post additional initial margin by its clearing agents, based on credit considerations at September 30, 2017.

OFFSETTING OF DERIVATIVE ASSETS AND DERIVATIVE LIABILITIES


The Bank presents derivative instruments, related cash collateral including initial marginreceived or pledged, and associated accrued interest on a net basis by clearing agent and/or by counterparty when it has met the netting requirements. Additional information regarding these agreements is provided in “Note 1 — Basis of Presentation” in this Form 10-Q and “Note 1 — Summary of Significant Accounting Policies” in the 20162021 Form 10-K.


The Bank has analyzed the enforceability of offsetting rights incorporated in its cleared derivative transactions and has determined that the exercise of those offsetting rights by a non-defaulting party under these transactions should be upheld under applicable law upon an event of default, including a bankruptcy, insolvency, or similar proceeding involving the Clearinghouse or the clearing agent, or both. Based on this analysis, the Bank presents a net derivative receivable or payable for all of its transactions through a particular clearing agent with a particular Clearinghouse.
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The following table presentstables present the fair value of derivative instruments meeting or not meeting the netting requirements includingand the related collateral received from or pledged to counterparties and variation margin for daily settled contracts (dollars in millions):
 September 30, 2017 December 31, 2016
 Derivative Assets Derivative Liabilities Derivative Assets Derivative Liabilities
Derivative instruments meeting netting requirements       
Gross recognized amount       
Uncleared derivatives$83
 $195
 $97
 $263
Cleared derivatives105
 416
 107
 481
Total gross recognized amount188
 611
 204
 744
Gross amounts of netting adjustments, cash collateral, and variation margin for daily settled contracts       
Uncleared derivatives(78) (192) (95) (187)
Cleared derivatives9
 (416) 82
 (481)
Total gross amounts of netting adjustments, cash collateral, and variation margin for daily settled contracts(69) (608) (13) (668)
Net amounts after netting adjustments, cash collateral, and variation margin for daily settled contracts       
Uncleared derivatives5
 3
 2
 76
Cleared derivatives114
 —
 189
 —
Total derivative assets and derivative liabilities$119
 $3
 $191
 $76
March 31, 2022
Derivative Instruments Meeting Netting Requirements
Gross Amount Recognized1
Gross Amount of Netting Adjustments and Cash Collateral
Derivative Instruments Not Meeting Netting Requirements2
Total Derivative Assets and Total Derivative Liabilities
Derivative Assets
   Uncleared derivatives$114 $(111)$— $3 
   Cleared derivatives1 342 — 343 
Total$115 $231 $— $346 
Derivative Liabilities
   Uncleared derivatives$152 $(148)$2 $6 
   Cleared derivatives39 (39)— — 
Total$191 $(187)$2 $6 



December 31, 2021
Derivative Instruments Meeting Netting Requirements
Gross Amount Recognized1
Gross Amount of Netting Adjustments and Cash Collateral
Derivative Instruments Not Meeting Netting Requirements2
Total Derivative Assets and Total Derivative Liabilities
Derivative Assets
   Uncleared derivatives$74 $(73)$— $1 
   Cleared derivatives1 219 — 220 
Total$75 $146 $— $221 
Derivative Liabilities
   Uncleared derivatives$172 $(170)$— $2 
   Cleared derivatives7 (6)— 1 
Total$179 $(176)$— $3 

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

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


Note 117 — Consolidated Obligations


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


Although the Bank is primarily liable for the portion of consolidated obligations issued on its behalf, it is also jointly and severally liable with the other FHLBanks for the payment of principal and interest on all FHLBank System consolidated obligations. The Finance Agency, at its discretion, may require any FHLBank to make principal and/or interest payments due on any consolidated obligation, whether or not the primary obligor FHLBank has defaulted on the payment of that consolidated obligation. The Finance Agency has never exercised this discretionary authority. At September 30, 2017March 31, 2022 and December 31, 2016,2021, the total par value of outstanding consolidated obligations of the FHLBanks was $1.0 trillion$699.5 billion and $989.3$652.9 billion.


27
Table of Contents
DISCOUNT NOTES


The following table summarizes the Bank’s discount notes (dollars in millions):
March 31, 2022December 31, 2021
AmountWeighted
Average
Interest
Rate		AmountWeighted
Average
Interest
Rate
Par value$36,800 0.32 %$22,355 0.08 %
Discounts and concessions1
(34)(6)
Fair value option adjustments(23)(1)
Total$36,743 $22,348 
 September 30, 2017 December 31, 2016
 Amount 
Weighted
Average
Interest
Rate
 Amount 
Weighted
Average
Interest
Rate
Par value$53,074
 1.07% $81,019
 0.49%
Discounts and concessions1
(98)   (72)  
Total$52,976
   $80,947
  


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



BONDS


The following table summarizes the Bank’s bonds outstanding by contractual maturity (dollars in millions):
March 31, 2022December 31, 2021
Year of Contractual MaturityAmountWeighted
Average
Interest
Rate		AmountWeighted
Average
Interest
Rate
Due in one year or less$26,516 0.52 %$38,778 0.30 %
Due after one year through two years3,705 2.17 3,928 2.06 
Due after two years through three years5,039 2.36 5,073 2.41 
Due after three years through four years937 1.94 1,010 2.11 
Due after four years through five years1,124 2.07 1,185 1.97 
Thereafter5,157 2.25 5,105 2.27 
Total par value42,478 1.16 %55,079 0.87 %
Premiums123 138 
Discounts and concessions1
(17)(17)
Fair value hedging adjustments(121)5 
Total$42,463 $55,205 
  September 30, 2017 December 31, 2016
Year of Contractual Maturity Amount 
Weighted
Average
Interest
Rate
 Amount 
Weighted
Average
Interest
Rate
Due in one year or less $49,500
 1.16% $47,733
 0.88%
Due after one year through two years 32,331
 1.28
 13,135
 0.94
Due after two years through three years 6,953
 1.83
 15,414
 1.48
Due after three years through four years 5,013
 1.83
 2,288
 3.28
Due after four years through five years 4,000
 2.10
 7,152
 1.66
Thereafter 4,659
 3.05
 4,331
 3.04
Total par value 102,456
 1.40% 90,053
 1.22%
Premiums 210
   254
  
Discounts and concessions1
 (65)   (79)  
Fair value hedging adjustments (307)   (330)  
Total $102,294
   $89,898
  


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



The following table summarizes the Bank’s bonds outstanding by call features (dollars in millions):
March 31,
2022		December 31,
2021
Non-callable or non-putable$36,332 $49,422 
Callable6,146 5,657 
Total par value$42,478 $55,079 

The following table summarizes the Bank’s bonds outstanding by year of contractual maturity or next call date (dollars in millions):
Year of Contractual Maturity or Next Call DateMarch 31,
2022		December 31,
2021
Due in one year or less$32,329 $44,071 
Due after one year through two years3,655 3,908 
Due after two years through three years3,522 3,831 
Due after three years through four years677 805 
Due after four years through five years692 753 
Thereafter1,603 1,711 
Total par value$42,478 $55,079 


28
 September 30,
2017		 December 31,
2016
Noncallable or nonputable$99,682
 $87,804
Callable2,774
 2,249
Total par value$102,456
 $90,053

Table of Contents

Note 128 — Capital


CAPITAL STOCK


The Bank’s capital stock has a par value of $100 per share, and all shares are issued, redeemed, and repurchased only at the stated par value. The Bank generally issues a single class of capital stock (Class B capital stock). The Bank and has two2 subclasses of Class B capital stock: membership and activity-based. Each member must purchase and hold membership capital stock in an amount equal to 0.12 percent of its total assets as of the preceding December 31st, subject to a cap of $10 million and a floor of $10,000. Each member is also required to purchase activity-based capital stock equal to 4.00 percent of its advances and mortgage loans outstanding inon the Bank’s Statements of Condition.Condition and 0.10 percent of its standby letters of credit. All capital stock issued is subject to a five year notice of redemption period.period of five years.


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


EXCESS STOCK


Capital stock owned by members in excess of their investment requirement is deemed excess capital stock. Under its Capital Plan, the Bank, at its discretion and upon 15 days’days written notice, may repurchase excess membership capital stock. The Bank, at its discretion, may also repurchase excess activity-based capital stock to the extent that (i) the excess capital stock balance exceeds an operational threshold set forth in the Capital Plan, which is currently set at zero, or (ii) a member submits a notice to redeem all or a portion of the excess activity-based capital stock. At September 30, 2017both March 31, 2022 and December 31, 2016,2021, the Bank had noBank’s excess capital stock outstanding.outstanding was less than $1 million.


MANDATORILY REDEEMABLE CAPITAL STOCK


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

As a result of the final rule on membership issued by the Finance Agency effective February 19, 2016, the eligibility requirements for FHLBank members were changed rendering captive insurance companies ineligible for FHLBank membership. On the effective date of the final rule, the Bank reclassified $723 million of capital stock, the total outstanding capital stock held by all of the Bank’s captive insurance companies, to mandatorily redeemable capital stock. In accordance with the final rule, on February 17, 2017, the Bank terminated the membership of all captive insurance company members that were admitted as members after September 12, 2014 (the date the Finance Agency proposed this rule) and repurchased outstanding capital stock to these captive insurance company members in the amount of $148 million. Captive insurance company members that were admitted as members prior to September 12, 2014 will also have their memberships terminated no later than February 19, 2021. At September 30, 2017 and December 31, 2016, the Bank’s mandatorily redeemable capital stock totaled $422 million and $664 million. During the three and nine months ended September 30, 2017, interest expense on mandatorily redeemable capital stock was $4 million and $13 million. Interest expense on mandatorily redeemable capital stock was $6 million and $15 million for the three and nine months ended September 30, 2016.


The following tables summarize changes in mandatorily redeemable capital stockMRCS (dollars in millions):
For the Three Months Ended March 31,
20222021
Balance, beginning of period$29 $52 
Capital stock reclassified to (from) MRCS, net1 — 
Net payments for repurchases/redemptions of MRCS(12)(16)
Balance, end of period$18 $36 
 
For the Three Months Ended
September 30,
 2017 2016
Balance, beginning of period$480
 $698
Capital stock reclassified to (from) mandatorily redeemable capital stock, net12
 1
Repurchases/redemptions of mandatorily redeemable capital stock(70) (24)
Balance, end of period$422
 $675
 
For the Nine Months Ended
September 30,
 2017 2016
Balance, beginning of period$664
 $103
Capital stock reclassified to (from) mandatorily redeemable capital stock, net40
 732
Repurchases/redemptions of mandatorily redeemable capital stock(282) (160)
Balance, end of period$422
 $675

The following table summarizes the Bank’s mandatorily redeemable capital stockMRCS by year of contractual redemption (dollars in millions):
Year of Contractual Redemption1
March 31,
2022		December 31, 2021
Due in one year or less$— $10 
Due after one year through two years1 1 
Due after three years through four years8 1 
Due after four years through five years1 9 
Past contractual redemption date due to outstanding activity with the Bank8 8 
Total$18 $29 
Year of Contractual Redemption1
 September 30, 2017 December 31, 2016
Due in one year or less $4
 $4
Due after one year through two years —
 5
Due after two years through three years 2
 4
Due after three years through four years 1
 —
Due after four years through five years 22
 1
Thereafter2
 378
 631
Past contractual redemption date due to outstanding activity with the Bank 15
 19
Total $422
 $664


11    At the Bank’s election, the mandatorily redeemable capital stock may be redeemed prior to the expiration of the five year redemption period that commences on the date of the notice of redemption, or in the case of captive insurance company members, on the date of the membership termination.

2Represents mandatorily redeemable capital stock resulting from the Finance Agency rule previously discussed that makes captive insurance companies ineligible for FHLBank membership. The related mandatorily redeemable capital stock is not required to be redeemed until five years after the member's termination.

ADDITIONAL CAPITAL FROM MERGER

The Bank recognized the net assets acquired from the Seattle Bank by recording the par value of capital stock issued in the transaction as capital stock, with the remaining portion of net assets acquired reflected in a capital account captioned as “Additional capital from merger.” The Bank treated this additional capital from merger as a component of total capital for regulatory capital purposes. Dividends on capital stock were paid from this account following the Merger until the balance was depleted following the first quarter dividend payment in May 2017. At December 31, 2016, the Bank’s additional capital from merger balance totaled $52 million.election, MRCS may be redeemed prior to the expiration of the five year redemption period that commences on the date of the notice of redemption.



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RESTRICTED RETAINED EARNINGS


The Bank entered into a Joint Capital Enhancement Agreement (JCE Agreement) with all of the other FHLBanks in February 2011. The JCE Agreement, as amended, is intended to enhance the capital position of the Bank over time. It requiresUnder the BankJCE Agreement, each FHLBank is required to allocate 20 percent of its quarterly net income to a separate restricted retained earnings account until the balance of that account, calculated as of the last day of each calendar quarter, equals at least one percent of its average balance of outstanding consolidated obligations for the previouscalendar quarter. The restricted retained earnings are not available to pay dividends. At September 30, 2017March 31, 2022 and December 31, 2016,2021, the Bank’s restricted retained earnings account totaled $311$628 million and $231$617 million.


ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)


The following table summarizes changes in AOCIaccumulated other comprehensive income (loss) (AOCI) (dollars in millions):
Net unrealized gains (losses) on AFS securities (Note 3)Pension and postretirement benefitsTotal AOCI
Balance, December 31, 2020Balance, December 31, 2020$52 $(4)$48 
Other comprehensive income (loss) before reclassificationsOther comprehensive income (loss) before reclassifications
Net unrealized gains (losses) on AFS securitiesNet unrealized gains (losses) on AFS securities52 — 52 
Net unrealized gains (losses) on AFS securities (Note 4) Pension and postretirement benefits Total AOCI
Balance, June 30, 2016$(83) $(2) $(85)
Net current period other comprehensive income (loss)Net current period other comprehensive income (loss)52 — 52 
Balance, March 31, 2021Balance, March 31, 2021$104 $(4)$100 
Balance, December 31, 2021Balance, December 31, 2021$88 $(4)$84 
Other comprehensive income (loss) before reclassifications     Other comprehensive income (loss) before reclassifications
Net unrealized gains (losses) on AFS securities46
 —
 46
Net unrealized gains (losses) on AFS securities(61)— (61)
Net current period other comprehensive income (loss)46
 —
 46
Balance, September 30, 2016$(37) $(2) $(39)
     
Balance, June 30, 2017$91
 $(2) $89
Other comprehensive income (loss) before reclassifications     
Net unrealized gains (losses) on AFS securities12
 —
 12
Reclassifications from other comprehensive income (loss) to net income    
Reclassifications from AOCI to net incomeReclassifications from AOCI to net income
Amortization - pension and postretirement—
 (1) (1)Amortization - pension and postretirement— (2)(2)
Net current period other comprehensive income (loss)12
 (1) 11
Net current period other comprehensive income (loss)(61)(2)(63)
Balance, September 30, 2017$103
 $(3) $100
Balance, March 31, 2022Balance, March 31, 2022$27 $(6)$21 
     
Balance, December 31, 2015$(82) $(2) $(84)
Other comprehensive income (loss) before reclassifications     
Net unrealized gains (losses) on AFS securities45
 —
 45
Net current period other comprehensive income (loss)45
 —
 45
Balance, September 30, 2016$(37) $(2) $(39)
     
Balance, December 31, 2016$(14) $(4) $(18)
Other comprehensive income (loss) before reclassifications     
Net unrealized gains (losses) on AFS securities117
 —
 117
Reclassifications from other comprehensive income (loss) to net income    
Amortization - pension and postretirement—
 1
 1
Net current period other comprehensive income (loss)117
 1
 118
Balance, September 30, 2017$103
 $(3) $100


REGULATORY CAPITAL REQUIREMENTS


The Bank is subject to three3 regulatory capital requirements:


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


•Regulatory capital. The Bank is required to maintain a minimum four percent capital-to-asset ratio, which is defined as total regulatory capital divided by total assets. Total regulatory capital includes Class B stock (including mandatorily redeemable capital stock)MRCS) and retained earnings. It does not include AOCI. At December 31, 2016, regulatory capital also included additional capital from merger. The additional capital from merger balance was depleted in May of 2017 following the first quarter dividend payment.


•Leverage capital. The Bank is required to maintain a minimum five percent leverage ratio, which is defined as the sum of permanent capital weighted 1.5 times and nonpermanent capital weighted 1.0 times, divided by total assets. The Bank did not hold any nonpermanent capital at September 30, 2017. AtMarch 31, 2022 and December 31, 2016, nonpermanent2021.

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


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



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The following table shows the Bank’s compliance with the Finance Agency’s regulatory capital requirements (dollars in millions):
March 31, 2022December 31, 2021
RequiredActualRequiredActual
Regulatory capital requirements
Risk-based capital$570 $5,942 $585 $5,783 
Regulatory capital$3,509 $5,942 $3,434 $5,783 
Leverage capital$4,387 $8,913 $4,293 $8,675 
Capital-to-assets ratio4.00 %6.77 %4.00 %6.74 %
Capital stock-to-assets ratio2.00 %4.00 %2.00 %4.08 %
Leverage ratio5.00 %10.16 %5.00 %10.10 %
 September 30, 2017 December 31, 2016
 Required Actual Required Actual
Regulatory capital requirements       
Risk-based capital$1,059
 $7,820
 $1,046
 $8,031
Regulatory capital$6,582
 $7,820
 $7,224
 $8,083
Leverage capital$8,227
 $11,730
 $9,030
 $12,098
Capital-to-assets ratio4.00% 4.75% 4.00% 4.48%
Leverage ratio5.00% 7.13% 5.00% 6.70%


Note 139 — Fair Value


Fair value amounts are determined by the Bank using available market information and reflect the Bank’s best judgment of appropriate valuation methods. GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., exit price). The fair value hierarchy requires an entity to maximize the use of significant observable inputs and minimize the use of significant unobservable inputs when measuring fair value. The inputs are evaluated and an overall level for the fair value measurement is determined. This overall level is an indication of market observability of the fair value measurement for the asset or liability.


The fair value hierarchy prioritizes the inputs used to measure fair value into three broad levels:


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


•Level 2 Inputs. Inputs other than quoted prices within Level 1 that are observable inputs for the asset or liability, either directly or indirectly. If the asset or liability has a specified (contractual) term, a Level 2 input must be observable for substantially the full term of the asset or liability. Level 2 inputs include the following: (i) quoted prices for similar assets or liabilities in active markets, (ii) quoted prices for identical or similar assets or liabilities in markets that are not active, (iii) inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates and yield curves that are observable at commonly quoted intervals and implied volatilities, and credit spreads)volatilities), and (iv) market-corroborated inputs.


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


The Bank reviews its fair value hierarchy classifications on a quarterly basis. Changes in the observability of the valuation inputs may result in a reclassification of certain assets or liabilities. These reclassifications are reported asThe Bank had no transfers in/of assets or liabilities into or out asof Level 3 of the beginning of the quarter in which the changes occur. There were no such transfersfair value hierarchy during the ninethree months ended September 30, 2017March 31, 2022 and 2016.2021.



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The following table summarizes the carrying value, fair value, and fair value hierarchy of the Bank’s financial instruments at September 30, 2017(dollars in millions). The Bank records trading securities, AFS securities, derivative assets, derivative liabilities, financial instruments held under the fair value option, and certain other assets at fair value on a recurring basis, and on occasion certain impaired mortgage loans held for portfolio on a non-recurring basis. The Bank records all other financial assets and liabilities at amortized cost. The fair values do not represent an estimate of the overall market value of the Bank as a going concern, which would take into account future business opportunities and the net profitability of assets and liabilities.
March 31, 2022
Fair Value
Financial InstrumentsCarrying ValueLevel 1Level 2Level 3
Netting Adjustments and Cash Collateral1
Total
Assets
Cash and due from banks$71 $71 $— $— $— $71 
Interest-bearing deposits947 — 947 — — 947 
Securities purchased under agreements to resell10,750 — 10,750 — — 10,750 
Federal funds sold6,200 — 6,200 — — 6,200 
Trading securities2,335 — 2,335 — — 2,335 
Available-for-sale securities13,133 — 13,133 — — 13,133 
Held-to-maturity securities1,256 — 1,294 4 — 1,298 
Advances44,773 — 44,755 — — 44,755 
Mortgage loans held for portfolio, net7,702 — 7,508 52 — 7,560 
Accrued interest receivable99 — 99 — — 99 
Derivative assets, net346 — 115 — 231 346 
Other assets40 40 — — — 40 
Liabilities
Deposits(1,808)— (1,808)— — (1,808)
Consolidated obligations
Discount notes(36,743)— (36,741)— — (36,741)
Bonds(42,463)— (42,147)— — (42,147)
Total consolidated obligations(79,206)— (78,888)— — (78,888)
MRCS(18)(18)— — — (18)
Accrued interest payable(97)— (97)— — (97)
Derivative liabilities, net(6)— (193)— 187 (6)

1    Amounts represent the application of the netting requirements that allow the Bank to net settle positive and negative positions and also cash collateral and the related accrued interest held or placed with the same clearing agent and/or counterparty.
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Table of Contents
    Fair Value
Financial Instruments Carrying Value Level 1 Level 2 Level 3 
Netting Adjustment1
 Total
Assets           
Cash and due from banks $218
 $218
 $—
 $—
 $—
 $218
Interest-bearing deposits 1
 —
 1
 —
 —
 1
Securities purchased under agreements to resell 5,500
 —
 5,500
 —
 —
 5,500
Federal funds sold 6,770
 —
 6,770
 —
 —
 6,770
Trading securities 1,792
 —
 1,792
 —
 —
 1,792
Available-for-sale securities 21,459
 —
 21,459
 —
 —
 21,459
Held-to-maturity securities 3,819
 —
 3,867
 13
 —
 3,880
Advances 117,514
 —
 117,731
 —
 —
 117,731
Mortgage loans held for portfolio, net 7,031
 —
 7,078
 66
 —
 7,144
Accrued interest receivable 239
 —
 239
 —
 —
 239
Derivative assets, net 119
 —
 188
 —
 (69) 119
Other assets 27
 27
 —
 —
 —
 27
Liabilities            
Deposits (934) —
 (934) —
 —
 (934)
Consolidated obligations            
Discount notes (52,976) —
 (52,976) —
 —
 (52,976)
Bonds (102,294) —
 (102,743) —
 —
 (102,743)
Total consolidated obligations (155,270) —
 (155,719) —
 —
 (155,719)
Mandatorily redeemable capital stock (422) (422) —
 —
 —
 (422)
Accrued interest payable (227) —
 (227) —
 —
 (227)
Derivative liabilities, net (3) —
 (611) —
 608
 (3)

1Amounts represent the application of the netting requirements that allow the Bank to net settle positive and negative positions and also cash collateral and the related accrued interest held or placed with the same clearing agent and/or counterparty. In addition, the amount includes the fair value adjustments on derivatives for variation margin which is characterized as a daily settled contract.


The following table summarizes the carrying value, fair value, and fair value hierarchy of the Bank’s financial instruments at December 31, 2016(dollars in millions):
December 31, 2021
Fair Value
Financial InstrumentsCarrying ValueLevel 1Level 2Level 3
Netting Adjustments and Cash Collateral1
Total
Assets
Cash and due from banks$295 $295 $— $— $— $295 
Interest-bearing deposits416 — 416 — — 416 
Securities purchased under agreements to resell12,450 — 12,450 — — 12,450 
Federal funds sold4,690 — 4,690 — — 4,690 
Trading securities1,169 — 1,169 — — 1,169 
Available-for-sale securities13,389 — 13,389 — — 13,389 
Held-to-maturity securities1,328 — 1,400 5 — 1,405 
Advances44,111 — 44,397 — — 44,397 
Mortgage loans held for portfolio, net7,578 — 7,694 81 — 7,775 
Accrued interest receivable84 — 84 — — 84 
Derivative assets, net221 — 75 — 146 221 
Other assets44 44 — — — 44 
Liabilities
Deposits(1,847)— (1,847)— — (1,847)
Consolidated obligations
Discount notes(22,348)— (22,348)— — (22,348)
Bonds(55,205)— (55,581)— — (55,581)
Total consolidated obligations(77,553)— (77,929)— — (77,929)
MRCS(29)(29)— — — (29)
Accrued interest payable(97)— (97)— — (97)
Derivative liabilities, net(3)— (179)— 176 (3)
    Fair Value
Financial Instruments Carrying Value Level 1 Level 2 Level 3 
Netting Adjustment1
 Total
Assets            
Cash and due from banks $223
 $223
 $—
 $—
 $—
 $223
Interest-bearing deposits 2
 —
 2
 —
 —
 2
Securities purchased under agreements to resell 5,925
 —
 5,925
 —
 —
 5,925
Federal funds sold 5,095
 —
 5,095
 —
 —
 5,095
Trading securities 2,553
 —
 2,553
 —
 —
 2,553
Available-for-sale securities 22,969
 —
 22,969
 —
 —
 22,969
Held-to-maturity securities 4,674
 —
 4,691
 15
 —
 4,706
Advances 131,601
 —
 131,772
 —
 —
 131,772
Mortgage loans held for portfolio, net 6,913
 —
 6,918
 71
 —
 6,989
Loans to other FHLBanks 200
 —
 200
 —
 —
 200
Accrued interest receivable 197
 —
 197
 —
 —
 197
Derivative assets, net 191
 —
 204
 —
 (13) 191
Other assets 24
 24
 —
 —
 —
 24
Liabilities            
Deposits (1,113) —
 (1,113) —
 —
 (1,113)
Consolidated obligations            
Discount notes (80,947) —
 (80,943) —
 —
 (80,943)
Bonds (89,898) —
 (90,370) —
 —
 (90,370)
Total consolidated obligations (170,845) —
 (171,313) —
 —
 (171,313)
Mandatorily redeemable capital stock (664) (664) —
 —
 —
 (664)
Accrued interest payable (180) —
 (180) —
 —
 (180)
Derivative liabilities, net (76) —
 (744) —
 668
 (76)


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



SUMMARY OF VALUATION TECHNIQUES AND PRIMARY INPUTS
CashThe valuation techniques and Due from Banks. Theprimary inputs used to develop the measurement of fair value equals the carrying value.

Interest-Bearing Deposits. For interest-bearing deposits with less than three months to maturity, thefor assets and liabilities that are measured at fair value approximateson a recurring or non-recurring basis on the carrying value. For interest-bearing deposits with more than three months to maturity, the fair value is determined by calculating the present valueStatements of the expected future cash flowsCondition are outlined below.

Trading and reducing the amount for accrued interest receivable.

Securities Purchased under Agreements to Resell. For overnight and term securities purchased under agreements to resell with less than three months to maturity, the fair value approximates the carrying value. For term securities purchased under agreements to resell with more than three months to maturity, the fair value is determined by calculating the present value of the expected future cash flows and reducing the amount for accrued interest receivable. The discount rates used in these calculations are the rates for securities with similar terms.

Federal Funds Sold. The fair value approximates the carrying value.


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


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


As of September 30, 2017March 31, 2022 and December 31, 2016,2021, multiple prices were received for the majority of the Bank’s trading and AFS investment securities. Based on the Bank’s review of the pricing methods and controls employed by the third-party pricing vendors and the relative lack of dispersion among the vendor prices, the Bank believes its final prices are representative of the prices that would have been received if the assets had been sold at the measurement date (i.e., exit prices) and further, that the fair value measurements are classified appropriately in the fair value hierarchy.


Advances. The fair value of advances is determined by calculating the present value of the expected future cash flows and reducing the amount for accrued interest receivable. The discount rates used in these calculations are equivalent to the replacement advance rates for advances with similar terms. In accordance with Finance Agency regulations, advances generally require a prepayment fee sufficient to make the Bank financially indifferent to a borrower’s decision to prepay the advances. Therefore, the fair value of advances assumes no prepayment risk.

The Bank uses the following inputs for measuring the fair value of advances:

Consolidated Obligation Curve (CO Curve). The Office of Finance constructs a market-observable curve referred to as the CO Curve. The CO Curve is constructed using the U.S. Treasury Curve as a base curve which is then adjusted by adding indicative spreads obtained largely from market-observable sources. These market indications are generally derived from pricing indications from dealers, historical pricing relationships, recent GSE trades, and secondary market activity. The Bank utilizes the CO Curve as its input to fair value for advances because it represents the Bank’s cost of funds and is used to price advances.

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

Spread assumption. Represents a spread adjustment to the CO Curve.

Mortgage Loans Held for Portfolio. The fair value of mortgage loans held for portfolio is estimated based on quoted market prices of similar mortgage loans available in the market, if available, or modeled prices. The modeled prices start with prices for new MBS issued by GSEs or similar new mortgage loans. The prices are adjusted for factors such as credit risk, servicing spreads, seasoning, delinquency status, and cash flow remittances. The prices for new MBS or similar new mortgage loans are highly dependent upon the underlying prepayment assumptions priced in the secondary market. Changes in expected prepayment rates often have a material effect on the fair value estimates.

Impaired Mortgage Loans Held for Portfolio. The fair value of impaired mortgage loans held for portfolio is estimated by obtaining property values from an external pricing vendor. This vendor utilizes multiple pricing models that generally factor in market observable inputs, including actual sales transactions and home price indices. The Bank applies an adjustment to these values to capture certain limitations in the estimation process and takes into consideration estimated selling costs and expected PMI proceeds.  In limited instances, the Bank may estimate the fair value of an impaired mortgage loan by calculating the present value of expected future cash flows discounted at the loan’s effective interest rate.  


Loans to other FHLBanks. The Bank may lend or borrow unsecured overnight funds to or from other FHLBanks. All such transactions are at current market rates. The fair value approximates the carrying value.

Accrued Interest Receivable and Payable. The fair value approximates the carrying value.

Derivative Assets and Liabilities.Liabilities and the Related Hedged Items. The fair value of derivatives is generally estimated using standard valuation techniques such as discounted cash flow analyses and comparisons to similar instruments, and also effective January 3, 2017, includes variation margin payments for daily settled contracts. In limited instances, fair value estimates for interest-rate related derivatives may be obtained using an external pricing model that utilizes observable market data. The Bank is subject to credit risk in derivatives transactions due to the potential nonperformance of its derivatives counterparties. The use of cleared derivatives is intended to mitigate credit risk exposure because a central counterparty is substituted for individual counterparties and collateral/payments is posted daily, through a clearing agent, for changes in the fair value of cleared derivatives. To mitigate credit risk on uncleared derivatives, the Bank enters into master netting agreements with its counterparties as well as collateral agreements that provide for thehave collateral delivery of collateral at specified levels tied to those counterparties’ credit ratings.thresholds. The Bank has evaluated the potential for the fair value of its derivatives to be affected by counterparty credit risk and its own credit risk and has determined that no adjustments were significant to the overall fair value measurements.


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


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


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


•Forward interest rate assumption. The Bank utilizes the London Interbank Offered Rate (LIBOR) swap curve.
curve of the instrument’s index rate.


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

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For forward settlement agreements (TBAs), the Bank utilizes TBA securities prices that are determined by coupon class and expected term until settlement. For mortgage deliveryloan purchase commitments, the Bank utilizes TBA securities prices adjusted for factors such as credit risk and servicing spreads.
For the related hedged items, the fair value is estimated using a discounted cash flow analysis which typically considers the following inputs:

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

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

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


Deposits. For deposits with three months or less to maturity,Consolidated Obligation Discount Notes Recorded under the Fair Value Option. The fair value of consolidated obligation discount notes recorded under the fair value approximates the carrying value. For deposits with more than three months to maturity, the fair valueoption is determined by calculating the present value of the expected future cash flows and reducing the amount for accrued interest payable.flows. The discount rates used in these calculations are the cost of deposits with similar terms.

Consolidated Obligations. The fair value of consolidated obligations is determined by calculating the present value of the expected future cash flows and reducing the amount for accrued interest payable. The discount rates used in these calculations are for consolidated obligations with similar terms. The Bank uses the CO Curve and a volatility assumptionconsolidated obligation curve for measuring the fair value of these consolidated obligations.obligations, which is a market-observable curve constructed by the Office of Finance. This curve is constructed using the U.S. Treasury curve as a base curve which is then adjusted by adding indicative spreads obtained largely from market-observable sources.



Mandatorily Redeemable Capital Stock. The fair value of capital stock subject to mandatory redemption is generally reported at par value. Fair value also includes an estimated dividend earned at the time of reclassification from equity to a liability (if applicable), until such amount is paid. Capital stock can only be acquired by members at par value and redeemed at par value. Capital stock is not publicly traded and no market mechanism exists for the exchange of stock outside the cooperative structure.
Subjectivity of Estimates. Estimates of the fair value of financial assets and liabilities using the methods previously described are highly subjective and require judgments regarding significant matters, such as the amount and timing of future cash flows, prepayment speed assumptions, expected interest rate volatility, possible distributions of future interest rates used to value options, and the selection of discount rates that appropriately reflect market and credit risks. The use of different assumptions could have a material effect on the fair value estimates.


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Table of Contents
FAIR VALUE ON A RECURRING BASIS


The following table summarizes, for each hierarchy level, the Bank’s assets and liabilities that are measured at fair value inon the Statements of Condition at September 30, 2017 (dollar(dollars in millions):
March 31, 2022
Recurring Fair Value MeasurementsLevel 1Level 2Level 3
Netting Adjustments and Cash Collateral1
Total
Assets
Trading securities
U.S. Treasury obligations$— $1,780 $— $— $1,780 
Other U.S. obligations— 92 — — 92 
GSE and TVA obligations— 55 — — 55 
Other non-MBS
— 190 — — 190 
GSE multifamily MBS— 218 — — 218 
Total trading securities— 2,335 — — 2,335 
Available-for-sale securities
Other U.S. obligations— 1,050 — — 1,050 
GSE and TVA obligations— 578 — — 578 
State or local housing agency obligations— 489 — — 489 
Other non-MBS— 274 — — 274 
U.S. obligations single-family MBS— 2,725 — — 2,725 
GSE single-family MBS— 254 — — 254 
GSE multifamily MBS— 7,763 — — 7,763 
Total available-for-sale securities— 13,133 — — 13,133 
Derivative assets, net
Interest-rate related— 113 — 231 344 
Forward settlement agreements (TBAs)— 2 — — 2 
Total derivative assets, net— 115 — 231 346 
Other assets40 — — — 40 
Total recurring assets at fair value$40 $15,583 $— $231 $15,854 
Liabilities
Discount notes2
$— $(20,363)$— $— $(20,363)
Derivative liabilities, net
Interest-rate related— (191)— 187 (4)
Mortgage loan purchase commitments— (2)— — (2)
Total derivative liabilities, net— (193)— 187 (6)
Total recurring liabilities at fair value$— $(20,556)$— $187 $(20,369)

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

2    Represents financial instruments recorded under the fair value option.

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Table of Contents
Recurring Fair Value Measurements Level 1 Level 2 Level 3 
Netting Adjustment1
 Total
Assets          
Trading securities          
Other U.S. obligations $—
 $203
 $—
 $—
 $203
GSE and Tennessee Valley Authority obligations —
 861
 —
 —
 861
Other non-MBS
 —
 274
 —
 —
 274
GSE multifamily MBS —
 454
 —
 —
 454
Total trading securities —
 1,792
 —
 —
 1,792
Available-for-sale securities          
Other U.S. obligations —
 3,207
 —
 —
 3,207
GSE and Tennessee Valley Authority obligations —
 1,275
 —
 —
 1,275
State or local housing agency obligations —
 961
 —
 —
 961
Other non-MBS —
 281
 —
 —
 281
Other U.S. obligations single-family MBS —
 3,842
 —
 —
 3,842
GSE single-family MBS —
 1,055
 —
 —
 1,055
GSE multifamily MBS —
 10,838
 —
 —
 10,838
Total available-for-sale securities —
 21,459
 —
 —
 21,459
Derivative assets, net          
Interest-rate related —
 188
 —
 (69) 119
Other assets 27
 —
 —
 —
 27
Total recurring assets at fair value $27
 $23,439
 $—
 $(69) $23,397
Liabilities          
Derivative liabilities, net          
Interest-rate related —
 (611) —
 608
 (3)
Total recurring liabilities at fair value $—
 $(611) $—
 $608
 $(3)

1Amounts represent the application of the netting requirements that allow the Bank to net settle positive and negative positions and also cash collateral and the related accrued interest held or placed with the same clearing agent and/or counterparty. In addition, the amount includes the fair value adjustments on derivatives for variation margin which is characterized as a daily settled contract.


The following table summarizes, for each hierarchy level, the Bank’s assets and liabilities that are measured at fair value inon the Statements of Condition at December 31, 2016(dollars in millions):
December 31, 2021
Recurring Fair Value MeasurementsLevel 1Level 2Level 3
Netting Adjustments and Cash Collateral1
Total
Assets
Trading securities
U.S. Treasury obligations$— $496 $— $— $496 
Other U.S. obligations— 102 — — 102 
GSE and TVA obligations— 60 — — 60 
Other non-MBS
— 201 — — 201 
GSE multifamily MBS— 310 — — 310 
Total trading securities— 1,169 — — 1,169 
Available-for-sale securities
Other U.S. obligations— 1,156 — — 1,156 
GSE and TVA obligations— 983 — — 983 
State or local housing agency obligations— 488 — — 488 
Other non-MBS— 288 — — 288 
U.S. obligations single-family MBS— 2,909 — — 2,909 
GSE single-family MBS— 277 — — 277 
GSE multifamily MBS— 7,288 — — 7,288 
Total available-for-sale securities— 13,389 — — 13,389 
Derivative assets, net
Interest-rate related— 75 — 146 221 
Other assets44 — — — 44 
Total recurring assets at fair value$44 $14,633 $— $146 $14,823 
Liabilities
Discount notes2
$— $(22,348)$— $— $(22,348)
Derivative liabilities, net
Interest-rate related— (179)— 176 (3)
Total recurring liabilities at fair value$— $(22,527)$— $176 $(22,351)
Recurring Fair Value Measurements Level 1 Level 2 Level 3 
Netting Adjustment1
 Total
Assets          
Trading securities          
Other U.S. obligations $—
 $216
 $—
 $—
 $216
GSE and Tennessee Valley Authority obligations —
 1,611
 —
 —
 1,611
Other non-MBS
 —
 273
 —
 —
 273
GSE multifamily MBS —
 453
 —
 —
 453
Total trading securities —
 2,553
 —
 —
 2,553
Available-for-sale securities          
Other U.S. obligations —
 3,529
 —
 —
 3,529
GSE and Tennessee Valley Authority obligations —
 1,351
 —
 —
 1,351
State or local housing agency obligations —
 1,009
 —
 —
 1,009
Other non-MBS —
 278
 —
 —
 278
Other U.S. obligations single-family MBS —
 3,838
 —
 —
 3,838
GSE single-family MBS —
 1,261
 —
 —
 1,261
GSE multifamily MBS —
 11,703
 —
 —
 11,703
Total available-for-sale securities —
 22,969
 —
 —
 22,969
Derivative assets, net          
Interest-rate related —
 204
 —
 (13) 191
Other assets 24
 —
 —
 —
 24
Total recurring assets at fair value $24
 $25,726
 $—
 $(13) $25,737
Liabilities          
Derivative liabilities, net          
Interest-rate related —
 (744) —
 668
 (76)
Total recurring liabilities at fair value $—
 $(744) $—
 $668
 $(76)


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


2    Represents financial instruments recorded under the fair value option.

FAIR VALUE ON A NON-RECURRING BASIS


The Bank measures certain impaired mortgage loans held for portfolio at levelLevel 3 fair value on a non-recurring basis. These assets are subject to fair value adjustments in certain circumstances. The Bank estimates the fair value of these assets based primarily on a broker price opinion or property values from an external pricing vendor. The Bank applies an adjustment to these values to capture certain limitations in the estimation process and takes into consideration estimated selling costs and expected PMI proceeds. At September 30, 2017March 31, 2022 and December 31, 2016,2021, impaired mortgage loans held for portfolio recorded at fair value as a result of a non-recurring change in fair value were $7$1 million and $15$4 million. These fair values were as of the date the fair value adjustment was recorded during the ninethree months ended September 30, 2017March 31, 2022 and year-endedyear ended December 31, 2016.2021.



FAIR VALUE OPTION



The fair value option provides an irrevocable option to elect fair value as an alternative measurement for selected financial assets, financial liabilities, unrecognized firm commitments, and written loan commitments not previously carried at fair value. It requires entities to display the fair value of those assets and liabilities for which it has chosen to use fair value on the face of the Statements of Condition. Fair value is used for both the initial and subsequent measurement of the designated assets, liabilities, and commitments, with the changes in fair value recognized in net income.


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

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

For the three months ended March 31, 2022, net gains on financial instruments held at fair value (i.e., discount notes) were $22 million. The Bank did not have any fair value option financial instruments outstanding during the three months ended March 31, 2021. At March 31, 2022, the Bank determined no credit risk adjustments for nonperformance were necessary. In determining that no credit risk adjustments were necessary, the Bank considered the following factors:

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

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

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

March 31, 2022
Unpaid Principal BalanceFair ValueFair Value Over (Under) Unpaid Principal
Discount Notes$20,409 $20,363 $(46)

December 31, 2021
Unpaid Principal BalanceFair ValueFair Value Over (Under) Unpaid Principal
Discount Notes$22,355 $22,348 $(7)



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Table of Contents
Note 1410 — Commitments and Contingencies


Joint and Several Liability. The FHLBanks have joint and several liability for all consolidated obligations issued. Accordingly, if an FHLBank were unable to repay any consolidated obligation for which it is the primary obligor, each of the other FHLBanks could be called upon by the Finance Agency to repay all or part of such obligations. No FHLBank has ever been asked or required to repay the principal or interest on any consolidated obligation on behalf of another FHLBank. At September 30, 2017March 31, 2022 and December 31, 2016,2021, the total par value of outstanding consolidated obligations issued on behalf of other FHLBanks for which the Bank is jointly and severally liable was approximately $873.2$620.2 billion and $818.2$575.5 billion.


The following table summarizes additional off-balance sheet commitments for the Bank (dollars in millions):
March 31, 2022December 31, 2021
Expire
within one year		Expire
after one year		TotalTotal
Standby letters of credit1,2
$7,300 $71 $7,371 $8,159 
Standby bond purchase agreements2
189 239 428 497 
Commitments to purchase mortgage loans154 — 154 115 
Commitments to issue discount notes870 — 870 — 
Commitments to fund advances2
766 4 770 1,728 
 September 30, 2017 December 31, 2016
 
Expire
within one year
 
Expire
after one year
 Total Total
Standby letters of credit1
$7,312
 $102
 $7,414
 $7,281
Standby bond purchase agreements109
 698
 807
 458
Commitments to purchase mortgage loans113
 —
 113
 102
Commitments to issue bonds24
 —
 24
 —
Commitments to fund advances1,420
 18
 1,438
 280


1Excludes commitments to issue standby letters of credit of $32 million and $1 million at September 30, 2017 and December 31, 2016 .

1    Excludes commitments to issue standby letters of credit, when applicable. At both March 31, 2022 and December 31, 2021, the Bank had no commitments to issue standby letters of credit.

2    The Bank has deemed it unnecessary to record any liability for credit losses on these agreements at March 31, 2022 and December 31, 2021.


Standby Letters of Credit. AThe Bank issues standby letterletters of credit is a financing arrangement betweenon behalf of its members to support certain obligations of the Bankmembers to third-party beneficiaries. Standby letters of credit may be offered to assist members and a member.non-member housing associates in facilitating residential housing finance, community lending, and asset-liability management, and to provide liquidity. In particular, members often use standby letters of credit as collateral for deposits from federal and state government agencies. Standby letters of credit are executed with members for a fee. If the Bank is required to make payment for a beneficiary’s draw, the payment is withdrawn frommember either reimburses the member’s demand account. Any resulting overdraft isBank for the amount drawn or, subject to the Bank’s discretion, the amount drawn may be converted into a collateralized advance to the member. The original terms of standby letters of credit outstanding at March 31, 2022 range from less than one month to 13seven years, currently no later than 2025.2028. The carrying value of guarantees related to standby letters of credit are recorded in “Other liabilities” inon the Statements of Condition and amounted to $3$2 million at September 30, 2017both March 31, 2022 andDecember 31, 2016.2021.


The Bank monitors the creditworthiness of its standby letters of credit based on an evaluation of its borrowers. The Bank has established parameters for the measurement, review, classification, and monitoring of credit risk related to these standby letters of credit. Based on management’s credit analyses and collateral requirements, the Bank does not deem it necessary to have any provision for credit losses on these standby letters of credit. All standby letters of credit, similar to advances, are fully collateralized at the time of issuance.issuance and subject to member borrowing limits as established by the Bank.


Standby Bond Purchase Agreements. The Bank has entered into standby bond purchase agreements with state housing associates within its district whereby,pursuant to which, for a fee, it agrees to serve as a standby liquidity provider if required, to purchase and hold the housing associate’s bonds until the designated marketing agent can find a suitable investor or the housing associate repurchases the bonds according to a schedule established by the agreement. Each standby bond purchase agreement includes the provisions under which the Bank would be required to purchase the bonds.bonds and typically allows the Bank to terminate the agreement upon the occurrence of a default event of the issuer. At September 30, 2017,March 31, 2022, the Bank had standby bond purchase agreements with eight7 housing associates. The standby bond purchase commitments entered into by the Bank have original expiration periods of up to seven years, currently no later than 2024. During both the ninethree months ended September 30, 2017March 31, 2022 and 2016,2021, the Bank was not required to purchase any bonds under these agreements. For the three months ended September 30, 2017 and 2016, the Bank received fees for the guarantees that amounted to $1 million and less than $1 million. For the nine months ended September 30, 2017 and 2016, the Bank received fees for the guarantees that amounted to $2 million and $1 million.


Commitments to Purchase Mortgage Loans. The Bank enters into commitments that unconditionally obligate it to purchase mortgage loans from its members. Commitments are generally for periods not to exceed 45 days. These commitments are considered derivatives and their estimated fair value at September 30, 2017March 31, 2022 and December 31, 20162021 is reported in “Note 106 — Derivatives and Hedging Activities” as mortgage deliveryloan purchase commitments.


Commitments to Issue Bonds.Discount Notes. The Bank enters into commitments to issue consolidated obligations in the normal course of its business, generally that settle within 30 calendar days. At September 30, 2017,March 31, 2022, the Bank had commitments to issue $24$870 million of consolidated obligation bonds.discount notes. At December 31, 2016,2021, the Bank had no commitments to issue consolidated obligations bonds.obligation discount notes.

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Table of Contents
Commitments to Fund Advances. The Bank enters into commitments that legally bind it to fund additional advances up to 24 months in the future. At September 30, 2017March 31, 2022 and December 31, 2016,2021, the Bank had commitments to fund advances of $1.4 billion$770 million and $280 million.$1.7 billion.



Other Commitments. For each MPF master commitment, the Bank’s potential loss exposure prior to the PFI’s credit enhancement obligation is estimated and tracked in a memorandumfirst loss account called the FLA.(FLA). For absorbing certain losses in excess of the FLA, PFIs are paid a credit enhancement fee, a portion of which may be performance-based. To the extent the Bank experiences losses under the FLA, it may be able to recapture performance-based credit enhancement fees paid to the PFI to offset these losses. The FLA balance for all MPF master commitments with a PFI credit enhancement obligation was $102$166 million and $99$163 million at September 30, 2017March 31, 2022 and December 31, 2016.2021.
Legal Proceedings. The Bank is subject to various pending legal proceedings arising in the normal course of business. As previously noted in the Bank’s 2021 Form 10-K, certain of these legal proceedings involved pending litigation with a resultcurrent member of the Merger, the Bank has been involved in a number of legal proceedings initiatedstemming from alleged breaches by the Seattle Bank against various entities relating to its purchases and subsequent impairment of certain private-label MBS. Althoughmember under the Seattle Bank sold all private-label MBS duringBank’s MPF program. After consultation with legal counsel, management does not anticipate that the first quarter of 2015 and allultimate liability, if any, arising out of the lawsuitsMPF litigation with this member bank will have been either settleda material adverse effect on the Bank’s financial condition or dismissed, theresults of operations. The Bank has appealed certain claims dismissed by the court against three defendants. Other than the private-label MBS litigation, the Bank doesis not believecurrently aware of any pending or threatened legal proceedings to which it is a party that it believes could have a material impact on its financial condition, results of operations, or cash flows.
Litigation settlement gains are considered realized and recorded when the Bank receives cash or assets that are readily convertible to known amounts of cash or claims to cash. In addition, litigation settlement gains are considered realizable and recorded when the Bank enters into a signed agreement that is not subject to appeal, where the counterparty has the ability to pay, and the amount to be received can be reasonably estimated. Prior to being realized or realizable, the Bank considers potential litigation settlement gains to be gain contingencies, and therefore they are not recorded in the Statements of Income.
The Bank records legal expenses related to litigation settlements as incurred in other expenses in the Statements of Income with the exception of certain legal expenses related to litigation settlement awards that are contingent based fees for the attorneys representing the Bank. The Bank incurs and recognizes these contingent based legal fees only when litigation settlement awards are realized, at which time these fees are netted against the gains recognized on the litigation settlement.  During the three months ended September 30, 2017 and 2016, the Bank did not settle any private-label MBS claims. During the nine months ended September 30, 2017, the Bank settled a private-label MBS claim and recognized $21 million in net gains on litigation settlements. During the nine months ended September 30, 2016, the Bank recognized $337 million in net gains on litigation settlements.

Note 1511 — Activities with Stockholders


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


TRANSACTIONS WITH DIRECTORS’ FINANCIAL INSTITUTIONS


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


The following table summarizes the Bank’s outstanding transactions with Directors’ Financial Institutions (dollars in millions):
March 31, 2022December 31, 2021
Amount% of TotalAmount% of Total
Advances$44 — $17 — 
Mortgage loans134 2 119 2 
Deposits24 1 15 1 
Capital stock31 1 43 1 
  September 30, 2017 December 31, 2016
  Amount % of Total Amount % of Total
Advances $5,056
 4 $2,497
 2
Mortgage loans 62
 1 186
 3
Deposits 42
 4 82
 7
Capital stock 257
 4 157
 2



BUSINESS CONCENTRATIONS


The Bank considers itself to have business concentrations with stockholders owning 10 percent or more of its total capital stock outstanding (including mandatorily redeemable capital stock)MRCS). At September 30, 2017,March 31, 2022 and December 31, 2021, the Bank had the following business concentrations withdid not have any stockholders (dollars in millions):owning 10 percent or more of its total capital stock outstanding.
40
  Capital Stock   Mortgage Interest
Stockholder Amount 
% of Total1
 Advances Loans 
Income2
Wells Fargo Bank, N.A. $2,406
 40 $59,895
 $—
 $629
Superior Guaranty Insurance Company3
 23
 — —
 556
 —
Wells Fargo Bank Northwest, N.A.3
 1
 — —
 31
 —
Total $2,430
 40 $59,895
 $587
 $629

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

2Represents interest income earned on advances during the nine months ended September 30, 2017. Interest income on mortgage loans is excluded from this table as this interest relates to the borrower, not to the stockholder.

3Superior Guaranty Insurance Company and Wells Fargo Bank Northwest, N.A. are affiliates of Wells Fargo Bank, N.A.


At December 31, 2016, the Bank had the following business concentrations with stockholders (dollars in millions):
Table of Contents
  Capital Stock   Mortgage Interest
Stockholder Amount 
% of Total1
 Advances Loans 
Income2
Wells Fargo Bank, N.A. $3,093
 47 $77,075
 $—
 $429
Superior Guaranty Insurance Company3
 28
 1 —
 683
 —
Wells Fargo Bank Northwest N.A.3
 2
 — —
 38
 —
Total $3,123
 48 $77,075
 $721
 $429

1Pursuant to applicable Finance Agency regulations, the Bank’s voting structure limits the voting rights of these stockholders and other members holding a significant amount of the Bank’s capital stock.
2Represents interest income earned on advances during the year ended December 31, 2016. Interest income on mortgage loans is excluded from this table as this interest relates to the borrower, not to the stockholder.

3Superior Guaranty Insurance Company and Wells Fargo Bank Northwest, N.A. are affiliates of Wells Fargo Bank, N.A.


LEASE TRANSACTIONS

On June 22, 2017, a storm pipe broke at the Bank’s headquarters causing significant water damage to the Bank’s office space and rendering it totally uninhabitable. As a result of the water damage, the estimated time to complete repairs, and the Bank’s plan to relocate its headquarters to a building in downtown Des Moines that it purchased in April of 2017, the Bank terminated its lease with Wells Fargo Financial, an affiliate of Wells Fargo Bank, effective September 30, 2017. The Bank paid lease termination fees of less than $1 million to Wells Fargo Financial related to the termination.

The Bank entered into a nine month lease agreement with Wells Fargo Financial effective September 30, 2017 to lease approximately 1,200 square feet of the former headquarters that was not damaged to serve general business functions. For information related to the water damage to the Bank’s office space, refer to “Note 1 — Basis of Presentation.”


Note 1612 — Activities with Other FHLBanks


Overnight Funds. The Bank may lend or borrow unsecured overnight funds to or from other FHLBanks. All such transactions are at current market rates. During the nine months ended September 30, 2016, the Bank did not lend funds to other FHLBanks. The following table summarizes loan activity to other FHLBanks during the ninethree months ended September 30, 2017March 31, 2022 and 2021 (dollars in millions):
Other FHLBank 
Beginning
Balance
 Loans 
Principal
Repayment
 
Ending
Balance
2017        
San Francisco $200
 $—
 $(200) $—

Other FHLBankBeginning
Balance		LoansPrincipal
Repayment		Ending
Balance
2022
Chicago$— $1 $(1)$— 
2021
Chicago$— $301 $(301)$— 
    

During the ninethree months ended September 30, 2017,March 31, 2022 and 2021, the Bank did not borrow funds from other FHLBanks. The following table summarizes borrowing activity from other FHLBanks during the nine months ended September 30, 2016 (dollars in millions):

Other FHLBank 
Beginning
Balance
 Borrowing Principal Payment 
Ending
Balance
2016        
San Francisco $—
 $200
 $(200) $—

At September 30, 2017 and 2016, none of the previous transactions were outstanding on the Bank’s Statements of Condition. The interest income and expense related to this activity were immaterial.

Advance Transfers. The Bank may purchase or sell advances from/to other FHLBanks. These transfers are accounted for in the same manner as an advances origination with a member bank. During the nine months ended September 30, 2017, a member of the Federal Home Loan Bank of Chicago (Chicago Bank) re-designated its charter, and concurrently transferred its Federal Home Loan Bank membership from the Chicago Bank to the Des Moines Bank. In conjunction with this transfer and at request of the member, the Bank purchased $37 million of par value advances outstanding to this member from the Chicago Bank and recognized related premiums of $1 million. There were no advance transfers during the nine months ended September 30, 2016.

Note 1713 — Subsequent Events


Subsequent events have been evaluated from OctoberApril 1, 2017,2022, through the time of the Form 10-Q filing with the Securities and Exchange Commission.SEC. No material subsequent events requiring disclosure were identified.





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


Our Management’s Discussion and Analysis (MD&A) of Financial Condition and Results of Operations should be read in conjunction with our financial statements and condensed notes at the beginning of this Form 10-Q and in conjunction with our MD&A and Annual Report on Form 10-K for the fiscal year ended December 31, 2016,2021, filed with the Securities and Exchange Commission (SEC) on March 21, 2017 (20169, 2022 (2021 Form 10-K). Our MD&A is designed to provide information that will help the reader develop a better understanding of our financial statements, key financial statement changes from quarter to quarter, and the primary factors driving those changes. Our MD&A is organized as follows:
CONTENTS
Forward-Looking Information
43
Selected Financial Data
44
Executive Overview
45
Conditions in the Financial Markets
50
CONTENTS
Forward-Looking Information
50
Executive Overview
51
Bank Developments
53
Conditions in the Financial Markets
54
Selected Financial Data
56
Results of Operations
5751
Net Income
5751
Net Interest Income
5852
Other Income (Loss)
6154
Hedging Activities
6255
Other Expense
6557
Statements of Condition
6657
Financial Highlights
6657
AdvancesCash and Due from Banks
6657
Advances
57
Mortgage Loans
6859
Investments
6960
Consolidated Obligations
7061
DepositsCapital
7062
Mandatorily Redeemable Capital Stock
Derivatives
7062
Capital
71
Derivatives
71
Liquidity and Capital Resources
7263
Critical Accounting Policies and Estimates
7666
Legislative and Regulatory Developments
7766
Risk Management
7967

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Table of Contents
FORWARD-LOOKING INFORMATION


Statements contained in this report, including statements describing the objectives, projections, estimates, or future predictions in our operations, may be forward-looking statements. These statements may be identified by the use of forward-looking terminology, such as believes, projects, expects, anticipates, estimates, intends, strategy, plan, could, should,may, and will or their negatives or other variations on these terms. By their nature, forward-looking statements involve risk or uncertainty, and actual results could differ materially from those expressed or implied or could affect the extent to which a particular objective, projection, estimate, or prediction is realized. As a result, you are cautioned not to place undue reliance on such statements. These risks and uncertainties include, but are not limited to, the following:
•political or economic events, including legislative, regulatory, monetary, judicial, or other developments that affect us, our members, our counterparties, and/or our investors in the consolidated obligations of the 11 Federal Home Loan Banks (FHLBanks);


•the ability to meet capital and other regulatory requirements;

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


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

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

•member consolidations and failures;

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

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

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

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

•risks related to the other FHLBanks that could trigger our joint and several liability for debt issued by the other 10 FHLBanks;


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

•changes in the relative attractiveness of consolidated obligations due to actual or perceived changes in the FHLBanks’ credit ratings as well as the U.S. Government’s long-term credit rating;


the ability to meet capital and liquidity requirements;

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

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

general economic and market conditions that could impact the volume of business we do with our members, including, but not limited to, the timing and volatility of market activity, inflation/deflation, employment rates, housing prices, the condition of the mortgage and housing markets on our mortgage-related assets, including the level of mortgage prepayments, and the condition of the capital markets on our consolidated obligations;

the availability of derivative instruments in the types and quantities needed for risk management purposes from acceptable counterparties;

•increases in delinquency or loss estimates on mortgage loans;


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

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


•significant business interruptions resulting from third party failures;

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

•the ability to attract and retain key personnel;personnel.

43
member consolidations and failures; and

reliance on the FHLBankTable of Chicago as Mortgage Partnership Finance (MPF) provider (Mortgage Partnership Finance and MPF are registered trademarks of the FHLBank of Chicago), and Fannie Mae, Redwood Trust Inc., and Ginnie Mae as the ultimate investors of certain MPF products.Contents



For additional information regarding these and other risks and uncertainties that could cause our actual results to differ materially from the expectations reflected in our forward-looking statements, see “Item 1A. Risk Factors” in this quarterly report and in our 20162021 Form 10-K. You are cautioned not to place undue reliance on any forward-looking statements made by us or on our behalf. Forward-looking statements apply only as of the date they are made, and we undertake no obligation to update or revise any forward-looking statement.


SELECTED FINANCIAL DATA

    The following tables present selected financial data for the periods indicated (dollars in millions):
Statements of ConditionMarch 31,
2022		December 31,
2021
Cash and due from banks$71 $295 
Investments1
34,621 33,442 
Advances44,773 44,111 
Mortgage loans held for portfolio, net2
7,702 7,578 
Total assets87,737 85,852 
Consolidated obligations
Discount notes36,743 22,348 
Bonds42,463 55,205 
Total consolidated obligations3
79,206 77,553 
Mandatorily redeemable capital stock18 29 
Total liabilities81,792 80,014 
Capital stock — Class B putable3,523 3,364 
Retained earnings2,401 2,390 
Accumulated other comprehensive income (loss)21 84 
Total capital5,945 5,838 
Regulatory capital ratio4
6.77 6.74 
For the Three Months Ended March 31,
Statements of Income20222021
Net interest income$99 $110 
Provision (reversal) for credit losses on mortgage loans2 (1)
Other income (loss)5
— 2 
Other expense6
37 40 
AHP assessments6 7 
Net income54 66 
Selected Financial Ratios7
Net interest spread8
0.42 %0.46 %
Net interest margin9
0.46 0.51 
Return on average equity (annualized)3.71 4.60 
Return on average capital stock (annualized)6.25 7.88 
Return on average assets (annualized)0.25 0.30 
Average equity to average assets6.67 6.48 

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

2    Includes an allowance for credit losses of $3 million and $1 million at March 31, 2022 and December 31, 2021.

3    The total par value of outstanding consolidated obligations of the 11 FHLBanks was $699.5 billion and $652.9 billion at March 31, 2022 and December 31, 2021.

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

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

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

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

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

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

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EXECUTIVE OVERVIEW


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


Financial Results
For the three and nine months ended September 30, 2017,March 31, 2022, we reported net income of $132 million and $402$54 million compared to $74 million and $493$66 million for the same periodsperiod in 2016. Our2021. The decline in our net income, for the three and nine months ended September 30, 2017, calculated in accordance with accounting principles generally accepted in the United States of America (GAAP), was primarily driven by a decline in net interest income other income (loss), and other expense.during the three months ended March 31, 2022.


Net interest income totaled $174declined $11 million and $497 million forduring the three and nine months ended September 30, 2017March 31, 2022 when compared to $117 million and $314 million for the same periodsperiod last year due primarily to a decline in advance prepayment fee income of $11 million and a decrease in net gains on fair value hedge relationships of $8 million. The decline was offset in part by lower funding costs resulting primarily from the call or maturity of higher advance spreads. In addition, the increase was partially duecosting consolidated obligation bonds. Additionally, we recorded decreased net premium amortization on mortgage loans resulting from a slowdown in prepayment activity.

Refer to higher average advance balances“Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations” for the nine months ended September 30, 2017.additional discussion on our results of operations.

    Our net interest margin was 0.40 percent and 0.38 percent during the three and nine months ended September 30, 2017total assets increased to $87.7 billion at March 31, 2022, compared to 0.27 percent and 0.26 percent for the same periods in 2016. The increase was primarily$85.9 billion at December 31, 2021, driven by changes madean increase in investments and advances. Investments increased $1.2 billion due primarily to advance pricing on certain variable rate callable advance productsthe purchase of U.S. Treasury obligations and our interest-earning assets repricing to higher interest rates at a quicker pace than our interest-bearing liabilities during the first nine months of 2017.

We recorded net gains of $4 million and $45 million in other income (loss) for the three and nine months ended September 30, 2017 compared to net losses of $5 million and income of $319 million for the same periods last year. Other income (loss) wasMBS. Advances increased $0.7 billion due primarily impacted by net gains of $21 million and $337 million during the nine months ended September 30, 2017 and 2016, as a result of settlements with certain defendants in our private-label mortgage-backed securities (private-label MBS) litigation. We did not record any litigation settlements during either the three months ended September 30, 2017 or 2016. Although all of the private-label MBS lawsuits have been either settled or dismissed, we have appealed certain claims dismissed by the court against three defendants. Other factors impacting other income (loss) included net gains (losses) on derivatives and hedging activities, net gains (losses) on trading securities, and other, net.

Other expense totaled $30 million and $93 million for the three and nine months ended September 30, 2017 compared to $28 million and $82 million for the same periods in 2016. The increase was primarily due to an increase in professional fees.
Our total assets decreased to $164.5 billion at September 30, 2017, from $180.6 billion at December 31, 2016, due primarily to a decrease in advances. Advances decreased due primarily to the repayment of advances heldborrowings by a large depository institution member and by certain captive insurance company members whose membership was terminated in response to the Finance Agency final rule affecting FHLBank membership. The decrease was partially offset by an increase in advances across other institution types.members.

Our total liabilities decreased to $157.0 billion at September 30, 2017, from $173.2 billion at December 31, 2016, driven primarily by a decline in the amount of consolidated obligations needed to fund our assets.


Total capital increased to $7.5$5.9 billion at September 30, 2017March 31, 2022 from $7.4$5.8 billion at December 31, 2016. Retained earnings increased to $1.8 billion at September 30, 2017 from $1.5 billion at December 31, 2016 due to net income, partially offset by dividends paid.2021. Our regulatory capital ratio increased to 4.756.77 percent at September 30, 2017,March 31, 2022, from 4.486.74 percent at December 31, 20162021, and was above the required regulatory minimumlimit at each period end. Regulatory capital includes all capital stock, mandatorily redeemable capital stock,MRCS, and retained earnings.


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

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Adjusted Earnings


As part of evaluating our financial performance, we adjust GAAP net interest income and GAAP net income before assessments for the impact of (i) unpredictable items, including, but not limited to, market adjustments relating to derivative and hedging activities and instruments held at fair value, (ii) realized gains (losses) on investment securities, and (iii) other non-routine and unpredictable items, including net asset prepayment fee income, debt extinguishment losses, mandatorily redeemable capital stock interest expense, and net gains on litigation settlements.settlements, and (ii) other non-routine items, if applicable. The resulting non-GAAP measure, referred to as our adjusted earnings, reflects both adjusted net interest income and adjusted net income.
Because our business model is primarily one of holding assets and liabilities to maturity, management believes that the adjusted earnings measure is helpful in understanding our operating results and provides a meaningful period-to-period comparison of our long-term economic valueperformance in contrast to GAAP results, which can be impacted by fair value changes driven by market volatility on financial instruments recorded at fair value or transactions that are considered to be unpredictable or not routine. As a result, management uses the adjusted earnings measure to assess performance under our incentive compensation plans and to ensure management remains focused on our long-term value and performance.plans. Non-GAAP financial measures have inherent limitations, are not required to be uniformly applied, and are not audited. While these non-GAAP measures can be used to assist in understanding the components of our earnings, they should not be considered a substitute for results reported under GAAP.


Effective January 1, 2017, management approved a revision to theThe adjusted net income methodology to calculate adjusted net income on a post Affordable Housing Program (AHP) assessment basis. The revision was made to better align adjusted net income results to the Bank’s strategic business plan which is calculated on a post AHPpost-Affordable Housing Program (AHP) assessment basis. Management believes AHP assessments are a fundamental component of our business and believes this assessment should be included in our adjusted net income calculation. In addition, one of our incentive plan targets, our adjusted return on capital stock spread to LIBOR target, is calculated on a post AHP assessment basis. The revision also aligns the adjusted net income measure to the measure used as the incentive plan target. Adjusted net income for the three and nine months ended September 30, 2016 has been revised to be reported on a post AHP assessment basis for comparability.


As indicated in the tables that follow, our adjusted net interest income and adjusted net income increased during the three and nine months ended September 30, 2017March 31, 2022 when compared to the same periodsperiod in 2016. The2021. Our increase in our adjusted net interest income and adjustedwas driven mainly by lower funding costs resulting primarily from the call or maturity of higher costing consolidated obligation bonds. Additionally, we recorded decreased net income was primarily due to an increasepremium amortization on mortgage loans resulting from a slowdown in interest income due to improved advance spreads. In addition, the increase was partially due to higher advance balances for the nine months ended September 30, 2017.prepayment activity.


The following table summarizes the reconciliation between GAAP and adjusted net interest income (dollars in millions):
For the Three Months Ended
March 31,
20222021
GAAP net interest income$99 $110 
Exclude:
Prepayment fees on advances, net1
6 17 
Prepayment fees on investments, net2
3 — 
Market value adjustments on fair value hedges3
3 12 
Total adjustments12 29 
Include items reclassified from other income (loss):
Net interest expense on economic hedges(1)(4)
Adjusted net interest income$86 $77 
Adjusted net interest margin0.40 %0.36 %

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

2    Prepayment fees on investments, net includes basis adjustment amortization and premium and/or discount amortization.

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


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 For the Three Months Ended For the Nine Months Ended
 September 30, September 30,
 2017 2016 2017 2016
GAAP net interest income before provision (reversal) for credit losses on mortgage loans$174
 $117
 $497
 $314
Exclude:       
Prepayment fees on advances, net1
—
 1
 1
 6
Prepayment fees on investments, net2
—
 —
 —
 2
Mandatorily redeemable capital stock interest expense(4) (6) (13) (15)
Total adjustments(4) (5) (12) (7)
Include items reclassified from other income (loss):       
Net interest expense on economic hedges(3) (4) (10) (13)
Adjusted net interest income$175
 $118

$499
 $308
Adjusted net interest margin0.41% 0.27% 0.38% 0.25%

1Prepayment fees on advances, net includes basis adjustment amortization.

2Prepayment fees on investments, net includes basis adjustment amortization and premium and/or discount amortization.


The following table summarizes the reconciliation between GAAP net income before assessments and adjusted net income (dollars in millions):
For the Three Months Ended For the Nine Months EndedFor the Three Months Ended
September 30, September 30,March 31,
2017 2016 2017 201620222021
GAAP net income before assessments$147
 $83
 $448
 $549
GAAP net income before assessments$60 $73 
Exclude:       Exclude:
Prepayment fees on advances, net1
—
 1
 1
 6
Prepayment fees on advances, net1
6 17 
Prepayment fees on investments, net2
—
 —
 —
 2
Prepayment fees on investments, net2
3 — 
Mandatorily redeemable capital stock interest expense(4) (6) (13) (15)
Market value adjustments on fair value hedges3
Market value adjustments on fair value hedges3
3 12 
Net gains (losses) on financial instruments held under fair value optionNet gains (losses) on financial instruments held under fair value option22 — 
Net gains (losses) on trading securities1
 (2) 10
 51
Net gains (losses) on trading securities(41)(22)
Net gains (losses) on derivatives and hedging activities(2) (3) 1
 (76)
Gains on litigation settlements, net—
 —
 21
 337
Net gains (losses) on derivatives4
Net gains (losses) on derivatives4
16 17 
Include:       Include:
Net interest expense on economic hedges(3) (4) (10) (13)Net interest expense on economic hedges(1)(4)
Adjusted net income before assessments149
 89
 418
 231
Adjusted net income before assessments50 45 
Adjusted AHP assessments3
15
 9
 42
 23
Adjusted AHP assessments5
Adjusted AHP assessments5
5 4 
Adjusted net income$134
 $80
 $376
 $208
Adjusted net income$45 $41 


1Prepayment fees on advances, net includes basis adjustment amortization.

1    Prepayment fees on advances, net includes basis adjustment amortization and premium and/or discount amortization.
2Prepayment fees on investments, net includes basis adjustment amortization and premium and/or discount amortization.


3Adjusted AHP assessments for this non-GAAP measure are calculated as 10 percent of adjusted net income before assessments. For additional discussion on AHP assessments, refer to “Item 8. Financial Statements and Supplementary Data — Note 14 — Affordable Housing Program” in our 2016 10-K.

2    Prepayment fees on investments, net includes basis adjustment amortization and premium and/or discount amortization.

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

4    Represents net gains (losses) on economic derivatives.

5    Adjusted AHP assessments for this non-GAAP measure are calculated as 10 percent of adjusted net income before assessments. For additional discussion on AHP assessments, refer to “Item 8. Financial Statements and Supplementary Data — Note 10 — Affordable Housing Program” in our 2021 Form 10-K.

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


Replacement of the LIBOR Benchmark Interest Rate
BANK DEVELOPMENTS

OnIn March 2021, the Financial Conduct Authority announced that LIBOR will either cease to be provided by any administrator or no longer be representative immediately after December 31, 2021 (or, in the case of some more frequently used LIBOR settings, immediately after June 22, 2017,30, 2023). Although the Financial Conduct Authority does not expect LIBOR to become unrepresentative before the applicable cessation date and intends to consult on requiring the administrator of LIBOR to continue publishing LIBOR of certain currencies and tenors on a storm pipe broke at our headquarters causing significant water damagenon-representative, synthetic basis for a period after the applicable cessation date, there is no assurance that LIBOR, of any particular currency or tenor, will continue to our office spacebe published or be representative through any particular date. The Financial Conduct Authority’s announcement constituted an index cessation event under the 2006 International Swaps and rendering it totally uninhabitable. From June 23 through July 14 of this year,Derivatives Association, Inc. (ISDA) Definitions (Supplement) and the ISDA 2020 IBOR Fallbacks Protocol (Protocol), which we utilized our back-up data center, and employees worked out of a business recovery center locatedadhered to in Urbandale, Iowa, additional leased space in downtown Des Moines, and remotely. On July 17, 2017, we resumed use of our primary data center at our headquarters, which was not damaged. However, asOctober 2020. As a result, of the water damage, the estimated time to complete repairs, and our plan to relocate our headquarters to a building in downtown Des Moines that we purchased in Aprilfallback spread adjustment for each tenor is fixed as of 2017, we terminated our lease with Wells Fargo Financial, an affiliate of Wells Fargo Bank effective September 30, 2017. We entered into a nine month lease agreement with Wells Fargo Financial effective September 30, 2017 to lease approximately 1,200 square feet of the former headquarters to support general business functions. In addition, in July and August 2017, we amended our lease at 666 Walnut St., Des Moines, Iowa to lease additional space for our temporary headquarters. We expect to remain at this location until our recently purchased building at 909 Locust St., Des Moines, Iowa is ready for occupancy, which is currently anticipated for late 2018. Through the date of the announcement.

As noted throughout this filing, therereport, certain of our advances, investments, derivatives, and related collateral are indexed to LIBOR. As of June 30, 2020, we ceased all LIBOR indexed transactions with maturities beyond December 31, 2021. We are preparing for a transition away from LIBOR and have been no material disruptionsdeveloped a transition plan that addresses considerations such as LIBOR exposure, member products, fallback language, operational readiness, and balance sheet management. We are in the process of ensuring we are operationally ready for fallback activities, including updating our processes and IT systems to our operations orsupport the transition from LIBOR to our abilityan alternative reference rate.

As market activity in SOFR-indexed financial instruments continues to serve our members.
We incurred immaterial expenses related to damages caused by the storm drain break during the second and third quarters of 2017 as a result of the damaged headquarters. Whileincrease, we continue to incur costs, we expect those costsoffer SOFR-indexed advances and issue SOFR-indexed debt. We are also utilizing interest rate swaps based on the federal funds overnight index swap (OIS) or SOFR rates as an alternative to be immaterial. We anticipate that weusing LIBOR when entering into new derivative transactions.

For additional information on regulatory action related to LIBOR, refer to “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Legislative and Regulatory Developments.”
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The following tables summarize our variable rate advances, investments, consolidated obligation bonds, and derivatives by interest-rate index (in millions):
March 31, 2022
LIBORSOFRFederal Funds OIS
Other1
Total
Advances, principal amount$435 $505 $— $13,526 $14,466 
Investment securities
Non-MBS, principal amount1,198 — — — 1,198 
MBS, principal amount5,689 — — — 5,689 
Total investment securities6,887 — — — 6,887 
Consolidated obligation bonds, principal amount— 12,025 — — 12,025 
Total variable rate financial instruments amount$7,322 $12,530 $— $13,526 $33,378 
Derivatives
Pay leg, notional amount$1,382 $35,713 $432 $— $37,527 
Receive leg, notional amount9,994 58 16,956 — 27,008 
December 31, 2021
LIBORSOFRFederal Funds OIS
Other1
Total
Advances, principal amount$564 $430 $— $13,537 $14,531 
Investment securities
Non-MBS, principal amount1,253 — — — 1,253 
MBS, principal amount6,084 — — — 6,084 
Total investment securities7,337 — — — 7,337 
Consolidated obligation bonds, principal amount— 7,786 — — 7,786 
Total variable rate financial instruments amount$7,901 $8,216 $— $13,537 $29,654 
Derivatives
Pay leg, notional amount$1,407 $53,602 $432 $— $55,441 
Receive leg, notional amount11,334 5 14,386 — 25,725 
1     Consists primarily of advances indexed in part to consolidated obligation yields.
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The following tables present our exposure to LIBOR-indexed advances, investments, consolidated obligation bonds, and derivatives (in millions):
March 31, 2022
LIBOR Tenors That Cease or Will no Longer be Representative Immediately After June 30, 2023
Due/Terminates in 2022Due/Terminates through June 30, 2023Due/Terminates ThereafterTotal
Assets Indexed to LIBOR
Advances, principal amount by redemption term$156 $50 $229 $435 
Investment securities, by contractual maturity1
Non-MBS, principal amount— 76 1,122 1,198 
MBS, principal amount— 78 5,611 5,689 
Derivatives, receive leg
Cleared, notional amount1,220 1,778 3,633 6,631 
Uncleared, notional amount506 891 1,966 3,363 
Total principal/notional amount$1,882 $2,873 $12,561 $17,316 
Liabilities Indexed to LIBOR
Derivatives, pay leg
Cleared, notional amount$55 $264 $660 $979 
Uncleared, notional amount103 50 250 403 
Total principal/notional amount$158 $314 $910 $1,382 
December 31, 2021
LIBOR Tenors That Cease or Will no Longer be Representative Immediately After June 30, 2023
Due/Terminates in 2022Due/Terminates through June 30, 2023Due/Terminates ThereafterTotal
Assets Indexed to LIBOR
Advances, principal amount by redemption term$206 $50 $308 $564 
Investment securities, by contractual maturity1
Non-MBS, principal amount— 84 1,169 1,253 
MBS, principal amount69 80 5,935 6,084 
Derivatives, receive leg
Cleared, notional amount1,800 1,786 3,851 7,437 
Uncleared, notional amount962 934 2,001 3,897 
Total principal/notional amount$3,037 $2,934 $13,264 $19,235 
Liabilities Indexed to LIBOR
Derivatives, pay leg
Cleared, notional amount$80 $264 $660 $1,004 
Uncleared, notional amount103 50 250 403 
Total principal/notional amount$183 $314 $910 $1,407 
1    MBS are presented by contractual maturity, however, their expected maturities will be ablelikely differ from contractual maturities as borrowers may have the right to recovercall or prepay obligations with or without call or prepayment fees.
For a summary of our risks on the majorityreplacement of these costs.the LIBOR benchmark interest rate, refer to “Item 1A. Risk Factors” in our 2021 Form 10-K.

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CONDITIONS IN THESELECTED FINANCIAL MARKETSDATA


Economy    The following tables present selected financial data for the periods indicated (dollars in millions):
Statements of ConditionMarch 31,
2022		December 31,
2021
Cash and due from banks$71 $295 
Investments1
34,621 33,442 
Advances44,773 44,111 
Mortgage loans held for portfolio, net2
7,702 7,578 
Total assets87,737 85,852 
Consolidated obligations
Discount notes36,743 22,348 
Bonds42,463 55,205 
Total consolidated obligations3
79,206 77,553 
Mandatorily redeemable capital stock18 29 
Total liabilities81,792 80,014 
Capital stock — Class B putable3,523 3,364 
Retained earnings2,401 2,390 
Accumulated other comprehensive income (loss)21 84 
Total capital5,945 5,838 
Regulatory capital ratio4
6.77 6.74 
For the Three Months Ended March 31,
Statements of Income20222021
Net interest income$99 $110 
Provision (reversal) for credit losses on mortgage loans2 (1)
Other income (loss)5
— 2 
Other expense6
37 40 
AHP assessments6 7 
Net income54 66 
Selected Financial Ratios7
Net interest spread8
0.42 %0.46 %
Net interest margin9
0.46 0.51 
Return on average equity (annualized)3.71 4.60 
Return on average capital stock (annualized)6.25 7.88 
Return on average assets (annualized)0.25 0.30 
Average equity to average assets6.67 6.48 

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

2    Includes an allowance for credit losses of $3 million and $1 million at March 31, 2022 and December 31, 2021.

3    The total par value of outstanding consolidated obligations of the 11 FHLBanks was $699.5 billion and $652.9 billion at March 31, 2022 and December 31, 2021.

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

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

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

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

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

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

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EXECUTIVE OVERVIEW

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

Financial MarketsResults

Economic and market data received sinceFor the Federal Open Market Committee (FOMC or Committee) meetingthree months ended March 31, 2022, we reported net income of $54 million compared to $66 million for the same period in July of 2017 indicates that the labor market has continued to strengthen and that economic activity has been rising moderately so far this year. Job gains have remained solid2021. The decline in recent months, and the unemployment rate has stayed low. Household spending has been expanding at a moderate rate, and growthour net income, calculated in business fixed investment has picked up in recent quarters. On a 12-month basis, overall inflation and measures excluding food and energy prices have declined this year and are running below two percent. Market-based measures of inflation adjusted compensation remain low and long-term inflation expectations remain stable.

In its September 20, 2017 statement, the FOMC stated it continues to seek to foster maximum employment and price stability. Hurricanes Harvey, Irma, and Maria have devastated many communities, inflicting severe hardship. Storm-related disruptions and rebuilding will affect economic activityaccordance with accounting principles generally accepted in the near term, but past experience suggests thatUnited States of America (GAAP), was driven by a decline in net interest income during the storms are unlikely to materially alterthree months ended March 31, 2022.

Net interest income declined $11 million during the course of the national economy over the medium or long term. Consequently, the Committee expects that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace and labor market conditions will strengthen somewhat further. Higher prices for gasoline and some other items in the aftermath of the hurricanes will likely boost inflation temporarily; apart from that effect, inflation on a 12-month basis is expected to remain somewhat below two percent in the near term but to stabilize around the Committee’s two percent objective over the medium term. The Committee stated that near-term risksthree months ended March 31, 2022 when compared to the economic outlook appear roughly balanced, butsame period last year due primarily to a decline in advance prepayment fee income of $11 million and a decrease in net gains on fair value hedge relationships of $8 million. The decline was offset in part by lower funding costs resulting primarily from the FOMC is monitoring inflation developments closely. Forcall or maturity of higher costing consolidated obligation bonds. Additionally, we recorded decreased net premium amortization on mortgage loans resulting from a slowdown in prepayment activity.

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

    Our total assets increased to $87.7 billion at March 31, 2022, compared to $85.9 billion at December 31, 2021, driven by an increase in investments and advances. Investments increased $1.2 billion due primarily to the potential impactpurchase of U.S. Treasury obligations and MBS. Advances increased $0.7 billion due primarily to an increase in borrowings by insurance company members.

Total capital increased to $5.9 billion at March 31, 2022 from $5.8 billion at December 31, 2021. Our regulatory capital ratio increased to 6.77 percent at March 31, 2022, from 6.74 percent at December 31, 2021, and was above the hurricanes may haverequired regulatory limit at each period end. Regulatory capital includes all capital stock, MRCS, and retained earnings.

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

As part of evaluating our financial performance, we adjust GAAP net interest income and GAAP net income before assessments for the impact of (i) unpredictable items, including, but not limited to, market adjustments relating to derivative and hedging activities and instruments held at fair value, net asset prepayment fee income, mandatorily redeemable capital stock interest expense, and net gains on litigation settlements, and (ii) other non-routine items, if applicable. The resulting non-GAAP measure, referred to as our adjusted earnings, reflects both adjusted net interest income and adjusted net income.
Because our business model is primarily one of holding assets and liabilities to maturity, management believes that the adjusted earnings measure is helpful in understanding our operating results and provides a meaningful period-to-period comparison of our economic performance in contrast to GAAP results, which can be impacted by fair value changes driven by market volatility on financial instruments recorded at fair value or transactions that are considered to be unpredictable or not routine. As a result, management uses the adjusted earnings measure to assess performance under our incentive compensation plans. Non-GAAP financial measures have inherent limitations, are not required to be uniformly applied, and are not audited. While these non-GAAP measures can be used to assist in understanding the components of our earnings, they should not be considered a substitute for results reported under GAAP.

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

As indicated in the tables that follow, our adjusted net interest income and adjusted net income increased during the three months ended March 31, 2022 when compared to the same period in 2021. Our increase in adjusted net interest income was driven mainly by lower funding costs resulting primarily from the call or maturity of higher costing consolidated obligation bonds. Additionally, we recorded decreased net premium amortization on mortgage loans resulting from a slowdown in prepayment activity.

The following table summarizes the reconciliation between GAAP and adjusted net interest income (dollars in millions):
For the Three Months Ended
March 31,
20222021
GAAP net interest income$99 $110 
Exclude:
Prepayment fees on advances, net1
6 17 
Prepayment fees on investments, net2
3 — 
Market value adjustments on fair value hedges3
3 12 
Total adjustments12 29 
Include items reclassified from other income (loss):
Net interest expense on economic hedges(1)(4)
Adjusted net interest income$86 $77 
Adjusted net interest margin0.40 %0.36 %

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

2    Prepayment fees on investments, net includes basis adjustment amortization and premium and/or discount amortization.

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


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The following table summarizes the reconciliation between GAAP net income before assessments and adjusted net income (dollars in millions):
For the Three Months Ended
March 31,
20222021
GAAP net income before assessments$60 $73 
Exclude:
Prepayment fees on advances, net1
6 17 
Prepayment fees on investments, net2
3 — 
Market value adjustments on fair value hedges3
3 12 
Net gains (losses) on financial instruments held under fair value option22 — 
Net gains (losses) on trading securities(41)(22)
Net gains (losses) on derivatives4
16 17 
Include:
Net interest expense on economic hedges(1)(4)
Adjusted net income before assessments50 45 
Adjusted AHP assessments5
5 4 
Adjusted net income$45 $41 

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

2    Prepayment fees on investments, net includes basis adjustment amortization and premium and/or discount amortization.

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

4    Represents net gains (losses) on economic derivatives.

5    Adjusted AHP assessments for this non-GAAP measure are calculated as 10 percent of adjusted net income before assessments. For additional discussion on AHP assessments, refer to “Item 8. Financial Statements and Supplementary Data — Note 10 — Affordable Housing Program” in our 2021 Form 10-K.

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


Mortgage MarketsReplacement of the LIBOR Benchmark Interest Rate


The housing market continuedIn March 2021, the Financial Conduct Authority announced that LIBOR will either cease to grow throughout the third quarter of 2017, as indicatedbe provided by rising home prices, lower inventories of properties for sale, and continued strong housing construction activity. The improvementany administrator or no longer be representative immediately after December 31, 2021 (or, in the housing market has been partly attributablecase of some more frequently used LIBOR settings, immediately after June 30, 2023). Although the Financial Conduct Authority does not expect LIBOR to lower interest rates.

Mortgage rates fell slightlybecome unrepresentative before the applicable cessation date and intends to consult on requiring the administrator of LIBOR to continue publishing LIBOR of certain currencies and tenors on a non-representative, synthetic basis for a period after the applicable cessation date, there is no assurance that LIBOR, of any particular currency or tenor, will continue to be published or be representative through any particular date. The Financial Conduct Authority’s announcement constituted an index cessation event under the 2006 International Swaps and Derivatives Association, Inc. (ISDA) Definitions (Supplement) and the ISDA 2020 IBOR Fallbacks Protocol (Protocol), which we adhered to in the third quarter, but are higher than rates observed in the prior year. The decrease in rates has resulted in a small increase in refinance activity. The annual increase in mortgage rates has not slowed down the demand for home purchases thus far as inventories remain limited. However, as prices increase and rates rise further, the pace of purchases may slow.

Interest Rates

The following table shows information on key market interest rates1:
 
Third Quarter 2017
3-Month Average
 
Third Quarter 2016
3-Month Average
 
Third Quarter 2017
9-Month Average
 
Third Quarter 2016
9-Month Average
 
September 30, 2017
Ending Rate
 
December 31, 2016
Ending Rate
Federal funds1.16% 0.40% 0.94% 0.38% 1.06% 0.55%
Three-month LIBOR1.32
 0.79
 1.20
 0.69
 1.33
 1.00
2-year U.S. Treasury1.36
 0.72
 1.29
 0.77
 1.49
 1.19
10-year U.S. Treasury2.24
 1.56
 2.31
 1.74
 2.33
 2.45
30-year residential mortgage note3.89
 3.45
 4.02
 3.60
 3.83
 4.32

1Source is Bloomberg.


In its September 2017 meeting, the FOMC maintained the Federal Reserve’s key target interest rate, the Federal funds rate, at a range of 1.00 to 1.25 percent compared to a range of 0.25 to 0.50 percent for the same period in 2016. The Committee’s stance on monetary policy remains accommodative, thereby supporting some further strengthening in the labor market conditions and a sustained return towards their inflation rate of two percent. The FOMC stated that it will assess realized and expected economic conditions relative to its longer-run goals of maximum employment and a two percent inflation rate. The assessment is expected to take into account measures of labor market conditions, indicators of inflation pressures, inflation expectations, and financial and international developments. The Committee stated that it anticipates economic conditions will evolve in a manner that will warrant gradual increases in the Federal funds rate, which is likely to remain below levels that are expected to prevail in the longer run.

The 10-year U.S. Treasury yields and mortgage rates were higher on average in the third quarter of 2017 when compared to the same period in prior year. Interest rates increased as the FOMC raised their target rate during 2017, and economic data remained strong.
In its September 20, 2017 statement, the Committee stated it will initiate the balance sheet normalization program in October. This program will gradually reduce the Federal Reserve’s securities holdings by decreasing reinvestment of principal payments from those securities.

Funding Spreads

The following table reflects our funding spreads to LIBOR (basis points)1:
 
Third Quarter 2017
3-Month
Average
 
Third Quarter 2016
3-Month
Average
 
Third Quarter 2017
9-Month
Average
 
Third Quarter 2016
9-Month
Average
 
September 30, 2017
Ending Spread
 
December 31, 2016
Ending Spread
3-month(24.6) (43.1) (30.6) (30.3) (27.6) (42.7)
2-year(15.5) (8.2) (16.9) (2.3) (17.2) (16.5)
5-year0.6
 15.3
 2.2
 18.7
 0.5
 9.0
10-year39.1
 51.7
 46.1
 59.0
 38.4
 57.7

1Source is the Office of Finance.

October 2020. As a result, the fallback spread adjustment for each tenor is fixed as of the date of the announcement.

As noted throughout this report, certain of our credit quality,advances, investments, derivatives, and related collateral are indexed to LIBOR. As of June 30, 2020, we generally have ready access to funding at relatively competitive interest rates. During the third quarter of 2017, our funding spreads were mixed relative to London Interbank Offered Rate (LIBOR). Short-term spreads deteriorated when compared to spreads atceased all LIBOR indexed transactions with maturities beyond December 31, 20162021. We are preparing for a transition away from LIBOR and have developed a transition plan that addresses considerations such as LIBOR has increased more slowly thanexposure, member products, fallback language, operational readiness, and balance sheet management. We are in the process of ensuring we are operationally ready for fallback activities, including updating our funding spreads year-to-date, while long-term spreads improvedprocesses and IT systems to support the transition from LIBOR to an alternative reference rate.

As market activity in SOFR-indexed financial instruments continues to increase, we continue to offer SOFR-indexed advances and issue SOFR-indexed debt. We are also utilizing interest rate swaps based on the federal funds overnight index swap (OIS) or SOFR rates as an alternative to using LIBOR when comparedentering into new derivative transactions.

For additional information on regulatory action related to spreads at December 31, 2016 as longer-term swap spreads have widened year-to-date. During the first nine monthsLIBOR, refer to “Item 2. Management’s Discussion and Analysis of 2017, we utilized step-up, callable,Financial Condition and term fixedResults of Operations — Legislative and floatingRegulatory Developments.”
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The following tables summarize our variable rate advances, investments, consolidated obligation bonds, and derivatives by interest-rate index (in millions):
March 31, 2022
LIBORSOFRFederal Funds OIS
Other1
Total
Advances, principal amount$435 $505 $— $13,526 $14,466 
Investment securities
Non-MBS, principal amount1,198 — — — 1,198 
MBS, principal amount5,689 — — — 5,689 
Total investment securities6,887 — — — 6,887 
Consolidated obligation bonds, principal amount— 12,025 — — 12,025 
Total variable rate financial instruments amount$7,322 $12,530 $— $13,526 $33,378 
Derivatives
Pay leg, notional amount$1,382 $35,713 $432 $— $37,527 
Receive leg, notional amount9,994 58 16,956 — 27,008 
December 31, 2021
LIBORSOFRFederal Funds OIS
Other1
Total
Advances, principal amount$564 $430 $— $13,537 $14,531 
Investment securities
Non-MBS, principal amount1,253 — — — 1,253 
MBS, principal amount6,084 — — — 6,084 
Total investment securities7,337 — — — 7,337 
Consolidated obligation bonds, principal amount— 7,786 — — 7,786 
Total variable rate financial instruments amount$7,901 $8,216 $— $13,537 $29,654 
Derivatives
Pay leg, notional amount$1,407 $53,602 $432 $— $55,441 
Receive leg, notional amount11,334 5 14,386 — 25,725 
1     Consists primarily of advances indexed in additionpart to consolidated obligation discount notesyields.
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The following tables present our exposure to capture attractive funding, matchLIBOR-indexed advances, investments, consolidated obligation bonds, and derivatives (in millions):
March 31, 2022
LIBOR Tenors That Cease or Will no Longer be Representative Immediately After June 30, 2023
Due/Terminates in 2022Due/Terminates through June 30, 2023Due/Terminates ThereafterTotal
Assets Indexed to LIBOR
Advances, principal amount by redemption term$156 $50 $229 $435 
Investment securities, by contractual maturity1
Non-MBS, principal amount— 76 1,122 1,198 
MBS, principal amount— 78 5,611 5,689 
Derivatives, receive leg
Cleared, notional amount1,220 1,778 3,633 6,631 
Uncleared, notional amount506 891 1,966 3,363 
Total principal/notional amount$1,882 $2,873 $12,561 $17,316 
Liabilities Indexed to LIBOR
Derivatives, pay leg
Cleared, notional amount$55 $264 $660 $979 
Uncleared, notional amount103 50 250 403 
Total principal/notional amount$158 $314 $910 $1,382 
December 31, 2021
LIBOR Tenors That Cease or Will no Longer be Representative Immediately After June 30, 2023
Due/Terminates in 2022Due/Terminates through June 30, 2023Due/Terminates ThereafterTotal
Assets Indexed to LIBOR
Advances, principal amount by redemption term$206 $50 $308 $564 
Investment securities, by contractual maturity1
Non-MBS, principal amount— 84 1,169 1,253 
MBS, principal amount69 80 5,935 6,084 
Derivatives, receive leg
Cleared, notional amount1,800 1,786 3,851 7,437 
Uncleared, notional amount962 934 2,001 3,897 
Total principal/notional amount$3,037 $2,934 $13,264 $19,235 
Liabilities Indexed to LIBOR
Derivatives, pay leg
Cleared, notional amount$80 $264 $660 $1,004 
Uncleared, notional amount103 50 250 403 
Total principal/notional amount$183 $314 $910 $1,407 
1    MBS are presented by contractual maturity, however, their expected maturities will likely differ from contractual maturities as borrowers may have the repricing structuresright to call or prepay obligations with or without call or prepayment fees.
For a summary of our risks on advances, and meet liquidity requirements.the replacement of the LIBOR benchmark interest rate, refer to “Item 1A. Risk Factors” in our 2021 Form 10-K.

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Table of Contents
SELECTED FINANCIAL DATA


The following tables present selected financial data for the periods indicated (dollars in millions):
Statements of ConditionMarch 31,
2022		December 31,
2021
Cash and due from banks$71 $295 
Investments1
34,621 33,442 
Advances44,773 44,111 
Mortgage loans held for portfolio, net2
7,702 7,578 
Total assets87,737 85,852 
Consolidated obligations
Discount notes36,743 22,348 
Bonds42,463 55,205 
Total consolidated obligations3
79,206 77,553 
Mandatorily redeemable capital stock18 29 
Total liabilities81,792 80,014 
Capital stock — Class B putable3,523 3,364 
Retained earnings2,401 2,390 
Accumulated other comprehensive income (loss)21 84 
Total capital5,945 5,838 
Regulatory capital ratio4
6.77 6.74 
For the Three Months Ended March 31,
Statements of Income20222021
Net interest income$99 $110 
Provision (reversal) for credit losses on mortgage loans2 (1)
Other income (loss)5
— 2 
Other expense6
37 40 
AHP assessments6 7 
Net income54 66 
Selected Financial Ratios7
Net interest spread8
0.42 %0.46 %
Net interest margin9
0.46 0.51 
Return on average equity (annualized)3.71 4.60 
Return on average capital stock (annualized)6.25 7.88 
Return on average assets (annualized)0.25 0.30 
Average equity to average assets6.67 6.48 

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

2    Includes an allowance for credit losses of $3 million and $1 million at March 31, 2022 and December 31, 2021.

3    The total par value of outstanding consolidated obligations of the 11 FHLBanks was $699.5 billion and $652.9 billion at March 31, 2022 and December 31, 2021.

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

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

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

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

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

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

44
Statements of ConditionSeptember 30,
2017		 June 30,
2017		 March 31,
2017		 December 31,
2016		 September 30,
2016
Cash and due from banks$218
 $964
 $237
 $223
 $245
Investments1
39,341
 37,763
 41,792
 41,218
 42,851
Advances117,514
 118,878
 123,609
 131,601
 125,828
Mortgage loans held for portfolio, net2
7,031
 6,953
 6,870
 6,913
 6,792
Total assets164,545
 164,988
 172,918
 180,605
 176,074
Consolidated obligations         
Discount notes52,976
 66,558
 72,549
 80,947
 84,481
Bonds102,294
 89,171
 90,956
 89,898
 82,454
Total consolidated obligations3
155,270
 155,729
 163,505
 170,845
 166,935
Mandatorily redeemable capital stock422
 480
 494
 664
 675
Total liabilities157,047
 157,592
 165,469
 173,204
 169,069
Capital stock — Class B putable5,624
 5,623
 5,803
 5,917
 5,658
Additional capital from merger—
 —
 9
 52
 92
Retained earnings1,774
 1,684
 1,590
 1,450
 1,294
Accumulated other comprehensive income (loss)100
 89
 47
 (18) (39)
Total capital7,498
 7,396
 7,449
 7,401
 7,005
Regulatory capital ratio4
4.75
 4.72
 4.57
 4.48
 4.38
Table of Contents
EXECUTIVE OVERVIEW

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

Financial Results
For the three months ended March 31, 2022, we reported net income of $54 million compared to $66 million for the same period in 2021. The decline in our net income, calculated in accordance with accounting principles generally accepted in the United States of America (GAAP), was driven by a decline in net interest income during the three months ended March 31, 2022.

Net interest income declined $11 million during the three months ended March 31, 2022 when compared to the same period last year due primarily to a decline in advance prepayment fee income of $11 million and a decrease in net gains on fair value hedge relationships of $8 million. The decline was offset in part by lower funding costs resulting primarily from the call or maturity of higher costing consolidated obligation bonds. Additionally, we recorded decreased net premium amortization on mortgage loans resulting from a slowdown in prepayment activity.

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

    Our total assets increased to $87.7 billion at March 31, 2022, compared to $85.9 billion at December 31, 2021, driven by an increase in investments and advances. Investments increased $1.2 billion due primarily to the purchase of U.S. Treasury obligations and MBS. Advances increased $0.7 billion due primarily to an increase in borrowings by insurance company members.

Total capital increased to $5.9 billion at March 31, 2022 from $5.8 billion at December 31, 2021. Our regulatory capital ratio increased to 6.77 percent at March 31, 2022, from 6.74 percent at December 31, 2021, and was above the required regulatory limit at each period end. Regulatory capital includes all capital stock, MRCS, and retained earnings.

Refer to “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Statements of Condition” for additional discussion on our financial condition.
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Table of Contents
 For the Three Months Ended
Statements of IncomeSeptember 30,
2017		 June 30,
2017		 March 31,
2017		 December 31,
2016		 September 30,
2016
Net interest income$174
 $170
 $153
 $135
 $117
Provision (reversal) for credit losses on mortgage loans1
 —
 —
 1
 1
Other income (loss)5
4
 6
 35
 77
 (5)
Other expense6
30
 31
 32
 36
 28
AHP assessments15
 15
 16
 19
 9
Net income132
 130
 140
 156
 74
Selected Financial Ratios7
         
Net interest spread8
0.35% 0.37% 0.31% 0.27% 0.24%
Net interest margin9
0.40
 0.41
 0.35
 0.30
 0.27
Return on average equity6.96
 7.13
 7.52
 8.81
 4.35
Return on average capital stock9.19
 9.30
 9.49
 10.99
 5.40
Return on average assets0.31
 0.31
 0.31
 0.35
 0.17
Average equity to average assets4.42
 4.41
 4.16
 4.00
 3.92
Dividend payout ratio10
32.26
 34.53
 30.74
 26.01
 47.85
Adjusted Earnings


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

As part of evaluating our financial performance, we adjust GAAP net interest income and GAAP net income before assessments for the impact of (i) unpredictable items, including, but not limited to, market adjustments relating to derivative and hedging activities and instruments held at fair value, net asset prepayment fee income, mandatorily redeemable capital stock interest expense, and net gains on litigation settlements, and (ii) other non-routine items, if applicable. The resulting non-GAAP measure, referred to as our adjusted earnings, reflects both adjusted net interest income and adjusted net income.
2Includes an allowance for credit losses of $2 million at September 30, 2017, June 30, 2017, March 31, 2017, December 31, 2016, and September 30, 2016.

Because our business model is primarily one of holding assets and liabilities to maturity, management believes that the adjusted earnings measure is helpful in understanding our operating results and provides a meaningful period-to-period comparison of our economic performance in contrast to GAAP results, which can be impacted by fair value changes driven by market volatility on financial instruments recorded at fair value or transactions that are considered to be unpredictable or not routine. As a result, management uses the adjusted earnings measure to assess performance under our incentive compensation plans. Non-GAAP financial measures have inherent limitations, are not required to be uniformly applied, and are not audited. While these non-GAAP measures can be used to assist in understanding the components of our earnings, they should not be considered a substitute for results reported under GAAP.
3The total par value of outstanding consolidated obligations of the FHLBanks was $1.0 trillion, $1.0 trillion, $959.3 billion, $989.3 billion, and $967.7 billion at September 30, 2017, June 30, 2017, March 31, 2017, December 31, 2016, and September 30, 2016, respectively.


4Represents period-end regulatory capital expressed as a percentage of period-end total assets. Regulatory capital includes Class B capital stock (including mandatorily redeemable capital stock), and retained earnings. At March 31, 2017, December 31, 2016, and September 30, 2016, regulatory capital also included additional capital from merger. The additional capital from merger balance was depleted in May of 2017 following the first quarter dividend payment.

The adjusted net income methodology is calculated on a post-Affordable Housing Program (AHP) assessment basis. Management believes AHP assessments are a fundamental component of our business and believes this assessment should be included in our adjusted net income calculation.
5Other income (loss) includes, among other things, net gains (losses) on investment securities, net gains (losses) on derivatives and hedging activities, net gains (losses) on the disposal of fixed assets, and gains on litigation settlements, net. During the three months ended March 31, 2017 and December 31, 2016, other income (loss) was impacted by net gains on litigation settlements. We did not record any litigation settlements during the three months ended September 30, 2017, June 30, 2017 and September 30, 2016.


6Other expense includes, among other things, compensation and benefits, professional fees, contractual services, and gains and losses on real estate owned (REO).

As indicated in the tables that follow, our adjusted net interest income and adjusted net income increased during the three months ended March 31, 2022 when compared to the same period in 2021. Our increase in adjusted net interest income was driven mainly by lower funding costs resulting primarily from the call or maturity of higher costing consolidated obligation bonds. Additionally, we recorded decreased net premium amortization on mortgage loans resulting from a slowdown in prepayment activity.
7Amounts used to calculate selected financial ratios are based on numbers in actuals. Accordingly, recalculations using numbers in millions may not produce the same results.


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

The following table summarizes the reconciliation between GAAP and adjusted net interest income (dollars in millions):
9Represents net interest income expressed as a percentage of average interest-earning assets.

For the Three Months Ended
March 31,
20222021
GAAP net interest income$99 $110 
Exclude:
Prepayment fees on advances, net1
6 17 
Prepayment fees on investments, net2
3 — 
Market value adjustments on fair value hedges3
3 12 
Total adjustments12 29 
Include items reclassified from other income (loss):
Net interest expense on economic hedges(1)(4)
Adjusted net interest income$86 $77 
Adjusted net interest margin0.40 %0.36 %
10Represents dividends declared and paid in the stated period expressed as a percentage of net income in the stated period.


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

2    Prepayment fees on investments, net includes basis adjustment amortization and premium and/or discount amortization.

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


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The following table summarizes the reconciliation between GAAP net income before assessments and adjusted net income (dollars in millions):
For the Three Months Ended
March 31,
20222021
GAAP net income before assessments$60 $73 
Exclude:
Prepayment fees on advances, net1
6 17 
Prepayment fees on investments, net2
3 — 
Market value adjustments on fair value hedges3
3 12 
Net gains (losses) on financial instruments held under fair value option22 — 
Net gains (losses) on trading securities(41)(22)
Net gains (losses) on derivatives4
16 17 
Include:
Net interest expense on economic hedges(1)(4)
Adjusted net income before assessments50 45 
Adjusted AHP assessments5
5 4 
Adjusted net income$45 $41 

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

2    Prepayment fees on investments, net includes basis adjustment amortization and premium and/or discount amortization.

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

4    Represents net gains (losses) on economic derivatives.

5    Adjusted AHP assessments for this non-GAAP measure are calculated as 10 percent of adjusted net income before assessments. For additional discussion on AHP assessments, refer to “Item 8. Financial Statements and Supplementary Data — Note 10 — Affordable Housing Program” in our 2021 Form 10-K.

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

Replacement of the LIBOR Benchmark Interest Rate

In March 2021, the Financial Conduct Authority announced that LIBOR will either cease to be provided by any administrator or no longer be representative immediately after December 31, 2021 (or, in the case of some more frequently used LIBOR settings, immediately after June 30, 2023). Although the Financial Conduct Authority does not expect LIBOR to become unrepresentative before the applicable cessation date and intends to consult on requiring the administrator of LIBOR to continue publishing LIBOR of certain currencies and tenors on a non-representative, synthetic basis for a period after the applicable cessation date, there is no assurance that LIBOR, of any particular currency or tenor, will continue to be published or be representative through any particular date. The Financial Conduct Authority’s announcement constituted an index cessation event under the 2006 International Swaps and Derivatives Association, Inc. (ISDA) Definitions (Supplement) and the ISDA 2020 IBOR Fallbacks Protocol (Protocol), which we adhered to in October 2020. As a result, the fallback spread adjustment for each tenor is fixed as of the date of the announcement.

As noted throughout this report, certain of our advances, investments, derivatives, and related collateral are indexed to LIBOR. As of June 30, 2020, we ceased all LIBOR indexed transactions with maturities beyond December 31, 2021. We are preparing for a transition away from LIBOR and have developed a transition plan that addresses considerations such as LIBOR exposure, member products, fallback language, operational readiness, and balance sheet management. We are in the process of ensuring we are operationally ready for fallback activities, including updating our processes and IT systems to support the transition from LIBOR to an alternative reference rate.

As market activity in SOFR-indexed financial instruments continues to increase, we continue to offer SOFR-indexed advances and issue SOFR-indexed debt. We are also utilizing interest rate swaps based on the federal funds overnight index swap (OIS) or SOFR rates as an alternative to using LIBOR when entering into new derivative transactions.

For additional information on regulatory action related to LIBOR, refer to “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Legislative and Regulatory Developments.”
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The following tables summarize our variable rate advances, investments, consolidated obligation bonds, and derivatives by interest-rate index (in millions):
March 31, 2022
LIBORSOFRFederal Funds OIS
Other1
Total
Advances, principal amount$435 $505 $— $13,526 $14,466 
Investment securities
Non-MBS, principal amount1,198 — — — 1,198 
MBS, principal amount5,689 — — — 5,689 
Total investment securities6,887 — — — 6,887 
Consolidated obligation bonds, principal amount— 12,025 — — 12,025 
Total variable rate financial instruments amount$7,322 $12,530 $— $13,526 $33,378 
Derivatives
Pay leg, notional amount$1,382 $35,713 $432 $— $37,527 
Receive leg, notional amount9,994 58 16,956 — 27,008 
December 31, 2021
LIBORSOFRFederal Funds OIS
Other1
Total
Advances, principal amount$564 $430 $— $13,537 $14,531 
Investment securities
Non-MBS, principal amount1,253 — — — 1,253 
MBS, principal amount6,084 — — — 6,084 
Total investment securities7,337 — — — 7,337 
Consolidated obligation bonds, principal amount— 7,786 — — 7,786 
Total variable rate financial instruments amount$7,901 $8,216 $— $13,537 $29,654 
Derivatives
Pay leg, notional amount$1,407 $53,602 $432 $— $55,441 
Receive leg, notional amount11,334 5 14,386 — 25,725 
1     Consists primarily of advances indexed in part to consolidated obligation yields.
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The following tables present our exposure to LIBOR-indexed advances, investments, consolidated obligation bonds, and derivatives (in millions):
March 31, 2022
LIBOR Tenors That Cease or Will no Longer be Representative Immediately After June 30, 2023
Due/Terminates in 2022Due/Terminates through June 30, 2023Due/Terminates ThereafterTotal
Assets Indexed to LIBOR
Advances, principal amount by redemption term$156 $50 $229 $435 
Investment securities, by contractual maturity1
Non-MBS, principal amount— 76 1,122 1,198 
MBS, principal amount— 78 5,611 5,689 
Derivatives, receive leg
Cleared, notional amount1,220 1,778 3,633 6,631 
Uncleared, notional amount506 891 1,966 3,363 
Total principal/notional amount$1,882 $2,873 $12,561 $17,316 
Liabilities Indexed to LIBOR
Derivatives, pay leg
Cleared, notional amount$55 $264 $660 $979 
Uncleared, notional amount103 50 250 403 
Total principal/notional amount$158 $314 $910 $1,382 
December 31, 2021
LIBOR Tenors That Cease or Will no Longer be Representative Immediately After June 30, 2023
Due/Terminates in 2022Due/Terminates through June 30, 2023Due/Terminates ThereafterTotal
Assets Indexed to LIBOR
Advances, principal amount by redemption term$206 $50 $308 $564 
Investment securities, by contractual maturity1
Non-MBS, principal amount— 84 1,169 1,253 
MBS, principal amount69 80 5,935 6,084 
Derivatives, receive leg
Cleared, notional amount1,800 1,786 3,851 7,437 
Uncleared, notional amount962 934 2,001 3,897 
Total principal/notional amount$3,037 $2,934 $13,264 $19,235 
Liabilities Indexed to LIBOR
Derivatives, pay leg
Cleared, notional amount$80 $264 $660 $1,004 
Uncleared, notional amount103 50 250 403 
Total principal/notional amount$183 $314 $910 $1,407 
1    MBS are presented by contractual maturity, however, their expected maturities will likely differ from contractual maturities as borrowers may have the right to call or prepay obligations with or without call or prepayment fees.
For a summary of our risks on the replacement of the LIBOR benchmark interest rate, refer to “Item 1A. Risk Factors” in our 2021 Form 10-K.
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CONDITIONS IN THE FINANCIAL MARKETS

Economy and Financial Markets

Indicators of economic activity and employment have continued to strengthen. Job gains have been strong in recent months, and the unemployment rate has declined substantially. Inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher energy prices, and broader price pressures.

The invasion of Ukraine by Russia is causing economic hardship, and the implications for the U.S. economy are highly uncertain. In the near term, the invasion and related events are likely to create additional upward pressure on inflation and weigh on economic activity.

In its March 16, 2022 statement, the Federal Open Market Committee (FOMC or Committee) stated that it decided to raise the target range for the federal funds rate to between 0.25 and 0.50 percent and stated that it anticipates that ongoing increases in the target range will be appropriate. In addition, the Committee stated that it expects to begin reducing its holdings of Treasury securities and agency debt and agency MBS at a coming meeting. The Committee also stated that its assessment will take into account a wide range of information, including readings on public health, labor market conditions, indicators of inflation pressures, inflation expectations, and financial and international developments.

Mortgage Markets

During the first quarter of 2022, mortgage rates increased, on average, compared to the same period last year and from the prior year-end. In the first quarter of 2022, new and existing home sales slowed, while home prices continued to rise due to low housing inventories. Refinancing activity remained the primary driver of mortgage activity.

Interest Rates

    The following table shows information on key market interest rates1:
First Quarter 2022
3-Month Average
First Quarter 2021
3-Month Average
March 31, 2022
Ending Rate
December 31, 2021
Ending Rate
Federal funds0.12 %0.08 %0.33 %0.07 %
Three-month LIBOR0.53 0.20 0.96 0.21 
SOFR0.09 0.04 0.29 0.05 
2-year U.S. Treasury1.46 0.13 2.34 0.73 
10-year U.S. Treasury1.95 1.33 2.34 1.51 
30-year residential mortgage note3.74 2.87 4.67 3.11 

1    Source: Bloomberg.

In response to higher inflation, the FOMC raised the target range for the federal funds rate, which led to higher interest rates during the three months ended March 31, 2022 compared to the same period in the prior year.

Funding Spreads

The following table reflects our funding spreads to SOFR (basis points)1:
First Quarter 2022
3-Month Average		First Quarter 2021
3-Month Average
March 31, 2022
Ending Spread
December 31, 2021
Ending Spread
3-month0.0 2.1 (4.5)(1.3)
2-year7.1 6.4 8.1 2.7 
5-year23.2 13.4 30.4 19.6 
10-year48.6 30.4 58.3 41.0 

1    Source: The Office of Finance.

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The following table reflects our funding spreads to U.S. Treasuries (basis points)1:
First Quarter 2022
3-Month Average		First Quarter 2021
3-Month Average		March 31, 2022
Ending Spread		December 31, 2021
Ending Spread
3-month3.4 1.8 11.5 1.5 
2-year3.9 1.4 2.2 1.5 
5-year7.4 3.3 11.0 7.0 
10-year31.7 11.8 39.5 24.0 

1    Source: The Office of Finance.

As a result of our credit quality and government-sponsored enterprise (GSE) status, we generally have ready access to funding at relatively competitive interest rates. During the first quarter of 2022, our funding spreads to SOFR and U.S. Treasuries generally deteriorated when compared to the prior year-end and the same period last year. During the three months ended March 31, 2022, we utilized discount notes and short-term consolidated obligation bonds in an effort to capture attractive funding, match the repricing structures on assets, and/or meet our liquidity requirements.

RESULTS OF OPERATIONS


Net Income


The following table presents comparative highlights of our net income for the three and nine months ended September 30, 2017March 31, 2022 and 20162021 (dollars in millions). See further discussion of these items in the sections that follow.
For the Three Months Ended
March 31,
20222021$ Change% Change
Net interest income$99 $110 $(11)(10)%
Provision (reversal) for credit losses on mortgage loans2 (1)3 300 
Other income (loss)— 2 (2)(100)
Other expense37 40 (3)(8)
AHP assessments6 7 (1)(14)
Net income$54 $66 $(12)(18)%
51
 For the Three Months Ended For the Nine Months Ended
 September 30, September 30,
 2017 2016 $ Change % Change 2017 2016 $ Change % Change
Net interest income$174
 $117
 $57
 49% $497
 $314
 $183
 58 %
Provision (reversal) for credit losses on mortgage loans1
 1
 —
 —
 1
 2
 (1) (50)
Other income (loss)4
 (5) 9
 180
 45
 319
 (274) (86)
Other expense30
 28
 2
 7
 93
 82
 11
 13
AHP assessments15
 9
 6
 67
 46
 56
 (10) (18)
Net income$132
 $74
 $58
 78% $402
 $493
 $(91) (18)%

Table of Contents
Net Interest Income


Our net interest income is impacted by changes in average interest-earning asset and interest-bearing liability balances, and the related yields.yields and costs. The following table presents average balances and ratesannualized yields/costs of major asset and liability categories (dollars in millions):    
For the Three Months Ended September 30,For the Three Months Ended March 31,
2017 201620222021
Average
Balance1
 Yield/Cost 
Interest
Income/
Expense
 
Average
Balance1
 Yield/Cost 
Interest
Income/
Expense
Average
Balance1
Yield/Cost
Interest
Income/
Expense2
Average
Balance1
Yield/Cost
Interest
Income/
Expense2
Interest-earning assets           Interest-earning assets
Interest-bearing deposits$269
 0.93% $—
 $945
 0.38% $1
Interest-bearing deposits$1,196 0.16 %$1 $863 0.10 %$— 
Securities purchased under agreements to resell5,028
 1.07
 14
 5,076
 0.36
 4
Securities purchased under agreements to resell4,546 0.10 1 2,880 0.06 1 
Federal funds sold8,845
 1.17
 26
 5,492
 0.40
 5
Federal funds sold11,302 0.11 3 7,634 0.08 1 
Mortgage-backed securities2,3
19,731
 1.79
 89
 20,295
 1.13
 58
Other investments2,3,4
8,268
 1.98
 41
 11,998
 1.23
 37
Advances3,5
120,223
 1.49
 451
 121,016
 0.78
 238
MBS3,4
MBS3,4
11,458 0.93 26 13,373 0.89 29 
Other investments3,4,5
Other investments3,4,5
4,391 1.57 17 8,022 1.30 26 
Advances4
Advances4
46,761 0.96 111 47,287 1.13 131 
Mortgage loans6
6,995
 3.33
 59
 6,704
 3.33
 56
Mortgage loans6
7,637 2.81 53 8,069 2.65 53 
Loans to other FHLBanks Loans to other FHLBanks— — — 3 0.12 — 
Total interest-earning assets169,359
 1.59
 680
 171,526
 0.93
 399
Total interest-earning assets87,291 0.99 212 88,131 1.11 241 
Non-interest-earning assets1,165
 —
 —
 545
 —
 —
Non-interest-earning assets806 — — 1,003 — — 
Total assets$170,524
 1.58% $680
 $172,071
 0.92% $399
Total assets$88,097 0.98 %$212 $89,134 1.10 %$241 
Interest-bearing liabilities           Interest-bearing liabilities   
Deposits$878
 0.72% $1
 $979
 0.09% $1
Deposits$1,959 0.01 %$— $1,870 0.01 %$— 
Consolidated obligations       
  
  
Consolidated obligations   
Discount notes62,267
 1.04
 163
 86,422
 0.45
 98
Bonds3
98,255
 1.37
 338
 75,549
 0.93
 177
Discount notes4
Discount notes4
29,165 0.18 14 23,620 0.09 5 
Bonds4
Bonds4
49,582 0.81 99 56,300 0.90 126 
Other interest-bearing liabilities7
450
 3.38
 4
 689
 3.40
 6
Other interest-bearing liabilities7
29 4.81 — 45 4.46 — 
Total interest-bearing liabilities161,850
 1.24
 506
 163,639
 0.69
 282
Total interest-bearing liabilities80,735 0.57 113 81,835 0.65 131 
Non-interest-bearing liabilities1,143
 —
 —
 1,681
 —
 —
Non-interest-bearing liabilities1,490 — — 1,527 — — 
Total liabilities162,993
 1.23
 506
 165,320
 0.68
 282
Total liabilities82,225 0.56 113 83,362 0.64 131 
Capital7,531
 —
 —
 6,751
 —
 —
Capital5,872 — — 5,772 — — 
Total liabilities and capital$170,524
 1.18% $506
 $172,071
 0.65% $282
Total liabilities and capital$88,097 0.52 %$113 $89,134 0.60 %$131 
Net interest income and spread8
  0.35% $174
   0.24% $117
Net interest income and spread8
0.42 %$99  0.46 %$110 
Net interest margin9
  0.40%     0.27%  
Net interest margin9
0.46 % 0.51 % 
Average interest-earning assets to interest-bearing liabilities  104.64%     104.82%  Average interest-earning assets to interest-bearing liabilities108.12 % 107.69 % 


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

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

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

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

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

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

7    Other interest-bearing liabilities consists primarily of MRCS.

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

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







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

2The average balance of AFS securities is reflected at amortized cost; therefore the resulting yields do not give effect to changes in fair value.

3Average balances reflect the impact of fair value hedging adjustments and/or fair value option adjustments.

4Other investments primarily include other U.S. obligations, government-sponsored enterprise (GSE) obligations and Tennessee Valley Authority obligations, state or local housing agency obligations, taxable municipal bonds, and Private Export Funding Corporation (PEFCO) bonds.

5
Advance interest income includes prepayment fee income of less than $1 million and $1 million for the three months ended September 30, 2017 and 2016.

6Non-accrual loans are included in the average balance used to determine the average yield.

7Other interest-bearing liabilities consists primarily of mandatorily redeemable capital stock.

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

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










The following table presents average balances and rates of major asset and liability categories (dollars in millions):
 For the Nine Months Ended September 30,
 2017 2016
 
Average
Balance1
 Yield/Cost 
Interest
Income/
Expense
 
Average
Balance1
 Yield/Cost 
Interest
Income/
Expense
Interest-earning assets           
Interest-bearing deposits$258
 0.74% $1
 $894
 0.36% $2
Securities purchased under agreements to resell4,864
 0.82
 30
 5,018
 0.35
 13
Federal funds sold7,295
 0.97
 53
 4,730
 0.38
 13
Mortgage-backed securities2,3
20,300
 1.60
 243
 19,423
 1.13
 165
    Other investments2,3,4
8,846
 1.79
 118
 12,737
 1.14
 109
Advances3,5
123,094
 1.27
 1,165
 110,003
 0.73
 600
Mortgage loans6
6,930
 3.40
 176
 6,684
 3.51
 176
     Loans to other FHLBanks1
 0.55
 —
 —
 —
 —
Total interest-earning assets171,588
 1.39
 1,786
 159,489
 0.90
 1,078
Non-interest-earning assets1,117
 —
 —
 521
 —
 —
Total assets$172,705
 1.38% $1,786
 $160,010
 0.90% $1,078
Interest-bearing liabilities           
Deposits$914
 0.49% $3
 $955
 0.07% $1
Consolidated obligations       
  
  
Discount notes68,151
 0.78
 396
 96,560
 0.44
 320
Bonds3
94,504
 1.24
 877
 54,163
 1.06
 428
Other interest-bearing liabilities7
494
 3.39
 13
 605
 3.38
 15
Total interest-bearing liabilities164,063
 1.05
 1,289
 152,283
 0.67
 764
Non-interest-bearing liabilities1,171
 —
 —
 1,509
 —
 —
Total liabilities165,234
 1.04
 1,289
 153,792
 0.66
 764
Capital7,471
 —
 —
 6,218
 —
 —
Total liabilities and capital$172,705
 1.00% $1,289
 $160,010
 0.64% $764
Net interest income and spread8
  0.34% $497
   0.23% $314
Net interest margin9
  0.38%     0.26%  
Average interest-earning assets to interest-bearing liabilities  104.59%     104.73%  

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

2The average balance of AFS securities is reflected at amortized cost; therefore the resulting yields do not give effect to changes in fair value.

3Average balances reflect the impact of fair value hedging adjustments and/or fair value option adjustments.

4Other investments primarily include other U.S. obligations, GSE obligations and Tennessee Valley Authority obligations, state or local housing agency obligations, taxable municipal bonds, and PEFCO bonds.

5
Advance interest income includes prepayment fee income of $1 million and $6 million for the nine months ended September 30, 2017 and 2016.

6Non-accrual loans are included in the average balance used to determine the average yield.

7Other interest-bearing liabilities consists primarily of mandatorily redeemable capital stock.

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

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



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The following table presents changes in interest income and interest expense. Changes in interest income and interest expense that are not identifiable as either volume-related or rate-related, but rather equally attributable to both volume and rate changes, are allocated to the volume and rate categories based on the proportion of the absolute value of the volume and rate changes (dollars in millions).
Three Months Ended Nine Months EndedThree Months Ended
September 30, 2017 vs. September 30, 2016 September 30, 2017 vs. September 30, 2016March 31, 2022 vs. March 31, 2021
Total Increase
(Decrease) Due to
 
Total Increase
(Decrease)
 
Total Increase
(Decrease) Due to
 
Total Increase
(Decrease)
Total Increase
(Decrease) Due to		Total Increase
(Decrease)
Volume Rate Volume Rate VolumeRate
Interest income           Interest income
Interest-bearing deposits$(1) $—
 $(1) $(2) $1
 $(1)Interest-bearing deposits$— $1 $1 
Securities purchased under agreements to resell—
 10
 10
 —
 17
 17
Federal funds sold5
 16
 21
 10
 30
 40
Federal funds sold1 1 2 
Mortgage-backed securities(2) 33
 31
 8
 70
 78
MBSMBS(4)1 (3)
Other investments(14) 18
 4
 (40) 49
 9
Other investments(13)4 (9)
Advances(2) 215
 213
 78
 487
 565
Advances(1)(19)(20)
Mortgage loans3
 —
 3
 6
 (6) —
Mortgage loans(3)3 — 
Total interest income(11) 292
 281
 60
 648
 708
Total interest income(20)(9)(29)
Interest expense           Interest expense
Deposits—
 —
 —
 —
 2
 2
Consolidated obligations           Consolidated obligations
Discount notes(34) 99
 65
 (114) 190
 76
Discount notes2 7 9 
Bonds63
 98
 161
 366
 83
 449
Bonds(15)(12)(27)
Other interest-bearing liabilities(2) —
 (2) (2) —
 (2)
Total interest expense27
 197
 224
 250
 275
 525
Total interest expense(13)(5)(18)
Net interest income$(38) $95
 $57
 $(190) $373
 $183
Net interest income$(7)$(4)$(11)
    
NET INTEREST SPREAD


Net interest spread equalsrepresents the annualized yield on total interest-earning assets minus the annualized cost of total interest-bearing liabilities. For the three and nine months ended September 30, 2017, ourOur net interest spread was 0.350.42 percent and 0.34 percentfor the three months ended March 31, 2022 compared to 0.240.46 percent and 0.23 percent duringfor the same periodsperiod last year. The decline was due primarily to a decrease in 2016.advance prepayment fee income of $11 million and a decrease in net gains on fair value hedge relationships of $8 million. The decline was offset in part by lower funding costs resulting primarily from the call or maturity of higher costing consolidated obligation bonds. Additionally, we recorded decreased net premium amortization on mortgage loans resulting from a slowdown in prepayment activity.

NET INTEREST MARGIN

Net interest margin equals net interest income expressed as a percentage of average interest-earning assets. Our net interest spreads duringmargin was 0.46 percent for the three and nine months ended September 30, 2017 wereMarch 31, 2022 compared to 0.51 percent for the same period last year due primarily impacted by a higher yield on total interest-earning assets, which was partially offset by a higher cost on total interest-bearing liabilities. to lower net interest spread, as discussed above.

The primary components of our interest income and interest expense are discussed further below.


Advances


Interest income on advances (including prepayment fees on advances, net) increaseddecreased during the three and nine months ended September 30, 2017March 31, 2022 when compared to the same periodsperiod in 20162021 due primarily to pricing changes made to certain variable rate callablea decline in advance products andprepayment fee income of $11 million, coupled with the higher interest rate environment. Additionally, interestprepayment or maturity of higher-yielding advances.

Investments

Interest income increased due to higher average advance balanceson investments decreased during the ninethree months ended September 30, 2017. While period end advance balances declined from DecemberMarch 31, 2016, average advance balances for the nine months ended September 30, 2017 increased2022 when compared to the prior year. The increasesame period in 2021 primarily due to lower average other investment and MBS balances resulting from paydowns and/or maturities, combined with a decline in net gains on investment fair value hedge relationships of $4 million.


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Mortgage Loans

Interest income on mortgage loans remained stable during the three months ended March 31, 2022 when compared to the same period in 2021. A decline in interest income resulting from lower average mortgage loan balances was due primarily to borrowings from large depository institution members, which was partiallyfully offset by a decrease in borrowingsnet premium amortization on mortgage loans resulting from certain captive insurance company members.a slowdown in prepayment activity.


InvestmentsConsolidated Obligations


Interest incomeexpense on investments increasedbonds decreased during the three and nine months ended September 30, 2017March 31, 2022 when compared to the same periodsperiod in 20162021 due primarily to the higher interest rate environment, partially offset by lower average balances of other investments.




Bonds

Interest expense on bonds increased during the three and nine months ended September 30, 2017 when compared to the same periods in 2016 due primarily to higher average bond balances and the call or maturity of higher interest rate environment. The increase in average balances was primarily due to our increased utilization of bonds in place of discount notes to reduce the maturity gap between our assets and liabilities and match the change in our advance product mix.costing debt.


Discount Notes

Interest expense on discount notes increased during the three and nine months ended September 30, 2017 when compared to the same periods in 2016 primarily due to the higherrising interest rate environment partially offset by a decrease in average discount note balances. Average discount note balances decreased primarily due toand our increased useutilization of bonds in place oflower-cost discount notes in an effort to reduce the maturity gap between our assets and liabilities andcapture attractive funding, match the change inrepricing structures on assets, and/or meet our advance product mix.liquidity requirements.


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

Other Income (Loss)


The following table summarizes the components of other income (loss) (dollars in millions):
For the Three Months Ended
For the Three Months Ended For the Nine Months EndedMarch 31,
September 30, September 30,20222021
2017 2016 2017 2016
Net gains (losses) on trading securities$1
 $(2) $10
 $51
Net gains (losses) on trading securities$(41)$(22)
Net gains (losses) on derivatives and hedging activities(2) (3) 1
 (76)
Gains on litigation settlements, net—
 —
 21
 337
Net gains (losses) on financial instruments held under fair value optionNet gains (losses) on financial instruments held under fair value option22 — 
Net gains (losses) on derivativesNet gains (losses) on derivatives16 17 
Standby letter of credit feesStandby letter of credit fees2 3 
Other, net5
 —
 13
 7
Other, net1 4 
Total other income (loss)$4
 $(5) $45
 $319
Total other income (loss)$— $2 
    
Other income (loss) can be volatile from period to period depending on the type of activity recorded. We recorded net gains of $4 million and $45 millionwas relatively stable during the three and nine months ended September 30, 2017March 31, 2022 when compared to the same period in 2021. During the three months ended March 31, 2022, we recorded net combined losses of $3 million on our trading securities, fair value option instruments, and economic derivatives compared to net losses of $5 million and net gains of $319 million during same periods in 2016. Other income (loss) was primarily impacted by net gains of $21 million and $337 million during the nine months ended September 30, 2017 and 2016, as a result of settlements with certain defendants in our private-label MBS litigation. We did not record any litigation settlements during the three months ended September 30, 2017 or 2016. Other factors impacting other income (loss) included net gains (losses) on derivatives and hedging activities, net gains (losses) on trading securities, and net gains in other, net as described below.

During the three and nine months ended September 30, 2017, we recorded net losses of $2 million and net gains of $1 million on our derivatives and hedging activities through other income (loss) compared to net losses of $3 million and $76 million duringfor the same periodsperiod in 2016. The2021. These changes in fair value changes were primarily driven by changes inmarket volatility and the impact it had on interest rates. These changes impactedrates, as well as credit spreads on our fair value hedge relationships and interestfixed rate swaps that we utilized to economically hedge our investment securities portfolio. Accounting rules require all derivatives to be recorded at fair value and therefore we may be subject to income statement volatility.trading securities. Refer to “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations — Hedging Activities” for additional discussion on our derivatives and hedging activities, including the net impacteconomic derivatives.


54
Table of economic hedge relationships.Contents

During the three and nine months ended September 30, 2017, we recorded net gains on trading securities of $1 million and $10 million compared to net losses of $2 million and net gains of $51 million during the same periods in 2016. These changes in fair value were primarily due to the impact of interest rates and credit spreads on our fixed rate trading securities. Trading securities are recorded at fair value with changes in fair value reflected through other income (loss).

During the three and nine months ended September 30, 2017, we recorded net gains in other, net of $5 million and $13 million compared to less than $1 million and $7 million during the same periods in 2016. The increase was driven by rental income recorded during the three and nine months ended September 30, 2017 related to the lease of a portion of our new headquarters building and fewer losses on disposals of fixed assets in 2017 compared to 2016.


Hedging Activities


We use derivatives to manage interest rate risk in our Statements of Condition.risk. Accounting rules affect the timing and recognition of income and expense on derivatives and therefore we may be subject to income statement volatility.


If a hedging activity qualifies for hedge accounting treatment (fair value hedge), we include the periodic cash flow componentsnet interest settlements of interest receivables or payables related to the derivative related toare recognized as interest income or expense in the relevant income statement caption consistent with the hedged asset or liability. We also record the amortization ofThe net fair value hedginggains and losses of derivatives and hedged items designated in fair value hedge relationships are also recognized as interest income or expense. Amortization of basis adjustments from terminated hedges and the amortization of the financing element of our off market derivativesis also recorded in interest income or expenseexpense.

If a hedging activity does not qualify for hedge accounting treatment (economic hedge), the net interest settlements of interest receivables or other income (loss). Changes inpayables related to the derivative as well as the fair value of bothgains and losses on the derivative and the hedged item are recorded as a component of other income (loss) in “Net gains (losses) on derivatives and hedging activities.derivatives;”

If a hedging activity does not qualify for hedge accounting treatment (economic hedge), we record the derivative’s components of interest income and expense, together with the effect of changes in fair value as a component of other income (loss) in “Net gains (losses) on derivatives and hedging activities”; however, there is no fair value adjustment for the corresponding asset or liability being hedged unless changes in the fair value of the asset or liability are normally marked to fair value through earnings (i.e., trading securities and fair value option instruments).



The following tables categorizetable categorizes the net effect of hedging activities on net income by product (dollars in millions):
For the Three Months Ended March 31, 2022
Net Effect of Hedging ActivitiesAdvancesInvestmentsMortgage
Loans		Discount NotesBondsTotal
Net interest income:
Net amortization/accretion1
$— $— $(1)$— $(1)$(2)
Net gains (losses) on derivatives and hedged items— 7 — — (3)4 
Net interest settlements on derivatives2
(39)(28)— — 13 (54)
Total impact to net interest income(39)(21)(1)— 9 (52)
Other income (loss):
Net gains (losses) on derivatives3
— 32 — (16)— 16 
Net gains (losses) on trading securities4
— (41)— — — (41)
Net gains (losses) on financial instruments held under fair value option4
— — — 22 — 22 
Total impact to other income (loss)— (9)— 6 — (3)
Total net effect of hedging activities5
$(39)$(30)$(1)$6 $9 $(55)
  For the Three Months Ended September 30, 2017
Net Effect of
Hedging Activities
 Advances Investments 
Mortgage
Loans
 Bonds Other Total
Net interest income:            
Net amortization/accretion1
 $3
 $2
 $—
 $(3) $—
 $2
Net interest settlements (19) (23) —
 (4) —
 (46)
Total impact to net interest income (16) (21) —
 (7) —
 (44)
Other income (loss):            
Net gains (losses) on derivatives and hedging activities:            
Gains (losses) on fair value hedges 1
 (4) —
 2
 —
 (1)
Gains (losses) on economic hedges —
 (2) —
 —
 —
 (2)
Price alignment amount on derivatives2
 —
 —
 —
 —
 1
 1
Total net gains (losses) on derivatives and hedging activities 1
 (6) —
 2
 1
 (2)
Net gains (losses) on trading securities3
 —
 2
 —
 —
 —
 2
Total impact to other income (loss) 1
 (4) —
 2
 1
 —
Total net effect of hedging activities4
 $(15) $(25) $—
 $(5) $1
 $(44)

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

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

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

4    Represents the net gains (losses) on those trading securities and fair value option instruments in which we have entered into a corresponding economic derivative to hedge the risk of changes in fair value. As a result, this line item may not agree to the Statements of Income.

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

55
  For the Three Months Ended September 30, 2016
Net Effect of
Hedging Activities
 Advances Investments 
Mortgage
Loans
 Bonds Total
Net interest income:          
Net amortization/accretion1
 $6
 $—
 $—
 $1
 $7
Net interest settlements (42) (38) —
 26
 (54)
Total impact to net interest income (36) (38) —
 27
 (47)
Other income (loss):          
Net gains (losses) on derivatives and hedging activities:          
Gains (losses) on fair value hedges —
 (13) —
 6
 (7)
Gains (losses) on economic hedges —
 5
 (1) —
 4
Total net gains (losses) on derivatives and hedging activities —
 (8) (1) 6
 (3)
Net gains (losses) on trading securities3
 —
 (4) —
 —
 (4)
Total impact to other income (loss) —
 (12) (1) 6
 (7)
Total net effect of hedging activities4
 $(36) $(50) $(1)
$33
 $(54)
Table of Contents

1Represents the amortization/accretion of fair value hedging adjustments on closed hedge relationships and the amortization of the financing element of off-market derivatives.

2Effective January 3, 2017, amount includes the price alignment amount on derivatives for which variation margin is characterized as a daily settled contract.

3Represents the net gains (losses) on those trading securities in which we have entered into a corresponding economic derivative to hedge the risk of changes in fair value. As a result, this line item may not agree to the Statements of Income.

4The hedging activity tables do not include the interest component on the related hedged items or the gross prepayment fee income on terminated advance or investment hedge relationships.


The following tables categorizetable categorizes the net effect of hedging activities on net income by product (dollars in millions):
For the Three Months Ended March 31, 2021
Net Effect of Hedging ActivitiesAdvancesInvestmentsMortgage
Loans		BondsTotal
Net interest income:
Net amortization/accretion1
$(8)$(9)$(1)$(1)$(19)
Net gains (losses) on derivatives and hedged items2 11 — (1)12 
Net interest settlements on derivatives2
(48)(32)— 38 (42)
Total impact to net interest income(54)(30)(1)36 (49)
Other income (loss):
Net gains (losses) on derivatives3
— 17 — — 17 
Net gains (losses) on trading securities4
— (22)— — (22)
Total impact to other income (loss)— (5)— — (5)
Total net effect of hedging activities5
$(54)$(35)$(1)$36 $(54)
  For the Nine Months Ended September 30, 2017
Net Effect of
Hedging Activities
 Advances Investments 
Mortgage
Loans
 Bonds Other Total
Net interest income:            
Net amortization/accretion1
 $13
 $5
 $(1) $(5) $—
 $12
Net interest settlements (75) (79) —
 27
 —
 (127)
Total impact to net interest income (62) (74) (1) 22
 —
 (115)
Other income (loss):            
Net gains (losses) on derivatives and hedging activities:            
Gains (losses) on fair value hedges 3
 10
 —
 (4) —
 9
Gains (losses) on economic hedges —
 (10) —
 —
 —
 (10)
Price alignment amount on derivatives2
 —
 —
 —
 —
 2
 2
Total net gains (losses) on derivatives and hedging activities 3
 —
 —
 (4) 2
 1
Net gains (losses) on trading securities3
 —
 12
 —
 —
 —
 12
Total impact to other income (loss) 3
 12
 —
 (4) 2
 13
Total net effect of hedging activities4
 $(59) $(62) $(1) $18
 $2
 $(102)


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

  For the Nine Months Ended September 30, 2016
Net Effect of
Hedging Activities
 Advances Investments 
Mortgage
Loans
 Bonds Total
Net interest income:          
Net amortization/accretion1
 $19
 $1
 $(1) $1
 $20
Net interest settlements (138) (115) —
 65
 (188)
Total impact to net interest income (119) (114) (1) 66
 (168)
Other income (loss):          
Net gains (losses) on derivatives and hedging activities:          
Gains (losses) on fair value hedges 1
 (16) —
 (1) (16)
Gains (losses) on economic hedges —
 (59) (1) —
 (60)
Total net gains (losses) on derivatives and hedging activities 1
 (75) (1) (1) (76)
Net gains (losses) on trading securities3
 —
 47
 —
 —
 47
Total impact to other income (loss) 1
 (28) (1) (1) (29)
Total net effect of hedging activities4
 $(118) $(142) $(2) $65
 $(197)
2    Represents the interest component on derivatives that qualify for fair value hedge accounting.


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

4    Represents the net gains (losses) on those trading securities in which we have entered into a corresponding economic derivative to hedge the risk of changes in fair value. As a result, this line item may not agree to the Statements of Income.

5    The hedging activity tables do not include the interest component on the related hedged items or the gross prepayment fee income on terminated advance or investment hedge relationships.
1Represents the amortization/accretion of fair value hedging adjustments on closed hedge relationships and the amortization of the financing element of off-market derivatives.

2Effective January 3, 2017, amount includes the price alignment amount on derivatives for which variation margin is characterized as a daily settled contract.

3Represents the net gains (losses) on those trading securities in which we have entered into a corresponding economic derivative to hedge the risk of changes in fair value. As a result, this line item may not agree to the Statements of Income.

4The hedging activity tables do not include the interest component on the related hedged items or the gross prepayment fee income on terminated advance or investment hedge relationships.

NET AMORTIZATION/ACCRETION

Amortization/accretion varies from period to period depending on our hedge relationship termination activities and the maturity, call, or prepayment of assets or liabilities previously in hedge relationships. In addition,During the three months ended March 31, 2022, we experienced decreased amortization is impacted byactivity when compared to the financing elementsame period last year, primarily due to a decline in prepayments of advances and investments that were previously in a hedge relationship.

NET GAINS (LOSSES) ON DERIVATIVES AND HEDGED ITEMS

The net gains and losses on derivatives and hedged items designated in fair value hedge relationships are recorded in net interest income. During the three months ended March 31, 2022, we recorded net gains of $4 million on our offfair value hedge relationships compared to net gains of $12 million in the same period last year, which primarily stemmed from market derivatives.volatility and the impact it had on interest rates.


NET INTEREST SETTLEMENTS ON DERIVATIVES


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



NET GAINS (LOSSES) ON FAIR VALUE HEDGESDERIVATIVES

Gains (losses) on fair value hedges are driven by hedge ineffectiveness. Hedge ineffectiveness occurs when changes in the fair value of the derivative and the related hedged item do not perfectly offset each other. The factors that affect hedge ineffectiveness include changes in the benchmark interest rate, volatility, and the divergence in the valuation curves used to value our assets, liabilities, and derivatives.

GAINS (LOSSES) ON ECONOMIC HEDGES


We utilize economic derivatives to manage certain risks inon our Statements of Condition. Gains and losses on economic derivatives are driven primarily by changes in interest rates and volatility and include interest settlements. Interest settlements represent the interest component on economic derivatives. These amounts vary from period to period depending on our hedging activities and interest rates. During the three months ended March 31, 2022, net gains on our economic derivatives remained relatively stable when compared to the same period last year. The following discussion highlights key items impacting gains and losses on investment economic derivatives.

Investments
We utilizechanges were primarily driven by changes in the fair value of interest rate swaps used to economically hedge a portion of our tradinginvestment securities againstportfolio and discount notes held under fair value option. These fair value changes in fair value. Gains and losses on these economic derivatives are duewere primarily todriven by market volatility resulting from changes in interest rates. Gains and losses on our trading securities are also due primarily to changes in interest rates and credit spreads.


The following table summarizes gains and losses on these economic derivatives as well as the related trading securities (dollars in millions):

56
 For the Three Months Ended For the Nine Months Ended
 September 30, September 30,
 2017 2016 2017 2016
Gains (losses) on interest rate swaps economically hedging our investments$1
 $10
 $—
 $(45)
Interest settlements(3) (5) (10) (14)
Net gains (losses) on investment derivatives(2) 5
 (10) (59)
Net gains (losses) on related trading securities2
 (4) 12
 47
Net gains (losses) on economic investment hedge relationships$—
 $1
 $2
 $(12)

Table of Contents
Other Expense
The following table shows the components of other expense (dollars in millions):
For the Three Months Ended March 31,
 20222021
Compensation and benefits$18 $21 
Contractual services5 4 
Professional fees3 4 
Other operating expenses4 5 
Total operating expenses30 34 
Federal Housing Finance Agency3 2 
Office of Finance2 2 
Other, net2 2 
Total other expense$37 $40 
 For the Three Months Ended September 30, For the Nine Months Ended September 30,
 2017 2016 2017 2016
Compensation and benefits$12
 $13
 $39
 $39
Contractual services2
 1
 8
 7
Professional fees5
 4
 15
 8
Other operating expenses6
 5
 16
 14
Total operating expenses25
 23
 78
 68
Federal Housing Finance Agency3
 2
 8
 6
Office of Finance1
 2
 5
 5
Other, net1
 1
 2
 3
Total other expense$30
 $28
 $93
 $82


Other expense totaled $30 million and $93 milliondecreased for the three and nine months ended September 30, 2017March 31, 2022 compared to $28 million and $82 million for the same periodsperiod last year. The increasedecrease was driven primarily by a decline in other expense during the nine months ended September 30, 2017 was primarily due to an increase in professional fees ascompensation and benefits resulting from a result of hiring external resources to assist with improving our internal control environment.lower employee headcount.



STATEMENTS OF CONDITION


Financial HighlightsMortgage Loans


Our totalInterest income on mortgage loans remained stable during the three months ended March 31, 2022 when compared to the same period in 2021. A decline in interest income resulting from lower average mortgage loan balances was fully offset by a decrease in net premium amortization on mortgage loans resulting from a slowdown in prepayment activity.

Consolidated Obligations

Interest expense on bonds decreased during the three months ended March 31, 2022 when compared to the same period in 2021 due primarily to lower average balances and the call or maturity of higher costing debt.

Interest expense on discount notes increased due to the rising interest rate environment and our increased utilization of lower-cost discount notes in an effort to capture attractive funding, match the repricing structures on assets, decreased to $164.5 billion at September 30, 2017 from $180.6 billion at December 31, 2016. Our total liabilities decreased to $157.0 billion at September 30, 2017 from $173.2 billion at December 31, 2016. Total capital increased to $7.5 billion at September 30, 2017 from $7.4 billion at December 31, 2016. See further discussion of changes inand/or meet our financial condition in the appropriate sections that follow.liquidity requirements.


AdvancesOther Income (Loss)


The following table summarizes our advances by typethe components of institutionother income (loss) (dollars in millions):
For the Three Months Ended
March 31,
20222021
Net gains (losses) on trading securities$(41)$(22)
Net gains (losses) on financial instruments held under fair value option22 — 
Net gains (losses) on derivatives16 17 
Standby letter of credit fees2 3 
Other, net1 4 
Total other income (loss)$— $2 
 September 30,
2017		 December 31,
2016
Commercial banks$82,887
 $94,939
Savings institutions2,478
 1,376
Credit unions3,918
 2,903
Non-captive insurance companies19,089
 17,441
Captive insurance companies8,516
 14,510
Community development financial institution3
 3
Total member advances116,891
 131,172
Housing associates81
 61
Non-member borrowers533
 304
Total par value$117,505
 $131,537

Our total advance par value decreased $14.0 billion or 11 percent at September 30, 2017Other income was relatively stable during the three months ended March 31, 2022 when compared to Decemberthe same period in 2021. During the three months ended March 31, 2016. The decrease2022, we recorded net combined losses of $3 million on our trading securities, fair value option instruments, and economic derivatives compared to net losses of $5 million for the same period in total par2021. These changes in fair value waswere primarily due to the repayment of $17.2 billion in advances helddriven by a large depository institution membermarket volatility and $6.0 billion held by certain captive insurance company members. The decrease was partially offset by an increase in advances of $9.2 billion across other institution types.

As a result of the final rule on membership issued by the Finance Agency effective February 19, 2016, the eligibility requirements for FHLBank members were changed rendering captive insurance company members ineligible for FHLBank membership. In accordance with the final rule, captive insurance company members that were admitted as members after September 12, 2014 (the date the Finance Agency proposed this rule) had their memberships terminated on February 17, 2017. Captive insurance company members that were admitted as members prior to September 12, 2014 will also have their memberships terminated no later than February 19, 2021. The magnitude of the impact of the final rule at that date will depend, in part,it had on interest rates, as well as credit spreads on our size and profitability at the time of membership termination or maturity of the related advances. As of September 30, 2017, we had six captive insurance company members with total advances outstanding of $8.5 billion, which represented seven percent of our total advances outstanding. One captive insurance company member was included in our five largest member borrowers at September 30, 2017 as shown in the table below.

The following table summarizes our advances by product type (dollars in millions):
 September 30, 2017 December 31, 2016
 Amount % of Total Amount % of Total
Variable rate$79,997
 68 $104,594
 80
Fixed rate35,842
 31 25,453
 19
Amortizing1,666
 1 1,490
 1
Total par value117,505
 100 131,537
 100
Premiums58
   83
  
Discounts(12)   (7)  
Fair value hedging adjustments(37)   (12)  
Total advances$117,514
   $131,601
  

Fair value hedging adjustments changed $25 million at September 30, 2017 when compared to December 31, 2016 due to the impact of interest rates on our cumulative fair value adjustments on advances in hedge relationships.

At September 30, 2017 and December 31, 2016, 34 and 59 percent of our advances were variable rate callable advances. Callable advances may be prepaid by borrowers on pertinent dates (call dates) and therefore provide borrowers a source of long-term financing with prepayment flexibility. Interest rates on our variable rate callable advances reset at each call date to be consistent with either the underlying LIBOR index or our current offering rate of our underlying cost of funds. In addition, we retain the flexibility to adjust the spread relative to our cost of funds for the majority of these variable rate advances on each reset date. We generally fund our variable rate callable advances with either discount notes, LIBOR indexed debt, or debt swapped to a LIBOR index. During the second quarter, we changed our pricing on certain variable rate callable advance products. As a result, we experienced a decrease in advance balances and a change in the composition of our advance portfolio to a higher percentage of fixed rate advances during the second and third quarters of 2017. For additional discussion on our funding strategies, refertrading securities. Refer to “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Liquidity — Sources of Liquidity.”

At September 30, 2017 and December 31, 2016, advances outstanding to our five largest member borrowers totaled $74.1 billion and $92.2 billion, representing 63 and 70 percent of our total advances outstanding. The following table summarizes advances outstanding to our five largest member borrowers at September 30, 2017 (dollars in millions):
 Amount % of Total
Wells Fargo Bank, N.A.$59,895
 51
Transamerica Life Insurance Company1
4,145
 3
Truman Insurance Company2
3,588
 3
ZB, National Association3,250
 3
Principal Life Insurance Company3,250
 3
Total par value$74,128
 63

1Excludes $1.5 billion of advances with Transamerica Premier Life Insurance Company, an affiliate of Transamerica Life Insurance Company.

2Represents a captive insurance company member whose membership will terminate within five years of the Finance Agency’s final rule on membership that became effective February 19, 2016.

We manage our credit exposure to advances through an approach that provides for an established credit limit for each borrower, ongoing reviews of each borrower’s financial condition, and detailed collateral and lending policies to limit risk of loss while balancing borrowers’ needs for a reliable source of funding. In addition, we lend to our borrowers in accordance with the Federal Home Loan Bank Act of 1932 (FHLBank Act), Federal Housing Finance Agency (Finance Agency) regulations, and other applicable laws and regulations.

The FHLBank Act requires that we obtain sufficient collateral on advances to protect against losses. We have never experienced a credit loss on an advance to a member or eligible housing associate. Based upon our collateral and lending policies, the collateral held as security, and the repayment history on advances, management has determined that there were no probable credit losses on our advances as of September 30, 2017 and December 31, 2016. Accordingly, we have not recorded any allowance for credit losses on our advances. See additional discussion regarding our collateral requirements in “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Risk Management — Credit Risk — Advances.”Hedging Activities” for additional discussion on our economic derivatives.




54
Hedging Activities

We use derivatives to manage interest rate risk. Accounting rules affect the timing and recognition of income and expense on derivatives and therefore we may be subject to income statement volatility.

If a hedging activity qualifies for hedge accounting treatment (fair value hedge), the net interest settlements of interest receivables or payables related to the derivative are recognized as interest income or expense in the relevant income statement caption consistent with the hedged asset or liability. The net fair value gains and losses of derivatives and hedged items designated in fair value hedge relationships are also recognized as interest income or expense. Amortization of basis adjustments from terminated hedges is also recorded in interest income or expense.

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

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

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

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

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

4    Represents the net gains (losses) on those trading securities and fair value option instruments in which we have entered into a corresponding economic derivative to hedge the risk of changes in fair value. As a result, this line item may not agree to the Statements of Income.

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

55
The following table categorizes the net effect of hedging activities on net income by product (dollars in millions):
For the Three Months Ended March 31, 2021
Net Effect of Hedging ActivitiesAdvancesInvestmentsMortgage
Loans		BondsTotal
Net interest income:
Net amortization/accretion1
$(8)$(9)$(1)$(1)$(19)
Net gains (losses) on derivatives and hedged items2 11 — (1)12 
Net interest settlements on derivatives2
(48)(32)— 38 (42)
Total impact to net interest income(54)(30)(1)36 (49)
Other income (loss):
Net gains (losses) on derivatives3
— 17 — — 17 
Net gains (losses) on trading securities4
— (22)— — (22)
Total impact to other income (loss)— (5)— — (5)
Total net effect of hedging activities5
$(54)$(35)$(1)$36 $(54)

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

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

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

4    Represents the net gains (losses) on those trading securities in which we have entered into a corresponding economic derivative to hedge the risk of changes in fair value. As a result, this line item may not agree to the Statements of Income.

5    The hedging activity tables do not include the interest component on the related hedged items or the gross prepayment fee income on terminated advance or investment hedge relationships.
NET AMORTIZATION/ACCRETION
Amortization/accretion varies from period to period depending on our hedge relationship termination activities and the maturity, call, or prepayment of assets or liabilities previously in hedge relationships. During the three months ended March 31, 2022, we experienced decreased amortization activity when compared to the same period last year, primarily due to a decline in prepayments of advances and investments that were previously in a hedge relationship.

NET GAINS (LOSSES) ON DERIVATIVES AND HEDGED ITEMS

The net gains and losses on derivatives and hedged items designated in fair value hedge relationships are recorded in net interest income. During the three months ended March 31, 2022, we recorded net gains of $4 million on our fair value hedge relationships compared to net gains of $12 million in the same period last year, which primarily stemmed from market volatility and the impact it had on interest rates.

NET INTEREST SETTLEMENTS ON DERIVATIVES

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

NET GAINS (LOSSES) ON DERIVATIVES

We utilize economic derivatives to manage certain risks on our Statements of Condition. Gains and losses on economic derivatives are driven by changes in interest rates and volatility and include interest settlements. Interest settlements represent the interest component on economic derivatives. These amounts vary from period to period depending on our hedging activities and interest rates. During the three months ended March 31, 2022, net gains on our economic derivatives remained relatively stable when compared to the same period last year. The changes were primarily driven by changes in the fair value of interest rate swaps used to economically hedge our investment securities portfolio and discount notes held under fair value option. These fair value changes were primarily driven by market volatility resulting from changes in interest rates.



56
Other Expense
The following table shows the components of other expense (dollars in millions):
For the Three Months Ended March 31,
 20222021
Compensation and benefits$18 $21 
Contractual services5 4 
Professional fees3 4 
Other operating expenses4 5 
Total operating expenses30 34 
Federal Housing Finance Agency3 2 
Office of Finance2 2 
Other, net2 2 
Total other expense$37 $40 

Other expense decreased for the three months ended March 31, 2022 compared to the same period last year. The decrease was driven primarily by a decline in compensation and benefits resulting from a lower employee headcount.

STATEMENTS OF CONDITION

Mortgage Loans


The following tables summarize informationInterest income on our mortgage loans held for portfolio (dollars in millions):
 September 30, 2017
 MPF MPP Total
Fixed rate conventional loans$6,104
 $299
 $6,403
Fixed rate government-insured loans501
 33
 534
Total unpaid principal balance6,605
 332
 6,937
Premiums87
 11
 98
Discounts(6) (1) (7)
Basis adjustments from mortgage loan commitments5
 —
 5
Total mortgage loans held for portfolio6,691
 342
 7,033
Allowance for credit losses(2) —
 (2)
Total mortgage loans held for portfolio, net$6,689
 $342
 $7,031
 December 31, 2016
 MPF MPP Total
Fixed rate conventional loans$5,907
 $361
 $6,268
Fixed rate government-insured loans513
 42
 555
Total unpaid principal balance6,420
 403
 6,823
Premiums82
 14
 96
Discounts(8) (1) (9)
Basis adjustments from mortgage loan commitments5
 —
 5
Total mortgage loans held for portfolio6,499
 416
 6,915
Allowance for credit losses(2) —
 (2)
Total mortgage loans held for portfolio, net$6,497
 $416
 $6,913

Our total mortgage loans increased slightly at September 30, 2017remained stable during the three months ended March 31, 2022 when compared to December 31, 2016. The increase was primarily due to loan purchases exceeding principal paydowns. For additional discussion on ourthe same period in 2021. A decline in interest income resulting from lower average mortgage loan credit risk, refer to “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Risk Management — Credit Risk — Mortgage Assets.”


Investments

The following table summarizes the carrying value of our investments (dollars in millions):
 September 30, 2017 December 31, 2016
 Amount % of Total Amount % of Total
Short-term investments1
       
Interest-bearing deposits$—
 — $1
 —
Securities purchased under agreements to resell5,500
 14 5,925
 14
Federal funds sold6,770
 17 5,095
 12
Total short-term investments12,270
 31 11,021
 26
Long-term investments2
       
 Interest-bearing deposits1
 — 1
 —
Mortgage-backed securities       
GSE single-family3,974
 10 4,804
 12
GSE multifamily11,292
 29 12,156
 30
Other U.S. obligations single-family3
3,859
 10 3,864
 9
Other U.S. obligations commercial3
3
 — 4
 —
Private-label residential13
 — 16
 —
Total mortgage-backed securities19,141
 49 20,844
 51
Non-mortgage-backed securities       
Other U.S. obligations3
3,410
 9 3,745
 9
GSE and Tennessee Valley Authority obligations2,530
 6 3,359
 8
State or local housing agency obligations1,434
 4 1,697
 4
Other555
 1 551
 2
Total non-mortgage-backed securities7,929
 20 9,352
 23
Total long-term investments27,071
 69 30,197
 74
Total investments$39,341
 100 $41,218
 100

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

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

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

Our investments decreased $1.9 billion or five percent at September 30, 2017 when compared to December 31, 2016 due primarily to maturities of MBS and agency securities, partiallybalances was fully offset by money market investment purchases to increase our liquidity position during the quarter.a decrease in net premium amortization on mortgage loans resulting from a slowdown in prepayment activity.


The Finance Agency limits our investments in MBS by requiring that the total book value of our MBS not exceed three times regulatory capital at the time of purchase. Our ratio of MBS to regulatory capital was 2.44 and 2.58 at September 30, 2017 and December 31, 2016.

We evaluate AFS and HTM securities in an unrealized loss position for other-than-temporary-impairment (OTTI) on at least a quarterly basis. As part of our OTTI evaluation, we consider our intent to sell each debt security and whether it is more likely than not that we will be required to sell the security before its anticipated recovery. If either of these conditions is met, we will recognize an OTTI charge to earnings equal to the entire difference between the security’s amortized cost basis and its fair value at the reporting date. For securities in an unrealized loss position that meet neither of these conditions, we perform analyses to determine if any of these securities are other-than-temporarily impaired. At September 30, 2017 we did not consider any of these securities to be other-than-temporarily-impaired. Refer to “Item 1. Financial Statements — Note 6 — Other-Than-Temporary Impairment” for additional information on our OTTI analysis performed at September 30, 2017.

Consolidated Obligations


Interest expense on bonds decreased during the three months ended March 31, 2022 when compared to the same period in 2021 due primarily to lower average balances and the call or maturity of higher costing debt.

Interest expense on discount notes increased due to the rising interest rate environment and our increased utilization of lower-cost discount notes in an effort to capture attractive funding, match the repricing structures on assets, and/or meet our liquidity requirements.

Other Income (Loss)

    The following table summarizes the components of other income (loss) (dollars in millions):
For the Three Months Ended
March 31,
20222021
Net gains (losses) on trading securities$(41)$(22)
Net gains (losses) on financial instruments held under fair value option22 — 
Net gains (losses) on derivatives16 17 
Standby letter of credit fees2 3 
Other, net1 4 
Total other income (loss)$— $2 
Other income was relatively stable during the three months ended March 31, 2022 when compared to the same period in 2021. During the three months ended March 31, 2022, we recorded net combined losses of $3 million on our trading securities, fair value option instruments, and economic derivatives compared to net losses of $5 million for the same period in 2021. These changes in fair value were primarily driven by market volatility and the impact it had on interest rates, as well as credit spreads on our fixed rate trading securities. Refer to “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations — Hedging Activities” for additional discussion on our economic derivatives.


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Hedging Activities

We use derivatives to manage interest rate risk. Accounting rules affect the timing and recognition of income and expense on derivatives and therefore we may be subject to income statement volatility.

If a hedging activity qualifies for hedge accounting treatment (fair value hedge), the net interest settlements of interest receivables or payables related to the derivative are recognized as interest income or expense in the relevant income statement caption consistent with the hedged asset or liability. The net fair value gains and losses of derivatives and hedged items designated in fair value hedge relationships are also recognized as interest income or expense. Amortization of basis adjustments from terminated hedges is also recorded in interest income or expense.

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

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

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

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

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

4    Represents the net gains (losses) on those trading securities and fair value option instruments in which we have entered into a corresponding economic derivative to hedge the risk of changes in fair value. As a result, this line item may not agree to the Statements of Income.

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

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The following table categorizes the net effect of hedging activities on net income by product (dollars in millions):
For the Three Months Ended March 31, 2021
Net Effect of Hedging ActivitiesAdvancesInvestmentsMortgage
Loans		BondsTotal
Net interest income:
Net amortization/accretion1
$(8)$(9)$(1)$(1)$(19)
Net gains (losses) on derivatives and hedged items2 11 — (1)12 
Net interest settlements on derivatives2
(48)(32)— 38 (42)
Total impact to net interest income(54)(30)(1)36 (49)
Other income (loss):
Net gains (losses) on derivatives3
— 17 — — 17 
Net gains (losses) on trading securities4
— (22)— — (22)
Total impact to other income (loss)— (5)— — (5)
Total net effect of hedging activities5
$(54)$(35)$(1)$36 $(54)

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

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

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

4    Represents the net gains (losses) on those trading securities in which we have entered into a corresponding economic derivative to hedge the risk of changes in fair value. As a result, this line item may not agree to the Statements of Income.

5    The hedging activity tables do not include the interest component on the related hedged items or the gross prepayment fee income on terminated advance or investment hedge relationships.
NET AMORTIZATION/ACCRETION
Amortization/accretion varies from period to period depending on our hedge relationship termination activities and the maturity, call, or prepayment of assets or liabilities previously in hedge relationships. During the three months ended March 31, 2022, we experienced decreased amortization activity when compared to the same period last year, primarily due to a decline in prepayments of advances and investments that were previously in a hedge relationship.

NET GAINS (LOSSES) ON DERIVATIVES AND HEDGED ITEMS

The net gains and losses on derivatives and hedged items designated in fair value hedge relationships are recorded in net interest income. During the three months ended March 31, 2022, we recorded net gains of $4 million on our fair value hedge relationships compared to net gains of $12 million in the same period last year, which primarily stemmed from market volatility and the impact it had on interest rates.

NET INTEREST SETTLEMENTS ON DERIVATIVES

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

NET GAINS (LOSSES) ON DERIVATIVES

We utilize economic derivatives to manage certain risks on our Statements of Condition. Gains and losses on economic derivatives are driven by changes in interest rates and volatility and include interest settlements. Interest settlements represent the interest component on economic derivatives. These amounts vary from period to period depending on our hedging activities and interest rates. During the three months ended March 31, 2022, net gains on our economic derivatives remained relatively stable when compared to the same period last year. The changes were primarily driven by changes in the fair value of interest rate swaps used to economically hedge our investment securities portfolio and discount notes held under fair value option. These fair value changes were primarily driven by market volatility resulting from changes in interest rates.



56
Other Expense
The following table shows the components of other expense (dollars in millions):
For the Three Months Ended March 31,
 20222021
Compensation and benefits$18 $21 
Contractual services5 4 
Professional fees3 4 
Other operating expenses4 5 
Total operating expenses30 34 
Federal Housing Finance Agency3 2 
Office of Finance2 2 
Other, net2 2 
Total other expense$37 $40 

Other expense decreased for the three months ended March 31, 2022 compared to the same period last year. The decrease was driven primarily by a decline in compensation and benefits resulting from a lower employee headcount.

STATEMENTS OF CONDITION

Financial Highlights

    Our total assets increased to $87.7 billion at March 31, 2022 from $85.9 billion at December 31, 2021. Our total liabilities increased to $81.8 billion at March 31, 2022 from $80.0 billion at December 31, 2021. Total capital increased to $5.9 billion at March 31, 2022 from $5.8 billion at December 31, 2021. See further discussion of changes in our financial condition in the appropriate sections that follow.

Cash and Due from Banks

At March 31, 2022, our total cash balance was $71 million compared to $295 million at December 31, 2021, a decrease of $224 million. Our cash balance is influenced by our liquidity needs, member advance activity, market conditions, and the availability of attractive investment opportunities.

Advances

The following table summarizes our advances by type of institution (dollars in millions):
 March 31,
2022		December 31,
2021
Commercial banks$8,804 $9,095 
Savings institutions560 671 
Credit unions4,248 4,054 
Insurance companies31,086 29,681 
CDFIs14 16 
Total member advances44,712 43,517 
Housing associates530 515 
Non-member borrowers105 107 
Total par value$45,347 $44,139 

Our total advance par value increased $1.2 billion or three percent at March 31, 2022 when compared to December 31, 2021, primarily due to an increase in borrowings by insurance companies.


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The following table summarizes our advances by interest rate payment terms (dollars in millions):
March 31, 2022December 31, 2021
Amount% of TotalAmount% of Total
Fixed rate$28,528 63 $27,053 61 
Fixed rate, putable1,000 2 1,139 2 
Variable rate949 2 1,212 3 
Variable rate, callable1
13,517 30 13,319 30 
Other2
1,348 3 1,416 4 
Overdrawn demand deposit accounts5 — — — 
Total advance par value45,347 100 44,139 100 
Premiums12 14 
Discounts(1)(2)
Fair value hedging adjustments(585)(40)
Total$44,773 $44,111 

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

Fair value hedging adjustments changed $545 million at March 31, 2022 when compared to December 31, 2021 due primarily to the impact of interest rates on our cumulative fair value adjustments on advances in active hedge relationships, coupled with an increase in closed basis adjustments on terminated advance hedge relationships.

At March 31, 2022 and December 31, 2021, advances outstanding to our five largest member borrowers totaled $17.9 billion and $17.0 billion, which represented 39 percent of our total advances outstanding at each period end. The following table summarizes advances outstanding to our five largest member borrowers at March 31, 2022 (dollars in millions):
Amount% of Total Advances
EquiTrust Life Insurance Company$4,550 10 
Principal Life Insurance Company4,250 9 
Midland National Life Insurance Company1
3,216 7 
Transamerica Life Insurance Company2,995 7 
Athene Annuity and Life Company2
2,856 6 
Total par value$17,867 39 

1    Excludes $1.5 billion of advances with North American Company for Life and Health Insurance, an affiliate of Midland National Life Insurance Company.

2    Excludes $0.4 billion of advances with Athene Annuity & Life Assurance Company, an affiliate of Athene Annuity and Life Company.    

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

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Mortgage Loans

    The following table summarizes information on our mortgage loans held for portfolio (dollars in millions):
March 31,
2022		December 31, 2021
Fixed rate conventional loans$7,206 $7,063 
Fixed rate government-insured loans406 416 
Total unpaid principal balance7,612 7,479 
Premiums95 96 
Discounts(3)(2)
Basis adjustments from mortgage loan purchase commitments1 6 
Total mortgage loans held for portfolio7,705 7,579 
Allowance for credit losses(3)(1)
Total mortgage loans held for portfolio, net$7,702 $7,578 

Our total mortgage loans increased $0.1 billion or two percent at March 31, 2022 when compared to December 31, 2021. The increase was primarily due to new loan purchases exceeding principal paydowns, as we saw a slowdown in prepayment activity driven by the increase in mortgage rates.

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

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Investments

The following table summarizes the carrying value of our investments (dollars in millions):
March 31, 2022December 31, 2021
Amount% of TotalAmount% of Total
Short-term investments1
Interest-bearing deposits$947 3 $416 1 
Securities purchased under agreements to resell10,750 31 12,450 37 
Federal funds sold6,200 18 4,690 14 
U.S. Treasury obligations2
552 1 — — 
Total short-term investments18,449 53 17,556 52 
Long-term investments3
MBS
GSE single-family947 3 1,037 3 
GSE multifamily7,981 23 7,598 23 
U.S. obligations single-family2
2,727 8 2,911 9 
Private-label residential4 — 5 — 
Total MBS11,659 34 11,551 35 
Non-MBS
U.S. Treasury obligations2
1,228 4 496 1 
Other U.S. obligations2
1,142 3 1,258 4 
GSE and TVA obligations1,006 3 1,417 4 
State or local housing agency obligations673 2 675 2 
Other4
464 1 489 2 
Total non-MBS4,513 13 4,335 13 
Total long-term investments16,172 47 15,886 48 
Total investments$34,621 100 $33,442 100 

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

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

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

4    Consists primarily of taxable municipal bonds.


Our investments increased $1.2 billion or four percent at March 31, 2022 when compared to December 31, 2021 due primarily to the purchase of U.S. Treasury obligations and MBS. At March 31, 2022 and December 31, 2021, we had GSE MBS purchases with a total par value of $471 million and $289 million that were traded but not yet settled. These investments were recorded as “available-for-sale” on our Statements of Condition with a corresponding payable recorded in “other liabilities.”

The Finance Agency limits our investments in MBS by requiring that the balance of our MBS not exceed three times regulatory capital at the time of purchase. Our ratio of MBS to regulatory capital was 2.00 and 1.99 at March 31, 2022 and December 31, 2021.

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

Consolidated obligations, which include bonds and discount notes, are the primary source of funds to support our advances, mortgage loans, and investments. At September 30, 2017March 31, 2022 and December 31, 2016,2021, the carrying value of consolidated obligations for which we are primarily liable totaled $155.3$79.2 billion and $170.8$77.6 billion.


DISCOUNT NOTES


The following table summarizes our discount notes, all of which are due within one year (dollars in millions):
September 30,
2017		 December 31,
2016		March 31,
2022		December 31,
2021
Par value$53,074
 $81,019
Par value$36,800 $22,355 
Discounts and concession fees1
(98) (72)
Discounts and concession fees1
(34)(6)
Fair value option valuation adjustmentsFair value option valuation adjustments(23)(1)
Total$52,976
 $80,947
Total$36,743 $22,348 


1Concessions represent fees paid to dealers in connection with the issuance of certain consolidated obligation discount notes.
1    Concessions represent fees paid to dealers in connection with the issuance of certain consolidated obligation discount notes.
    
Our discount notes decreased $28.0increased $14.4 billion or 3564 percent at September 30, 2017March 31, 2022 when compared to December 31, 2016. The decrease was primarily due to2021. We increased our increased use of bonds in placeutilization of discount notes in an effort to reducecapture attractive funding, match the maturity gap betweenrepricing structures on assets, and/or meet our assets and liabilities and in response to changes in our advance products outstanding. For additional information on our discount notes and maturity gap, refer to “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Liquidity — Sources of Liquidity.”liquidity requirements.


BONDS


The following table summarizes information on our bonds (dollars in millions):
March 31,
2022		December 31,
2021
Par value$42,478 $55,079 
Premiums123 138 
Discounts and concession fees1
(17)(17)
Fair value hedging adjustments(121)5 
Total$42,463 $55,205 
 September 30,
2017		 December 31,
2016
Total par value$102,456
 $90,053
Premiums210
 254
Discounts and concession fees1
(65) (79)
Fair value hedging adjustments(307) (330)
Total bonds$102,294
 $89,898


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


Our bonds increased $12.4decreased $12.7 billion or 1423 percent at September 30, 2017 when compared to DecemberMarch 31, 2016. The increase was driven by our increased use of bonds in place of discount notes to reduce the maturity gap between our assets and liabilities and in response to changes in our advance products outstanding. Fair value hedging adjustments changed $23 million at September 30, 20172022 when compared to December 31, 20162021. Although the balance declined from the prior year-end due primarily to the maturity of long-term bonds, during the three months ended March 31, 2022, we continued to utilize short-term bonds in an effort to capture attractive funding, match the repricing structures on assets, and/or meet our liquidity requirements. Fair value hedging adjustments also changed $126 million at March 31, 2022 when compared to December 31, 2021due primarily to the impact of interest rates on our cumulative fair value adjustments on bonds in active hedge relationships.

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


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Deposits

Deposit levels will vary based on member alternatives for short-term investments. Our deposits decreased $179 million or 16 percent at September 30, 2017 when compared to December 31, 2016 due to a decrease in interest-bearing deposits.

Mandatorily Redeemable Capital Stock

We reclassify capital stock subject to redemption from equity to a liability (mandatorily redeemable capital stock) at the time shares meet the definitionTable of a mandatorily redeemable financial instrument. This occurs after a member provides written notice of redemption, gives notice of intention to withdraw from membership, becomes ineligible for continuing membership, or attains non-member status by merger or consolidation, charter termination, or other involuntary termination from membership.Contents

Our total mandatorily redeemable capital stock balance decreased $242 million at September 30, 2017 when compared to December 31, 2016 due in part to the repurchase of $148 million in capital stock outstanding to certain captive insurance company members in the first quarter of 2017. The repurchase was in response to the Finance Agency final rule affecting membership eligibility that became effective February 19, 2016. In accordance with the final rule, on February 17, 2017, we terminated the membership of all captive insurance company members that were admitted as members after September 12, 2014 (the date the Finance Agency proposed this rule) and repurchased outstanding capital stock to these captive insurance company members in the amount of $148 million. Captive insurance company members that were admitted as members prior to September 12, 2014 will also have their memberships terminated no later than February 19, 2021. At September 30, 2017 and December 31, 2016, our mandatorily redeemable capital stock totaled $422 million and $664 million.

Capital


The following table summarizes information on our capital (dollars in millions):
March 31,
2022		December 31,
2021
Capital stock$3,523 $3,364 
Retained earnings2,401 2,390 
Accumulated other comprehensive income (loss)21 84 
Total capital$5,945 $5,838 
 September 30,
2017		 December 31,
2016
Capital stock$5,624
 $5,917
Additional capital from merger—
 52
Retained earnings1,774
 1,450
Accumulated other comprehensive income (loss)100
 (18)
Total capital$7,498
 $7,401


Our capital increasedremained relatively stable at September 30, 2017March 31, 2022 when compared to December 31, 2016. The slight increase was due to an increase in retained earnings due to net income earned and an increase in AOCI due primarily to changes in unrealized gains on our MBS GSE and agency securities. These increases were partially offset by a decline in capital stock due to a decrease in member activity and a decline in additional capital from merger driven by dividend payments paid during 2017. As a result of the first quarter dividend payment, the additional capital from merger balance was depleted.2021. Refer to “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Capital — Capital Stock”Capital” for additional information on our capital stock activity.capital.


Derivatives


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


The following table categorizes the notional amount of our derivatives by type (dollars in millions):
September 30,
2017		 December 31,
2016		March 31,
2022		December 31,
2021
Interest rate swaps   Interest rate swaps
Noncallable$51,367
 $49,887
Noncallable$60,923 $77,770 
Callable by counterparty2,228
 3,287
Callable by counterparty3,612 3,396 
Callable by the Bank172
 136
Total interest rate swaps53,767
 53,310
Total interest rate swaps64,535 81,166 
Forward settlement agreements (TBAs)108
 94
Forward settlement agreements (TBAs)153 115 
Mortgage delivery commitments114
 102
Mortgage loan purchase commitmentsMortgage loan purchase commitments154 115 
Total notional amount$53,989
 $53,506
Total notional amount$64,842 $81,396 
    
The notional amount of our derivative contracts remained relatively stabledecreased $16.6 billion or 20 percent at September 30, 2017March 31, 2022 when compared to December 31, 2016.2021. During 2017,the three months ended March 31, 2022, we continuedreduced our use of swapped consolidated obligation bonds in additionresponse to LIBOR indexed debt to capture attractive funding, match repricing structures on advances,market conditions. For additional discussion regarding our use of derivatives, see “Item 2. Management’s Discussion and provide additional liquidity.Analysis of Financial Condition and Results of Operations — Risk Management — Credit Risk — Derivatives.”

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LIQUIDITY AND CAPITAL RESOURCES


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


Liquidity


SOURCES OF LIQUIDITY


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


Our primary source of liquidity is proceeds from the issuance of consolidated obligations (bonds and discount notes) in the capital markets. During the ninethree months ended September 30, 2017,March 31, 2022, proceeds from the issuance of bonds and discount notes were $53.2$8.7 billion and $162.9$83.9 billion compared to $77.9$15.9 billion and $209.4$67.3 billion for the same period in 2016. We2021. During the three months ended March 31, 2022, we continued to issue term fixedutilize discount notes and floating rate, callable, and step-up rateshort-term consolidated obligation bonds as well as shorter-term discount notesin an effort to capture attractive funding, match the repricing structures on advances, and provide additional liquidity.assets, and/or meet our liquidity requirements.


We maintained continual access to funding and adapted our debt issuance to meet the needs of our members, which has generally favored the issuance of shorter-term debt. Access to short-term debt markets has been reliable because investors, driven by increased liquidity preferencespreference and risk aversion, including the effects of money market fund reform,our government affiliation, have sought the FHLBanks' short-termFHLBanks’ debt as an asset of choice, which has led to advantageous funding opportunities and increased utilization of debt maturing in one year or less.choice. However, due to the short-term maturity of the debt, we may be exposed to additional risks associated with refinancing and our ability to access the capital markets.



We are focused on maintaining an adequate liquidity balance and a funding balance between our financial assets and financial liabilities and work collectively with the other FHLBanks to manage the system-wide liquidity and funding needs. We monitor our debt refinancing risk and continue to enhance our liquidity position primarily by tracking the maturities of financial assets and funding management.financial liabilities. In measuringmanaging and monitoring the levelamounts of assets requiring refinancing,that require refunding, we consider the maturity characteristicscontractual maturities of our assets and liabilities. The following table presents the composition of ourfinancial assets and liabilities, by maturity (dollars in millions):
  September 30, 2017 December 31, 2016
  1 year or less > 1 year Total 1 year or less > 1 year Total
Assets            
Investments1
 $14,786
 $24,136
 $38,922
 $14,265
 $26,653
 $40,918
Advances2
 47,049
 70,456
 117,505
 22,533
 109,004
 131,537
Mortgage loans held for portfolio3
 934
 6,003
 6,937
 862
 5,961
 6,823
Other interest earning assets4
 —
 —
 —
 200
 —
 200
   Subtotal $62,769
 $100,595
 163,364
 $37,860
 $141,618
 179,478
Other5
     1,181
     1,127
Total assets 
 
 $164,545
     $180,605
             
Liabilities            
Consolidated obligation bonds6
 $49,500
 $52,956
 $102,456
 $47,733
 $42,320
 $90,053
Consolidated obligation discount notes6
 53,074
 —
 53,074
 81,019
 —
 81,019
   Subtotal $102,574
 $52,956
 155,530
 $128,752
 $42,320
 171,072
Other5
     1,517
     2,132
Total liabilities 
 
 $157,047
     $173,204
Maturity gap $39,805
   
 $90,892
    
Maturity gap percentage7
 24%   
 50%    

1Represents the principal balance of interest-bearing deposits, securities purchased under agreements to resell, Federal funds sold, trading securities, AFS securities, and HTM securities. MBS and asset-backed investments are based on expected maturity, which factors in projected prepayments; all other investments are based on contractual maturity. Certain assumptions are factored into the greater than one year bucket as they are not monitored as part of the maturity gap.

2Represents the principal balance of advances based on contractual maturity. At September 30, 2017 and December 31, 2016, 34 percent and 60 percent of our advances were callable, many of which have call dates in the next year. For further detail of our advance call dates, refer to “Item 1. Financial Statements — Note 7 — Advances.”

3Represents the principal balance of MPF and MPP mortgage loans based on expected maturity, which factors in projected prepayments. Certain assumptions are factored into the greater than one year bucket as they are not monitored as part of the maturity gap.

4Represents loans outstanding to other FHLBanks at December 31, 2016. There were no loans outstanding to other FHLBanks at September 30, 2017.

5Represents all other assets or liabilities reflected in the Bank’s Statements of Condition that are not monitored as part of the maturity gap.

6Represents the principal balance of consolidated obligations based on contractual maturity.

7The maturity gap percentage is calculated as the maturity gap divided by total assets.

During the nine months ended September 30, 2017, we continued to monitor the maturity gap between our assets and liabilities and made efforts to reduce our maturity gap percentage to reduce the level of refinancing risk that could potentially occur if we could not obtain funding in the capital markets due to an unforeseen event. Our maturity gap objective in the future may vary based on a number ofas well as certain assumptions regarding expected cash flows (i.e., estimated prepayments). External factors, including our member borrowing needs, supply and demand in the debt markets, and other factors.factors may affect liquidity balances and the funding balances between financial assets and financial liabilities. Refer to “Item 1. Financial Statements” for additional information regarding the contractual maturities of certain of our financial assets and liabilities.


Our ability to raise funds in the capital markets as well as our cost of borrowing may be affected by our credit ratings. As of October 31, 2017,April 30, 2022, our consolidated obligations were rated AA+/A-1+ by Standard and Poor’s and Aaa/P-1 by Moody’s and both ratings had a stable outlook. For further discussion of how credit rating changes and our ability to access the capital markets may impact us in the future, refer to “Item 1A. Risk Factors” in our 20162021 Form 10-K.


Although we are primarily liable for the portion of consolidated obligations whichthat are issued on our behalf, we are also jointly and severally liable with the other FHLBanks for the payment of principal and interest on all consolidated obligations issued by the FHLBank System. At September 30, 2017March 31, 2022 and December 31, 2016,2021, the total par value of outstanding consolidated obligations for which we are primarily liable was $155.5$79.3 billion and $171.1$77.4 billion. At September 30, 2017March 31, 2022 and December 31, 2016,2021, the total par value of outstanding consolidated obligations issued on behalf of other FHLBanks for which we are jointly and severally liable was approximately $873.2$620.2 billion and $818.2$575.5 billion.



The Office of Finance and FHLBanks have contingency plans in place that prioritize the allocation of proceeds from the issuance of consolidated obligations during periods of financial distress if consolidated obligations cannot be issued in sufficient amounts to satisfy all FHLBank demand. In the event of significant market disruptions or local disasters, our President or his designee is authorized to establish interim borrowing relationships with other FHLBanks. To provide further access to funding, the FHLBank Act also authorizes the U.S. Treasury to directly purchase new issue consolidated obligations of the GSEs, including FHLBanks, up to an aggregate principal amount of $4.0 billion. As of October 31, 2017,April 30, 2022, no purchases had been made by the U.S. Treasury under this authorization.


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USES OF LIQUIDITY


We use our available liquidity, including proceeds from the issuance of consolidated obligations, primarily to repay consolidated obligations, fund advances, and purchase investments. During the ninethree months ended September 30, 2017,March 31, 2022, repayments of consolidated obligations totaled $231.7$90.9 billion compared to $250.6$83.8 billion for the same period in 2016. A portion of these payments were due to the call of certain bonds in an effort to better match our projected asset cash flows. During the nine months ended September 30, 2017 and 2016, we called bonds with a total par value of $110 million and $1.6 billion.2021.


During the ninethree months ended September 30, 2017,March 31, 2022, advance disbursements totaled $197.2$35.4 billion compared to $171.2$25.4 billion for the same period in 2016.2021. Advance disbursements will vary from period to period depending on member needs. During the ninethree months ended September 30, 2017,March 31, 2022, investment purchases (excluding overnight investments) totaled $76.6$2.1 billion compared to $88.7$0.6 billion for the same period in 2016. Investment purchases during each period were primarily driven by2021. During the purchase ofthree months ended March 31, 2022, we purchased money market investments including secured resale agreementsand U.S. Treasury securities in an effort to manage our liquidity position.position, and also began purchasing agency MBS.


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


LIQUIDITY REQUIREMENTS
We are subject to certain liquidity requirements set forth by the Finance Agency regulations mandate threeand maintain a liquidity requirements. First, we are requiredcontingency funding plan designed to maintain contingent liquidity sufficientenable us to meet our obligations and the liquidity needs which shall, at a minimum, cover five calendar days of inability to access the consolidated obligation debt markets. Second, we are required to have available at all times an amount greater than or equal to members’ current deposits invested in advances with maturities not to exceed five years, deposits in banks or trust companies, and obligations of the U.S. Treasury. Third, we are required to maintain,our members in the aggregate, unpledged qualifying assets in an amountevent of short-term capital market disruptions, or operational disruptions at least equalour Bank and/or the Office of Finance. For additional details on these liquidity requirements, refer to the amount of our participation in total consolidated obligations outstanding. At September 30, 2017 and December 31, 2016, we were in compliance with all three of the 2021 Form 10-K. Our primary liquidity requirement is discussed further below.
Finance Agency liquidity requirements.
In addition to the liquidity measures previously discussed, the Finance Agency has providedAdvisory Bulletin on FHLBank Liquidity (the Liquidity Guidance AB) – This guidance requires us with guidance to maintain sufficient liquidity in an amount at least equalfor a period of 10 to our anticipated30 calendar days. The base case scenario requires 20 days of positive daily cash outflows under two different scenarios. One scenario (roll-off scenario)balances and assumes that we cannot access the capital markets to issue debt, for a period of 10 to 20 days with initial guidance set at 15 days and that during that time members do not renew any maturing, prepaid, and called advances. The second scenario (renew scenario) assumes that we cannot access the capital markets to issue debt for a period of three to seven days with initial guidance set at five days and that during that time we will automatically renew maturing and called advances for all members, exceptincluding very large, highly-rated members. This guidance is designedmembers, and we hold additional liquid assets equal to protect against temporary disruptions in the debt markets that could lead to a reduction in market liquidity and thus the inability for us to provide advances toone percent of our members.letters of credit balances. At September 30, 2017March 31, 2022 and December 31, 2016,2021, we were in compliance with this base case liquidity guidance.
The Liquidity Guidance AB also specifies appropriate funding gap limits to address the risks associated with an FHLBank having too large a mismatch between the contractual maturities of its assets and liabilities. A funding gap measures the difference between assets and liabilities that are scheduled to mature during a specified period and is expressed as a percentage of total assets. The guidance provides funding gap limits within the range of negative 10 percent to negative 20 percent for a three-month horizon and negative 25 percent to negative 35 percent for a one-year horizon. At March 31, 2022 and December 31, 2021, we adhered to these funding gap requirements.
Capital


CAPITAL REQUIREMENTS


We are subject to threecertain regulatory capital requirements. First, the FHLBank Act requires that we maintain at all times permanent capital greater than or equal to the sum of our credit, market, and operationsoperational risk capital requirements, all calculated in accordance with Finance Agency regulations. Only permanent capital, defined as Class B capital stock (including mandatorily redeemable capital stock),MRCS) and retained earnings, can satisfy this risk-based capital requirement. Second, the FHLBank Act requires a minimum four percent capital-to-asset ratio, which is defined as total regulatory capital divided by total assets. Total regulatory capital includes Class B capital stock (including mandatorily redeemable capital stock), additional capital from merger,MRCS) and retained earnings. It does not include AOCI. Third, the FHLBank Act imposes a five percent minimum leverage ratio, which is defined as the sum of permanent capital weighted 1.5 times and nonpermanent capital weighted 1.0 times, divided by total assets. Nonpermanent capital includes additional capital from merger. At September 30, 2017March 31, 2022 and December 31, 2016,2021, we did not hold any nonpermanent capital. At March 31, 2022 and December 31, 2021, we were in compliance with all three of the Finance Agency’s regulatory capital requirements.

    In addition to the requirements previously discussed, the Finance Agency Advisory Bulletin on capital stock (the Capital Stock AB) requires each FHLBank to maintain at all times a ratio of at least two percent of capital stock to total assets. For purposes of the Capital Stock AB, capital stock includes MRCS. The capital stock to total assets ratio is measured on a daily average basis at month end. At March 31, 2022 and December 31, 2021, we were in compliance with the Capital Stock AB.

Refer to “Item 1. Financial Statements — Note 128 — Capital” for additional information.information on our regulatory capital requirements.

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

We reclassify capital stock subject to redemption from equity to a liability (mandatorily redeemable capital stock) when a member provides written notice of redemption, gives notice of intention to withdraw from membership, becomes ineligible for continuing membership, or attains non-member status by merger or consolidation, charter termination, or other involuntary termination from membership.


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

Capital stock owned by members in excess of their investment requirement is deemed excess capital stock. Under our Capital Plan, we, at our discretion and upon 15 days’ written notice, may repurchase excess membership capital stock. We, at our discretion, may also repurchase excess activity-based capital stock to the extent that (i) the excess capital stock balance exceeds an operational threshold set forth in the Capital Plan, which is currently set at zero, or (ii) a member submits a notice to redeem all or a portion of the excess activity-based capital stock. At September 30, 2017 and December 31, 2016, we had no excess capital stock outstanding.

The following table summarizes our regulatory capital stock by type of member (dollars in millions):
March 31,
2022		December 31,
2021
Commercial banks$1,341 $1,305 
Savings institutions86 86 
Credit unions564 519 
Insurance companies1,531 1,453 
CDFIs1 1 
Total GAAP capital stock3,523 3,364 
Mandatorily redeemable capital stock18 29 
Total regulatory capital stock$3,541 $3,393 
 September 30,
2017		 December 31,
2016
Commercial banks$4,096
 $4,549
Savings institutions150
 121
Credit unions386
 320
Non-captive insurance companies614
 296
Captive insurance companies378
 631
Total GAAP capital stock5,624
 5,917
Mandatorily redeemable capital stock422
 664
Total regulatory capital stock$6,046
 $6,581


The decrease inOur regulatory capital stock heldremained relatively stable at September 30, 2017March 31, 2022 when compared to December 31, 2016 was due to a decline in mandatorily redeemable2021. For additional information on our capital stock, and in GAAP capital stock. The decline in the mandatorily redeemable capital stock was driven by the repurchase of capital stock held by certain captive insurance company members whose membership was terminated on February 17, 2017 in responserefer to the Finance Agency final rule affecting FHLBank membership. The decrease in GAAP capital stock was due to a decline in member activity.Item 1. Financial Statements — Note 8 — Capital.”


Additional Capital from Merger

We recognized net assets acquired from the Seattle Bank by recording the par value of capital stock issued in the transaction as capital stock, with the remaining portion of net assets acquired reflected in a capital account captioned “Additional capital from merger.” We treated this additional capital from merger as a component of total capital for regulatory capital purposes. Dividends on capital stock were paid from this account following the Merger until the balance was depleted following the first quarter dividend payment in May 2017.


Retained Earnings
Our Enterprise Risk Management Policy (ERMP) includesrisk management policies include a target level of retained earnings and additional capital from merger based on the amount we believe necessary to help protect the redemption value of capital stock, facilitate safe and sound operations, maintain regulatory capital ratios, and support our ability to pay a relatively stable dividend. We monitor our achievement of this target and may utilize tools such as restructuring our balance sheet, generating additional income, reducing our risk exposures, increasing capital stock requirements, or reducing our dividends to enable us to return toachieve our targeted level of retained earnings over time.earnings. At September 30, 2017, weMarch 31, 2022 and December 31, 2021, our actual retained earnings exceeded our retained earnings target.
We entered into a Joint Capital Enhancement Agreement (JCE Agreement) with all of the other FHLBanksFederal Home Loan Banks in February 2011. The JCE Agreement, as amended, is intended to enhance our capital position by allocating the earnings historically paid to satisfy the Resolution Funding Corporation obligation to a separate restricted retained earnings account. Under the JCE Agreement, we are required to allocate 20 percent of our quarterly net income to a separate restricted retained earnings account until the balance of that account, calculated as of the last day of each calendar quarter, equals at least one percent of our average balance of outstanding consolidated obligations for the previouscalendar quarter. The restricted retained earnings are not available to pay dividends and are presented separately inon our Statements of Condition. At September 30, 2017March 31, 2022 and December 31, 2016,2021, our restricted retained earnings balance totaled $311$628 million and $231$617 million. One percent of our average balance of outstanding consolidated obligations for the three months ended June 30, 2017March 31, 2022 was $1.6 billion. For more information on our JCE Agreement, refer to “Item 1. Business — Retained Earnings” in our 2016 Form 10-K.$788 million.


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Dividends


Our Board of Directors believes any returns on capital stock above an appropriate benchmark rate that are not retained for capital growth should be returned to members that utilize our product and service offerings. Our current dividend philosophy is to pay a membership capital stock dividend similarequal to or greater than a benchmarkreference rate of interest, such as average three-month LIBOR over time,SOFR, and an activity-based capital stock dividend, when possible, at a level above the membership capital stock dividend. Our dividend rates seek to strike a balance between providing reasonable and consistent returns to members while preserving our financial position, flexibility, and ability to serve as a long-term liquidity provider. Our actual dividend is determined quarterly by our Board of Directors, based on policies, regulatory requirements, actual performance, and other considerations.considerations that the Board determines to be appropriate.


The following table summarizes dividend-related information (dollars in millions):
For the Three Months Ended For the Nine Months EndedFor the Three Months Ended
September 30, September 30,March 31,
2017 2016 2017 201620222021
Aggregate cash dividends paid1
$42
 $36
 $130
 $102
Aggregate cash dividends paid1
$43 $40 
Effective combined annualized dividend rate paid on capital stock3.06% 2.98% 3.07% 2.91%
Effective combined annualized dividend rate paid on capital stock2
Effective combined annualized dividend rate paid on capital stock2
4.86 %4.61 %
Annualized dividend rate paid on membership capital stock1.00% 0.75% 0.92% 0.58%Annualized dividend rate paid on membership capital stock3.00 %3.00 %
Annualized dividend rate paid on activity-based capital stock3.50% 3.50% 3.50% 3.50%Annualized dividend rate paid on activity-based capital stock6.00 %5.50 %
Average three-month LIBOR1.32% 0.79% 1.20% 0.69%
Average SOFRAverage SOFR0.09 %0.04 %

1Amounts for the three and nine months ended September 30, 2017 exclude cash dividends of $4 million and $14 million paid on mandatorily redeemable capital stock, which is recorded as interest expense on the Statements of Income. Amounts for the three and nine months ended September 30, 2016 exclude cash dividends of $6 million and $10 million paid on mandatorily redeemable capital stock.


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

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

CRITICAL ACCOUNTING POLICIES AND ESTIMATES


For a discussion of our critical accounting policies and estimates, refer to our 20162021 Form 10-K. There have been no material changes to our critical accounting policies and estimates during the ninethree months ended September 30, 2017 with the exception of one policy noted below:March 31, 2022.


Derivatives. All derivatives are recognized on the Statements of Condition at their fair values and reported as either derivative assets or derivative liabilities, net of cash collateral, including initial margin, and accrued interest received from or pledged to clearing agents and/or counterparties. The fair values of derivatives are netted by clearing agent and/or counterparty when the netting requirements have been met. If these netted amounts are positive, they are classified as a derivative asset and, if negative, they are classified as a derivative liability. Cash flows associated with derivatives are reflected as cash flows from operating activities in the Statements of Cash Flows unless the derivative meets the criteria to be a financing derivative.

We utilize one Derivative Clearing Organization (Clearinghouse), CME Clearing, for all cleared derivative transactions. Effective January 3, 2017, CME Clearing made certain amendments to its rulebook changing the legal characterization of variation margin payments to be daily settlement payments, rather than collateral. Initial margin is considered cash collateral.

LEGISLATIVE AND REGULATORY DEVELOPMENTS

Adjustable Interest Rate (LIBOR) Act
Information Security Management Advisory Bulletin


On September 28, 2017,March 15, 2022, President Biden signed into law the Finance Agency issued an Advisory Bulletin that supersedes previous guidance on an FHLBank’s information security program.Economic Continuity and Stability Act, which includes the Adjustable Interest Rate (LIBOR) Act (the LIBOR Act). The Advisory Bulletin describes three main componentsLIBOR Act addresses certain issues of an information security programcontractual uncertainty arising from the phase out of the publication of LIBOR, as discussed in “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Executive Overview.” The LIBOR Act provides the expectation that each FHLBank will use a risk-basednational, uniform approach to implement its information security program.legacy contracts with inadequate or unworkable fallback provisions commencing from the LIBOR replacement date. The Advisory Bulletin contains expectations relatedLIBOR replacement date is the first London banking date after June 30, 2023 or such other date as the Federal Reserve Board may designate. For relevant contracts, the LIBOR Act will automatically impose a rate selected by the Federal Reserve Board based upon SOFR including any applicable tenor spread adjustment. The legislation also includes a safe harbor against liability for parties with contractual discretion who choose the Federal Reserve Board’s SOFR-based rate to (i) governance, including guidance relatedreplace LIBOR. Notwithstanding enactment of the LIBOR Act, the contractual consequences of LIBOR cessation for some existing LIBOR-indexed instruments may still be unclear. Accordingly, we continue to roles and responsibilities, risk assessments, industry standards, and cyber-insurance; (ii) engineering and architecture, including guidancetake steps to mitigate the risks that arise from the phase out of LIBOR.

Proposed SEC Rule on network security, software security, and security of endpoints; and (iii) operations, including guidance on continuous monitoring, vulnerability management, baseline configuration, asset life cycle, awareness and training, incident response and recovery, user access management, data classification and protection, oversight of third parties, and threat intelligence sharing.Climate-related Disclosures

We do not expect this advisory bulletin to materially affect our financial condition or results of operations.

Minority and Women Inclusion


On July 25, 2017,March 21, 2022, the Finance Agency published a final rule, effective August 24, 2017, amending its Minority and Women Inclusion regulations to clarify the scope of the FHLBanks’ obligation to promote diversity and ensure inclusion. The final rule updates the existing Finance Agency regulations aimed at promoting diversity and the inclusion and use of minorities, women, and individuals with disabilities, and the businesses they own (MWDOB) in all FHLBank business and activities, including management, employment, and contracting. The final rule will:

require us to develop stand-alone diversity and inclusion strategic plans or incorporate diversity and inclusion into our existing strategic planning processes and adopt strategies for promoting diversity and ensuring inclusion;

encourage us to expand contracting opportunities for minorities, women, and individuals with disabilities through subcontracting arrangements;

require us to develop policies that address reasonable accommodations for employees to observe their religious beliefs;

require us to provide information in our annual reports to the Finance Agency about our efforts to advance diversity and inclusion through financial transactions, identification of ways in which we might be able to improve MWDOB business with the Bank by enhancing customer access by MWDOB businesses, including through our affordable housing and community investment programs and strategies for promoting the diversity of supervisors and managers; and

require us to classify and provide additional data in our annual reports about the number of and amounts paid under its contracts with MWDOB.

We do not expect this final rule to materially affect our financial condition or results of operations, but anticipate that it may result in increased compliance costs and substantially increase the amount of tracking, monitoring, and reporting that would be required.


FHLBank Capital Requirements

On July 3, 2017, the Finance Agency publishedSEC issued a proposed rule on climate-related disclosures that would require the Bank to adopt, with amendments,expand the regulationsbreadth, specificity, and rigor of the Federal Housing Finance Board (predecessor to the FHFA) pertaining to the capital requirements for the FHLBanks. The proposed rule would carry over most of the existing regulations without material change but would substantively revise the credit risk component of the risk-based capital requirement, as well as the limitations on extensions of unsecured credit. The main revisions would remove requirements that we calculate credit risk capital charges and unsecured credit limits based on ratings issued by a Nationally Recognized Statistical Rating Organization (NRSRO), and instead, require that the FHLBanks establish and use their own internal rating methodology. With respect to derivatives,climate-related disclosures in its periodic reports. More specifically, the proposed rule would impose a new capital charge for cleared derivatives, which underrequire the existing rule do not carry a capital charge,Bank to aligndisclose its:
•direct and certain indirect greenhouse gas emissions;
•climate transition plan, climate-related targets, and progress toward such plan or targets;
•climate-related risks over various time horizons and their impacts on the Bank’s business;
•climate-related risks in qualitative and quantitative terms in the notes to the Bank’s financial statements; and
•corporate governance of climate-related risks and risk management processes.

Compliance would be phased in, with the Dodd-Frank Act’s clearing mandate. The proposed rule also would revise the percentages used in the regulation’s tables to calculate credit risk capital charges for advances and for non-mortgage assets. The Finance Agency proposes to retain, for now, the percentages used in the tables to calculate capital charges for mortgage-related assets, and to address the methodology for residential mortgage assets at a later date. While a March 2009 regulatory directive pertainingBank becoming subject to certain liquidity matters willdisclosure requirements for its annual report for fiscal year 2024 and additional disclosure requirements for its annual report for fiscal year 2025.
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We continue to remain in place, the Finance Agency also proposes to rescind certain minimum regulatory liquidity requirements for the FHLBanks and address these liquidity requirements in a separate rulemaking.

We submitted a joint comment letter with the other FHLBanks on August 31, 2017. We are continuing to evaluatereview the proposed rule, but do not expect that it would result in increased costs and complexity associated with the Bank’s SEC reporting. While we are unable to quantify the anticipated costs at this time, we expect that compliance would require operational enhancements impacting many aspects of our business. We are unable to predict at this time whether the SEC will finalize the proposed rule, if adopted in final form,the extent to materially affect our financial condition or results of operations.

FHLBank Membership for Non-Federally-Insured Credit Unions

On June 5, 2017, the Finance Agency issued awhich any final rule effective July 5, 2017 governing FHLBank membership that would implement statutory amendments to the FHLBank Act authorizing FHLBanks to accept applications for membership from state-chartered credit unions without federal share insurance, provided that certain prerequisites have been met. The new rule generally treats these credit unions the same as other depository institutions with an additional requirement that they obtain: (1) an affirmative statement from their state regulator that they meet the requirements for federal insurance as of the date of their application for FHLBank membership; (2) a written statementwill deviate from the state regulator that it cannot or will not make any determination regarding eligibility for federal insurance; or (3) ifproposed rule, and the regulator fails or refusesextent to respond to the credit union’s request within six months, confirmation of the failure to receive a response.

We do not expect this rule to materially affect our financial condition or results of operations.

Other Significant Developments

Mandatory Contractual Stay Requirements for Qualified Financial Contracts (QFCs)

On September 12, 2017, the Federal Reserve Board (FRB) published a final rule, effective November 13, 2017, requiring certain global systemically important banking institutions (GSIBs) regulated by the FRB to amend their covered qualified financial contracts (QFCs) to limit a counterparty’s immediate termination or exercise of default rights under the QFCs in the event of bankruptcy or receivership of the GSIB or an affiliate of the GSIB. Covered QFCs include derivatives, repurchase agreements (known as repos) and reverse repos, and securities lending and borrowing agreements. On September 27, 2017, the FDIC adopted a substantively identical final rule, effective January 1, 2018, with respect to QFCs entered into with certain FDIC-supervised institutions.

Althoughwhich we are not a covered entity under these rules, as a counterparty to covered entities under QFCs, we maywould be required to amend QFCs entered intocomply with FRB-regulated GSIBs or applicable FDIC-supervised institutions. We do not expect theseany final rules to materially affect our financial condition or results of operations.rule.



RISK MANAGEMENT
    
We have risk management policies, established by our Board of Directors, that allow us to monitor and control our exposure to market,interest rate, liquidity, credit, operational, model, information security, legal, regulatory and compliance, diversity, equity, and inclusion (DEI), and strategic risk, as well as capital adequacy. Our primary risk management objective is to manage our assets and liabilities in ways that ensure liquidity is available to our members and protect the par redemption value of our capital stock. We periodically evaluate our risk management policies in order to respond to changes in our financial position and general market conditions.

MarketInterest Rate Risk


We define marketinterest rate risk as the risk that Market Value of Capital Stock (MVCS) or net income will change as a result of changes in market conditions, suchinterest rates or spreads will adversely affect our financial condition (market value) and performance (income). Interest rate risk is the principal type of risk to which we are exposed, as our cash flows, and therefore earnings and equity value, can change significantly as interest rates spreads, and volatilities. Interest rate risk was our predominant type of market risk exposure during the nine months ended September 30, 2017 and 2016.change. Our general approach toward managing interest rate risk is to acquire and maintain a portfolio of assets, liabilities, and derivatives which, taken together, limit our expected exposure to interest rate risk. Management regularly reviews our sensitivity toOur key interest rate changes by monitoring our market risk measures in parallel and non-parallel interest rate changes and spread and volatility movements.

Our key risk measures are MVCS SensitivityMarket Value of Equity (MVE) and Projected Income Sensitivity.24-Month Income. Management regularly monitors these key measures, as discussed further in the sections below.


MARKET VALUE OF CAPITAL STOCK SENSITIVITYEQUITY

    
We define MVCSMVE measures the net present value of the Bank by either marking positions to market or discounting all future cash flows using market discount rates. MVE is measured as an estimate of the market value of our assets minus the market value of our liabilities (excluding mandatorily redeemable capital stock) divided by the total shares of capital stock (including mandatorily redeemable capital stock) outstanding. It representsMRCS). MVE is an estimationestimate of the “liquidation value” of one share of our capital stock if all assetsBank’s value and liabilities were liquidated at current market prices. MVCS does not represent our long-term value, as it takes into account short-term market price fluctuations. These fluctuations are often unrelated to the long-term value of the cash flows from our assets and liabilities.

The MVCS calculation uses market prices, as well as interest rates and volatilities, and assumes a run-off balance sheet. The timing and variability of balance sheet cash flows are calculated by an internal model. To ensure the accuracy of the MVCS calculation, we reconcile the computed market prices of complex instruments, such as derivatives and mortgage assets, to market observed prices or dealers’ quotes.

Interest rate risk stress tests of MVCS involve instantaneous parallel and non-parallel changes in interest rates. The resulting percentage change in MVCS from the base case value is an indication of longer-term repricing risk and option risk embedded in the balance sheet.

To protect the MVCS from large interest rate swings, we manage the interest rate risk of our balance sheet by using hedging transactions, such as entering into or canceling interest rate swaps, caps, floors, and swaptions and issuing consolidated obligation bonds, including those with step-up, callable, or other structured features.


We monitor and manage to the MVCSMVE policy limits in an effort to ensure the stability of the Bank’s value. Our policy limits are based on declines from the base case in parallel and non-parallel interest rate change scenarios. Any policy limit breach requires a prompt action to address the measure outside of the policy limit and the breach must be reported to the Enterprise Risk Committee of the Bank and the Risk and Compliance Committee of the Board of Directors. WeDirectors and be remediated in a timely manner. At March 31, 2022 and December 31, 2021, our base case MVE was $6.2 billion and $6.0 billion and we were in compliance with all MVE policy limits.

Market Value of Capital Stock (MVCS) represents our MVE divided by the MVCS policy limits at September 30, 2017 and December 31, 2016.

Our down 200 basis point policy limit is suspended when the 10-year swap rate is below 2.50 percent and remains so for five consecutive days. At September 30, 2017 and December 31, 2016, the 10-year swap rate was below 2.50 percent and therefore the associated policy limit was suspended.

The following tables show our policy limits and base case and change from base case MVCS in dollars per share and percent change respectively, based ontotal outstanding shares of our capital stock including shares classified as mandatorily redeemable, assuming instantaneous parallel changes in interest rates(including MRCS). To ensure we remain adequately capitalized, we must ensure our MVCS remains at September 30, 2017 and December 31, 2016:
 Market Value of Capital Stock (dollars per share)
 Down 200 Down 100 Down 50 Base Case Up 50 Up 100 Up 200
September 30, 2017$128.6
 $129.7
 $130.3
 $130.1
 $129.5
 $128.5
 $126.0
December 31, 2016$119.8
 $120.3
 $120.0
 $119.6
 $118.7
 $117.6
 $114.9
 % Change from Base Case
 Down 200 Down 100 Down 50 Base Case Up 50 Up 100 Up 200
September 30, 2017(1.2)% (0.3)% 0.1% —% (0.5)% (1.3)% (3.1)%
December 31, 20160.2 % 0.6 % 0.4% —% (0.7)% (1.7)% (3.9)%
 Policy Limits (declines from base case)
 Down 200 Down 100 Down 50 Base Case Up 50 Up 100 Up 200
September 30, 2017 and December 31, 2016(12.0)% (5.0)% (2.2)% —% (2.2)% (5.0)% (12.0)%

The following tables showor above our policy limits and base case and change from base case MVCS in dollars per share and percent change respectively, based on outstanding shares of capital stock, including shares classified as mandatorily redeemable, assuming instantaneous non-parallel changes in interest rates at September 30, 2017 and December 31, 2016:
 Market Value of Capital Stock (dollars per share)
 Down 200 Down 100 Down 50 Base Case Up 50 Up 100 Up 200
September 30, 2017$129.9
 $130.4
 $130.5
 $130.1
 $129.4
 $128.3
 $125.4
December 31, 2016$121.0
 $120.9
 $120.4
 $119.6
 $118.3
 $117.0
 $114.2
 % Change from Base Case
 Down 200 Down 100 Down 50 Base Case Up 50 Up 100 Up 200
September 30, 2017(0.2)% 0.2% 0.3% —% (0.6)% (1.4)% (3.6)%
December 31, 20161.2 % 1.1% 0.7% —% (1.0)% (2.1)% (4.5)%
 Policy Limits (declines from base case)
 Down 200 Down 100 Down 50 Base Case Up 50 Up 100 Up 200
September 30, 2017 and December 31, 2016(13.0)% (5.5)% (2.5)% —% (2.5)% (5.5)% (13.0)%

$100 par value. Our base case MVCS was 130.1$173.9 at September 30, 2017 whenMarch 31, 2022 compared to 119.6$177.5 at December 31, 2016. The change was primarily attributable to the following factors:2021.


Increase in net income: We recorded net income of $402 million during the nine months ended September 30, 2017, which was primarily driven by net interest income of $497 million. Dividend payments for the nine months ended September 30, 2017 totaled $130 million. The earnings in excess of dividends paid had a positive impact on the market value of our assets, thereby increasing MVCS.

Option-adjusted spread: The spread between mortgage interest rates and LIBOR, adjusted for the mortgage prepayment option, decreased at September 30, 2017 when compared to December 31, 2016. This had a positive impact on MVCS as it increased the value of mortgage-related assets.

Decreased shares of activity-based capital stock: During the nine months ended September 30, 2017, our advance activity with members declined, and therefore our activity-based capital stock requirements decreased. As we repurchased this activity-based capital stock back at par, which is below our current MVCS level, our MVCS was positively impacted.


PROJECTED INCOME SENSITIVITY

We monitor the Bank’s projected 24-month income sensitivity through our review of the projected return on capital stock measure. Projected return on capital stock is computed as an annualized ratio of projected net income over a 24 month period to average projected capital stock over the same period.

We monitor and manage projected 24-month income sensitivity in an effort to limit the short-term earnings volatility of the Bank. The projected 24-month income sensitivity is based on the forward interest rates, business, and risk management assumptions.
Our primary income sensitivity policy limits specify a floor on our projected return on capital stock of no less than 50 percent of average projected 3-month LIBOR over 24 months for the up and down 100 and 200 basis point parallel interest rate change scenarios as well as for the up and down 100 basis point non-parallel interest rate changes for each shock scenario. Any policy limit breach requires a prompt action to address the measure outside of the policy limit. The breach must be reported to the Enterprise Risk Committee of the Bank and the Risk Committee of the Board of Directors. We were in compliance with the projected 24-month income sensitivity policy limits at both September 30, 2017 and December 31, 2016. For more information on our Projected Income Sensitivity,this risk measure, including policy limits, refer to “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Risk Management — Interest Rate Risk — Market Value of Equity” in our 2021 Form 10-K.

PROJECTED 24-MONTH INCOME

The projected 24-month income simulation measures our short-term earnings forecast over a two-year horizon based on forward interest rates and business assumptions. The spread between our projected return on average capital stock (ROACS) and average SOFR is used as the primary measure of our profitability.

We monitor and manage to policy limits, which are based on the spread between our projected ROACS and average SOFR in parallel and non-parallel interest rate change scenarios. Additionally, there is a limit on the decline in projected ROACS from base case ROACS for certain basis shock scenarios to limit basis risk exposure. Any policy limit breach must be reported to the Enterprise Risk Committee of the Bank and the Risk and Compliance Committee of the Board of Directors and be remediated in a timely manner. We were in compliance with all projected 24-month income policy limits at March 31, 2022. In October 2021, our Board of Directors approved an exception to all projected income policy limits effective September 30, 2021 through February 28, 2022, due primarily to the low probability of our modeled changes in mortgage rates occurring. As such, there were no projected 24-month income policy limits in effect at December 31, 2021.
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For more information on this risk measure, including policy limits, refer to “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Risk Management — Interest Rate Risk — Projected Income Sensitivity”24-Month Income” in our 20162021 Form 10-K.
Capital Adequacy

CAPITAL ADEQUACY

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

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

For additional capital from merger. For a discussion of our key capital adequacy measure,information on MVCS, refer to “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Risk Management — MarketInterest Rate Risk — Market Value of Capital Stock Sensitivity.Equity.”


RETAINED EARNINGS AND ADDITIONAL CAPITAL FROM MERGER TARGET LEVEL AND REGULATORY CAPITAL REQUIREMENTS

Our ERMP includes a target level of retained earnings and additional capital from merger based on the amount we believe necessary to protect the redemption value of capital stock, facilitate safe and sound operations, maintain regulatory capital ratios, and support our ability to pay a relatively stable dividend.We are also subject to three regulatory capital requirements. For additional information on our compliance with these requirements, refer to “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources.”

Liquidity Risk


We define liquidity risk as the risk that we will be unable to meet our financial obligations as they come due or meet the credit needs of our members and housing associates in a timely and cost efficient manner. To manage this risk, we maintain liquidity in accordance with Finance Agency regulations. For additional information on our compliance with these requirements, refer to “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Liquidity — Liquidity Requirements.”


Credit Risk


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

During the third quarter of 2017, two significant hurricanes impacted the southeastern coasts of the United States. We have analyzed the potential impact that damage related to Hurricanes Irma and Harvey might have on our advances, letters of credit, mortgage loans held for portfolio, and non-agency MBS securities. Based on the information currently available, we do not anticipate that the impact of the hurricanes will have a material effect, if any, on the Bank’s financial condition or results of operations. We continue to evaluate the impact of the hurricanes on advances, letters of credit, mortgage loans held for portfolio, and non-agency MBS investments. If additional information becomes available indicating that any of these assets has been impaired and the amount of the loss can be reasonably estimated, we will record appropriate reserves at that time.



ADVANCES


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


We are required by regulation to obtain sufficient collateral to fully secure our advances, standby letters of credit, and other extensions of credit products. Eligibleto borrowers (collectively, credit products). The estimated value of the collateral includes (i) whole first mortgages on improved residential real property or securities representing a whole interest in such mortgages, (ii) loans and securities issued, insured, or guaranteed by the U.S. Government or any agency thereof, including MBS issued or guaranteed by Fannie Mae, Freddie Mac, or Ginnie Mae and Federal Family Education Loan Program guaranteed student loans, (iii) cash deposited with us, and (iv) other real estate-related collateral acceptablerequired to us provided such collateral has a readily ascertainable value and we can perfect a security interest in such property. Community Financial Institutions (CFIs) may also pledge collateral consisting of secured small business, small agri-business, or small farm loans. As additional security, the FHLBank Act provides that we have a lien onsecure each borrower’s capital stock investment; however, capital stock cannot be pledged as collateral to secure credit exposures.

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

Under a blanket lien, we are granted a security interest in all financial assets of the borrower to fully secure the borrower’s obligation. Other than securities and cash deposits, we do not initially take delivery of collateral pledged by blanket lien borrowers. In the event of deterioration in the financial condition of a blanket lien borrower, we have the ability to require delivery of pledged collateral sufficient to secure the borrower’s obligation. With respect to non-blanket lien borrowers that are federally insured, we generally require collateral to be specifically assigned. With respect to non-blanket lien borrowers that are not federally insured (typically insurance companies, CDFIs, and housing associates), we generally take control of collateral through the delivery of cash, securities, or loans to us or our custodians.

Although management has policies and procedures in place to manage credit risk, we may be exposed to this risk if our outstanding advance value exceeds the liquidation value of our collateral. We mitigate this riskproducts is calculated by applying collateral discounts, or haircuts, to the unpaid principal balance or market value, if available,as applicable, of the collateral. We also have policies and procedures for validating the reasonableness of our collateral to determine the advance equivalent value of thevaluations. In addition, we perform collateral securing each borrower’s obligation. The amount of these discounts will varyverifications and on-site reviews based on the typerisk profile of collateral and security agreement. We determinethe borrower. Management believes that these discounts or haircuts using data based upon historical price changes, discounted cash flow analyses, and loan level modeling.policies effectively manage our credit risk from advances.

At September 30, 2017March 31, 2022 and December 31, 2016,2021, borrowers pledged $325.0$302.8 billion and $330.4$294.3 billion of collateral (net of applicable discounts) to support activity with us, including advances. AllAt March 31, 2022 and December 31, 2021, all of our advances are requiredmet the requirement to be collateralized at a minimum of 100 percent, net of applicable discounts. Borrowers pledge collateral in excess of their collateral requirement mainly to demonstrate available liquidity and to borrow additional amounts in the future.


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We evaluate advances for credit losses on a quarterly basis. We have never experienced a credit loss on our advances. Based upon our collateral and lending policies, the collateral held as security, and the repayment history on credit products,advances, management has determined that there were no probableexpected credit losses on our credit productsadvances as of September 30, 2017March 31, 2022 and December 31, 2016. Accordingly, we have not recorded any2021. Refer to “Item 1. Financial Statements — Note 4 — Advances” for additional information on our collateral practices and allowance for credit losses on our credit products.losses.


MORTGAGE LOANS


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


Through our participation in the MPF program, we invest in conventional and government-insured residential mortgage loans that are acquired through or purchased from a participating financial institution (PFI). In addition, MPF Xtra, MPF Direct, and MPF Government MBS are off-balance sheet loan products that are passed through to a third-party investor and are not maintained in our Statements of Condition.

Effective May 31, 2015, as part of the Merger, we acquired mortgage loans previously purchased by the Seattle Bank under the MPP. This program involved investment by the Seattle Bank in single-family mortgage loans that were purchased directly from MPP PFIs. Similar to the MPF program, MPP PFIs generally originated, serviced, and credit enhanced the mortgage loans sold to the Seattle Bank. In 2005, the Seattle Bank ceased entering into new MPP master commitment contracts and therefore all MPP loans acquired were originated prior to 2006. We currently do not purchase mortgage loans under this program.


The following table presents the unpaid principal balance of our MPF and MPP portfoliosmortgage loans by product type (dollars in millions):
Product TypeMarch 31,
2022		December 31,
2021
Conventional$7,206 $7,063 
Government406 416 
Total unpaid principal balance$7,612 $7,479 
Product Type September 30,
2017		 December 31,
2016
MPF Conventional $6,104
 $5,907
MPF Government 501
 513
Total MPF 6,605
 6,420
     
MPP Conventional 299
 361
MPP Government 33
 42
Total MPP 332
 403
Total mortgage loan unpaid principal balance $6,937
 $6,823


We manage the credit risk on mortgage loans acquired in the MPF program and MPP by (i) adhering to our underwriting standards, (ii) using agreements to establish credit risk sharing responsibilities with our PFIs, and (iii) monitoring the performance of the mortgage loan portfolio and creditworthiness of PFIs,PFIs.
We evaluate mortgage loans for credit losses on a quarterly basis and (iv) establishingestablish an allowance for credit losses to reflect management’s estimate of probableexpected credit losses inherent in the portfolio.

Government-Insured Mortgage Loans. For our government-insured mortgage loans, our loss protection consists of the loan guarantee, the ability of the loan servicer to repurchase any government-insured loan once it reaches 90 days delinquent, At March 31, 2022 and the contractual obligation of the loan servicer to liquidate a government-insured loan in full upon sale of the REO property if not repurchased previously. Therefore,December 31, 2021, we have not recorded any allowance for credit losses on government-insured mortgage loans.
Conventional Mortgage Loans. For our conventional mortgage loans, we have several layers of legal loss protection that are defined in agreements among us and our PFIs. For our MPF loans, these loss layers may vary depending on the MPF product alternatives selected and credit profile of the loans. Loss layers may consist of (i) homeowner equity, (ii) primary mortgage insurance (PMI), (iii) a first loss account (FLA), and (iv) a credit enhancement obligation of the PFI. For our MPP loans, these loss layers consist of (i) homeowner equity and (ii) PMI. For a detailed discussion of these loss layers, refer to “Item 1. Financial Statements — Note 9 — Allowance for Credit Losses.”

Allowance for Credit Losses. We utilizehad an allowance for credit losses to reserve for estimated losses inof $3 million and $1 million on our conventional MPFmortgage loans. We have never experienced a credit loss on our government-insured mortgage loans. At March 31, 2022 and MPP mortgage loan portfolios at the balance sheet date. The measurement of our MPF and MPPDecember 31, 2021, we determined no allowance for credit losses is determined by (i) reviewing similar conventional mortgage loans for impairment on a collective basis, (ii) reviewing conventional mortgage loans for impairment on an individual basis, and (iii) estimating additional credit losses in the conventional mortgage loan portfolio. The allowance for credit losseswas necessary on our conventional MPFgovernment-insured mortgage loans was $2 million at September 30, 2017 and December 31, 2016. The allowance for credit losses on our conventional MPP mortgage loans was less than $1 million at both September 30, 2017 and December 31, 2016.loans.


Refer to “Item 1. Financial Statements — Note 95 — AllowanceMortgage Loans Held for Credit Losses”Portfolio” for additional information on our allowance for credit losses.


Non-Accrual Loanslosses and Delinquencies. We place athe payment status of our conventional mortgage loan on non-accrual status if it is determined that either the collection of interest or principal is doubtful or interest or principal is 90 days or more past due. We do not place a government-insured mortgage loan on non-accrual status due to the U.S. Government guarantee of the loan and contractual obligation of the loan servicer to repurchase the loan when certain criteria are met. Refer to “Item 1. Financial Statements — Note 9 — Allowance for Credit Losses” for a summary of our non-accrual loans and mortgage loan delinquencies.loans.


INVESTMENTS


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


Finance Agency regulations also limit the type of investments we may purchase. We are prohibited from investing in financial instruments issued by non-U.S. entities other than those issued by U.S. branches and agency offices of foreign commercial banks, unless otherwise approved by the Finance Agency. Our unsecured credit exposures to U.S. branches and agency offices of foreign commercial banks include the risk that, as a result of political or economic conditions in a country, the counterparty may be unable to meet their contractual repayment obligations. Our unsecured credit exposures to domestic counterparties and U.S. subsidiaries of foreign commercial banks include the risk that these counterparties have extended credit to foreign counterparties. At September 30, 2017,March 31, 2022, we were in compliance with the above regulation and did not own any financial instruments issued by non-U.S. entities, other than those issued by U.S. branches and agency offices of foreign commercial banks, and those approved by the Finance Agency.


In addition, Finance Agency regulations also include limits on the amount of unsecured credit we may extend to a counterparty or to a group of affiliated counterparties. This limit isThese limits are based on a percentage of eligible regulatory capital and the counterparty’s overall credit rating. Under these regulations, the level of eligible regulatory capital is determined as the lesser of our total regulatory capital or the eligible amount of regulatory capital of the counterparty. The eligible amount of regulatory capital is then multiplied by a stated percentage. The percentage that we may offer for term extensions of unsecured credit ranges from three to 15 percent based on the counterparty’s credit rating. Our total overnight unsecured exposure to a counterparty may not exceed twice the regulatory limit for term exposures, or a total of six to 30 percent of the eligible amount of regulatory capital, based on the counterparty’s credit rating. At September 30, 2017,March 31, 2022, we were in compliance with the regulatory limits established for unsecured credit.


Refer to“Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Risk Management — Credit Risk” in our 2021 Form 10-K for additional information on these regulatory limits.

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


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


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

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


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




At September 30, 2017,March 31, 2022, our unsecured short-term investment exposure consisted of overnight Federalinterest-bearing deposits and federal funds sold. The following table presents our unsecured short-term investment exposure by counterparty credit rating and domicile at September 30, 2017(excluding accrued interest receivable) (dollars in millions):
March 31, 2022
Credit Rating1,2
Domicile of CounterpartyAAATotal
Domestic$— $945 $945 
U.S. branches and agency offices of foreign commercial banks
Australia865 — 865 
Belgium— 300 300 
Canada— 2,175 2,175 
Finland865 — 865 
Germany865 — 865 
Netherlands— 305 305 
Sweden— 575 575 
United Kingdom— 250 250 
Total U.S. branches and agency offices of foreign commercial banks2,595 3,605 6,200 
Total unsecured short-term investment exposure$2,595 $4,550 $7,145 

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

2    Table excludes investments issued or guaranteed by the U.S. Government, an agency or instrumentality of the U.S. Government, or the FDIC.



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Credit Rating1,2
Domicile of Counterparty AA A BBB Total
Domestic $—
 $—
 $875
 $875
U.S subsidiaries of foreign commercial banks —
 45
 —
 45
Total domestic and U.S. subsidiaries of foreign commercial banks —
 45
 875
 920
U.S. branches and agency offices of foreign commercial banks       
Australia 700
 —
 —
 700
Canada —
 600
 —
 600
France —
 700
 —
 700
Germany —
 600
 —
 600
Japan —
 600
 —
 600
Netherlands —
 300
 —
 300
Norway —
 600
 —
 600
Sweden 1,150
 600
 —
 1,750
Total U.S. branches and agency offices of foreign commercial banks 1,850
 4,000
 —
 5,850
Total unsecured investment exposure $1,850
 $4,045
 $875
 $6,770
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1Represents the lowest credit rating available for each investment based on an NRSRO. In instances where an NRSRO rating is not available for the investment, the issuer rating is applied.

2Table excludes investments issued or guaranteed by the U.S. Government, an agency or instrumentality of the U.S. Government, or the FDIC.

Investment Ratings

The following table summarizes the carrying value of our investments by credit rating (dollars in millions):
 September 30, 2017
 
Credit Rating1
 AAA AA A BBB BB or Lower Total
Interest-bearing deposits2
$—
 $1
 $—
 $—
 $—
 $1
Securities purchased under agreements to resell500
 250
 1,000
 3,750
 —
 5,500
Federal funds sold—
 1,850
 4,045
 875
 —
 6,770
Investment securities:           
Mortgage-backed securities           
GSE single-family—
 3,974
 —
 —
 —
 3,974
GSE multifamily—
 11,292
 —
 —
 —
 11,292
Other U.S. obligations single-family3
—
 3,859
 —
 —
 —
 3,859
Other U.S. obligations commercial3
—
 3
 —
 —
 —
 3
Private-label residential—
 4
 —
 7
 2
 13
Total mortgage-backed securities—
 19,132
 —
 7
 2
 19,141
Non-mortgage-backed securities           
Other U.S. obligations3
—
 3,410
 —
 —
 —
 3,410
GSE and Tennessee Valley Authority obligations—
 2,530
 —
 —
 —
 2,530
State or local housing agency obligations1,150
 284
 —
 —
 —
 1,434
Other454
 101
 —
 —
 —
 555
Total non-mortgage-backed securities1,604
 6,325
 —
 —
 —
 7,929
Total investments4
$2,104
 $27,558
 $5,045
 $4,632
 $2
 $39,341

1Represents the lowest credit rating available for each investment based on an NRSRO. In instances where an NRSRO rating is not available for the investment, the issuer rating is applied.

2Interest bearing deposits are rated AA because they are guaranteed by the FDIC up to $250,000.

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

4At September 30, 2017, 17 percent of our total investments were unsecured.


The following table summarizes the carrying value of our investments by credit rating (dollars in millions):
March 31, 2022
Credit Rating1
AAAAAABBBUnratedTotal
Interest-bearing deposits$— $2 $945 $— $— $947 
Securities purchased under agreements to resell— 8,500 1,250 — 1,000 10,750 
Federal funds sold— 2,595 3,605 — — 6,200 
Investment securities:
MBS
GSE single-family— 947 — — — 947 
GSE multifamily— 7,981 — — — 7,981 
U.S. obligations single-family2
— 2,727 — — — 2,727 
Private-label residential— — 2 2 — 4 
Total MBS— 11,655 2 2 — 11,659 
Non-MBS
U.S. Treasury obligations2
— 1,780 — — — 1,780 
Other U.S. obligations2
— 1,142 — — — 1,142 
GSE and TVA obligations— 1,006 — — — 1,006 
State or local housing agency obligations492 181 — — — 673 
Other3
400 64 — — — 464 
Total non-MBS892 4,173 — — — 5,065 
Total investments$892 $26,925 $5,802 $2 $1,000 $34,621 
 December 31, 2016
 
Credit Rating1
 AAA AA A BBB BB or Lower Total
Interest-bearing deposits2
$—
 $2
 $—
 $—
 $—
 $2
Securities purchased under agreements to resell1,425
 250
 500
 3,750
 —
 5,925
Federal funds sold—
 200
 4,050
 845
 —
 5,095
Investment securities:           
Mortgage-backed securities           
GSE single-family—
 4,804
 —
 —
 —
 4,804
GSE multifamily—
 12,156
 —
 —
 —
 12,156
Other U.S. obligations single-family3
—
 3,864
 —
 —
 —
 3,864
Other U.S. obligations commercial3
—
 4
 —
 —
 —
 4
Private-label residential—
 —
 5
 9
 2
 16
Total mortgage-backed securities—
 20,828
 5
 9
 2
 20,844
Non-mortgage-backed securities           
Other U.S. obligations3
—
 3,745
 —
 —
 —
 3,745
GSE and Tennessee Valley Authority obligations—
 3,359
 —
 —
 —
 3,359
State or local housing agency obligations1,242
 455
 —
 —
 —
 1,697
Other449
 102
 —
 —
 —
 551
Total non-mortgage-backed securities1,691
 7,661
 —
 —
 —
 9,352
Total investments4
$3,116
 $28,941
 $4,555
 $4,604
 $2
 $41,218


1Represents the lowest credit rating available for each investment based on an NRSRO. In instances where an NRSRO rating is not available for the investment, the issuer rating is applied.

2Interest bearing deposits are rated AA because they are guaranteed by the FDIC up to $250,000.

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

4
At December 31, 2016, 12percent of our total investments were unsecured.

1    Represents either the lowest credit rating available for each investment based on an NRSRO, or the guarantor credit rating, if applicable. In instances where an NRSRO rating or guarantor rating is not available for the investment, the investment is classified as unrated.
Our total
2    Represents investment securities backed by the full faith and credit of the U.S. Government.

3    Consists primarily of taxable municipal bonds.


We evaluate investments decreased at September 30, 2017 when compared to Decemberfor credit losses on a quarterly basis. At March 31, 2016 due primarily to maturities of MBS and agency securities, partially offset by money market investment purchases to increase our liquidity position during the quarter.

At September 30, 20172022 and December 31, 2016,2021, we did not consider any of our investments to be other-than-temporarily impaired. For more informationdetermined no allowance for credit losses was necessary on our evaluation of OTTI, referinvestments. Refer to “Item 1. Financial Statements — Note 63 — Other-Than-Temporary Impairment.”Investments” for additional information on our allowance for credit losses.


Mortgage-Backed Securities

We are exposed to mortgage asset credit risk through our investments in MBS. Mortgage asset credit risk is the risk that we will not receive timely payments of principal and interest due from mortgage borrowers because of borrower defaults. Credit risk on mortgage assets is affected by a number of factors, including the strength and ability to guarantee the payments from the agency that created the structure, underlying loan performance, and other economic factors in the local market or nationwide.

We limit our investments in MBS to those guaranteed by the U.S. Government or issued by a GSE. Further, our ERMP prohibits new purchases of private-label MBS. We perform ongoing analysis on these investments to determine potential credit issues. At September 30, 2017 and December 31, 2016, we owned $19.1 billion and $20.8 billion of MBS, of which approximately 99.9 percent were guaranteed by the U.S. Government or issued by GSEs and 0.1 percent were private-label MBS at each period end.

DERIVATIVES


We execute most of our derivative transactions with large banks and major broker-dealers. Over-the-counter derivative transactions may be either executed directly with a counterparty, (uncleared derivatives)referred to as uncleared derivatives, or cleared through a Futures Commission Merchant (i.e., clearing agent),agent with a Derivative Clearing Organization (cleared derivatives).Clearinghouse, referred to as cleared derivatives.



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

Uncleared Derivatives. Due to risk of nonperformance by the counterparties to our derivative agreements, we generally require collateral on uncleared derivative agreements. The amount of net unsecured credit exposure that is permissible with respect to each counterparty depends on the credit rating of that counterparty. A counterparty generally must deliver collateral to us if the total market value of our exposure to that counterparty rises above a specific trigger point. As a result of these risk mitigation initiatives, we do not anticipate any credit losses on our uncleared derivative agreements.

Cleared Derivatives. For cleared derivatives, the Derivative Clearing Organization (Clearinghouse) is our counterparty. We are subject to risk of nonperformance by the Clearinghouse and clearing agent. The requirement that we post initial and variation margin through the clearing agent, to the Clearinghouse, exposes us to institutional credit risk in the event that the clearing agent or the Clearinghouse fails to meet its obligations. However, the use of cleared derivatives is intended to mitigate credit risk exposure because a central counterparty is substituted for individual counterparties and collateral/payments is posted daily, through a clearing agent, for changes in the fair value of cleared derivatives. We do not anticipate any credit losses on our cleared derivatives.


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



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The following table shows our derivative counterparty credit exposure (dollars in millions):
March 31, 2022
Credit Rating1
Notional AmountNet Derivatives
Fair Value Before Collateral		Cash Collateral Pledged
To (From) Counterparty		Net Credit Exposure
 to Counterparties
Non-member counterparties:
Asset positions with credit exposure
Uncleared derivatives
A$153 $2 $— $2 
Liability positions with credit exposure
Uncleared derivatives
A2
1,225 (17)17 — 
BBB2,272 (50)51 1 
Cleared derivatives3
57,336 (38)381 343 
Total derivative positions with credit exposure to non-member counterparties60,986 (103)449 346 
Member institutions2,4
35 — — — 
Total61,021 $(103)$449 $346 
Derivative positions without credit exposure3,821 
Total notional$64,842 
  September 30, 2017
Credit Rating1
 Notional Amount 
Net Derivatives
Fair Value Before Collateral and Variation Margin for Daily Settled Contracts
 
Cash Collateral Pledged
To (From) Counterparty and Variation Margin for Daily Settled Contracts2
 
Net Credit Exposure
 to Counterparties
Non-member counterparties:        
Asset positions with credit exposure        
Uncleared derivatives        
A $2,540
 $9
 $(8) $1
BBB4
 499
 —
 —
 —
Liability positions with credit exposure        
Uncleared derivatives        
AA 551
 (25) 26
 1
A 4,970
 (64) 66
 2
BBB 1,166
 (26) 27
 1
Cleared derivatives2, 3
 43,029
 (311) 425
 114
Total derivative positions with credit exposure to non-member counterparties 52,755
 (417) 536
 118
Member institutions4,5
 105
 —
 —
 —
Total 52,860
 $(417) $536
 $118
Derivative positions without credit exposure 1,129
      
Total notional $53,989
      


1Represents the lowest credit rating available for each counterparty based on an NRSRO.

2Includes variation margin for daily unsettled contracts of $305 million at September 30, 2017.

3Represents derivative transactions cleared with CME Clearing, our clearinghouse, who is not rated. CME Clearing's parent, CME Group Inc. was rated Aa3 by Moody's and AA- by Standard and Poor's at September 30, 2017.

4Net credit exposure is less than $1 million.

5Represents mortgage delivery commitments with our member institutions.

1    Represents either the lowest credit rating available for each counterparty based on an NRSRO, or the guarantor credit rating, if applicable.
The following table shows our derivative counterparty
2    Net credit exposure (dollars in millions):is less than $1 million.


3    Represents derivative transactions cleared with CME Clearing, our clearinghouse, who is not rated. CME Clearing's parent, CME Group Inc. was rated Aa3 by Moody's and AA- by Standard and Poor's at March 31, 2022.
  December 31, 2016
Credit Rating1
 Notional Amount 
Net Derivatives
Fair Value Before Collateral
 
Cash Collateral Pledged
To (From) Counterparty
 
Net Credit Exposure
to Counterparties
Non-member counterparties:        
Asset positions with credit exposure        
Uncleared derivatives        
   A $94
 $1
 $—
 $1
Liability positions with credit exposure       

Uncleared derivatives        
BBB 736
 (8) 9
 1
Cleared derivatives2
 40,678
 (374) 563
 189
Total derivative positions with credit exposure to non-member counterparties 41,508
 (381) 572
 191
Member institutions3,4
 49
 —
 —
 —
Total 41,557
 $(381) $572
 $191
Derivative positions without credit exposure 11,949
     

Total notional $53,506
 

 

 



4    Represents mortgage loan purchase commitments with our member institutions.
1Represents the lowest credit rating available for each counterparty based on an NRSRO.


2Represents derivative transactions cleared with CME Clearing, our clearinghouse, who is not rated. CME Clearing’s parent, CME Group Inc. was rated Aa3 by Moody’s and AA- by Standard and Poor’s at December 31, 2016.

Refer to “Item 1. Financial Statements — Note 6 — Derivatives and Hedging Activities” for additional information on our derivatives and hedging activities.
3Net credit exposure is less than $1 million.

4Represents mortgage delivery commitments with our member institutions.


Operational Risk


We define operational risk as the risk of loss or harmarising from inadequate or failed processes, people, and/or systems, including those emanating from external sources. Operational risk is inherent in allAll of our business activities and processes and systems.generate operational risk. Management has established policies, procedures, and procedurescontrols to reduce the likelihoodlevel of operational risk and designed ourrisk. We perform annual risk assessment processassessments to provide ongoing identification, measurement,identify, assess, mitigate, and monitoringreport on operational risks outside of operational risk.the Board’s risk appetite. Due to the manual nature of many of our processes, our operational risk exposure has been designatedis closely monitored. Refer to “Item 1A. Risk Factors” in our 2021 Form 10-K for additional information.

Model Risk

We define model risk as elevated. Tothe risk of adverse consequences from decisions based on incorrect and misused model outputs. Throughout the course of our day-to-day activities, we utilize external and internal pricing and financial models as important inputs into business and risk management decision-making processes. Refer to “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Risk Management — Model Risk” in our 2021 Form 10-K for additional information.

Information Security Risk

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

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

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

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

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

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

Legal, Regulatory, and Compliance Risk

We define legal, regulatory, and compliance risk as the executionrisk of controls surrounding spreadsheets by streamliningviolations of laws, rules, regulations, regulatory and eliminating spreadsheets through automation.

As a result ofsupervisory guidance, and internal enterprise governing documents. Our legal and compliance departments are responsible for coordinating with various business units in connection with the storm drain pipe breakidentification, evaluation, and water damage to our headquarters on June 22, 2017, we utilized our back-up data center, and employees worked out of a business recovery center located in Urbandale, Iowa, additional leased space in downtown Des Moines, and remotely during June 23 through July 14 of this year. On July 17, 2017 we resumed usemitigation of our primary data center atlegal, regulatory, and compliance risks. We manage compliance risk by the development of, and adherence to, appropriate policies, procedures, and controls.

Diversity, Equity, and Inclusion Risk

We define DEI risk as the risk of not achieving the key objectives in our headquarters, which was not damaged. However, as a resultDEI Strategic Plan. We actively monitor progress against the goals established. Our Board of Directors actively oversees management’s efforts and remains steadfast in its commitment to further developing our DEI program. The DEI Office maintains collaborative lines of communication with our Board of Directors, executive team, business units, and the water damage,compliance risk and internal audit departments in an effort to ensure the estimated time to complete repairs, and our plan to relocate our headquarters to a building in downtown Des Moines that we purchased in Aprilappropriate level of 2017, we terminated our lease with Wells Fargo Financial, an affiliate of Wells Fargo Bank effective September 30, 2017. We entered into a nine month lease agreement with Wells Fargo Financial effective September 30, 2017 to lease approximately 1,200 square feet of the former headquarters to support general business functions. In addition, in July and August 2017, we amended our lease at 666 Walnut St., Des Moines, Iowa to lease additional space for our temporary headquarters. We expect to remain at this location until our recently purchased building at 909 Locust St., Des Moines, Iowarisk is ready for occupancy, which is currently anticipated for late 2018. As a result of the storm drain pipe and transitioning employees to a temporary headquarters location, our operational risk profile was elevated. No known material disruptions in member services or material impacts to our financial condition and results of operations have been experienced due to the disruption.maintained.



Strategic Risk


We define strategic risk as the risk arising from adverse strategic business decisions, poor implementation of an adverse impact on our mission, financial condition,the strategic business plan, or currenta lack of responsiveness to changes in the industry and future profitability resulting from external factors that may occur in both the short- and long-term.operating environment. Strategic risk includes political, reputation,reputational, regulatory, and/or environmental factors, many of which are beyondTo support our control. From time to time, proposals are made, or legislativemission, we manage and regulatory changes are considered, which could affect our cost of doing business or other aspects of our business. We mitigate strategic risk through strategicthe business planning process and by monitoring of ourthe external environment. For additional information on some of the more important risks we face, refer to “Part II — Item 1A. Risk Factors” and “Item 1A. Risk Factors” in our 20162021 Form 10-K.



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK


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

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ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures
Management is responsible for establishing and maintaining disclosure controls and procedures designed to ensure that information required to be disclosed in reports we file or submit under the Securities Exchange Act of 1934, as amended (the Exchange Act) is (i) recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms; and (ii) accumulated and communicated to our management, including our President and chief executive officer (CEO), and chief financial officer (CFO), as appropriate, to allow timely decisions regarding required disclosure.
Management, with the participation of our President and CEO, and CFO, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the quarterly period covered by this report. Based on that evaluation, and management’s previous identification of the material weakness in our internal control over financial reporting at December 31, 2016, our President and CEO, and CFO have concluded that our disclosure controls and procedures were not effective as of September 30, 2017.
As previously disclosed in our 2016 Form 10-K, management identified one material weakness in our internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.
Management identified the following material weakness in our internal control over financial reporting: We did not maintain effective controls over spreadsheets used in our financial close and reporting process. Specifically, we identified multiple failures with the operating effectiveness of controls over key spreadsheets used in our financial close and reporting process. There were no material misstatements identified in our annual and interim financial statements as a result of this material weakness. However, this material weakness could result in misstatements of various account balances or disclosures given its pervasive nature that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected.
Remediation of Material Weakness in Internal Control over Financial Reporting
Management is committed to improving our overall system of internal control over financial reporting and we continue to take steps to remediate the remaining material weakness related to spreadsheet controls. These steps include streamlining certain spreadsheets, training our personnel, risk assessment of key controls and mapping to spreadsheets, and reducing our reliance on spreadsheets. These actions are subject to ongoing review by our senior management, as well as oversight by the audit committee of our board of directors. We have placed a high priority on the remediation process and are allocating the necessary resources to the remediation efforts.March 31, 2022.
Changes in Internal Control over Financial Reporting


Other thanDuring the actions described above,quarter ended March 31, 2022, there were no changes in our internal control over financial reporting that occurred during the quarter ended September 30, 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.



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PART II - OTHER INFORMATION


ITEM 1. LEGAL PROCEEDINGS
    
As a result of the Merger, the Bank has been involved in certainRefer to “Item 1. Financial Statements — Note 10 — Commitments and Contingencies” for information regarding legal proceedings initiated by the Seattle Bank against various entities relating to its purchases and subsequent impairments of certain private-label MBS, as described below. Although the Seattle Bank sold all private-label MBS during the first quarter of 2015 and all of the lawsuits have been either settled or dismissed, the Bank has appealed certain claims dismissed by the court against three defendants. The private-label MBS litigation is described below. After consultation with legal counsel, other than the private-label MBS litigation, we do not believe any legal proceedings to which we are a party could have a material impact on our financial condition, results of operations, or cash flows.proceedings.


Private-Label MBS Litigation

As the Seattle Bank previously reported, in December of 2009, it filed 11 complaints in the Superior Court of Washington for King County relating to private-label MBS that it purchased from various dealers and financial institutions in an aggregate original principal amount of approximately $4 billion. The Seattle Bank’s complaints under Washington State law requested rescission of its purchases of the securities and repurchases of the securities by the defendants for the original purchase prices plus eight percent per annum (plus related costs), minus distributions on the securities received by the Seattle Bank. The Seattle Bank asserted that the defendants made untrue statements and omitted important information in connection with their sales of the securities to the Seattle Bank.

Of the 11 cases initially filed, one has been dismissed and ten have been settled in whole or in part, the remaining portions of which are under appeal. The appeal covers the claims related to five certificates across three different cases. The aggregate consideration paid for the private-label MBS currently on appeal is $767 million.

Litigation Settlement Gains

Litigation settlement gains are considered realized and recorded when we receive cash or assets that are readily convertible to known amounts of cash or claims to cash. In addition, litigation settlement gains are considered realizable and recorded when we enter into a signed agreement that is not subject to appeal, where the counterparty has the ability to pay, and the amount to be received can be reasonably estimated. Prior to being realized or realizable, we consider potential litigation settlement gains to be gain contingencies, and therefore they are not recorded in the Statements of Income.
We record legal expenses related to litigation settlements as incurred in other expenses in the Statements of Income with the exception of certain legal expenses related to litigation settlement awards that are contingent based fees for the attorneys representing the Bank. We incur and recognize these contingent based legal fees only when litigation settlement awards are realized, at which time these fees are netted against the gains recognized on the litigation settlement. 
During the three months ended September 30, 2017 and 2016 we did not settle any private-label MBS claims. During the nine months ended September 30, 2017, we settled a private-label MBS claim and recognized $21 million in net gains on litigation settlements. During the nine months ended September 30, 2016, we recognized $337 million in net gains on litigation settlements.



ITEM 1A. RISK FACTORS


For a discussion of our risk factors, refer to our 20162021 Form 10-K. There have been no material changes to our risk factors during the ninethree months ended September 30, 2017, except as follows:March 31, 2022.


FAILURES OR INTERRUPTIONS IN INTERNAL CONTROLS, INFORMATION SYSTEMS, AND OTHER OPERATING TECHNOLOGIES COULD HARM OUR FINANCIAL CONDITION, RESULTS OF OPERATIONS, REPUTATION, AND RELATIONS WITH MEMBERS

Control failures, including failures in our controls over financial reporting, or business interruptions with members, vendors, or counterparties, could result from human error, fraud, breakdowns in information and computer systems, lapses in operating processes, or natural or man-made disasters. If a significant control failure or business interruption were to occur, it could materially damage our financial condition and results of operations. We may not be able to foresee, prevent, mitigate, reverse, or repair the negative effects of such failures or interruptions.
Moreover, we rely heavily upon information systems and other operating technologies to conduct and manage our business. To the extent that we, our members, vendors, or counterparties experience a technical failure or interruption in any of these systems or other operating technologies, including any "cyberattacks" or other breaches of technical security, we may be unable to conduct and manage our business effectively. Although we have implemented our disaster recovery and business continuity plans, there can be no assurance that it will be able to prevent, timely and adequately address, or mitigate the negative effects of any technical failure or interruption. Any technical failure or interruption could harm our customer relations, risk management, and profitability, and could adversely impact our financial condition and results of operations.
During 2016, we identified certain control deficiencies in our internal control over financial reporting. These control deficiencies were evaluated, individually and in the aggregate, and as a result, we determined one material weakness in our internal control over financial reporting remained from the previous year which related to our failure to maintain effective controls over spreadsheets used in our financial close and reporting process. This material weakness is described more fully in “Item 4. Controls and Procedures”. These control deficiencies could result in a misstatement of any of our financial statement accounts and disclosures that could in turn result in a material misstatement of the annual or interim financial statements that would not be prevented or detected. Accordingly, management has concluded that these control deficiencies constitute a material weakness. In addition, other material weaknesses or deficiencies may be identified in the future.
If we are unable to correct the material weakness or deficiencies in internal control over financial reporting in a timely manner, our ability to record, process, summarize, and report financial information accurately and within the time periods specified in the rules and forms of the SEC could be adversely affected. This failure could cause our members to lose confidence in our reported financial information, subject us to government enforcement actions, and generally, materially, and adversely impact our business and financial condition.
On June 22, 2017, a storm pipe broke at our headquarters causing significant water damage to our office space and rendering it totally uninhabitable. From June 23 through July 14 of this year, we utilized our back-up data center, and employees worked out of a business recovery center located in Urbandale, Iowa, additional leased space in downtown Des Moines, and remotely. On July 17, 2017, we resumed use of our primary data center at our headquarters, which was not damaged. However, as a result of the water damage, the estimated time to complete repairs, and our plan to relocate our headquarters to a building in downtown Des Moines that we purchased in April of 2017, we terminated our lease with Wells Fargo Financial, an affiliate of Wells Fargo Bank effective September 30, 2017. We entered into a nine month lease agreement with Wells Fargo Financial effective September 30, 2017 to lease approximately 1,200 square feet of the former headquarters to support general business functions. In addition, in July and August 2017, we amended our lease at 666 Walnut St., Des Moines, Iowa to lease additional space for our temporary headquarters. We expect to remain at this location until our recently purchased building at 909 Locust St., Des Moines, Iowa is ready for occupancy, which is currently anticipated for late 2018. Through the date of this filing we have not experienced material disruptions in member services or material impacts to our financial condition and results of operations; however, there can be no assurance that future technical failures or interruption will not take place. Any technical failure or interruption could harm our customer relations, risk management, and profitability, and could adversely impact our financial condition and results of operations.


CHANGES TO AND REPLACEMENT OF THE LIBOR BENCHMARK INTEREST RATE COULD ADVERSELY AFFECT OUR BUSINESS, FINANCIAL CONDITION, AND RESULTS OF OPERATIONS
In July 2017, the United Kingdom's Financial Conduct Authority (FCA), a regulator of financial services firms and financial markets in the U.K., stated that they will plan for a phase out of regulatory oversight of LIBOR interest rate indices. The FCA has indicated they will support the LIBOR indices through 2021 to allow for an orderly transition to an alternative reference rate(s).  Other financial services regulators and industry groups, including the International Swaps and Derivatives Association (ISDA), are evaluating the possible phase-out of LIBOR and the development of alternate interest rate indices or reference rate(s).  As noted throughout this report, many of the Bank's assets and liabilities are indexed to LIBOR. We are not able to predict whether LIBOR will cease to be available after 2021, whether the alternative rates the Federal Reserve Board proposes to publish will become market benchmarks in place of LIBOR, or what the impact of such a transition may be on our business, financial condition, and results of operations.

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


There were no material changes to the disclosure related to the Rule 2-01 (c)(1)(ii)(A)None.



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Table of SEC Regulation S-X (the Loan Rule) included in our 2016 10-K. Refer to “Part II. Item 9B - Other Information “ in our 2016 Form 10-K for additional information.Contents


ITEM 6. EXHIBITS
3.1
3.2
4.1
10.1
31.1
31.2
32.1
32.2
101.INSXBRL 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.SCHXBRL Taxonomy Extension Schema Document
101.CALXBRL Taxonomy Extension Calculation Linkbase Document
101.LAB101.DEFXBRL Taxonomy Extension Definition Linkbase Document
101.LABXBRL Taxonomy Extension Label Linkbase Document
101.PREXBRL Taxonomy Extension Presentation Linkbase Document
101.DEF104Cover Page Interactive Data File - The cover page interactive data file does not appear in the interactive data file because its XBRL Taxonomy Extension Definition Linkbase Documenttags are embedded within the inline XBRL document.

1Incorporated by reference to our Form 8-K filed with the SEC on June 1, 2015 (Commission File No. 000-51999).

2Incorporated by reference to our Form 8-K filed with the SEC on February 17, 2016 (Commission File No. 000-51999).



1    Incorporated by reference from our Form 8-K filed with the SEC on June 1, 2015 (Commission File No. 000-51999).



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



3    Incorporated by reference from our Form 10-Q filed with the SEC on November 10, 2020 (Commission File No. 000-51999).



4    Incorporated by reference from our Form 8-K filed with the SEC on November 5, 2021 (Commission File No. 000-51999).






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Table of Contents

SIGNATURES


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


FEDERAL HOME LOAN BANK OF DES MOINES
(Registrant)
FEDERAL HOME LOAN BANK OF DES MOINESDate:May 10, 2022
(Registrant)
Date:By:November 9, 2017/s/ Kristina K. Williams
By:/s/ Michael L. Wilson
Michael L. Wilson
Kristina K. Williams
President and Chief Executive Officer
By:/s/ Ardis E. Kelley
Ardis E. Kelley
Senior
By:/s/ Joelyn R. Jensen-Marren
Joelyn R. Jensen-Marren
Executive Vice President and Chief AccountingFinancial Officer
(Principal Financial and Chief Strategic Planning Officer (Principal Accounting Officer)



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