UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended ~~March 31,~~June 30, 2022

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

For the transition period from ________ to ________

Commission File Number 000-52004

FEDERAL HOME LOAN BANK OF TOPEKA

(Exact name of registrant as specified in its charter)


Federally chartered corporation of the United States						48-0561319
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)
500 SW Wanamaker Road, Topeka, KS						66606
(Address of principal executive offices)						(Zip Code)

Registrant’s telephone number, including area code: 785.233.0507

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


Title of each class	Trading symbol(s)	Name of each exchange on which registered
None	N/A	N/A

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

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See 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

☐

Emerging growth company

☐

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

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

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~~July 29, 2022
Class A Stock, par value $100 per share			~~3,088,049~~2,538,998
Class B Stock, par value $100 per share			~~15,224,684~~16,527,211

.FEDERAL HOME LOAN BANK OF TOPEKA

TABLE OF CONTENTS



PART I	FINANCIAL INFORMATION	5
Item 1.	Financial Statements	5
	Statements of Condition	6
	Statements of Income	8
	Statements of Comprehensive Income	10
	Statements of Capital	1112
	Statements of Cash Flows	1213
	Notes to Financial Statements	1415
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4448
	Executive Level Overview	4549
	Financial Market Trends	4651
	Critical Accounting Policies and Estimates	4752
	Results of Operations	4853
	Financial Condition	5565
	Liquidity and Capital Resources	6879
	Risk Management	7182
	Recently Issued Accounting Standards	7384
	Legislative and Regulatory Developments	7385
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	7485
Item 4.	Controls and Procedures	7890
Part II	OTHER INFORMATION	7890
Item 1.	Legal Proceedings	7890
Item 1A.	Risk Factors	7890
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	7890
Item 3.	Defaults Upon Senior Securities	7890
Item 4.	Mine Safety Disclosures	7890
Item 5.	Other Information	7890
Item 6.	Exhibits	7991

Important Notice about Information in this Quarterly Report

In this quarterly report, unless the context suggests otherwise, references to “FHLBank,” “FHLBank Topeka,” “we,” “us” and “our” mean Federal Home Loan Bank of Topeka, and “FHLBanks” mean all Federal Home Loan Banks, including FHLBank Topeka.

The information contained in this quarterly report is accurate only as of the date of this quarterly report and as of the dates specified herein.

The product and service names used in this quarterly report are the property of FHLBank, and in some cases, other FHLBanks. Where the context suggests otherwise, the products, services and company names mentioned in this quarterly report are the property of their respective owners.

Special Cautionary Notice Regarding Forward-looking Statements

The information in this Form 10-Q contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements include statements describing the objectives, projections, estimates or future predictions of FHLBank’s operations. These statements may be identified by the use of forward-looking terminology such as “anticipates,” “believes,” “may,” “is likely,” “could,” “estimate,” “expect,” “will,” “intend,” “probable,” “project,” “should,” or their negatives or other variations of these terms. FHLBank cautions that by their nature forward-looking statements involve risks or uncertainties and that actual results may differ materially from those expressed in any forward-looking statements as a result of such risks and uncertainties, including but not limited to:

•Changes in the general economy and capital markets, the rate of inflation, ~~or deflation,~~ employment rates, housing market activity and pricing, the size and volatility of the residential mortgage market, geopolitical events, and global economic uncertainty;

•The ongoing and evolving impact of the coronavirus (COVID-19) pandemic and its variants or other pandemics on our members, our business, the economy and capital markets;

•Governmental actions, including legislative, regulatory, judicial or other developments that affect FHLBank; its members, counterparties or investors; housing government-sponsored enterprises (GSE); or the FHLBank System in general;

•External events, such as economic, financial, or political disruptions, and/or wars and natural disasters, including disasters caused by climate change, which could damage our facilities or the facilities of our members, damage or destroy collateral pledged to secure advances, or ~~mortgages held for portfolio,~~mortgage-related assets, which could increase our risk exposure or loss experience;

•Effects of derivative accounting treatment and other accounting rule requirements, or changes in such requirements;

•Competitive forces, including competition for loan demand, purchases of mortgage loans and access to funding;

•The ability of FHLBank to introduce new products and services to meet market demand and to manage successfully the risks associated with all products and services;

•Changes in demand for FHLBank products and services or consolidated obligations of the FHLBank System;

•Membership changes, including changes resulting from member failures or mergers, changes due to member eligibility, or changes in the principal place of business of members;

•Changes in the U.S. government’s long-term debt rating and the long-term credit rating of the senior unsecured debt issues of the FHLBank System;

•Soundness of other financial institutions, including FHLBank members, non-member borrowers, counterparties, and the other FHLBanks;

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

•The volume and quality of eligible mortgage loans originated and sold by participating members to FHLBank through its various mortgage finance products (Mortgage Partnership Finance® (MPF®) Program). “Mortgage Partnership Finance,” “MPF,” “MPF Xtra,” and “MPF Direct” are registered trademarks of FHLBank Chicago;

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

•Changes in the value or liquidity of collateral underlying advances to FHLBank members or non-member borrowers or collateral pledged by reverse repurchase and derivative counterparties;

•Volatility of market prices, changes in interest rates and indices and the timing and volume of market activity, including the effects of these factors on amortization/accretion;

•Gains/losses on derivatives or on trading investments and the ability to enter into effective derivative instruments on acceptable terms;

•The upcoming discontinuance of the London Interbank Offered Rate (LIBOR) and the related effect on FHLBank's LIBOR-based investments, contracts, and the collateral underlying advances to our members;

•Changes in FHLBank’s capital structure;

•FHLBank's ability to declare dividends or to pay dividends at rates consistent with past practices;

•The ability of FHLBank to keep pace with technological changes and the ability to develop and support technology and information systems, including the ability to manage cybersecurity risks and securely access the internet and internet-based systems and services, sufficient to effectively manage the risks of FHLBank’s business; and

•The ability of FHLBank to attract, onboard and retain skilled individuals, including qualified executive officers.

Readers of this quarterly report should not rely solely on the forward-looking statements and should consider all risks and uncertainties addressed throughout this quarterly report, as well as those discussed under Item 1A – Risk Factors in our annual report on Form 10-K for the fiscal year ended December 31, 2021, incorporated by reference herein.

All forward-looking statements contained in this Form 10-Q are expressly qualified in their entirety by reference to this cautionary notice. The reader should not place undue reliance on such forward-looking statements, since the statements speak only as of the date that they are made and FHLBank has no obligation and does not undertake publicly to update, revise or correct any forward-looking statement for any reason to reflect events or circumstances after the date of this quarterly report.

PART I

Item 1: Financial Statements

Table of Contents


FEDERAL HOME LOAN BANK OF TOPEKA	FEDERAL HOME LOAN BANK OF TOPEKA					FEDERAL HOME LOAN BANK OF TOPEKA
STATEMENTS OF CONDITION - Unaudited	STATEMENTS OF CONDITION - Unaudited					STATEMENTS OF CONDITION - Unaudited
(In thousands, except par value)	(In thousands, except par value)					(In thousands, except par value)
		03/31/2022		12/31/2021			06/30/2022		12/31/2021
ASSETS	ASSETS					ASSETS
Cash and due from banks	Cash and due from banks	$	29,264	$	25,841	Cash and due from banks	$	31,350	$	25,841
Interest-bearing deposits	Interest-bearing deposits	624,145		693,249		Interest-bearing deposits	854,271		693,249
Securities purchased under agreements to resell (Note 9)	Securities purchased under agreements to resell (Note 9)	2,100,000		1,500,000		Securities purchased under agreements to resell (Note 9)	2,250,000		1,500,000
Federal funds sold	Federal funds sold	3,100,000		3,360,000		Federal funds sold	5,360,000		3,360,000

Investment securities:	Investment securities:					Investment securities:
Trading securities (Note 3)	Trading securities (Note 3)	2,775,818		2,339,955		Trading securities (Note 3)	2,360,237		2,339,955
Available-for-sale securities, amortized cost of $7,812,873 and $7,644,496 (Note 3)		7,846,335		7,719,185
Held-to-maturity securities, fair value of $423,695 and $450,771 (Note 3)		421,583		446,185
Available-for-sale securities, amortized cost of $8,164,934 and $7,644,496 (Note 3)						Available-for-sale securities, amortized cost of $8,164,934 and $7,644,496 (Note 3)	8,143,831		7,719,185
Held-to-maturity securities, fair value of $399,737 and $450,771 (Note 3)						Held-to-maturity securities, fair value of $399,737 and $450,771 (Note 3)	399,308		446,185
Total investment securities	Total investment securities	11,043,736		10,505,325		Total investment securities	10,903,376		10,505,325

Advances (Note 4)	Advances (Note 4)	25,487,576		23,484,288		Advances (Note 4)	29,522,840		23,484,288

Mortgage loans held for portfolio, net of allowance for credit losses of $5,038 and $5,317 (Note 5)		8,021,949		8,135,046
Mortgage loans held for portfolio, net of allowance for credit losses of $5,202 and $5,317 (Note 5)						Mortgage loans held for portfolio, net of allowance for credit losses of $5,202 and $5,317 (Note 5)	8,018,930		8,135,046

Overnight loans to other FHLBanks						Overnight loans to other FHLBanks	200,000		—
Accrued interest receivable	Accrued interest receivable	79,890		78,032		Accrued interest receivable	96,425		78,032

Derivative assets, net (Notes 6, 9)	Derivative assets, net (Notes 6, 9)	175,645		156,926		Derivative assets, net (Notes 6, 9)	181,849		156,926
Other assets	Other assets	80,487		82,531		Other assets	80,259		82,531

TOTAL ASSETS	TOTAL ASSETS	$	50,742,692	$	48,021,238	TOTAL ASSETS	$	57,499,300	$	48,021,238

LIABILITIES	LIABILITIES					LIABILITIES
Deposits (Note 7)	Deposits (Note 7)	$	936,691	$	946,207	Deposits (Note 7)	$	781,845	$	946,207

Consolidated obligations, net:	Consolidated obligations, net:					Consolidated obligations, net:
Discount notes (Note 8)	Discount notes (Note 8)	7,843,651		6,568,989		Discount notes (Note 8)	20,076,331		6,568,989
Bonds (Note 8)	Bonds (Note 8)	38,960,721		37,630,609		Bonds (Note 8)	32,928,146		37,630,609
Total consolidated obligations, net	Total consolidated obligations, net	46,804,372		44,199,598		Total consolidated obligations, net	53,004,477		44,199,598

Overnight loans from other FHLBanks						Overnight loans from other FHLBanks	500,000		—
Mandatorily redeemable capital stock (Note 10)	Mandatorily redeemable capital stock (Note 10)	559		582		Mandatorily redeemable capital stock (Note 10)	537		582
Accrued interest payable	Accrued interest payable	48,820		42,753		Accrued interest payable	74,572		42,753
Affordable Housing Program payable	Affordable Housing Program payable	45,105		42,224		Affordable Housing Program payable	45,801		42,224
Derivative liabilities, net (Notes 6, 9)	Derivative liabilities, net (Notes 6, 9)	2,494		4,580		Derivative liabilities, net (Notes 6, 9)	5,572		4,580
Other liabilities	Other liabilities	126,771		71,028		Other liabilities	91,730		71,028

TOTAL LIABILITIES	TOTAL LIABILITIES	47,964,812		45,306,972		TOTAL LIABILITIES	54,504,534		45,306,972

Commitments and contingencies (Note 13)	Commitments and contingencies (Note 13)	0				Commitments and contingencies (Note 13)	0

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

Table of Contents


FEDERAL HOME LOAN BANK OF TOPEKA	FEDERAL HOME LOAN BANK OF TOPEKA					FEDERAL HOME LOAN BANK OF TOPEKA
STATEMENTS OF CONDITION - Unaudited	STATEMENTS OF CONDITION - Unaudited					STATEMENTS OF CONDITION - Unaudited
(In thousands, except par value)	(In thousands, except par value)					(In thousands, except par value)
		03/31/2022		12/31/2021			06/30/2022		12/31/2021

CAPITAL	CAPITAL					CAPITAL
Capital stock outstanding - putable:	Capital stock outstanding - putable:					Capital stock outstanding - putable:
Class A ($100 par value; 2,202 and 2,342 shares issued and outstanding) (Note 10)		$	220,222	$	234,190
Class B ($100 par value; 13,539 and 12,651 shares issued and outstanding) (Note 10)		1,353,935		1,265,111
Class A ($100 par value; 2,716 and 2,342 shares issued and outstanding) (Note 10)						Class A ($100 par value; 2,716 and 2,342 shares issued and outstanding) (Note 10)	$	271,621	$	234,190
Class B ($100 par value; 15,494 and 12,651 shares issued and outstanding) (Note 10)						Class B ($100 par value; 15,494 and 12,651 shares issued and outstanding) (Note 10)	1,549,395		1,265,111
Total capital stock	Total capital stock	1,574,157		1,499,301		Total capital stock	1,821,016		1,499,301

Retained earnings:	Retained earnings:					Retained earnings:
Unrestricted	Unrestricted	872,252		852,408		Unrestricted	886,710		852,408
Restricted	Restricted	300,321		290,242		Restricted	310,393		290,242
Total retained earnings	Total retained earnings	1,172,573		1,142,650		Total retained earnings	1,197,103		1,142,650

Accumulated other comprehensive income (loss) (Note 11)	Accumulated other comprehensive income (loss) (Note 11)	31,150		72,315		Accumulated other comprehensive income (loss) (Note 11)	(23,353)		72,315

TOTAL CAPITAL	TOTAL CAPITAL	2,777,880		2,714,266		TOTAL CAPITAL	2,994,766		2,714,266

TOTAL LIABILITIES AND CAPITAL	TOTAL LIABILITIES AND CAPITAL	$	50,742,692	$	48,021,238	TOTAL LIABILITIES AND CAPITAL	$	57,499,300	$	48,021,238

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

Table of Contents


FEDERAL HOME LOAN BANK OF TOPEKA	FEDERAL HOME LOAN BANK OF TOPEKA							FEDERAL HOME LOAN BANK OF TOPEKA
STATEMENTS OF INCOME - Unaudited	STATEMENTS OF INCOME - Unaudited							STATEMENTS OF INCOME - Unaudited
(In thousands)	(In thousands)							(In thousands)

		Three Months Ended					Three Months Ended				Six Months Ended
			03/31/2022		03/31/2021				06/30/2022		06/30/2021		06/30/2022		06/30/2021
INTEREST INCOME:	INTEREST INCOME:							INTEREST INCOME:
Interest-bearing deposits	Interest-bearing deposits		$	376	$	269		Interest-bearing deposits	$	2,367	$	215	$	2,743	$	484
Securities purchased under agreements to resell	Securities purchased under agreements to resell		536		489			Securities purchased under agreements to resell	5,251		401		5,787		890
Federal funds sold	Federal funds sold		794		520			Federal funds sold	6,360		460		7,154		980
Trading securities	Trading securities		13,883		16,385			Trading securities	16,348		16,483		30,231		32,868
Available-for-sale securities	Available-for-sale securities		14,784		11,477			Available-for-sale securities	25,960		7,411		40,744		18,888
Held-to-maturity securities	Held-to-maturity securities		1,053		3,938			Held-to-maturity securities	1,450		1,847		2,503		5,785
Advances	Advances		37,881		35,443			Advances	77,874		30,309		115,755		65,752

Mortgage loans held for portfolio	Mortgage loans held for portfolio		54,554		53,478			Mortgage loans held for portfolio	56,383		51,443		110,937		104,921
Other	Other		197		257			Other	295		242		492		499
Total interest income	Total interest income		124,058		122,256			Total interest income	192,288		108,811		316,346		231,067

INTEREST EXPENSE:	INTEREST EXPENSE:							INTEREST EXPENSE:
Deposits	Deposits		126		108			Deposits	997		103		1,123		211
Consolidated obligations:	Consolidated obligations:							Consolidated obligations:
Discount notes	Discount notes		2,036		1,998			Discount notes	27,998		1,069		30,034		3,067
Bonds	Bonds		36,556		46,515			Bonds	79,776		40,151		116,332		86,666
Mandatorily redeemable capital stock	Mandatorily redeemable capital stock		1		9			Mandatorily redeemable capital stock	1		9		2		18
Other	Other		264		257			Other	290		249		554		506
Total interest expense	Total interest expense		38,983		48,887			Total interest expense	109,062		41,581		148,045		90,468

NET INTEREST INCOME	NET INTEREST INCOME		85,075		73,369			NET INTEREST INCOME	83,226		67,230		168,301		140,599
Provision (reversal) for credit losses on mortgage loans	Provision (reversal) for credit losses on mortgage loans		(307)		(14)			Provision (reversal) for credit losses on mortgage loans	(108)		2,312		(415)		2,298
NET INTEREST INCOME AFTER LOAN LOSS PROVISION (REVERSAL)	NET INTEREST INCOME AFTER LOAN LOSS PROVISION (REVERSAL)		85,382		73,383			NET INTEREST INCOME AFTER LOAN LOSS PROVISION (REVERSAL)	83,334		64,918		168,716		138,301

OTHER INCOME (LOSS):	OTHER INCOME (LOSS):							OTHER INCOME (LOSS):
Net gains (losses) on trading securities	Net gains (losses) on trading securities		(59,488)		(26,747)			Net gains (losses) on trading securities	(23,339)		(13,411)		(82,827)		(40,158)

Net gains (losses) on derivatives	Net gains (losses) on derivatives		46,563		17,581			Net gains (losses) on derivatives	12,814		(15)		59,377		17,566

Standby bond purchase agreement commitment fees	Standby bond purchase agreement commitment fees		625		621			Standby bond purchase agreement commitment fees	651		630		1,276		1,251
Letters of credit fees	Letters of credit fees		1,570		1,683			Letters of credit fees	1,551		1,588		3,121		3,271
Other	Other		1,221		970			Other	671		1,062		1,892		2,032
Total other income (loss)	Total other income (loss)		(9,509)		(5,892)			Total other income (loss)	(7,652)		(10,146)		(17,161)		(16,038)

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

Table of Contents


FEDERAL HOME LOAN BANK OF TOPEKA	FEDERAL HOME LOAN BANK OF TOPEKA							FEDERAL HOME LOAN BANK OF TOPEKA
STATEMENTS OF INCOME - Unaudited	STATEMENTS OF INCOME - Unaudited							STATEMENTS OF INCOME - Unaudited
(In thousands)	(In thousands)							(In thousands)

		Three Months Ended					Three Months Ended				Six Months Ended
			03/31/2022		03/31/2021				06/30/2022		06/30/2021		06/30/2022		06/30/2021
OTHER EXPENSES:	OTHER EXPENSES:							OTHER EXPENSES:
Compensation and benefits	Compensation and benefits		$	10,558	$	10,293		Compensation and benefits	$	10,750	$	9,458	$	21,308	$	19,751
Other operating	Other operating		5,003		4,278			Other operating	4,861		4,768		9,864		9,046
Federal Housing Finance Agency	Federal Housing Finance Agency		1,413		1,110			Federal Housing Finance Agency	1,327		1,109		2,740		2,219
Office of Finance	Office of Finance		1,224		1,171			Office of Finance	919		923		2,143		2,094

Mortgage loans transaction service fees	Mortgage loans transaction service fees		1,521		1,656			Mortgage loans transaction service fees	1,522		1,593		3,043		3,249
Other	Other		159		197			Other	346		294		505		491
Total other expenses	Total other expenses		19,878		18,705			Total other expenses	19,725		18,145		39,603		36,850

INCOME BEFORE ASSESSMENTS	INCOME BEFORE ASSESSMENTS		55,995		48,786			INCOME BEFORE ASSESSMENTS	55,957		36,627		111,952		85,413

Affordable Housing Program	Affordable Housing Program		5,600		4,880			Affordable Housing Program	5,596		3,663		11,196		8,543

NET INCOME	NET INCOME		$	50,395	$	43,906		NET INCOME	$	50,361	$	32,964	$	100,756	$	76,870

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

Table of Contents


FEDERAL HOME LOAN BANK OF TOPEKA	FEDERAL HOME LOAN BANK OF TOPEKA				FEDERAL HOME LOAN BANK OF TOPEKA
STATEMENTS OF COMPREHENSIVE INCOME - Unaudited	STATEMENTS OF COMPREHENSIVE INCOME - Unaudited							STATEMENTS OF COMPREHENSIVE INCOME - Unaudited
(In thousands)	(In thousands)							(In thousands)

		Three Months Ended					Three Months Ended				Six Months Ended
			03/31/2022		03/31/2021				06/30/2022		06/30/2021		06/30/2022		06/30/2021
Net income	Net income		$	50,395	$	43,906		Net income	$	50,361	$	32,964	$	100,756	$	76,870

Other comprehensive income (loss):	Other comprehensive income (loss):							Other comprehensive income (loss):
Net unrealized gains (losses) on available-for-sale securities	Net unrealized gains (losses) on available-for-sale securities		(41,227)		29,234			Net unrealized gains (losses) on available-for-sale securities	(54,565)		21,852		(95,792)		51,086

Defined benefit pension plan	Defined benefit pension plan		62		72			Defined benefit pension plan	62		78		124		150
Total other comprehensive income (loss)	Total other comprehensive income (loss)		(41,165)		29,306			Total other comprehensive income (loss)	(54,503)		21,930		(95,668)		51,236

TOTAL COMPREHENSIVE INCOME (LOSS)	TOTAL COMPREHENSIVE INCOME (LOSS)		$	9,230	$	73,212		TOTAL COMPREHENSIVE INCOME (LOSS)	$	(4,142)	$	54,894	$	5,088	$	128,106

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

Table of Contents


FEDERAL HOME LOAN BANK OF TOPEKA	FEDERAL HOME LOAN BANK OF TOPEKA																				FEDERAL HOME LOAN BANK OF TOPEKA
STATEMENTS OF CAPITAL - Unaudited	STATEMENTS OF CAPITAL - Unaudited																				STATEMENTS OF CAPITAL - Unaudited
(In thousands)	(In thousands)																				(In thousands)
		Capital Stock1									Retained Earnings						Accumulated		Total Capital			Capital Stock1									Retained Earnings						Accumulated		Total Capital
																	Other																				Other
		Class A			Class B			Total									Comprehensive					Class A			Class B			Total									Comprehensive
		Shares	Par Value		Shares	Par Value		Shares	Par Value		Unrestricted		Restricted		Total		Income (Loss)					Shares	Par Value		Shares	Par Value		Shares	Par Value		Unrestricted		Restricted		Total		Income (Loss)

Balance at December 31, 2020		4,122	412,225		11,618	1,161,779		15,740	1,574,004		793,331		258,124		1,051,455		42,308		2,667,767
Balance at March 31, 2021																					Balance at March 31, 2021	3,762	$	376,196	11,642	$	1,164,169	15,404	$	1,540,365	$	812,169	$	266,905	$	1,079,074	$	71,614	$	2,691,053

Comprehensive income	Comprehensive income										35,125		8,781		43,906		29,306		73,212		Comprehensive income										26,371		6,593		32,964		21,930		54,894
Proceeds from issuance of capital stock	Proceeds from issuance of capital stock	5	500		4,614	461,427		4,619	461,927										461,927		Proceeds from issuance of capital stock	30	2,971		3,553	355,262		3,583	358,233										358,233
Repurchase/redemption of capital stock	Repurchase/redemption of capital stock	(1,331)	(133,115)		(204)	(20,431)		(1,535)	(153,546)										(153,546)		Repurchase/redemption of capital stock	(2,207)	(220,659)		(111)	(11,076)		(2,318)	(231,735)										(231,735)
Net reclassification of shares to mandatorily redeemable capital stock	Net reclassification of shares to mandatorily redeemable capital stock	(3,156)	(315,648)		(426)	(42,595)		(3,582)	(358,243)										(358,243)		Net reclassification of shares to mandatorily redeemable capital stock	(1,504)	(150,322)		(755)	(75,487)		(2,259)	(225,809)										(225,809)
Net transfer of shares between Class A and Class B	Net transfer of shares between Class A and Class B	4,122	412,234		(4,122)	(412,234)		—	—										—		Net transfer of shares between Class A and Class B	3,198	319,699		(3,198)	(319,699)		—	—										—

Dividends on capital stock (Class A - 0.3%, Class B - 5.2%):
Dividends on capital stock (Class A - 0.3%, Class B - 5.3%):																					Dividends on capital stock (Class A - 0.3%, Class B - 5.3%):
Cash payment	Cash payment										(64)				(64)				(64)		Cash payment										(65)				(65)				(65)
Stock issued	Stock issued				162	16,223		162	16,223		(16,223)				(16,223)				—		Stock issued				157	15,682		157	15,682		(15,682)				(15,682)				—
Balance at March 31, 2021		3,762	$	376,196	11,642	$	1,164,169	15,404	$	1,540,365	$	812,169	$	266,905	$	1,079,074	$	71,614	$	2,691,053
Balance at June 30, 2021																					Balance at June 30, 2021	3,279	$	327,885	11,288	$	1,128,851	14,567	$	1,456,736	$	822,793	$	273,498	$	1,096,291	$	93,544	$	2,646,571

		Capital Stock1									Retained Earnings						Accumulated		Total Capital			Capital Stock1									Retained Earnings						Accumulated		Total Capital
																	Other																				Other
		Class A			Class B			Total									Comprehensive					Class A			Class B			Total									Comprehensive
		Shares	Par Value		Shares	Par Value		Shares	Par Value		Unrestricted		Restricted		Total		Income (Loss)					Shares	Par Value		Shares	Par Value		Shares	Par Value		Unrestricted		Restricted		Total		Income (Loss)
Balance at December 31, 2021		2,342	234,190		12,651	1,265,111		14,993	1,499,301		852,408		290,242		1,142,650		72,315		2,714,266
Balance at March 31, 2022																					Balance at March 31, 2022	2,202	$	220,222	13,539	$	1,353,935	15,741	$	1,574,157	$	872,252	$	300,321	$	1,172,573	$	31,150	$	2,777,880

Comprehensive income	Comprehensive income										40,316		10,079		50,395		(41,165)		9,230		Comprehensive income										40,289		10,072		50,361		(54,503)		(4,142)
Proceeds from issuance of capital stock	Proceeds from issuance of capital stock	—	—		6,387	638,709		6,387	638,709										638,709		Proceeds from issuance of capital stock	20	2,019		9,144	914,414		9,164	916,433										916,433
Repurchase/redemption of capital stock	Repurchase/redemption of capital stock	(3,607)	(360,704)		(605)	(60,520)		(4,212)	(421,224)										(421,224)		Repurchase/redemption of capital stock	(3,297)	(329,700)		(703)	(70,329)		(4,000)	(400,029)										(400,029)
Net reclassification of shares to mandatorily redeemable capital stock	Net reclassification of shares to mandatorily redeemable capital stock	(604)	(60,397)		(1,027)	(102,650)		(1,631)	(163,047)										(163,047)		Net reclassification of shares to mandatorily redeemable capital stock	(2,024)	(202,423)		(928)	(92,893)		(2,952)	(295,316)										(295,316)
Net transfer of shares between Class A and Class B	Net transfer of shares between Class A and Class B	4,071	407,133		(4,071)	(407,133)		—	—										—		Net transfer of shares between Class A and Class B	5,815	581,503		(5,815)	(581,503)		—	—										—

Dividends on capital stock (Class A - 0.3%, Class B - 5.8%):
Dividends on capital stock (Class A - 1.0%, Class B - 6.5%):																					Dividends on capital stock (Class A - 1.0%, Class B - 6.5%):
Cash payment	Cash payment										(54)				(54)				(54)		Cash payment										(60)				(60)				(60)
Stock issued	Stock issued				204	20,418		204	20,418		(20,418)				(20,418)				—		Stock issued				257	25,771		257	25,771		(25,771)				(25,771)				—
Balance at March 31, 2022		2,202	$	220,222	13,539	$	1,353,935	15,741	$	1,574,157	$	872,252	$	300,321	$	1,172,573	$	31,150	$	2,777,880
Balance at June 30, 2022																					Balance at June 30, 2022	2,716	$	271,621	15,494	$	1,549,395	18,210	$	1,821,016	$	886,710	$	310,393	$	1,197,103	$	(23,353)	$	2,994,766

1 Putable

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

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FEDERAL HOME LOAN BANK OF TOPEKA
STATEMENTS OF CASH FLOWS - Unaudited
(In thousands)
Three Months Ended
03/31/2022 03/31/2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 50,395 $ 43,906
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization:
Premiums and discounts on consolidated obligations, net (1,789) (4,487)
Concessions on consolidated obligations 964 2,220
Premiums and discounts on investments, net 1,673 4,713
Premiums, discounts and commitment fees on advances, net (1,113) (1,264)
Premiums, discounts and deferred loan costs on mortgage loans, net 6,527 16,696
Fair value adjustments on hedged assets or liabilities 388 720
Premises, software and equipment 808 823
Other 62 72
Provision (reversal) for credit losses on mortgage loans (307) (14)
Non-cash interest on mandatorily redeemable capital stock — 8
Net realized (gains) losses on disposal of premises, software and equipment 1 —
Other adjustments, net (162) (100)
Net (gains) losses on trading securities 59,488 26,747
Net change in derivatives and hedging activities 303,292 160,428
(Increase) decrease in accrued interest receivable (1,684) 4,782
Change in net accrued interest included in derivative assets (19,212) (6,129)
(Increase) decrease in other assets 904 968
Increase (decrease) in accrued interest payable 5,892 (496)
Change in net accrued interest included in derivative liabilities 6,042 (2,340)
Increase (decrease) in Affordable Housing Program liability 2,881 1,755
Increase (decrease) in other liabilities (5,694) (4,263)
Total adjustments 358,961 200,839
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 409,356 244,745


FEDERAL HOME LOAN BANK OF TOPEKA
STATEMENTS OF CAPITAL - Unaudited
(In thousands)
	Capital Stock1									Retained Earnings						Accumulated		Total Capital
																Other
	Class A			Class B			Total									Comprehensive
	Shares	Par Value		Shares	Par Value		Shares	Par Value		Unrestricted		Restricted		Total		Income (Loss)











Balance at December 31, 2020	4,122	$	412,225	11,618	$	1,161,779	15,740	$	1,574,004	$	793,331	$	258,124	$	1,051,455	$	42,308	$	2,667,767

Comprehensive income										61,496		15,374		76,870		51,236		128,106
Proceeds from issuance of capital stock	35	3,471		8,167	816,689		8,202	820,160										820,160
Repurchase/redemption of capital stock	(3,538)	(353,774)		(315)	(31,507)		(3,853)	(385,281)										(385,281)
Net reclassification of shares to mandatorily redeemable capital stock	(4,660)	(465,970)		(1,181)	(118,082)		(5,841)	(584,052)										(584,052)
Net transfer of shares between Class A and Class B	7,320	731,933		(7,320)	(731,933)		—	—										—

Dividends on capital stock (Class A - 0.3%, Class B - 5.3%):
Cash payment										(129)				(129)				(129)
Stock issued				319	31,905		319	31,905		(31,905)				(31,905)				—
Balance at June 30, 2021	3,279	$	327,885	11,288	$	1,128,851	14,567	$	1,456,736	$	822,793	$	273,498	$	1,096,291	$	93,544	$	2,646,571

	Capital Stock1									Retained Earnings						Accumulated		Total Capital
																Other
	Class A			Class B			Total									Comprehensive
	Shares	Par Value		Shares	Par Value		Shares	Par Value		Unrestricted		Restricted		Total		Income (Loss)
Balance at December 31, 2021	2,342	$	234,190	12,651	$	1,265,111	14,993	$	1,499,301	$	852,408	$	290,242	$	1,142,650	$	72,315	$	2,714,266

Comprehensive income										80,605		20,151		100,756		(95,668)		5,088
Proceeds from issuance of capital stock	20	2,019		15,531	1,553,123		15,551	1,555,142										1,555,142
Repurchase/redemption of capital stock	(6,904)	(690,404)		(1,308)	(130,849)		(8,212)	(821,253)										(821,253)
Net reclassification of shares to mandatorily redeemable capital stock	(2,628)	(262,820)		(1,955)	(195,543)		(4,583)	(458,363)										(458,363)
Net transfer of shares between Class A and Class B	9,886	988,636		(9,886)	(988,636)		—	—										—

Dividends on capital stock (Class A - 0.6%, Class B - 6.1%):
Cash payment										(114)				(114)				(114)
Stock issued				461	46,189		461	46,189		(46,189)				(46,189)				—
Balance at June 30, 2022	2,716	$	271,621	15,494	$	1,549,395	18,210	$	1,821,016	$	886,710	$	310,393	$	1,197,103	$	(23,353)	$	2,994,766

1 Putable

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

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FEDERAL HOME LOAN BANK OF TOPEKA
STATEMENTS OF CASH FLOWS - Unaudited
(In thousands)
Three Months Ended
03/31/2022 03/31/2021
CASH FLOWS FROM INVESTING ACTIVITIES:
Net (increase) decrease in interest-bearing deposits $ (72,681) $ 299,341
Net (increase) decrease in securities purchased under resale agreements (600,000) 900,000
Net (increase) decrease in Federal funds sold 260,000 (2,125,000)
Proceeds from maturities of and principal repayments on trading securities 404,650 4,665
Purchases of trading securities (900,000) (675,000)
Proceeds from maturities of and principal repayments on available-for-sale securities 351,543 503,950
Purchases of available-for-sale securities (697,435) (249,922)
Proceeds from maturities of and principal repayments on held-to-maturity securities 24,646 181,169
Advances repaid 159,083,449 134,393,793
Advances originated (161,291,476) (134,365,546)
Principal collected on mortgage loans 390,204 1,060,598
Purchases of mortgage loans (286,235) (542,022)
Proceeds from sale of foreclosed assets 70 47
Other investing activities 930 870
Purchases of premises, software and equipment (133) (278)
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (3,332,468) (613,335)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits (1,513) 33,284
Net proceeds from issuance of consolidated obligations:
Discount notes 39,888,155 53,566,824
Bonds 12,747,640 9,331,771
Payments for maturing and retired consolidated obligations:
Discount notes (38,614,004) (54,376,409)
Bonds (11,141,400) (12,635,100)
Net interest payments received (paid) for financing derivatives (6,704) (7,086)
Proceeds from issuance of capital stock 638,709 461,927
Payments for repurchase/redemption of capital stock (421,224) (153,546)
Payments for repurchase of mandatorily redeemable capital stock (163,070) (358,290)
Cash dividends paid (54) (64)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 2,926,535 (4,136,689)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 3,423 (4,505,279)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 25,841 4,570,415
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 29,264 $ 65,136
Supplemental disclosures:
Interest paid $ 44,786 $ 53,406
Affordable Housing Program payments $ 2,764 $ 3,135
Net transfers of mortgage loans to other assets $ 67 $ 183


FEDERAL HOME LOAN BANK OF TOPEKA
STATEMENTS OF CASH FLOWS - Unaudited
(In thousands)


	Six Months Ended
	06/30/2022		06/30/2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	100,756	$	76,870
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization:
Premiums and discounts on consolidated obligations, net	19,826		(9,003)
Concessions on consolidated obligations	2,120		3,592
Premiums and discounts on investments, net	2,336		8,968
Premiums, discounts and commitment fees on advances, net	(2,043)		(2,592)
Premiums, discounts and deferred loan costs on mortgage loans, net	11,934		30,663
Fair value adjustments on hedged assets or liabilities	809		2,245
Premises, software and equipment	1,639		1,645
Other	124		150
Provision (reversal) for credit losses on mortgage loans	(415)		2,298
Non-cash interest on mandatorily redeemable capital stock	2		17



Net realized (gains) losses on disposal of premises, software and equipment	16		—

Other adjustments, net	(192)		(139)
Net (gains) losses on trading securities	82,827		40,158
Net change in derivatives and hedging activities	493,441		143,042
(Increase) decrease in accrued interest receivable	(18,375)		13,513
Change in net accrued interest included in derivative assets	(33,149)		(4,580)
(Increase) decrease in other assets	(260)		474
Increase (decrease) in accrued interest payable	31,482		(4,845)
Change in net accrued interest included in derivative liabilities	5,764		(4,031)
Increase (decrease) in Affordable Housing Program liability	3,577		1,029
Increase (decrease) in other liabilities	(3,120)		(2,366)
Total adjustments	598,343		220,238
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES	699,099		297,108

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

Table of Contents


FEDERAL HOME LOAN BANK OF TOPEKA
STATEMENTS OF CASH FLOWS - Unaudited
(In thousands)


	Six Months Ended
	06/30/2022		06/30/2021
CASH FLOWS FROM INVESTING ACTIVITIES:
Net (increase) decrease in interest-bearing deposits	$	(409,606)	$	324,383
Net (increase) decrease in securities purchased under resale agreements	(750,000)		600,000
Net (increase) decrease in Federal funds sold	(2,000,000)		(271,000)

Proceeds from maturities of and principal repayments on trading securities	1,686,892		964,650
Purchases of trading securities	(1,790,000)		(1,500,000)

Proceeds from maturities of and principal repayments on available-for-sale securities	715,524		1,148,174
Purchases of available-for-sale securities	(1,573,277)		(550,335)

Proceeds from maturities of and principal repayments on held-to-maturity securities	46,903		261,616

Advances repaid	285,513,050		249,739,414
Advances originated	(291,848,144)		(249,626,718)
Principal collected on mortgage loans	700,359		1,952,872
Purchases of mortgage loans	(602,813)		(1,111,712)
Proceeds from sale of foreclosed assets	691		604

Other investing activities	1,875		1,754
Net (increase) decrease in loans to other FHLBanks	(200,000)		—

Purchases of premises, software and equipment	(1,186)		(633)
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES	(10,509,732)		1,933,069

CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits	(136,788)		(140,796)
Net proceeds from issuance of consolidated obligations:
Discount notes	123,799,659		150,599,735
Bonds	18,972,994		20,803,806
Payments for maturing and retired consolidated obligations:
Discount notes	(110,298,433)		(151,151,746)
Bonds	(23,287,700)		(26,332,300)
Net increase (decrease) in overnight loans from other FHLBanks	500,000		—





Net interest payments received (paid) for financing derivatives	(8,955)		(11,356)
Proceeds from issuance of capital stock	1,555,142		820,160
Payments for repurchase/redemption of capital stock	(821,253)		(385,281)
Payments for repurchase of mandatorily redeemable capital stock	(458,410)		(584,150)
Cash dividends paid	(114)		(129)

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES	9,816,142		(6,382,057)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	5,509		(4,151,880)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	25,841		4,570,415
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	31,350	$	418,535

Supplemental disclosures:
Interest paid	$	112,450	$	101,557
Affordable Housing Program payments	$	7,739	$	7,739
Net transfers of mortgage loans to other assets	$	67	$	220
Transfer of held-to-maturity securities to available-for-sale securities with the adoption of the reference rate reform guidance	$	—	$	2,019,635

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

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FEDERAL HOME LOAN BANK OF TOPEKA

Notes to Financial Statements - Unaudited

~~March 31,~~June 30, 2022

NOTE 1 – BASIS OF PRESENTATION

Basis of Presentation: The accompanying interim financial statements of FHLBank are unaudited and have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information and with the instruction provided by Article 10, Rule 10-01 of Regulation S-X. The financial statements contain all adjustments which are, in the opinion of management, necessary for a fair statement of FHLBank’s financial position, results of operations and cash flows for the interim periods presented. All such adjustments were of a normal recurring nature. The results of operations for the periods presented are not necessarily indicative of the results to be expected for the full fiscal year or any other interim period.

FHLBank’s significant accounting policies and certain other disclosures are set forth in the notes to the audited financial statements for the year ended December 31, 2021. The interim financial statements presented herein should be read in conjunction with FHLBank’s audited financial statements and notes thereto, which are included in FHLBank’s annual report on Form 10-K filed with the Securities and Exchange Commission (SEC) on March 21, 2022 (annual report on Form 10-K). The notes to the interim financial statements highlight significant changes to the notes included in the annual report on Form 10-K.

Use of Estimates: The preparation of financial statements under GAAP requires management to make estimates and assumptions as of the date of the financial statements in determining the reported amounts of assets, liabilities and estimated fair values and in determining the disclosure of any contingent assets or liabilities. Estimates and assumptions by management also affect the reported amounts of income and expense during the reporting period. The most significant of these estimates include the fair value of trading and available-for-sale securities and the fair value of derivatives. Many of the estimates and assumptions, including those used in financial models, are based on financial market conditions as of the date of the financial statements. Because of the volatility of the financial markets, as well as other factors that affect management estimates, actual results may vary from these estimates.

NOTE 2 – RECENTLY ISSUED ACCOUNTING STANDARDS AND INTERPRETATIONS AND CHANGES IN AND ADOPTIONS OF ACCOUNTING PRINCIPLES

Troubled Debt Restructurings and Vintage Disclosures (Accounting Standards Update (ASU) 2022-02). In March 2022, the Financial Accounting Standards Board (FASB) issued amendments to eliminate the accounting guidance for troubled debt restructurings by creditors in Accounting Standards Codification (ASC) 310 for entities that have adopted ASU 2016-13, while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty. The amended guidance requires that an entity apply the loan refinancing and restructuring guidance in ASC 310-20-35-9 through ASC 310-20-35-11 to determine whether a modification results in a new loan or a continuation of an existing loan. Additionally, the amendments require that an entity disclose current-period gross writeoffs by year of origination for financing receivables and net investments in leases within the scope of ASC 326. The guidance is effective for annual periods and interim periods within those annual periods beginning after December 15, 2022. Early adoption is permitted. FHLBank is evaluating this guidance and its effect on FHLBank’s financial condition, results of operations, cash flows, and disclosures.

Fair Value Hedging – Portfolio Layer Method (ASU 2022-01). In March 2022, the FASB issued an amendment to clarify the application of the guidance in ASC 815 related to fair value hedging of interest rate risk for portfolios of financial assets. The ASU expands the scope and application of the portfolio layer method and provides guidance on the accounting for and disclosure of hedge basis adjustments. The guidance is effective for annual periods and interim periods within those annual periods beginning after December 15, 2022. Early adoption is permitted. FHLBank is evaluating this guidance and its effect on FHLBank’s financial condition, results of operations, cash flows, and disclosures.

1415

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Reference Rate Reform (ASU 2021-01). In January 2021, the FASB issued an amendment that refines the scope of ASC 848 and clarifies the guidance issued to facilitate the effects of reference rate reform on financial reporting. The amendment permits entities to elect certain optional expedients and exceptions when accounting for derivative contracts and certain hedging relationships affected by changes in the interest rates used for discounting cash flows, computing variation margin settlements and calculating price alignment interest in connection with reference rate reform activities. During the fourth quarter of 2020, FHLBank elected applicable optional expedients specific to discounting transition on a retrospective basis. As a result of electing this expedient, discounting transition did not have a material effect on FHLBank's financial condition, results of operations, or cash flows. This guidance was effective immediately for FHLBank and was applied consistently with the optional expedient guidance under ASU 2020-04, described below.

Facilitation of the Effects of Reference Rate Reform on Financial Reporting (ASU 2020-04). In March 2020, the FASB issued temporary optional guidance to ease the potential burden in accounting for reference rate reform. The new guidance provides optional expedients and exceptions for applying GAAP to transactions affected by reference rate reform if certain criteria are met. The transactions primarily include: (1) contract modifications; (2) hedging relationships; and (3) sale or transfer of debt securities classified as held-to-maturity. During the second quarter of 2021, FHLBank adopted a provision of ASU 2020-04 which allows a one-time election to sell, transfer, or both sell and transfer debt securities classified as held-to-maturity that reference a rate affected by reference rate reform and that were classified as held-to-maturity before January 1, 2020 by transferring LIBOR-indexed securities. See Note 3 – Investments for additional information related to this transfer. This guidance was effective immediately for FHLBank, and the amendments may be applied prospectively through December 31, 2022. FHLBank continues to evaluate the impact of the guidance and anticipates electing the applicable optional expedients as reference rate reform activities occur. The effect of this guidance and these activities on FHLBank's financial condition, results of operations, and cash flows is not estimable, as it depends on the nature of the transactions undertaken in response to reference rate reform and market conditions at the time of those transactions.

NOTE 3 – INVESTMENTS

FHLBank's investment portfolio consists of interest-bearing deposits, securities purchased under agreements to resell, Federal funds sold, and debt securities.

Interest-Bearing Deposits, Securities Purchased under Agreements to Resell, and Federal Funds Sold: FHLBank 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 triple-B or greater (investment grade) by a Nationally Recognized Statistical Rating Organization (NRSRO). These may differ from internal ratings of the investments, if applicable. As of ~~March 31,~~June 30, 2022, approximately 3424 percent of these overnight investments were with counterparties not rated by an NRSRO. All transactions with unrated counterparties are secured transactions.

Federal funds sold are unsecured loans that are generally transacted on an overnight term. Federal Housing Finance Agency (FHFA) regulations include a limit on the amount of unsecured credit FHLBank may extend to a counterparty. As of ~~March 31,~~June 30, 2022 and December 31, 2021, all investments in interest-bearing deposits and Federal funds sold were repaid or expected to be repaid according to the contractual terms. No allowance for credit losses was recorded for these assets as of ~~March 31,~~June 30, 2022 and December 31, 2021. Carrying values of interest-bearing deposits and Federal funds sold exclude accrued interest receivable of ~~$102,000~~$556,000 and ~~$28,000,~~$236,000, respectively, as of ~~March 31,~~June 30, 2022, and $51,000 and $7,000, respectively, as of December 31, 2021.

Securities purchased under agreements to resell are 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). Based upon the collateral held as security and collateral maintenance provisions with its counterparties, FHLBank determined that no allowance for credit losses was needed for its securities purchased under agreements to resell as of ~~March 31,~~June 30, 2022 and December 31, 2021. The carrying value of securities purchased under agreements to resell excludes accrued interest receivable of ~~$19,000~~$99,000 and $3,000 as of ~~March 31,~~June 30, 2022 and December 31, 2021, respectively.

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

FHLBank's debt securities include the following major security types, which are based on the issuer and the risk characteristics of the security:

▪Certificates of deposit - unsecured negotiable promissory notes issued by banks;

▪U.S. Treasury obligations - sovereign debt of the United States;

▪GSE debentures - debentures issued by other FHLBanks, Federal National Mortgage Association (Fannie Mae), Federal Farm Credit Bank and Federal Agricultural Mortgage Corporation. GSE securities are not guaranteed by the U.S. government;

▪State or local housing agency obligations - municipal bonds issued by housing finance agencies;

▪U.S. obligation MBS - single-family MBS issued by Government National Mortgage Association (Ginnie Mae), which are guaranteed by the U.S. government; and

▪GSE MBS - single-family and multifamily MBS issued by Fannie Mae and Federal Home Loan Mortgage Corporation (Freddie Mac).

Trading Securities: Trading securities by major security type as of ~~March 31,~~June 30, 2022 and December 31, 2021 are summarized in Table 3.1 (in thousands):

Table 3.1


		Fair Value					Fair Value
		03/31/2022		12/31/2021			06/30/2022		12/31/2021
Non-mortgage-backed securities:	Non-mortgage-backed securities:					Non-mortgage-backed securities:

Certificates of deposit	Certificates of deposit	$	700,211	$	200,023	Certificates of deposit	$	639,786	$	200,023
U.S. Treasury obligations	U.S. Treasury obligations	905,038		917,472		U.S. Treasury obligations	649,108		917,472
GSE debentures	GSE debentures	401,915		415,918		GSE debentures	396,487		415,918
Non-mortgage-backed securities	Non-mortgage-backed securities	2,007,164		1,533,413		Non-mortgage-backed securities	1,685,381		1,533,413
Mortgage-backed securities:	Mortgage-backed securities:					Mortgage-backed securities:

GSE MBS	GSE MBS	768,654		806,542		GSE MBS	674,856		806,542
Mortgage-backed securities	Mortgage-backed securities	768,654		806,542		Mortgage-backed securities	674,856		806,542
TOTAL	TOTAL	$	2,775,818	$	2,339,955	TOTAL	$	2,360,237	$	2,339,955

Net gains (losses) on trading securities during the three and six months ended ~~March 31,~~June 30, 2022 and 2021 are shown in Table 3.2 (in thousands):

Table 3.2

Three Months Ended
03/31/2022 03/31/2021
Net gains (losses) on trading securities held as of March 31, 2022 $ (59,465) $ (23,663)
Net gains (losses) on trading securities sold or matured prior to March 31, 2022 (23) (3,084)
NET GAINS (LOSSES) ON TRADING SECURITIES $ (59,488) $ (26,747)



	Three Months Ended				Six Months Ended
	06/30/2022		06/30/2021		06/30/2022		06/30/2021
Net gains (losses) on trading securities held as of June 30, 2022	$	(22,229)	$	(7,439)	$	(76,490)	$	(27,779)
Net gains (losses) on trading securities sold or matured prior to June 30, 2022	(1,110)		(5,972)		(6,337)		(12,379)
NET GAINS (LOSSES) ON TRADING SECURITIES	$	(23,339)	$	(13,411)	$	(82,827)	$	(40,158)

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Available-for-sale Securities: Available-for-sale securities by major security type as of ~~March 31,~~June 30, 2022 are summarized in Table 3.3 (in thousands). Amortized cost includes adjustments made to the cost basis of an investment for accretion, amortization, and fair value hedge accounting adjustments, and excludes accrued interest receivable of ~~$16,340,000~~$20,634,000 as of ~~March 31,~~June 30, 2022.

Table 3.3


		03/31/2022									06/30/2022
		Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Fair Value			Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Fair Value
Non-mortgage-backed securities:	Non-mortgage-backed securities:									Non-mortgage-backed securities:
U.S. Treasury obligations	U.S. Treasury obligations	$	2,794,109	$	1,922	$	(7,972)	$	2,788,059	U.S. Treasury obligations	$	2,844,222	$	2,935	$	(11,718)	$	2,835,439
Non-mortgage-backed securities	Non-mortgage-backed securities	2,794,109		1,922		(7,972)		2,788,059		Non-mortgage-backed securities	2,844,222		2,935		(11,718)		2,835,439
Mortgage-backed securities:	Mortgage-backed securities:									Mortgage-backed securities:
U.S. obligation MBS	U.S. obligation MBS	46,763		78		(24)		46,817		U.S. obligation MBS	43,937		—		(247)		43,690
GSE MBS	GSE MBS	4,972,001		62,067		(22,609)		5,011,459		GSE MBS	5,276,775		36,359		(48,432)		5,264,702
Mortgage-backed securities	Mortgage-backed securities	5,018,764		62,145		(22,633)		5,058,276		Mortgage-backed securities	5,320,712		36,359		(48,679)		5,308,392
TOTAL	TOTAL	$	7,812,873	$	64,067	$	(30,605)	$	7,846,335	TOTAL	$	8,164,934	$	39,294	$	(60,397)	$	8,143,831

Available-for-sale securities by major security type as of December 31, 2021 are summarized in Table 3.4 (in thousands). Amortized cost includes adjustments made to the cost basis of an investment for accretion, amortization, and fair value hedge accounting adjustments, and excludes accrued interest receivable of $19,457,000 as of December 31, 2021.

Table 3.4


	12/31/2021
	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Fair Value
Non-mortgage-backed securities:
U.S. Treasury obligations	$	2,814,519	$	3,377	$	(1,459)	$	2,816,437
Non-mortgage-backed securities	2,814,519		3,377		(1,459)		2,816,437
Mortgage-backed securities:
U.S. obligation MBS	50,512		261		(6)		50,767
GSE MBS	4,779,465		78,246		(5,730)		4,851,981
Mortgage-backed securities	4,829,977		78,507		(5,736)		4,902,748
TOTAL	$	7,644,496	$	81,884	$	(7,195)	$	7,719,185

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Table 3.5 summarizes the available-for-sale securities with unrealized losses as of ~~March 31,~~June 30, 2022 (in thousands). The unrealized losses are aggregated by major security type and length of time that individual securities have been in a continuous unrealized loss position.

Table 3.5


		03/31/2022													06/30/2022
		Less Than 12 Months				12 Months or More				Total					Less Than 12 Months				12 Months or More				Total
		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses			Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Non-mortgage-backed securities:	Non-mortgage-backed securities:													Non-mortgage-backed securities:
U.S. Treasury obligations	U.S. Treasury obligations	$	1,277,798	$	(7,972)	$	—	$	—	$	1,277,798	$	(7,972)	U.S. Treasury obligations	$	1,340,401	$	(11,718)	$	—	$	—	$	1,340,401	$	(11,718)
Non-mortgage-backed securities	Non-mortgage-backed securities	1,277,798		(7,972)		—		—		1,277,798		(7,972)		Non-mortgage-backed securities	1,340,401		(11,718)		—		—		1,340,401		(11,718)
Mortgage-backed securities:	Mortgage-backed securities:													Mortgage-backed securities:
U.S. obligation MBS	U.S. obligation MBS	3,654		(9)		5,808		(15)		9,462		(24)		U.S. obligation MBS	38,196		(205)		5,494		(42)		43,690		(247)
GSE MBS	GSE MBS	1,275,723		(20,642)		717,035		(1,967)		1,992,758		(22,609)		GSE MBS	2,238,221		(45,067)		733,939		(3,365)		2,972,160		(48,432)
Mortgage-backed securities	Mortgage-backed securities	1,279,377		(20,651)		722,843		(1,982)		2,002,220		(22,633)		Mortgage-backed securities	2,276,417		(45,272)		739,433		(3,407)		3,015,850		(48,679)
TOTAL	TOTAL	$	2,557,175	$	(28,623)	$	722,843	$	(1,982)	$	3,280,018	$	(30,605)	TOTAL	$	3,616,818	$	(56,990)	$	739,433	$	(3,407)	$	4,356,251	$	(60,397)

Table 3.6 summarizes the available-for-sale securities with unrealized losses as of December 31, 2021 (in thousands). The unrealized losses are aggregated by major security type and length of time that individual securities have been in a continuous unrealized loss position.

Table 3.6


	12/31/2021
	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:
U.S. Treasury obligations	$	786,606	$	(1,459)	$	—	$	—	$	786,606	$	(1,459)
Non-mortgage-backed securities	786,606		(1,459)		—		—		786,606		(1,459)
Mortgage-backed securities:
U.S. obligation MBS	—		—		6,191		(6)		6,191		(6)
GSE MBS	331,546		(4,166)		740,451		(1,564)		1,071,997		(5,730)
Mortgage-backed securities	331,546		(4,166)		746,642		(1,570)		1,078,188		(5,736)
TOTAL	$	1,118,152	$	(5,625)	$	746,642	$	(1,570)	$	1,864,794	$	(7,195)

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The amortized cost and fair values of available-for-sale securities by contractual maturity as of ~~March 31,~~June 30, 2022 and December 31, 2021 are shown in Table 3.7 (in thousands). Expected maturities of MBS will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment fees.

Table 3.7


		03/31/2022				12/31/2021					06/30/2022				12/31/2021
		Amortized Cost		Fair Value		Amortized Cost		Fair Value			Amortized Cost		Fair Value		Amortized Cost		Fair Value
Non-mortgage-backed securities:	Non-mortgage-backed securities:									Non-mortgage-backed securities:
Due in one year or less	Due in one year or less	$	1,200,885	$	1,201,645	$	907,110	$	907,908	Due in one year or less	$	944,775	$	945,807	$	907,110	$	907,908
Due after one year through five years	Due after one year through five years	1,360,753		1,354,151		1,660,664		1,661,260		Due after one year through five years	1,674,588		1,665,306		1,660,664		1,661,260
Due after five years through ten years	Due after five years through ten years	232,471		232,263		246,745		247,269		Due after five years through ten years	224,859		224,326		246,745		247,269
Due after ten years	Due after ten years	—		—		—		—		Due after ten years	—		—		—		—
Non-mortgage-backed securities	Non-mortgage-backed securities	2,794,109		2,788,059		2,814,519		2,816,437		Non-mortgage-backed securities	2,844,222		2,835,439		2,814,519		2,816,437
Mortgage-backed securities	Mortgage-backed securities	5,018,764		5,058,276		4,829,977		4,902,748		Mortgage-backed securities	5,320,712		5,308,392		4,829,977		4,902,748
TOTAL	TOTAL	$	7,812,873	$	7,846,335	$	7,644,496	$	7,719,185	TOTAL	$	8,164,934	$	8,143,831	$	7,644,496	$	7,719,185

Held-to-maturity Securities: Held-to-maturity securities by major security type as of ~~March 31,~~June 30, 2022 are summarized in Table 3.8 (in thousands). Carrying value equals amortized cost, which includes adjustments made to the cost basis of an investment for accretion and amortization, and excludes accrued interest receivable of ~~$283,000~~$402,000 as of ~~March 31,~~June 30, 2022.

Table 3.8


		03/31/2022									06/30/2022
		Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Fair Value			Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Fair Value
Non-mortgage-backed securities:	Non-mortgage-backed securities:									Non-mortgage-backed securities:
State or local housing agency obligations	State or local housing agency obligations	$	74,865	$	—	$	(1,185)	$	73,680	State or local housing agency obligations	$	73,940	$	—	$	(1,039)	$	72,901
Non-mortgage-backed securities	Non-mortgage-backed securities	74,865		—		(1,185)		73,680		Non-mortgage-backed securities	73,940		—		(1,039)		72,901
Mortgage-backed securities:	Mortgage-backed securities:									Mortgage-backed securities:

GSE MBS	GSE MBS	346,718		4,643		(1,346)		350,015		GSE MBS	325,368		3,664		(2,196)		326,836
Mortgage-backed securities	Mortgage-backed securities	346,718		4,643		(1,346)		350,015		Mortgage-backed securities	325,368		3,664		(2,196)		326,836
TOTAL	TOTAL	$	421,583	$	4,643	$	(2,531)	$	423,695	TOTAL	$	399,308	$	3,664	$	(3,235)	$	399,737

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Held-to-maturity securities by major security type as of December 31, 2021 are summarized in Table 3.9 (in thousands). Carrying value equals amortized cost, which includes adjustments made to the cost basis of an investment for accretion and amortization, and excludes accrued interest receivable of $224,000 as of December 31, 2021.

Table 3.9


	12/31/2021
	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Fair Value
Non-mortgage-backed securities:
State or local housing agency obligations	$	74,865	$	—	$	(1,250)	$	73,615
Non-mortgage-backed securities	74,865		—		(1,250)		73,615
Mortgage-backed securities:

GSE MBS	371,320		5,913		(77)		377,156
Mortgage-backed securities	371,320		5,913		(77)		377,156
TOTAL	$	446,185	$	5,913	$	(1,327)	$	450,771

The amortized cost and fair values of held-to-maturity securities by contractual maturity as of ~~March 31,~~June 30, 2022 and December 31, 2021 are shown in Table 3.10 (in thousands). Expected maturities of certain securities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment fees.

Table 3.10


		03/31/2022		12/31/2021				06/30/2022				12/31/2021
		Amortized Cost		Fair Value		Amortized Cost			Fair Value			Amortized Cost		Fair Value		Amortized Cost		Fair Value
Non-mortgage-backed securities:	Non-mortgage-backed securities:										Non-mortgage-backed securities:
Due in one year or less	Due in one year or less	$	—	$	—	$	—		$	—	Due in one year or less	$	—	$	—	$	—	$	—
Due after one year through five years	Due after one year through five years	—		—		—			—		Due after one year through five years	—		—		—		—
Due after five years through ten years	Due after five years through ten years	44,865		44,745		44,865			44,736		Due after five years through ten years	43,940		43,835		44,865		44,736
Due after ten years	Due after ten years	30,000		28,935		30,000			28,879		Due after ten years	30,000		29,066		30,000		28,879
Non-mortgage-backed securities	Non-mortgage-backed securities	74,865		73,680		74,865			73,615		Non-mortgage-backed securities	73,940		72,901		74,865		73,615
Mortgage-backed securities	Mortgage-backed securities	346,718		350,015		371,320			377,156		Mortgage-backed securities	325,368		326,836		371,320		377,156
TOTAL	TOTAL	$	421,583	$	423,695	$	446,185		$	450,771	TOTAL	$	399,308	$	399,737	$	446,185	$	450,771

During the second quarter of 2021, FHLBank adopted a provision of ASU 2020-04 which allows a one-time election to sell, transfer, or both sell and transfer debt securities classified as held-to-maturity that reference a rate affected by reference rate reform and that were classified as held-to-maturity before January 1, 2020. Upon adopting the provision, FHLBank transferred held-to-maturity securities with an amortized cost of $2,019,635,000 to available-for-sale and recorded unrealized gains in accumulated other comprehensive income (AOCI) of $4,059,000.

Allowance for Credit Losses on Available-for-Sale and Held-to-Maturity Securities: FHLBank evaluates available-for-sale and held-to-maturity investment securities for credit losses on a quarterly basis. As of ~~March 31,~~June 30, 2022 and 2021, FHLBank did not recognize a provision for credit losses associated with available-for-sale investments or held-to-maturity investments.

Although certain available-for-sale securities were in an unrealized loss position, these losses are considered temporary as FHLBank expects to recover the entire amortized cost basis on these available-for-sale investment securities. FHLBank neither intends to sell these securities nor considers it more likely than not that it will be required to sell these securities before its anticipated recovery of each security's remaining amortized cost basis.

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FHLBank's held-to-maturity and available-for-sale securities: (1) were all highly rated and/or had short remaining terms to maturity; (2) had not experienced, nor did FHLBank expect, any payment default on the instruments; (3) in the case of U.S. obligations, carry an explicit government guarantee such that FHLBank considers the risk of nonpayment to be zero; and (4) in the case of GSE debentures or MBS, the securities are purchased under an assumption that the U.S. government is willing and able to intervene on behalf of investors during a financial crisis.

NOTE 4 – ADVANCES

General Terms: FHLBank offers a wide range of fixed and variable rate advance products with different maturities, interest rates, payment characteristics and optionality. As of ~~March 31,~~June 30, 2022 and December 31, 2021, FHLBank had advances outstanding at interest rates ranging from ~~0.21~~0.29 percent to 7.20 percent and 0.12 percent to 7.20 percent, respectively. Table 4.1 presents advances summarized by redemption term as of ~~March 31,~~June 30, 2022 and December 31, 2021 (dollar amounts in thousands). The redemption term represents the period in which principal amounts are contractually due. Carrying amounts exclude accrued interest receivable of ~~$14,701,000~~$29,642,000 and $13,140,000 as of ~~March 31,~~June 30, 2022 and December 31, 2021, respectively.

Table 4.1


		03/31/2022				12/31/2021					06/30/2022				12/31/2021
Redemption Term	Redemption Term	Amount		Weighted Average Interest Rate		Amount		Weighted Average Interest Rate		Redemption Term	Amount		Weighted Average Interest Rate		Amount		Weighted Average Interest Rate
Due in one year or less	Due in one year or less	$	15,252,784	0.52	%	$	13,279,735	0.34	%	Due in one year or less	$	19,288,811	1.43	%	$	13,279,735	0.34	%
Due after one year through two years	Due after one year through two years	1,972,740		1.40		1,825,235		1.31		Due after one year through two years	2,406,071		1.84		1,825,235		1.31
Due after two years through three years	Due after two years through three years	2,602,736		1.11		2,359,249		0.98		Due after two years through three years	2,494,157		1.74		2,359,249		0.98
Due after three years through four years	Due after three years through four years	1,356,634		1.31		1,511,691		1.18		Due after three years through four years	1,376,074		1.66		1,511,691		1.18
Due after four years through five years	Due after four years through five years	1,290,236		1.16		1,314,949		1.09		Due after four years through five years	1,392,569		1.74		1,314,949		1.09
Thereafter	Thereafter	3,165,725		1.92		3,141,969		1.76		Thereafter	2,810,240		2.41		3,141,969		1.76
Total par value	Total par value	25,640,855		0.90	%	23,432,828		0.77	%	Total par value	29,767,922		1.60	%	23,432,828		0.77	%
Discounts	Discounts	(15,741)				(16,856)				Discounts	(14,810)				(16,856)
Hedging adjustments	Hedging adjustments	(137,538)				68,316				Hedging adjustments	(230,272)				68,316
TOTAL	TOTAL	$	25,487,576			$	23,484,288			TOTAL	$	29,522,840			$	23,484,288

FHLBank’s outstanding advances include advances that contain call options that may be exercised with or without prepayment fees at the borrower’s discretion on specific dates (call dates) before the stated advance maturities (callable advances). In exchange for receiving the right to call the advance on a predetermined call schedule, the borrower may pay a higher fixed rate for the advance relative to an equivalent maturity, non-callable, fixed rate advance. The borrower generally exercises its call options on these advances when interest rates decline (fixed rate advances) or spreads change (adjustable rate advances).

Convertible advances allow FHLBank to convert an advance from one interest payment term structure to another. When issuing convertible advances, FHLBank purchases put options from a member that allow FHLBank to convert the fixed rate advance to a variable rate advance at the current market rate or another structure after an agreed-upon lockout period. A convertible advance carries a lower interest rate than a comparable-maturity fixed rate advance without the conversion feature. Convertible advances are no longer a current product offering; however, ~~$1,333,150,000~~$728,600,000 remain outstanding at ~~March 31,~~June 30, 2022.

2122

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Table 4.2 presents advances summarized by redemption term or next call date (for callable advances) and by redemption term or next conversion date (for convertible advances) as of ~~March 31,~~June 30, 2022 and December 31, 2021 (in thousands):

Table 4.2


		Redemption Term or Next Call Date				Redemption Term or Next Conversion Date					Redemption Term or Next Call Date				Redemption Term or Next Conversion Date
Redemption Term	Redemption Term	03/31/2022		12/31/2021		03/31/2022		12/31/2021		Redemption Term	06/30/2022		12/31/2021		06/30/2022		12/31/2021
Due in one year or less	Due in one year or less	$	16,430,851	$	14,582,991	$	16,337,284	$	14,324,735	Due in one year or less	$	20,533,430	$	14,582,991	$	19,806,011	$	14,324,735
Due after one year through two years	Due after one year through two years	1,693,216		1,552,690		2,107,990		2,034,485		Due after one year through two years	2,003,127		1,552,690		2,511,571		2,034,485
Due after two years through three years	Due after two years through three years	2,015,557		1,821,308		2,693,136		2,452,148		Due after two years through three years	2,014,673		1,821,308		2,597,057		2,452,148
Due after three years through four years	Due after three years through four years	1,307,354		1,280,597		1,352,284		1,507,341		Due after three years through four years	1,374,326		1,280,597		1,375,724		1,507,341
Due after four years through five years	Due after four years through five years	1,282,347		1,308,086		1,290,236		1,314,949		Due after four years through five years	1,292,947		1,308,086		1,384,569		1,314,949
Thereafter	Thereafter	2,911,530		2,887,156		1,859,925		1,799,170		Thereafter	2,549,419		2,887,156		2,092,990		1,799,170
TOTAL PAR VALUE	TOTAL PAR VALUE	$	25,640,855	$	23,432,828	$	25,640,855	$	23,432,828	TOTAL PAR VALUE	$	29,767,922	$	23,432,828	$	29,767,922	$	23,432,828

Interest Rate Payment Terms: Table 4.3 details additional interest rate payment and redemption terms for advances as of ~~March 31,~~June 30, 2022 and December 31, 2021 (in thousands):

Table 4.3


Redemption Term	Redemption Term	03/31/2022		12/31/2021		Redemption Term	06/30/2022		12/31/2021
Fixed rate:	Fixed rate:					Fixed rate:
Due in one year or less	Due in one year or less	$	14,943,734	$	13,061,185	Due in one year or less	$	18,911,761	$	13,061,185
Due after one year through three years	Due after one year through three years	2,740,376		2,593,884		Due after one year through three years	2,964,328		2,593,884
Due after three years through five years	Due after three years through five years	1,799,305		1,871,575		Due after three years through five years	1,795,328		1,871,575
Due after five years through fifteen years	Due after five years through fifteen years	2,776,402		2,752,551		Due after five years through fifteen years	2,419,468		2,752,551
Due after fifteen years	Due after fifteen years	38,776		37,371		Due after fifteen years	34,775		37,371
Total fixed rate	Total fixed rate	22,298,593		20,316,566		Total fixed rate	26,125,660		20,316,566
Variable rate:	Variable rate:					Variable rate:
Due in one year or less	Due in one year or less	309,050		218,550		Due in one year or less	377,050		218,550
Due after one year through three years	Due after one year through three years	1,835,100		1,590,600		Due after one year through three years	1,935,900		1,590,600
Due after three years through five years	Due after three years through five years	847,565		955,065		Due after three years through five years	973,315		955,065
Due after five years through fifteen years	Due after five years through fifteen years	348,047		349,547		Due after five years through fifteen years	353,497		349,547
Due after fifteen years	Due after fifteen years	2,500		2,500		Due after fifteen years	2,500		2,500
Total variable rate	Total variable rate	3,342,262		3,116,262		Total variable rate	3,642,262		3,116,262
TOTAL PAR VALUE	TOTAL PAR VALUE	$	25,640,855	$	23,432,828	TOTAL PAR VALUE	$	29,767,922	$	23,432,828

Credit Risk Exposure and Security Terms: FHLBank manages its credit exposure to advances through an integrated approach that includes establishing a credit limit for each borrower. This approach includes an ongoing review of each borrower's financial condition, in conjunction with FHLBank's collateral and lending policies to limit risk of loss, while balancing borrowers' needs for a reliable source of funding. Using a risk-based approach and taking into consideration each borrower's financial strength, FHLBank considers the types and level of collateral to be the primary indicator of credit quality on advances. As of ~~March 31,~~June 30, 2022 and December 31, 2021, FHLBank had rights to collateral on a borrower-by-borrower basis with an estimated value greater than its outstanding advances.

FHLBank continues to evaluate and make changes to its collateral guidelines, as necessary, based on current market conditions. As of ~~March 31,~~June 30, 2022 and December 31, 2021, no advances were past due, on nonaccrual status, or considered impaired. In addition, there were no troubled debt restructurings related to advances during the three and six months ended ~~March 31,~~June 30, 2022 and 2021.

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Based on the collateral held as security, FHLBank's credit extension and collateral policies, and repayment history on advances, no losses are expected on advances as of ~~March 31,~~June 30, 2022 and December 31, 2021, and therefore no allowance for credit losses on advances was recorded.

NOTE 5 – MORTGAGE LOANS

Mortgage loans held for portfolio consist of loans obtained through the MPF Program and are either conventional mortgage loans or government-guaranteed or -insured mortgage loans. Under the MPF Program, FHLBank purchases single-family mortgage loans that are originated or acquired by ~~PFIs.~~participating financial institutions (PFI). These mortgage loans are credit-enhanced by ~~participating financial institutions (PFI)~~PFIs or are guaranteed or insured by Federal agencies.

Mortgage Loans Held for Portfolio: Table 5.1 presents information as of ~~March 31,~~June 30, 2022 and December 31, 2021 on mortgage loans held for portfolio (in thousands). Carrying amounts exclude accrued interest receivable of ~~$36,717,000~~$36,840,000 and $36,959,000 as of ~~March 31,~~June 30, 2022 and December 31, 2021, respectively.

Table 5.1


		03/31/2022		12/31/2021			06/30/2022		12/31/2021
Real estate:	Real estate:					Real estate:
Fixed rate, medium-term1, single-family mortgages	Fixed rate, medium-term1, single-family mortgages	$	1,324,691	$	1,375,318	Fixed rate, medium-term1, single-family mortgages	$	1,278,877	$	1,375,318
Fixed rate, long-term, single-family mortgages	Fixed rate, long-term, single-family mortgages	6,608,373		6,664,654		Fixed rate, long-term, single-family mortgages	6,657,873		6,664,654
Total unpaid principal balance	Total unpaid principal balance	7,933,064		8,039,972		Total unpaid principal balance	7,936,750		8,039,972
Premiums	Premiums	104,101		107,697		Premiums	101,799		107,697
Discounts	Discounts	(1,361)		(1,371)		Discounts	(1,920)		(1,371)
Deferred loan costs, net	Deferred loan costs, net	64		76		Deferred loan costs, net	54		76

Hedging adjustments	Hedging adjustments	(8,881)		(6,011)		Hedging adjustments	(12,551)		(6,011)
Total before allowance for credit losses on mortgage loans	Total before allowance for credit losses on mortgage loans	8,026,987		8,140,363		Total before allowance for credit losses on mortgage loans	8,024,132		8,140,363
Allowance for credit losses on mortgage loans	Allowance for credit losses on mortgage loans	(5,038)		(5,317)		Allowance for credit losses on mortgage loans	(5,202)		(5,317)
MORTGAGE LOANS HELD FOR PORTFOLIO, NET	MORTGAGE LOANS HELD FOR PORTFOLIO, NET	$	8,021,949	$	8,135,046	MORTGAGE LOANS HELD FOR PORTFOLIO, NET	$	8,018,930	$	8,135,046

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

Table 5.2 presents information as of ~~March 31,~~June 30, 2022 and December 31, 2021 on the outstanding unpaid principal balance of mortgage loans held for portfolio (in thousands):

Table 5.2


		03/31/2022		12/31/2021			06/30/2022		12/31/2021
Conventional loans	Conventional loans	$	7,557,502	$	7,644,184	Conventional loans	$	7,576,855	$	7,644,184
Government-guaranteed or -insured loans	Government-guaranteed or -insured loans	375,562		395,788		Government-guaranteed or -insured loans	359,895		395,788
TOTAL UNPAID PRINCIPAL BALANCE	TOTAL UNPAID PRINCIPAL BALANCE	$	7,933,064	$	8,039,972	TOTAL UNPAID PRINCIPAL BALANCE	$	7,936,750	$	8,039,972

Payment Status of Mortgage Loans: Payment status is the key credit quality indicator for conventional mortgage loans and allows FHLBank to monitor borrower performance. A past due loan is one where the borrower has failed to make a full payment of principal and interest within 30 days of its due date. Other delinquency statistics include nonaccrual loans and loans in process of foreclosure.

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Table 5.3 presents the payment status based on amortized cost as well as other delinquency statistics for FHLBank’s mortgage loans as of ~~March 31,~~June 30, 2022 (dollar amounts in thousands):

Table 5.3


		03/31/2022																						06/30/2022
		Conventional Loans															Government Loans			Total				Conventional Loans															Government Loans			Total
		Origination Year												Subtotal										Origination Year												Subtotal
		Prior to 2018		2018		2019		2020		2021		2022												Prior to 2018		2018		2019		2020		2021		2022
Amortized Cost:1	Amortized Cost:1																						Amortized Cost:1
Past due 30-59 days delinquent	Past due 30-59 days delinquent	$	21,713	$	6,087	$	7,303	$	5,559	$	4,533	$	—	$	45,195		$	8,095		$	53,290		Past due 30-59 days delinquent	$	17,920	$	5,471	$	8,583	$	4,119	$	4,650	$	1,648	$	42,391		$	8,395		$	50,786
Past due 60-89 days delinquent	Past due 60-89 days delinquent	5,616		1,376		2,839		1,217		448		—		11,496			2,887			14,383			Past due 60-89 days delinquent	5,943		1,618		2,699		460		466		—		11,186			2,961			14,147
Past due 90 days or more delinquent	Past due 90 days or more delinquent	8,749		6,418		10,704		—		646		—		26,517			9,348			35,865			Past due 90 days or more delinquent	5,932		4,147		8,269		794		—		—		19,142			5,559			24,701
Total past due	Total past due	36,078		13,881		20,846		6,776		5,627		—		83,208			20,330			103,538			Total past due	29,795		11,236		19,551		5,373		5,116		1,648		72,719			16,915			89,634
Total current loans	Total current loans	1,996,741		326,542		1,206,839		1,790,639		1,992,479		249,717		7,562,957			360,492			7,923,449			Total current loans	1,894,072		306,279		1,152,270		1,739,822		1,942,914		551,226		7,586,583			347,915			7,934,498
Total mortgage loans	Total mortgage loans	$	2,032,819	$	340,423	$	1,227,685	$	1,797,415	$	1,998,106	$	249,717	$	7,646,165		$	380,822		$	8,026,987		Total mortgage loans	$	1,923,867	$	317,515	$	1,171,821	$	1,745,195	$	1,948,030	$	552,874	$	7,659,302		$	364,830		$	8,024,132

Other delinquency statistics:	Other delinquency statistics:																						Other delinquency statistics:
In process of foreclosure2	In process of foreclosure2													$	4,604		$	2,288		$	6,892		In process of foreclosure2													$	9,307		$	1,441		$	10,748
Serious delinquency rate3	Serious delinquency rate3													0.4		%	2.5		%	0.5		%	Serious delinquency rate3													0.2		%	1.5		%	0.3		%
Past due 90 days or more and still accruing interest	Past due 90 days or more and still accruing interest													$	—		$	9,348		$	9,348		Past due 90 days or more and still accruing interest													$	—		$	5,559		$	5,559
Loans on nonaccrual status4	Loans on nonaccrual status4													$	32,039		$	—		$	32,039		Loans on nonaccrual status4													$	26,294		$	—		$	26,294

1 Excludes accrued interest receivable.

2 Includes 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 dependent on their delinquency status.

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

4 Includes ~~$22,130,000~~$16,433,000 of conventional mortgage loans on nonaccrual status that did not have an associated 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 was greater than the amortized cost of the loans.

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Table 5.4 presents the payment status based on amortized cost as well as other delinquency statistics for ~~FHLBank’s��~~FHLBank’s mortgage loans as of December 31, 2021 (dollar amounts in thousands):

Table 5.4


	12/31/2021
	Conventional Loans															Government Loans			Total
	Origination Year												Subtotal
	Prior to 2017		2017		2018		2019		2020		2021
Amortized Cost:1
Past due 30-59 days delinquent	$	17,460	$	4,799	$	6,567	$	9,385	$	3,472	$	2,743	$	44,426		$	8,539		$	52,965
Past due 60-89 days delinquent	2,908		1,258		1,653		2,408		1,063		—		9,290			2,187			11,477
Past due 90 days or more delinquent	8,530		3,271		6,241		13,199		353		1,103		32,697			13,290			45,987
Total past due	28,898		9,328		14,461		24,992		4,888		3,846		86,413			24,016			110,429
Total current loans	1,719,777		415,762		356,936		1,299,061		1,853,232		2,007,773		7,652,541			377,393			8,029,934
Total mortgage loans	$	1,748,675	$	425,090	$	371,397	$	1,324,053	$	1,858,120	$	2,011,619	$	7,738,954		$	401,409		$	8,140,363

Other delinquency statistics:
In process of foreclosure2													$	3,065		$	1,868		$	4,933
Serious delinquency rate3													0.4		%	3.3		%	0.6		%
Past due 90 days or more and still accruing interest													$	—		$	13,290		$	13,290
Loans on nonaccrual status4													$	37,867		$	—		$	37,867

1 Excludes accrued interest receivable.

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

4 Includes $25,211,000 of conventional mortgage loans on nonaccrual status that did not have an associated 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 was greater than the amortized cost of the loans.

The balance of troubled debt restructurings related to conventional mortgage loans was immaterial as of ~~March 31,~~June 30, 2022 and December 31, 2021.

Allowance for Credit Losses:

Conventional Mortgage Loans: Conventional 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. FHLBank 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. FHLBank uses a model that projects cash flows to estimate expected credit losses over the life of the loans. This model relies on a number of inputs, such as both current and forecasted property values and interest rates as well as historical borrower behavior experience. FHLBank also incorporates associated credit enhancements, as available, to determine its estimate of expected credit losses.

Certain conventional loans may be evaluated for credit losses using the practical expedient for collateral dependent assets. A mortgage loan is considered collateral dependent when the borrower is experiencing financial difficulty and repayment is expected to be substantially through the sale of the underlying collateral. FHLBank may estimate the fair value of this collateral by applying an appropriate loss severity rate or using third party estimates or property valuation model(s). The expected credit loss of a collateral dependent mortgage loan is equal to the difference between the amortized cost of the loan and the estimated fair value of the collateral, less estimated selling costs. FHLBank records a direct charge-off of the loan balance if certain triggering criteria are met. Expected recoveries of prior charge-offs, if any, are included in the allowance for credit losses.

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FHLBank established an allowance for credit losses on its conventional mortgage loans held for portfolio. Table 5.5 presents a roll-forward of the allowance for credit losses on mortgage loans for the three and six months ended ~~March 31,~~June 30, 2022 and 2021.

Table 5.5


		Three Months Ended					Three Months Ended				Six Months Ended
Conventional Loans	Conventional Loans		03/31/2022		03/31/2021			Conventional Loans	06/30/2022		06/30/2021		06/30/2022		06/30/2021
Balance, beginning of the period	Balance, beginning of the period		$	5,317	$	5,177		Balance, beginning of the period	$	5,038	$	4,956	$	5,317	$	5,177

Net (charge-offs) recoveries	Net (charge-offs) recoveries		28		(207)			Net (charge-offs) recoveries	272		284		300		77
Provision (reversal) for credit losses	Provision (reversal) for credit losses		(307)		(14)			Provision (reversal) for credit losses	(108)		2,312		(415)		2,298
Balance, end of the period	Balance, end of the period		$	5,038	$	4,956		Balance, end of the period	$	5,202	$	7,552	$	5,202	$	7,552

Government-Guaranteed or -Insured Mortgage Loans: FHLBank invests in fixed-rate mortgage loans that are insured or guaranteed by the Federal Housing Administration, the Department of Veterans Affairs, the Rural Housing Service of the Department of Agriculture, and/or the Department of Housing and Urban Development. The servicer provides and maintains insurance or a guarantee from the applicable government agency. The servicer is responsible for compliance with all government agency requirements and for obtaining the benefit of the applicable guarantee or insurance with respect to defaulted government-guaranteed or -insured mortgage loans. Any losses on these loans that are not recovered from the issuer or the guarantor are absorbed by the servicer. Therefore, FHLBank only has credit risk for these loans if the servicer fails to pay for losses not covered by the guarantee or insurance, but in such instance, FHLBank would have recourse against the servicer for such failure. Based on FHLBank's assessment of its servicers and the collateral backing the loans, the risk of loss was immaterial; consequently, no allowance for credit losses for government-guaranteed or -insured mortgage loans was recorded as of ~~March 31,~~June 30, 2022 and December 31, 2021. Furthermore, none of these mortgage loans has been placed on nonaccrual 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.

NOTE 6 – DERIVATIVES AND HEDGING ACTIVITIES

Table 6.1 presents outstanding notional amounts and fair values of the derivatives outstanding by type of derivative and by hedge designation as of ~~March 31,~~June 30, 2022 and December 31, 2021 (in thousands). Total derivative assets and liabilities include the effect of netting adjustments and cash collateral.

Table 6.1


		03/31/2022						12/31/2021							06/30/2022						12/31/2021
		Notional Amount		Derivative Assets		Derivative Liabilities		Notional Amount		Derivative Assets		Derivative Liabilities			Notional Amount		Derivative Assets		Derivative Liabilities		Notional Amount		Derivative Assets		Derivative Liabilities
Derivatives designated as hedging instruments:	Derivatives designated as hedging instruments:													Derivatives designated as hedging instruments:
Interest rate swaps	Interest rate swaps	$	23,432,796	$	41,172	$	323,629	$	18,695,438	$	16,678	$	152,302	Interest rate swaps	$	29,696,990	$	72,099	$	449,643	$	18,695,438	$	16,678	$	152,302
Total derivatives designated as hedging relationships	Total derivatives designated as hedging relationships	23,432,796		41,172		323,629		18,695,438		16,678		152,302		Total derivatives designated as hedging relationships	29,696,990		72,099		449,643		18,695,438		16,678		152,302
Derivatives not designated as hedging instruments:	Derivatives not designated as hedging instruments:													Derivatives not designated as hedging instruments:
Interest rate swaps	Interest rate swaps	2,070,945		6,354		534		2,079,830		5		28,963		Interest rate swaps	5,505,369		16,039		1,584		2,079,830		5		28,963
Interest rate caps/floors	Interest rate caps/floors	354,000		1,276		—		477,500		335		—		Interest rate caps/floors	329,000		1,421		—		477,500		335		—
Mortgage delivery commitments	Mortgage delivery commitments	129,831		34		1,940		72,025		32		45		Mortgage delivery commitments	101,659		299		316		72,025		32		45

Total derivatives not designated as hedging instruments	Total derivatives not designated as hedging instruments	2,554,776		7,664		2,474		2,629,355		372		29,008		Total derivatives not designated as hedging instruments	5,936,028		17,759		1,900		2,629,355		372		29,008
TOTAL	TOTAL	$	25,987,572	48,836		326,103		$	21,324,793	17,050		181,310		TOTAL	$	35,633,018	89,858		451,543		$	21,324,793	17,050		181,310
Netting adjustments and cash collateral1	Netting adjustments and cash collateral1			126,809		(323,609)				139,876		(176,730)		Netting adjustments and cash collateral1			91,991		(445,971)				139,876		(176,730)
DERIVATIVE ASSETS AND LIABILITIES	DERIVATIVE ASSETS AND LIABILITIES			$	175,645	$	2,494			$	156,926	$	4,580	DERIVATIVE ASSETS AND LIABILITIES			$	181,849	$	5,572			$	156,926	$	4,580

1 Amounts represent the application of the netting requirements that allow FHLBank to settle positive and negative positions and cash collateral, including accrued interest, held or placed with the same clearing agent and/or derivative counterparty. Cash collateral posted was ~~$458,421,000~~$565,551,000 and $316,606,000 as of ~~March 31,~~June 30, 2022 and December 31, 2021, respectively. Cash collateral received was ~~$8,003,000~~$27,589,000 and $0 as of ~~March 31,~~June 30, 2022 and December 31, 2021, respectively.

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FHLBank carries derivative instruments at fair value on its Statements of Condition. Changes in fair value of the derivative hedging instrument and the hedged item attributable to the hedged risk for designated fair value hedges are recorded in net interest income in the same line as the earnings effect of the hedged item.

Gains (losses) on fair value hedges include unrealized changes in fair value as well as net interest settlements. For the three months ended ~~March 31,~~June 30, 2022 and 2021, FHLBank recorded net gains (losses) on derivatives and the related hedged items in fair value hedging relationships and the impact of those derivatives on FHLBank’s net interest income as presented in Table 6.2 (in thousands):

Table 6.2


		Three Months Ended									Three Months Ended
		03/31/2022									06/30/2022
		Interest Income/Expense									Interest Income/Expense
		Advances		Available-for-sale Securities		Consolidated Obligation Discount Notes		Consolidated Obligation Bonds			Advances		Available-for-sale Securities		Consolidated Obligation Discount Notes		Consolidated Obligation Bonds
Total amounts presented in the Statements of Income	Total amounts presented in the Statements of Income	$	37,881	$	14,784	$	2,036	$	36,556	Total amounts presented in the Statements of Income	$	77,874	$	25,960	$	27,998	$	79,776
Gains (losses) on fair value hedging relationships:	Gains (losses) on fair value hedging relationships:									Gains (losses) on fair value hedging relationships:
Interest rate contracts:	Interest rate contracts:									Interest rate contracts:
Derivatives1	Derivatives1	$	193,430	$	215,804	$	(606)	$	(255,563)	Derivatives1	$	83,919	$	109,717	$	(12,112)	$	(97,791)
Hedged items2	Hedged items2	(207,166)		(235,685)		1,230		273,563		Hedged items2	(92,726)		(122,076)		19,597		109,196
NET GAINS (LOSSES) ON FAIR VALUE HEDGING RELATIONSHIPS	NET GAINS (LOSSES) ON FAIR VALUE HEDGING RELATIONSHIPS	$	(13,736)	$	(19,881)	$	624	$	18,000	NET GAINS (LOSSES) ON FAIR VALUE HEDGING RELATIONSHIPS	$	(8,807)	$	(12,359)	$	7,485	$	11,405


		Three Months Ended									Three Months Ended
		03/31/2021									06/30/2021
		Interest Income/Expense									Interest Income/Expense
		Advances		Available-for-sale Securities		Consolidated Obligation Discount Notes		Consolidated Obligation Bonds			Advances		Available-for-sale Securities		Consolidated Obligation Discount Notes		Consolidated Obligation Bonds
Total amounts presented in the Statements of Income	Total amounts presented in the Statements of Income	$	35,443	$	11,477	$	1,998	$	46,515	Total amounts presented in the Statements of Income	$	30,309	$	7,411	$	1,069	$	40,151
Gains (losses) on fair value hedging relationships:	Gains (losses) on fair value hedging relationships:									Gains (losses) on fair value hedging relationships:
Interest rate contracts:	Interest rate contracts:									Interest rate contracts:
Derivatives1	Derivatives1	$	116,674	$	124,675	$	13	$	(21,293)	Derivatives1	$	(34,074)	$	(44,845)	$	—	$	10,529
Hedged items2	Hedged items2	(131,314)		(148,040)		(4)		28,620		Hedged items2	16,080		17,973		(29)		(2,178)
NET GAINS (LOSSES) ON FAIR VALUE HEDGING RELATIONSHIPS	NET GAINS (LOSSES) ON FAIR VALUE HEDGING RELATIONSHIPS	$	(14,640)	$	(23,365)	$	9	$	7,327	NET GAINS (LOSSES) ON FAIR VALUE HEDGING RELATIONSHIPS	$	(17,994)	$	(26,872)	$	(29)	$	8,351

1 Includes net interest settlements in interest income/expense.

2 Includes amortization/accretion on closed fair value relationships in interest income.

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For the six months ended June 30, 2022 and 2021, FHLBank recorded net gains (losses) on derivatives and the related hedged items in fair value hedging relationships and the impact of those derivatives on FHLBank’s net interest income as presented in Table 6.3 (in thousands):

Table 6.3



	Six Months Ended
	06/30/2022
	Interest Income/Expense
	Advances		Available-for-sale Securities		Consolidated Obligation Discount Notes		Consolidated Obligation Bonds
Total amounts presented in the Statements of Income	$	115,755	$	40,744	$	30,034	$	116,332
Gains (losses) on fair value hedging relationships:
Interest rate contracts:
Derivatives1	$	277,349	$	325,521	$	(12,718)	$	(353,354)
Hedged items2	(299,892)		(357,761)		20,827		382,759
NET GAINS (LOSSES) ON FAIR VALUE HEDGING RELATIONSHIPS	$	(22,543)	$	(32,240)	$	8,109	$	29,405



	Six Months Ended
	6/30/2021
	Interest Income/Expense
	Advances		Available-for-sale Securities		Consolidated Obligation Discount Notes		Consolidated Obligation Bonds
Total amounts presented in the Statements of Income	$	65,752	$	18,888	$	3,067	$	86,666
Gains (losses) on fair value hedging relationships:
Interest rate contracts:
Derivatives1	$	82,600	$	79,830	$	13	$	(10,764)
Hedged items2	(115,234)		(130,067)		(33)		26,442
NET GAINS (LOSSES) ON FAIR VALUE HEDGING RELATIONSHIPS	$	(32,634)	$	(50,237)	$	(20)	$	15,678

1 Includes net interest settlements in interest income/expense.

2 Includes amortization/accretion on closed fair value relationships in interest income.

Table of Contents

Table ~~6.3~~6.4 presents the cumulative basis adjustments on hedged items designated as fair value hedges and the related amortized cost of the hedged items as of ~~March 31,~~June 30, 2022 and December 31, 2021 (in thousands):

Table ~~6.3~~6.4


03/31/2022
06/30/2022										06/30/2022
Line Item in Statements of Condition of Hedged Item	Line Item in Statements of Condition of Hedged Item	Carrying Value of Hedged Asset/(Liability)1		Basis Adjustments for Active Hedging Relationships2		Basis Adjustments for Discontinued Hedging Relationships2		Cumulative Amount of Fair Value Hedging Basis Adjustments2		Line Item in Statements of Condition of Hedged Item	Carrying Value of Hedged Asset/(Liability)1		Basis Adjustments for Active Hedging Relationships2		Basis Adjustments for Discontinued Hedging Relationships2		Cumulative Amount of Fair Value Hedging Basis Adjustments2
Advances	Advances	$	6,479,371	$	(148,239)	$	10,701	$	(137,538)	Advances	$	6,006,368	$	(240,414)	$	10,142	$	(230,272)
Available-for-sale securities	Available-for-sale securities	5,558,283		(136,497)		—		(136,497)		Available-for-sale securities	5,671,339		(258,572)		—		(258,572)
Consolidated obligation discount notes	Consolidated obligation discount notes	(697,523)		1,230		—		1,230		Consolidated obligation discount notes	(6,901,591)		20,827		—		20,827
Consolidated obligation bonds	Consolidated obligation bonds	(10,084,063)		314,077		—		314,077		Consolidated obligation bonds	(10,150,905)		423,273		—		423,273

12/31/2021	12/31/2021									12/31/2021
Line Item in Statements of Condition of Hedged Item	Line Item in Statements of Condition of Hedged Item	Carrying Value of Hedged Asset/(Liability)1		Basis Adjustments for Active Hedging Relationships2		Basis Adjustments for Discontinued Hedging Relationships2		Cumulative Amount of Fair Value Hedging Basis Adjustments2		Line Item in Statements of Condition of Hedged Item	Carrying Value of Hedged Asset/(Liability)1		Basis Adjustments for Active Hedging Relationships2		Basis Adjustments for Discontinued Hedging Relationships2		Cumulative Amount of Fair Value Hedging Basis Adjustments2
Advances	Advances	$	6,268,057	$	57,055	$	11,261	$	68,316	Advances	$	6,268,057	$	57,055	$	11,261	$	68,316
Available-for-sale securities	Available-for-sale securities	5,785,963		100,372		—		100,372		Available-for-sale securities	5,785,963		100,372		—		100,372

Consolidated obligation bonds	Consolidated obligation bonds	(6,754,140)		40,514		—		40,514		Consolidated obligation bonds	(6,754,140)		40,514		—		40,514

1 Includes only the portion of carrying value representing the hedged items in fair value hedging relationships. For available-for-sale securities, amortized cost is considered to be carrying value (i.e., the fair value adjustment recorded in AOCI is excluded).

2 Included in amortized cost of the hedged asset/liability.

Table ~~6.4~~6.5 provides information regarding net gains (losses) on derivatives recorded in non-interest income (in thousands).

Table ~~6.4~~6.5


		Three Months Ended					Three Months Ended				Six Months Ended
			03/31/2022		03/31/2021				06/30/2022		06/30/2021		06/30/2022		06/30/2021
Derivatives not designated as hedging instruments:

Economic hedges:	Economic hedges:							Economic hedges:
Interest rate swaps	Interest rate swaps		$	60,931	$	34,451		Interest rate swaps	$	20,060	$	11,111	$	80,987	$	45,554
Interest rate caps/floors	Interest rate caps/floors		941		160			Interest rate caps/floors	144		(232)		1,085		(72)
Net interest settlements	Net interest settlements		(10,374)		(12,841)			Net interest settlements	(5,470)		(13,054)		(15,844)		(25,895)
Price alignment interest								Price alignment interest	(1)		3		3		11
Mortgage delivery commitments	Mortgage delivery commitments		(4,935)		(4,189)			Mortgage delivery commitments	(1,919)		2,157		(6,854)		(2,032)

NET GAINS (LOSSES) ON DERIVATIVES	NET GAINS (LOSSES) ON DERIVATIVES		$	46,563	$	17,581		NET GAINS (LOSSES) ON DERIVATIVES	$	12,814	$	(15)	$	59,377	$	17,566

Based on credit analyses and collateral requirements, FHLBank management does not anticipate any credit losses on its derivative agreements. The maximum credit risk applicable to a single counterparty was ~~$7,703,000~~$13,440,000 as of ~~March 31,~~June 30, 2022. There was no credit risk applicable to a single counterparty at December 31, 2021.

For uncleared derivative transactions, FHLBank has entered into bilateral security agreements with its counterparties with bilateral-collateral-exchange provisions that require all credit exposures be collateralized, subject to minimum transfer amounts.

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FHLBank utilizes two Derivative Clearing Organizations (Clearinghouse) for all cleared derivative transactions, LCH Limited and CME Clearing. At both Clearinghouses, initial margin is considered cash collateral. For cleared derivatives, 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. FHLBank was not required to post additional initial margin by its clearing agents as of ~~March 31,~~June 30, 2022 and December 31, 2021.

FHLBank’s net exposure on derivative agreements is presented in Note 9.

NOTE 7 – DEPOSITS

FHLBank offers demand, overnight and short-term deposit programs to its members and to other qualifying non-members. A member that services mortgage loans may also deposit funds collected in connection with the mortgage loans, pending disbursement of these funds to the owners of the mortgage loans. FHLBank classifies these funds as other deposits. Deposits classified as demand and overnight pay interest based on a daily interest rate. Term deposits pay interest based on a fixed rate determined at the issuance of the deposit. Table 7.1 details the types of deposits held by FHLBank as of ~~March 31,~~June 30, 2022 and December 31, 2021 (in thousands):

Table 7.1


		03/31/2022		12/31/2021			06/30/2022		12/31/2021
Interest-bearing:	Interest-bearing:					Interest-bearing:
Demand	Demand	$	298,835	$	317,911	Demand	$	290,849	$	317,911
Overnight	Overnight	554,000		530,100		Overnight	405,100		530,100
Term	Term	5,750		2,750		Term	12,750		2,750

Total interest-bearing	Total interest-bearing	858,585		850,761		Total interest-bearing	708,699		850,761
Non-interest-bearing:	Non-interest-bearing:					Non-interest-bearing:
Other	Other	78,106		95,446		Other	73,146		95,446

Total non-interest-bearing	Total non-interest-bearing	78,106		95,446		Total non-interest-bearing	73,146		95,446
TOTAL DEPOSITS	TOTAL DEPOSITS	$	936,691	$	946,207	TOTAL DEPOSITS	$	781,845	$	946,207

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NOTE 8 – CONSOLIDATED OBLIGATIONS

Consolidated Obligation Bonds: Table 8.1 presents FHLBank’s participation in consolidated obligation bonds outstanding as of ~~March 31,~~June 30, 2022 and December 31, 2021 (dollar amounts in thousands):

Table 8.1


		03/31/2022				12/31/2021					06/30/2022				12/31/2021
Year of Contractual Maturity	Year of Contractual Maturity	Amount		Weighted Average Interest Rate		Amount		Weighted Average Interest Rate		Year of Contractual Maturity	Amount		Weighted Average Interest Rate		Amount		Weighted Average Interest Rate
Due in one year or less	Due in one year or less	$	21,828,700	0.26	%	$	21,821,300	0.13	%	Due in one year or less	$	14,909,700	1.20	%	$	21,821,300	0.13	%
Due after one year through two years	Due after one year through two years	2,836,400		1.03		2,582,600		1.02		Due after one year through two years	3,205,530		1.41		2,582,600		1.02
Due after two years through three years	Due after two years through three years	3,497,700		1.01		2,435,700		0.90		Due after two years through three years	4,316,265		1.32		2,435,700		0.90
Due after three years through four years	Due after three years through four years	2,190,000		0.85		1,927,100		0.86		Due after three years through four years	2,404,000		1.16		1,927,100		0.86
Due after four years through five years	Due after four years through five years	3,750,500		1.02		3,766,500		0.89		Due after four years through five years	3,561,500		1.30		3,766,500		0.89
Thereafter	Thereafter	5,159,550		1.59		5,125,050		1.57		Thereafter	4,944,550		1.70		5,125,050		1.57
Total par value	Total par value	39,262,850		0.66	%	37,658,250		0.55	%	Total par value	33,341,545		1.32	%	37,658,250		0.55	%
Premiums	Premiums	26,015				27,470				Premiums	23,786				27,470
Discounts	Discounts	(2,604)				(2,720)				Discounts	(2,537)				(2,720)
Concession fees	Concession fees	(11,463)				(11,877)				Concession fees	(11,375)				(11,877)
Hedging adjustments	Hedging adjustments	(314,077)				(40,514)				Hedging adjustments	(423,273)				(40,514)
TOTAL	TOTAL	$	38,960,721			$	37,630,609			TOTAL	$	32,928,146			$	37,630,609

FHLBank issues optional principal redemption bonds (callable bonds) that may be redeemed in whole or in part at the discretion of FHLBank on predetermined call dates in accordance with terms of bond offerings. FHLBank’s participation in consolidated obligation bonds outstanding as of ~~March 31,~~June 30, 2022 and December 31, 2021 includes callable bonds totaling ~~$13,306,000,000~~$15,932,000,000 and $11,224,000,000, respectively. Table 8.2 summarizes FHLBank’s participation in consolidated obligation bonds outstanding by year of maturity, or by the next call date for callable bonds as of ~~March 31,~~June 30, 2022 and December 31, 2021 (in thousands):

Table 8.2


Year of Maturity or Next Call Date	Year of Maturity or Next Call Date	03/31/2022		12/31/2021		Year of Maturity or Next Call Date	06/30/2022		12/31/2021
Due in one year or less	Due in one year or less	$	34,337,200	$	32,612,800	Due in one year or less	$	28,213,200	$	32,612,800
Due after one year through two years	Due after one year through two years	2,109,400		2,224,600		Due after one year through two years	2,211,030		2,224,600
Due after two years through three years	Due after two years through three years	1,059,200		1,024,200		Due after two years through three years	1,220,265		1,024,200
Due after three years through four years	Due after three years through four years	599,000		565,100		Due after three years through four years	633,000		565,100
Due after four years through five years	Due after four years through five years	646,500		684,500		Due after four years through five years	607,500		684,500
Thereafter	Thereafter	511,550		547,050		Thereafter	456,550		547,050
TOTAL PAR VALUE	TOTAL PAR VALUE	$	39,262,850	$	37,658,250	TOTAL PAR VALUE	$	33,341,545	$	37,658,250

In addition to having fixed rate or simple variable rate coupon payment terms, consolidated obligation bonds may also have the following broad terms, regarding the coupon payment:

▪Range bonds that have coupon rates at fixed or variable rates and pay the fixed or variable rate as long as the index rate is within the established range, but generally pay zero percent or a minimal interest rate if the specified index rate is outside the established range;

▪Conversion bonds that have coupon rates that convert from fixed to variable, or variable to fixed, rates or from one index to another, on predetermined dates according to the terms of the bond offerings; and

▪Step bonds that have coupon rates at fixed or variable rates for specified intervals over the lives of the bonds. At the end of each specified interval, the coupon rate or variable rate spread increases (decreases) or steps up (steps down). These bond issues generally contain call provisions enabling the bonds to be called at FHLBank’s discretion on the step dates.

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Table 8.3 summarizes interest rate payment terms for consolidated obligation bonds as of ~~March 31,~~June 30, 2022 and December 31, 2021 (in thousands):

Table 8.3


		03/31/2022		12/31/2021			06/30/2022		12/31/2021
Fixed rate	Fixed rate	$	18,918,850	$	20,957,250	Fixed rate	$	17,385,045	$	20,957,250
Simple variable rate	Simple variable rate	18,737,000		15,752,000		Simple variable rate	13,734,500		15,752,000
Step	Step	1,607,000		949,000		Step	2,222,000		949,000

TOTAL PAR VALUE	TOTAL PAR VALUE	$	39,262,850	$	37,658,250	TOTAL PAR VALUE	$	33,341,545	$	37,658,250

Consolidated Discount Notes: Table 8.4 summarizes FHLBank’s participation in consolidated obligation discount notes, all of which are due within one year (dollar amounts in thousands):

Table 8.4


		Carrying Value		Par Value		Weighted Average Interest Rate1			Carrying Value		Par Value		Weighted Average Interest Rate1
March 31, 2022		$	7,843,651	$	7,848,461	0.28	%
June 30, 2022								June 30, 2022	$	20,076,331	$	20,185,211	1.38	%

December 31, 2021	December 31, 2021	$	6,568,989	$	6,569,580	0.04	%	December 31, 2021	$	6,568,989	$	6,569,580	0.04	%

1 Represents yield to maturity excluding concession fees.

NOTE 9 – ASSETS AND LIABILITIES SUBJECT TO OFFSETTING

FHLBank presents certain financial instruments, including derivatives, repurchase agreements and securities purchased under agreements to resell, on a net basis by clearing agent by Clearinghouse, or by counterparty, when it has met the netting requirements. For these financial instruments, FHLBank has elected to offset its asset and liability positions, as well as cash collateral received or pledged, including associated accrued interest.

FHLBank has analyzed the enforceability of offsetting rights incorporated in its cleared derivative transactions and determined that the exercise of those offsetting rights by a non-defaulting party under these transactions should be upheld under applicable law upon an event of default including a bankruptcy, insolvency, or similar proceeding involving the Clearinghouse or clearing agent, or both. Based on this analysis, FHLBank 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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Tables 9.1 and 9.2 present the fair value of financial assets, including the related collateral received from or pledged to clearing agents or counterparties, based on the terms of FHLBank’s master netting arrangements or similar agreements as of ~~March 31,~~June 30, 2022 and December 31, 2021 (in thousands):

Table 9.1


03/31/2022
06/30/2022												06/30/2022
Description	Description	Gross Amounts of Recognized Assets		Gross Amounts Offset in the Statements of Condition		Net Amounts of Assets Presented in the Statements of Condition		Gross Amounts Not Offset in the Statement of Condition1		Net Amount		Description	Gross Amounts of Recognized Assets		Gross Amounts Offset in the Statements of Condition		Net Amounts of Assets Presented in the Statements of Condition		Gross Amounts Not Offset in the Statement of Condition1		Net Amount
Derivative assets:	Derivative assets:											Derivative assets:
Uncleared derivatives	Uncleared derivatives	$	47,555	$	(43,513)	$	4,042	$	(34)	$	4,008	Uncleared derivatives	$	86,528	$	(64,192)	$	22,336	$	(299)	$	22,037
Cleared derivatives	Cleared derivatives	1,281		170,322		171,603		—		171,603		Cleared derivatives	3,330		156,183		159,513		—		159,513
Total derivative assets	Total derivative assets	48,836		126,809		175,645		(34)		175,611		Total derivative assets	89,858		91,991		181,849		(299)		181,550
Securities purchased under agreements to resell	Securities purchased under agreements to resell	2,100,000		—		2,100,000		(2,100,000)		—		Securities purchased under agreements to resell	2,250,000		—		2,250,000		(2,250,000)		—
TOTAL	TOTAL	$	2,148,836	$	126,809	$	2,275,645	$	(2,100,034)	$	175,611	TOTAL	$	2,339,858	$	91,991	$	2,431,849	$	(2,250,299)	$	181,550

1 Represents noncash collateral received on financial instruments that: (1) do not qualify for netting on the Statements of Condition; or (2) are not subject to an enforceable netting agreement (e.g., mortgage delivery commitments).

Table 9.2


12/31/2021
Description	Gross Amounts of Recognized Assets		Gross Amounts Offset in the Statements of Condition		Net Amounts of Assets Presented in the Statements of Condition		Gross Amounts Not Offset in the Statement of Condition1		Net Amount
Derivative assets:
Uncleared derivatives	$	16,855	$	(16,522)	$	333	$	(32)	$	301
Cleared derivatives	195		156,398		156,593		—		156,593
Total derivative assets	17,050		139,876		156,926		(32)		156,894
Securities purchased under agreements to resell	1,500,000		—		1,500,000		(1,500,000)		—
TOTAL	$	1,517,050	$	139,876	$	1,656,926	$	(1,500,032)	$	156,894

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Tables 9.3 and 9.4 present the fair value of financial liabilities, including the related collateral received from or pledged to counterparties, based on the terms of FHLBank’s master netting arrangements or similar agreements as of ~~March 31,~~June 30, 2022 and December 31, 2021 (in thousands):

Table 9.3


03/31/2022
06/30/2022												06/30/2022
Description	Description	Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Statements of Condition		Net Amounts of Liabilities Presented in the Statements of Condition		Gross Amounts Not Offset in the Statement of Condition1		Net Amount		Description	Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Statements of Condition		Net Amounts of Liabilities Presented in the Statements of Condition		Gross Amounts Not Offset in the Statement of Condition1		Net Amount
Derivative liabilities:	Derivative liabilities:											Derivative liabilities:
Uncleared derivatives	Uncleared derivatives	$	318,054	$	(315,560)	$	2,494	$	(1,940)	$	554	Uncleared derivatives	$	407,857	$	(402,285)	$	5,572	$	(316)	$	5,256
Cleared derivatives	Cleared derivatives	8,049		(8,049)		—		—		—		Cleared derivatives	43,686		(43,686)		—		—		—
Total derivative liabilities	Total derivative liabilities	326,103		(323,609)		2,494		(1,940)		554		Total derivative liabilities	451,543		(445,971)		5,572		(316)		5,256

TOTAL	TOTAL	$	326,103	$	(323,609)	$	2,494	$	(1,940)	$	554	TOTAL	$	451,543	$	(445,971)	$	5,572	$	(316)	$	5,256

Table 9.4


12/31/2021
Description	Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Statements of Condition		Net Amounts of Liabilities Presented in the Statements of Condition		Gross Amounts Not Offset in the Statement of Condition1		Net Amount
Derivative liabilities:
Uncleared derivatives	$	179,338	$	(174,758)	$	4,580	$	(45)	$	4,535
Cleared derivatives	1,972		(1,972)		—		—		—
Total derivative liabilities	181,310		(176,730)		4,580		(45)		4,535

TOTAL	$	181,310	$	(176,730)	$	4,580	$	(45)	$	4,535

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NOTE 10 – CAPITAL

Capital Requirements: FHLBank is subject to three capital requirements under the provisions of the Gramm-Leach-Bliley Act (GLB Act) and the FHFA's capital structure regulation. Regulatory capital does not include AOCI but does include mandatorily redeemable capital stock.

•Risk-based capital. FHLBank must maintain at all times permanent capital in an amount at least equal to the sum of its credit risk, market risk and operational risk capital requirements. The risk-based capital requirements are all calculated in accordance with the rules and regulations of the FHFA. Only permanent capital, defined as Class B Common Stock and retained earnings, can be used by FHLBank to satisfy its risk-based capital requirement. The FHFA may require FHLBank to maintain a greater amount of permanent capital than is required by the risk-based capital requirement as defined, but the FHFA has not placed any such requirement on FHLBank to date.

•Total regulatory capital. The GLB Act requires FHLBank to maintain at all times at least a 4.0 percent total capital-to-asset ratio. Total regulatory capital is defined as the sum of permanent capital, Class A Common Stock, any general loss allowance, if consistent with GAAP and not established for specific assets, and other amounts from sources determined by the FHFA as available to absorb losses.

•Leverage capital. FHLBank is required to maintain at all times a leverage capital-to-assets ratio of at least 5.0 percent, with the leverage capital ratio defined as the sum of permanent capital weighted 1.5 times and non-permanent capital (currently only Class A Common Stock) weighted 1.0 times, divided by total assets.

Table 10.1 illustrates that FHLBank was in compliance with its regulatory capital requirements as of ~~March 31,~~June 30, 2022 and December 31, 2021 (dollar amounts in thousands):

Table 10.1


		03/31/2022						12/31/2021							06/30/2022						12/31/2021
		Required			Actual			Required			Actual				Required			Actual			Required			Actual
Regulatory capital requirements:	Regulatory capital requirements:													Regulatory capital requirements:
Risk-based capital	Risk-based capital	$	489,854		$	2,526,508		$	363,108		$	2,407,762		Risk-based capital	$	572,657		$	2,746,499		$	363,108		$	2,407,762
Total regulatory capital-to-asset ratio	Total regulatory capital-to-asset ratio	4.0		%	5.4		%	4.0		%	5.5		%	Total regulatory capital-to-asset ratio	4.0		%	5.2		%	4.0		%	5.5		%
Total regulatory capital	Total regulatory capital	$	2,029,708		$	2,747,289		$	1,920,850		$	2,642,533		Total regulatory capital	$	2,299,972		$	3,018,656		$	1,920,850		$	2,642,533
Leverage capital ratio	Leverage capital ratio	5.0		%	7.9		%	5.0		%	8.0		%	Leverage capital ratio	5.0		%	7.6		%	5.0		%	8.0		%
Leverage capital	Leverage capital	$	2,537,135		$	4,010,543		$	2,401,062		$	3,846,414		Leverage capital	$	2,874,965		$	4,391,905		$	2,401,062		$	3,846,414

Mandatorily Redeemable Capital Stock: FHLBank is a cooperative whose members own most of FHLBank’s capital stock. Former members (including certain non-members that own FHLBank capital stock as a result of merger or acquisition, relocation, charter termination, or involuntary termination of an FHLBank member) own the remaining capital stock to support business transactions still carried on FHLBank's Statements of Condition. Shares cannot be purchased or sold except between FHLBank and its members at a price equal to the $100 per share par value. If a member cancels its written notice of redemption or notice of withdrawal, FHLBank will reclassify mandatorily redeemable capital stock from a liability to equity. After the reclassification, dividends on the capital stock would no longer be classified as interest expense.

Table of Contents

Table 10.2 presents a roll-forward of mandatorily redeemable capital stock for the three and six months ended ~~March 31,~~June 30, 2022 and 2021 (in thousands):

Table 10.2


		Three Months Ended					Three Months Ended				Six Months Ended
			03/31/2022		03/31/2021				06/30/2022		06/30/2021		06/30/2022		06/30/2021
Balance, beginning of period	Balance, beginning of period		$	582	$	1,624		Balance, beginning of period	$	559	$	1,585	$	582	$	1,624
Capital stock subject to mandatory redemption reclassified from equity during the period	Capital stock subject to mandatory redemption reclassified from equity during the period		163,047		358,243			Capital stock subject to mandatory redemption reclassified from equity during the period	295,316		225,809		458,363		584,052

Redemption or repurchase of mandatorily redeemable capital stock during the period	Redemption or repurchase of mandatorily redeemable capital stock during the period		(163,070)		(358,290)			Redemption or repurchase of mandatorily redeemable capital stock during the period	(295,340)		(225,860)		(458,410)		(584,150)
Stock dividend classified as mandatorily redeemable capital stock during the period	Stock dividend classified as mandatorily redeemable capital stock during the period		—		8			Stock dividend classified as mandatorily redeemable capital stock during the period	2		9		2		17
Balance, end of period	Balance, end of period		$	559	$	1,585		Balance, end of period	$	537	$	1,543	$	537	$	1,543

~~Table of Contents~~

Excess Capital Stock: Excess capital stock is defined as the amount of stock held by a member (or former member) in excess of that institution’s minimum stock purchase requirement. FHFA rules limit the ability of FHLBank to create excess member stock under certain circumstances. For example, FHLBank may not pay dividends in the form of capital stock or issue new excess stock to members if FHLBank’s excess stock exceeds 1 percent of its total assets or if the issuance of excess stock would cause FHLBank’s excess stock to exceed 1 percent of its total assets. As of ~~March 31,~~June 30, 2022, FHLBank’s excess stock was less than 1 percent of total assets.

Capital Classification Determination: The FHFA determines each FHLBank’s capital classification on at least a quarterly basis. If an FHLBank is determined to be other than adequately capitalized, that FHLBank becomes subject to additional supervisory authority by the FHFA. Before implementing a reclassification, the Director of the FHFA is required to provide an FHLBank with written notice of the proposed action and an opportunity to submit a response. As of the most recent review by the FHFA, FHLBank Topeka was classified as adequately capitalized.

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NOTE 11 – ACCUMULATED OTHER COMPREHENSIVE INCOME

Table 11.1 summarizes the changes in AOCI for the three months ended ~~March 31,~~June 30, 2022 and 2021 (in thousands):

Table 11.1


		Three Months Ended						Three Months Ended
		Net Unrealized Gains (Losses) on Available-for-sale Securities		Defined Benefit Pension Plan		Total AOCI				Net Unrealized Gains (Losses) on Available-for-sale Securities		Defined Benefit Pension Plan		Total AOCI

Balance at December 31, 2020		$	45,196	$	(2,888)	$	42,308
Balance at March 31, 2021									Balance at March 31, 2021	$	74,430	$	(2,816)	$	71,614
Other comprehensive income (loss) before reclassification:	Other comprehensive income (loss) before reclassification:								Other comprehensive income (loss) before reclassification:

Unrealized gains (losses)		29,234				29,234

Unrealized gains (losses)1									Unrealized gains (losses)1	21,852				21,852

Reclassifications from other comprehensive income (loss) to net income:	Reclassifications from other comprehensive income (loss) to net income:								Reclassifications from other comprehensive income (loss) to net income:

Amortization of net losses - defined benefit pension plan2									Amortization of net losses - defined benefit pension plan2			78		78
Net current period other comprehensive income (loss)									Net current period other comprehensive income (loss)	21,852		78		21,930
Balance at June 30, 2021									Balance at June 30, 2021	$	96,282	$	(2,738)	$	93,544

Amortization of net losses - defined benefit pension plan1				72		72
Net current period other comprehensive income (loss)		29,234		72		29,306
Balance at March 31, 2021		$	74,430	$	(2,816)	$	71,614

Balance at December 31, 2021		$	74,689	$	(2,374)	$	72,315
Balance at March 31, 2022									Balance at March 31, 2022	$	33,462	$	(2,312)	$	31,150
Other comprehensive income (loss) before reclassification:	Other comprehensive income (loss) before reclassification:								Other comprehensive income (loss) before reclassification:
Unrealized gains (losses)	Unrealized gains (losses)	(41,227)				(41,227)			Unrealized gains (losses)	(54,565)				(54,565)

Reclassifications from other comprehensive income (loss) to net income:	Reclassifications from other comprehensive income (loss) to net income:								Reclassifications from other comprehensive income (loss) to net income:

Amortization of net losses - defined benefit pension plan1				62		62
Amortization of net losses - defined benefit pension plan2									Amortization of net losses - defined benefit pension plan2			62		62
Net current period other comprehensive income (loss)	Net current period other comprehensive income (loss)	(41,227)		62		(41,165)			Net current period other comprehensive income (loss)	(54,565)		62		(54,503)
Balance at March 31, 2022		$	33,462	$	(2,312)	$	31,150
Balance at June 30, 2022									Balance at June 30, 2022	$	(21,103)	$	(2,250)	$	(23,353)

1Includes $4,059,000 related to the transfer of securities from held-to-maturity to available-for-sale upon the adoption of reference rate reform guidance.

2 Recorded in “Other” non-interest expense on the Statements of Income. Amount represents a debit (increase to other expenses).

Table of Contents

Table 11.2 summarizes the changes in AOCI for the six months ended June 30, 2022 and 2021 (in thousands):

Table 11.2


	Six Months Ended
	Net Unrealized Gains (Losses) on Available-for-sale Securities		Defined Benefit Pension Plan		Total AOCI
















Balance at December 31, 2020	$	45,196	$	(2,888)	$	42,308
Other comprehensive income (loss) before reclassification:

Unrealized gains (losses)1	51,086				51,086





Reclassifications from other comprehensive income (loss) to net income:


Amortization of net losses - defined benefit pension plan2			150		150
Net current period other comprehensive income (loss)	51,086		150		51,236
Balance at June 30, 2021	$	96,282	$	(2,738)	$	93,544


Balance at December 31, 2021	$	74,689	$	(2,374)	$	72,315
Other comprehensive income (loss) before reclassification:
Unrealized gains (losses)	(95,792)				(95,792)





Reclassifications from other comprehensive income (loss) to net income:


Amortization of net losses - defined benefit pension plan2			124		124
Net current period other comprehensive income (loss)	(95,792)		124		(95,668)
Balance at June 30, 2022	$	(21,103)	$	(2,250)	$	(23,353)

1 Includes $4,059,000 related to the transfer of securities from held-to-maturity to available-for-sale upon the adoption of reference rate reform guidance.

2 Recorded in “Other” non-interest expense on the Statements of Income. Amount represents a debit (increase to other expenses).

~~Table of Contents~~

NOTE 12 – FAIR VALUES

The fair value amounts recorded on the Statements of Condition and presented in the note disclosures have been determined by FHLBank using available market and other pertinent information and reflect FHLBank’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., an exit price). Although FHLBank uses its best judgment in estimating the fair value of its financial instruments, there are inherent limitations in any valuation technique. Therefore, the fair values may not be indicative of the amounts that would have been realized in market transactions as of ~~March 31,~~June 30, 2022 and December 31, 2021. Additionally, these values do not represent an estimate of the overall market value of FHLBank as a going concern, which would take into account future business opportunities and the net profitability of assets and liabilities.

Subjectivity of Estimates: Estimates of the fair value of advances with options, mortgage instruments, derivatives with embedded options and consolidated obligation bonds with options 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, methods to determine possible distributions of future interest rates used to value options, and the selection of discount rates that appropriately reflect market and credit risks. The use of different assumptions could have a material effect on the fair value estimates.

Fair Value Hierarchy: The fair value hierarchy requires FHLBank to maximize the use of observable inputs and minimize the use of 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 the market observability of the fair value measurement for the asset or liability. FHLBank must disclose the level within the fair value hierarchy in which the measurements are classified for all assets and liabilities.

Table of Contents

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 active markets that FHLBank can access on the measurement date. An active market for the asset or liability is a market in which the transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.

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

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

FHLBank 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. There were no transfers of assets or liabilities between fair value levels during the three and six months ended ~~March 31,~~June 30, 2022 and 2021.

Tables 12.1 and 12.2 present the carrying value, fair value and fair value hierarchy of financial assets and liabilities as of ~~March 31,~~June 30, 2022 and December 31, 2021. FHLBank records trading securities, available-for-sale securities, derivative assets, and derivative liabilities at fair value on a recurring basis, and on occasion certain mortgage loans held for portfolio and certain other assets at fair value on a nonrecurring basis. FHLBank measures all other financial assets and liabilities at amortized cost. Further details about the financial assets and liabilities held at fair value on either a recurring or non-recurring basis are presented in Tables 12.3 and 12.4.

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The carrying value, fair value and fair value hierarchy of FHLBank’s financial assets and liabilities as of ~~March 31,~~June 30, 2022 and December 31, 2021 are summarized in Tables 12.1 and 12.2 (in thousands):

Table 12.1


		03/31/2022													06/30/2022
		Carrying Value		Total Fair Value		Level 1		Level 2		Level 3		Netting Adjustment and Cash Collateral1			Carrying Value		Total Fair Value		Level 1		Level 2		Level 3		Netting Adjustment and Cash Collateral1
Assets:	Assets:													Assets:
Cash and due from banks	Cash and due from banks	$	29,264	$	29,264	$	29,264	$	—	$	—	$	—	Cash and due from banks	$	31,350	$	31,350	$	31,350	$	—	$	—	$	—
Interest-bearing deposits	Interest-bearing deposits	624,145		624,145		—		624,145		—		—		Interest-bearing deposits	854,271		854,271		—		854,271		—		—
Securities purchased under agreements to resell	Securities purchased under agreements to resell	2,100,000		2,100,000		—		2,100,000		—		—		Securities purchased under agreements to resell	2,250,000		2,250,000		—		2,250,000		—		—
Federal funds sold	Federal funds sold	3,100,000		3,100,000		—		3,100,000		—		—		Federal funds sold	5,360,000		5,360,000		—		5,360,000		—		—
Trading securities	Trading securities	2,775,818		2,775,818		—		2,775,818		—		—		Trading securities	2,360,237		2,360,237		—		2,360,237		—		—
Available-for-sale securities	Available-for-sale securities	7,846,335		7,846,335		—		7,846,335		—		—		Available-for-sale securities	8,143,831		8,143,831		—		8,143,831		—		—
Held-to-maturity securities	Held-to-maturity securities	421,583		423,695		—		350,015		73,680		—		Held-to-maturity securities	399,308		399,737		—		326,836		72,901		—
Advances	Advances	25,487,576		25,489,324		—		25,489,324		—		—		Advances	29,522,840		29,483,307		—		29,483,307		—		—
Mortgage loans held for portfolio, net of allowance	Mortgage loans held for portfolio, net of allowance	8,021,949		7,494,067		—		7,491,143		2,924		—		Mortgage loans held for portfolio, net of allowance	8,018,930		7,116,503		—		7,114,995		1,508		—

Overnight loans to other FHLBanks														Overnight loans to other FHLBanks	200,000		200,000		—		200,000		—		—
Accrued interest receivable	Accrued interest receivable	79,890		79,890		—		79,890		—		—		Accrued interest receivable	96,425		96,425		—		96,425		—		—
Derivative assets	Derivative assets	175,645		175,645		—		48,836		—		126,809		Derivative assets	181,849		181,849		—		89,858		—		91,991
Liabilities:	Liabilities:													Liabilities:
Deposits	Deposits	936,691		936,683		—		936,683		—		—		Deposits	781,845		781,814		—		781,814		—		—
Consolidated obligation discount notes	Consolidated obligation discount notes	7,843,651		7,843,233		—		7,843,233		—		—		Consolidated obligation discount notes	20,076,331		20,051,414		—		20,051,414		—		—
Consolidated obligation bonds	Consolidated obligation bonds	38,960,721		38,413,389		—		38,413,389		—		—		Consolidated obligation bonds	32,928,146		32,069,779		—		32,069,779		—		—
Overnight loans from other FHLBanks														Overnight loans from other FHLBanks	500,000		500,000		—		500,000		—		—
Mandatorily redeemable capital stock	Mandatorily redeemable capital stock	559		559		559		—		—		—		Mandatorily redeemable capital stock	537		537		537		—		—		—
Accrued interest payable	Accrued interest payable	48,820		48,820		—		48,820		—		—		Accrued interest payable	74,572		74,572		—		74,572		—		—
Derivative liabilities	Derivative liabilities	2,494		2,494		—		326,103		—		(323,609)		Derivative liabilities	5,572		5,572		—		451,543		—		(445,971)
Other Asset (Liability):	Other Asset (Liability):													Other Asset (Liability):
Industrial revenue bonds	Industrial revenue bonds	35,000		34,053		—		34,053		—		—		Industrial revenue bonds	35,000		33,130		—		33,130		—		—
Financing obligation payable	Financing obligation payable	(35,000)		(34,053)		—		(34,053)		—		—		Financing obligation payable	(35,000)		(33,130)		—		(33,130)		—		—

1 Represents the effect of legally enforceable master netting agreements that allow FHLBank to net settle positive and negative positions and also derivative cash collateral and related accrued interest held or placed with the same clearing agent or derivative counterparty.

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Table 12.2


	12/31/2021
	Carrying Value		Total Fair Value		Level 1		Level 2		Level 3		Netting Adjustment and Cash Collateral1
Assets:
Cash and due from banks	$	25,841	$	25,841	$	25,841	$	—	$	—	$	—
Interest-bearing deposits	693,249		693,249		—		693,249		—		—
Securities purchased under agreements to resell	1,500,000		1,500,000		—		1,500,000		—		—
Federal funds sold	3,360,000		3,360,000		—		3,360,000		—		—
Trading securities	2,339,955		2,339,955		—		2,339,955		—		—
Available-for-sale securities	7,719,185		7,719,185		—		7,719,185		—		—
Held-to-maturity securities	446,185		450,771		—		377,156		73,615		—
Advances	23,484,288		23,567,860		—		23,567,860		—		—
Mortgage loans held for portfolio, net of allowance	8,135,046		8,064,657		—		8,060,200		4,457		—

Accrued interest receivable	78,032		78,032		—		78,032		—		—
Derivative assets	156,926		156,926		—		17,050		—		139,876
Liabilities:
Deposits	946,207		946,207		—		946,207		—		—
Consolidated obligation discount notes	6,568,989		6,568,645		—		6,568,645		—		—
Consolidated obligation bonds	37,630,609		37,565,481		—		37,565,481		—		—
Mandatorily redeemable capital stock	582		582		582		—		—		—
Accrued interest payable	42,753		42,753		—		42,753		—		—
Derivative liabilities	4,580		4,580		—		181,310		—		(176,730)
Other Asset (Liability):
Industrial revenue bonds	35,000		36,114		—		36,114		—		—
Financing obligation payable	(35,000)		(36,114)		—		(36,114)		—		—

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Fair Value Measurements: Tables 12.3 and 12.4 present, for each hierarchy level, FHLBank’s assets and liabilities that are measured at fair value on a recurring or nonrecurring basis on the Statements of Condition as of or for the periods ended ~~March 31,~~June 30, 2022 and December 31, 2021 (in thousands).

Table 12.3


		03/31/2022											06/30/2022
		Total		Level 1		Level 2		Level 3		Netting Adjustment and Cash Collateral1			Total		Level 1		Level 2		Level 3		Netting Adjustment and Cash Collateral1
Recurring fair value measurements - Assets:	Recurring fair value measurements - Assets:											Recurring fair value measurements - Assets:
Trading securities:	Trading securities:											Trading securities:

Certificates of deposit	Certificates of deposit	$	700,211	$	—	$	700,211	$	—	$	—	Certificates of deposit	$	639,786	$	—	$	639,786	$	—	$	—
U.S. Treasury obligations	U.S. Treasury obligations	905,038		—		905,038		—		—		U.S. Treasury obligations	649,108		—		649,108		—		—
GSE debentures	GSE debentures	401,915		—		401,915		—		—		GSE debentures	396,487		—		396,487		—		—

GSE MBS	GSE MBS	768,654		—		768,654		—		—		GSE MBS	674,856		—		674,856		—		—
Total trading securities	Total trading securities	2,775,818		—		2,775,818		—		—		Total trading securities	2,360,237		—		2,360,237		—		—
Available-for-sale securities:	Available-for-sale securities:											Available-for-sale securities:
U.S. Treasury obligations	U.S. Treasury obligations	2,788,059		—		2,788,059		—		—		U.S. Treasury obligations	2,835,439		—		2,835,439		—		—
U.S. obligation MBS	U.S. obligation MBS	46,817		—		46,817		—		—		U.S. obligation MBS	43,690		—		43,690		—		—
GSE MBS	GSE MBS	5,011,459		—		5,011,459		—		—		GSE MBS	5,264,702		—		5,264,702		—		—
Total available-for-sale securities	Total available-for-sale securities	7,846,335		—		7,846,335		—		—		Total available-for-sale securities	8,143,831		—		8,143,831		—		—
Derivative assets:	Derivative assets:											Derivative assets:
Interest-rate related	Interest-rate related	175,611		—		48,802		—		126,809		Interest-rate related	181,550		—		89,559		—		91,991
Mortgage delivery commitments	Mortgage delivery commitments	34		—		34		—		—		Mortgage delivery commitments	299		—		299		—		—
Total derivative assets	Total derivative assets	175,645		—		48,836		—		126,809		Total derivative assets	181,849		—		89,858		—		91,991
TOTAL RECURRING FAIR VALUE MEASUREMENTS - ASSETS	TOTAL RECURRING FAIR VALUE MEASUREMENTS - ASSETS	$	10,797,798	$	—	$	10,670,989	$	—	$	126,809	TOTAL RECURRING FAIR VALUE MEASUREMENTS - ASSETS	$	10,685,917	$	—	$	10,593,926	$	—	$	91,991

Recurring fair value measurements - Liabilities:	Recurring fair value measurements - Liabilities:											Recurring fair value measurements - Liabilities:
Derivative liabilities:	Derivative liabilities:											Derivative liabilities:
Interest-rate related	Interest-rate related	$	554	$	—	$	324,163	$	—	$	(323,609)	Interest-rate related	$	5,256	$	—	$	451,227	$	—	$	(445,971)
Mortgage delivery commitments	Mortgage delivery commitments	1,940		—		1,940		—		—		Mortgage delivery commitments	316		—		316		—		—
Total derivative liabilities	Total derivative liabilities	2,494		—		326,103		—		(323,609)		Total derivative liabilities	5,572		—		451,543		—		(445,971)
TOTAL RECURRING FAIR VALUE MEASUREMENTS - LIABILITIES	TOTAL RECURRING FAIR VALUE MEASUREMENTS - LIABILITIES	$	2,494	$	—	$	326,103	$	—	$	(323,609)	TOTAL RECURRING FAIR VALUE MEASUREMENTS - LIABILITIES	$	5,572	$	—	$	451,543	$	—	$	(445,971)

Nonrecurring fair value measurements - Assets2:	Nonrecurring fair value measurements - Assets2:											Nonrecurring fair value measurements - Assets2:

Impaired mortgage loans	Impaired mortgage loans	$	2,974	$	—	$	—	$	2,974	$	—	Impaired mortgage loans	$	1,533	$	—	$	—	$	1,533	$	—

TOTAL NONRECURRING FAIR VALUE MEASUREMENTS - ASSETS	TOTAL NONRECURRING FAIR VALUE MEASUREMENTS - ASSETS	$	2,974	$	—	$	—	$	2,974	$	—	TOTAL NONRECURRING FAIR VALUE MEASUREMENTS - ASSETS	$	1,533	$	—	$	—	$	1,533	$	—

1 Represents the effect of legally enforceable master netting agreements that allow FHLBank to net settle positive and negative positions and also derivative cash collateral, including related accrued interest, held or placed with the same clearing agent or derivative counterparty.

2 Includes assets adjusted to fair value during the ~~three~~six months ended ~~March 31,~~June 30, 2022 and still outstanding as of ~~March 31,~~June 30, 2022.

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Table 12.4


	12/31/2021
	Total		Level 1		Level 2		Level 3		Netting Adjustment and Cash Collateral1
Recurring fair value measurements - Assets:
Trading securities:

Certificates of deposit	$	200,023	$	—	$	200,023	$	—	$	—
U.S. Treasury obligations	917,472		—		917,472		—		—
GSE debentures	415,918		—		415,918		—		—

GSE MBS	806,542		—		806,542		—		—
Total trading securities	2,339,955		—		2,339,955		—		—
Available-for-sale securities:
U.S. Treasury obligations	2,816,437		—		2,816,437		—		—
U.S. obligation MBS	50,767		—		50,767		—		—
GSE MBS	4,851,981		—		4,851,981		—		—
Total available-for-sale securities	7,719,185		—		7,719,185		—		—
Derivative assets:
Interest-rate related	156,894		—		17,018		—		139,876
Mortgage delivery commitments	32		—		32		—		—
Total derivative assets	156,926		—		17,050		—		139,876
TOTAL RECURRING FAIR VALUE MEASUREMENTS - ASSETS	$	10,216,066	$	—	$	10,076,190	$	—	$	139,876

Recurring fair value measurements - Liabilities:
Derivative liabilities:
Interest-rate related	$	4,535	$	—	$	181,265	$	—	$	(176,730)
Mortgage delivery commitments	45		—		45		—		—
Total derivative liabilities	4,580		—		181,310		—		(176,730)
TOTAL RECURRING FAIR VALUE MEASUREMENTS - LIABILITIES	$	4,580	$	—	$	181,310	$	—	$	(176,730)

Nonrecurring fair value measurements - Assets2:


Impaired mortgage loans	$	4,510	$	—	$	—	$	4,510	$	—
Real estate owned	52		—		—		52		—
TOTAL NONRECURRING FAIR VALUE MEASUREMENTS - ASSETS	$	4,562	$	—	$	—	$	4,562	$	—

2 Includes assets adjusted to fair value during the year ended December 31, 2021 and still outstanding as of December 31, 2021.

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NOTE 13 – COMMITMENTS AND CONTINGENCIES

Joint and Several Liability: As provided in the Federal Home Loan Bank Act of 1932, as amended, or in FHFA regulations, consolidated obligations are backed only by the financial resources of the FHLBanks. FHLBank Topeka is jointly and severally liable with the other FHLBanks for the payment of principal and interest on all of the consolidated obligations issued by the FHLBanks. The par amounts for which FHLBank Topeka is jointly and severally liable were approximately ~~$652,418,633,000~~$828,954,487,000 and $608,633,999,000 as of ~~March 31,~~June 30, 2022 and December 31, 2021, respectively.

The joint and several obligations are mandated by FHFA regulations and are not the result of arms-length transactions among the FHLBanks. As described above, the FHLBanks have no control over the amount of the guaranty or the determination of how each FHLBank would perform under the joint and several liability. Because the FHLBanks are subject to the authority of the FHFA as it relates to decisions involving the allocation of the joint and several liability for all FHLBanks' consolidated obligations, FHLBank Topeka regularly monitors the financial condition of the other FHLBanks to determine whether it should expect a loss to arise from its joint and several obligations. If FHLBank were to determine that a loss was probable and the amount of the loss could be reasonably estimated, FHLBank would charge to income the amount of the expected loss. Based upon the creditworthiness of the other FHLBanks as of ~~March 31,~~June 30, 2022, FHLBank Topeka has concluded that a loss accrual is not necessary at this time.

Off-balance Sheet Commitments: As of ~~March 31,~~June 30, 2022 and December 31, 2021, off-balance sheet commitments are presented in Table 13.1 (in thousands):

Table 13.1


		03/31/2022						12/31/2021							06/30/2022						12/31/2021
Notional Amount	Notional Amount	Expire Within One Year		Expire After One Year		Total		Expire Within One Year		Expire After One Year		Total		Notional Amount	Expire Within One Year		Expire After One Year		Total		Expire Within One Year		Expire After One Year		Total
Standby letters of credit outstanding	Standby letters of credit outstanding	$	4,835,558	$	1,983	$	4,837,541	$	5,206,182	$	1,983	$	5,208,165	Standby letters of credit outstanding	$	4,904,546	$	842	$	4,905,388	$	5,206,182	$	1,983	$	5,208,165

Advance commitments outstanding	Advance commitments outstanding	32,901		3,905		36,806		21,001		3,905		24,906		Advance commitments outstanding	22,465		3,905		26,370		21,001		3,905		24,906
Principal commitments for standby bond purchase agreements	Principal commitments for standby bond purchase agreements	102,980		667,715		770,695		—		727,200		727,200		Principal commitments for standby bond purchase agreements	102,980		691,865		794,845		—		727,200		727,200
Commitments to fund or purchase mortgage loans	Commitments to fund or purchase mortgage loans	129,831		—		129,831		72,025		—		72,025		Commitments to fund or purchase mortgage loans	101,659		—		101,659		72,025		—		72,025
Commitments to issue consolidated bonds, at par	Commitments to issue consolidated bonds, at par	395,000		—		395,000		635,000		—		635,000		Commitments to issue consolidated bonds, at par	140,000		—		140,000		635,000		—		635,000
Commitments to issue consolidated discount notes, at par	Commitments to issue consolidated discount notes, at par	2,813,716		—		2,813,716		—		—		—		Commitments to issue consolidated discount notes, at par	555,250		—		555,250		—		—		—

Commitments to Extend Credit: FHLBank issues standby letters of credit on behalf of its members to support certain obligations of the members to third-party beneficiaries. These standby letters of credit are subject to the same collateralization and borrowing limits that are applicable to advances and are fully collateralized at the time of issuance with assets allowed by FHLBank’s Member Products Policy (MPP). Standby letters of credit may be offered to assist members and 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 for members for a fee. If FHLBank is required to make payment for a beneficiary's draw, the member either reimburses FHLBank for the amount drawn or, subject to FHLBank's discretion, the amount drawn may be converted into a collateralized advance to the member. However, standby letters of credit usually expire without being drawn upon. Outstanding standby letters of credit have original or extended expiration periods of up to 6 years. FHLBank's current outstanding standby letters of credit expire no later than ~~2023.~~2027. Unearned fees as well as the value of the guarantees related to standby letters of credit are recorded in other liabilities and amounted to ~~$1,103,000~~$1,292,000 and $1,336,000 as of ~~March 31,~~June 30, 2022 and December 31, 2021, respectively. Advance commitments legally bind and unconditionally obligate FHLBank for additional advances up to 24 months in the future. Based upon management’s credit analysis of members and collateral requirements under the MPP, FHLBank does not expect to incur any credit losses on the outstanding letters of credit or advance commitments.

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Standby Bond-Purchase Agreements: FHLBank has entered into standby bond purchase agreements with state housing authorities whereby FHLBank, for a fee, agrees to purchase and hold the authorities’ bonds until the designated marketing agent can find a suitable investor or the housing authority repurchases the bond according to a schedule established by the standby agreement. Each standby agreement dictates the specific terms that would require FHLBank to purchase the bond and typically allows FHLBank to terminate the agreement upon the occurrence of a default event of the issuer. The bond purchase commitments entered into by FHLBank expire no later than 2025, though some are renewable at the option of FHLBank. As of ~~March 31,~~June 30, 2022 and December 31, 2021, the total commitments for bond purchases included agreements with 2 in-district state housing authorities. FHLBank was 0t required to purchase any bonds under any agreements during the ~~three~~six months ended ~~March 31,~~June 30, 2022 and 2021.

Commitments to Purchase Mortgage Loans: These commitments that unconditionally obligate FHLBank to purchase mortgage loans from participating FHLBank Topeka members in the MPF Program are generally for periods not to exceed 60 calendar days. Certain commitments are recorded as derivatives at their fair values on the Statements of Condition. FHLBank recorded mortgage delivery commitment net derivative asset (liability) balances of ~~$(1,906,000)~~$(17,000) and $(13,000) as of ~~March 31,~~June 30, 2022 and December 31, 2021, respectively.

Commitments to Issue Consolidated Obligations: FHLBank enters into commitments to issue consolidated obligation bonds and discount notes outstanding in the normal course of its business. Most settle within the shortest period possible and are considered regular way trades; however, certain commitments are recorded as derivatives at their fair values on the Statements of Condition.

NOTE 14 – TRANSACTIONS WITH STOCKHOLDERS

FHLBank is a cooperative whose members own most of the capital stock of FHLBank and generally receive dividends on their investments. In addition, certain former members that still have outstanding transactions are also required to maintain their investments in FHLBank capital stock until the transactions mature or are paid off. Nearly all outstanding advances are with current members, and the majority of outstanding mortgage loans held for portfolio were purchased from current or former members. FHLBank also maintains demand deposit accounts for members primarily to facilitate settlement activities that are directly related to advances and mortgage loan purchases.

Transactions with members are entered into in the ordinary course of business. In instances where members also have officers or directors who are directors of FHLBank, transactions with those members are subject to the same eligibility and credit criteria, as well as the same terms and conditions, as other transactions with members. For financial reporting and disclosure purposes, FHLBank defines related parties as FHLBank directors’ financial institutions and members with capital stock investments in excess of 10 percent of FHLBank’s total regulatory capital stock outstanding, which includes mandatorily redeemable capital stock.

Activity with Members that Exceed a 10 Percent Ownership in FHLBank Regulatory Capital Stock: Tables 14.1 and 14.2 present information on members that owned more than 10 percent of outstanding FHLBank regulatory capital stock as of ~~March 31,~~June 30, 2022 and December 31, 2021 (dollar amounts in thousands). None of the officers or directors of this member currently serve on FHLBank’s board of directors.

Table 14.1


03/31/2022
06/30/2022															06/30/2022
Member Name	Member Name	State	Total Class A Stock Par Value		Percent of Total Class A		Total Class B Stock Par Value		Percent of Total Class B		Total Capital Stock Par Value		Percent of Total Capital Stock		Member Name	State	Total Class A Stock Par Value		Percent of Total Class A		Total Class B Stock Par Value		Percent of Total Class B		Total Capital Stock Par Value		Percent of Total Capital Stock
MidFirst Bank	MidFirst Bank	OK	$	500	0.2	%	$	440,988	32.6	%	$	441,488	28.0��	%	MidFirst Bank	OK	$	549	0.2	%	$	402,887	26.0	%	$	403,436	22.1	%

TOTAL	TOTAL		$	500	0.2	%	$	440,988	32.6	%	$	441,488	28.0	%	TOTAL		$	549	0.2	%	$	402,887	26.0	%	$	403,436	22.1	%

Table 14.2


12/31/2021
Member Name	State	Total Class A Stock Par Value		Percent of Total Class A		Total Class B Stock Par Value		Percent of Total Class B		Total Capital Stock Par Value		Percent of Total Capital Stock
MidFirst Bank	OK	$	500	0.2	%	$	413,430	32.7	%	$	413,930	27.6	%


TOTAL		$	500	0.2	%	$	413,430	32.7	%	$	413,930	27.6	%

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Advance and deposit balances with members that owned more than 10 percent of outstanding FHLBank regulatory capital stock as of ~~March 31,~~June 30, 2022 and December 31, 2021 are summarized in Table 14.3 (dollar amounts in thousands).

Table 14.3


		03/31/2022				12/31/2021				03/31/2022				12/31/2021					06/30/2022				12/31/2021				06/30/2022				12/31/2021
Member Name	Member Name	Outstanding Advances		Percent of Total		Outstanding Advances		Percent of Total		Outstanding Deposits		Percent of Total		Outstanding Deposits		Percent of Total		Member Name	Outstanding Advances		Percent of Total		Outstanding Advances		Percent of Total		Outstanding Deposits		Percent of Total		Outstanding Deposits		Percent of Total
MidFirst Bank	MidFirst Bank	$	9,810,000	38.3	%	$	9,045,000	38.6	%	$	542	0.1	%	$	517	0.1	%	MidFirst Bank	$	8,815,000	29.6	%	$	9,045,000	38.6	%	$	946	0.1	%	$	517	0.1	%

TOTAL	TOTAL	$	9,810,000	38.3	%	$	9,045,000	38.6	%	$	542	0.1	%	$	517	0.1	%	TOTAL	$	8,815,000	29.6	%	$	9,045,000	38.6	%	$	946	0.1	%	$	517	0.1	%

MidFirst Bank did not sell any mortgage loans into the MPF Program during the three and six months ended ~~March 31,~~June 30, 2022 and 2021.

Transactions with FHLBank Directors’ Financial Institutions: Table 14.4 presents information as of ~~March 31,~~June 30, 2022 and December 31, 2021 for members that had an officer or director serving on FHLBank’s board of directors (dollar amounts in thousands). Information is only included for the period in which the officer or director served on FHLBank’s board of directors. Capital stock listed is regulatory capital stock, which includes mandatorily redeemable capital stock.

Table 14.4


		03/31/2022				12/31/2021					06/30/2022				12/31/2021
		Outstanding Amount		Percent of Total		Outstanding Amount		Percent of Total			Outstanding Amount		Percent of Total		Outstanding Amount		Percent of Total
Advances	Advances	$	171,563	0.7	%	$	180,099	0.8	%	Advances	$	149,122	0.5	%	$	180,099	0.8	%

Deposits	Deposits	$	12,650	1.4	%	$	15,613	1.6	%	Deposits	$	7,896	1.0	%	$	15,613	1.6	%

Class A Common Stock	Class A Common Stock	$	5,285	2.4	%	$	4,655	2.0	%	Class A Common Stock	$	4,624	1.7	%	$	4,655	2.0	%
Class B Common Stock	Class B Common Stock	16,216		1.2		17,056		1.3		Class B Common Stock	10,431		0.7		17,056		1.3
TOTAL CAPITAL STOCK	TOTAL CAPITAL STOCK	$	21,501	1.4	%	$	21,711	1.4	%	TOTAL CAPITAL STOCK	$	15,055	0.8	%	$	21,711	1.4	%

Table 14.5 presents mortgage loans acquired during the three and six months ended ~~March 31,~~June 30, 2022 and 2021 for members that had an officer or director serving on FHLBank’s board of directors in 2022 or 2021 (dollar amounts in thousands). Information is only included for the period in which the officer or director served on FHLBank’s board of directors.

Table 14.5

Three Months Ended
03/31/2022 03/31/2021
Amount Percent of Total Amount Percent of Total
Mortgage loans acquired $ 5,577 2.0 % $ 8,083 1.5 %



	Three Months Ended								Six Months Ended
	06/30/2022				06/30/2021				06/30/2022				06/30/2021
	Amount		Percent of Total		Amount		Percent of Total		Amount		Percent of Total		Amount		Percent of Total
Mortgage loans acquired	$	5,719	1.8	%	$	10,888	1.9	%	$	11,296	1.9	%	$	18,971	1.7	%

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Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is intended to assist the reader in understanding our business and assessing our operations both historically and prospectively. This discussion should be read in conjunction with our interim financial statements and related notes presented under Part I, Item 1 of this quarterly report on Form 10-Q and the annual report on Form 10-K for the year ended December 31, 2021, which includes audited financial statements and related notes for the year ended December 31, 2021. Our MD&A includes the following sections:

•Selected Financial Data – a tabular summary of selected balances, financial ratios and other financial information;

•Executive Level Overview – a general description of our business and financial highlights;

•Financial Market Trends – a discussion of current trends in the financial markets and overall economic environment, including the related impact on our operations;

•Critical Accounting Policies and Estimates – a discussion of accounting policies that require critical estimates and assumptions;

•Results of Operations – an analysis of our operating results, including disclosures about the sustainability of our earnings;

•Financial Condition – an analysis of our financial position;

•Liquidity and Capital Resources – an analysis of our cash flows and capital position;

•Risk Management – a discussion of our risk management strategies;

•Recently Issued Accounting Standards; and

•Legislative and Regulatory Developments.

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Selected Financial Data

Table 1 presents Selected Financial Data for the periods indicated (dollar amounts in thousands):

Table 1


		03/31/2022			12/31/2021			09/30/2021			06/30/2021			03/31/2021				06/30/2022			03/31/2022			12/31/2021			09/30/2021			06/30/2021
Statement of Condition (as of period end):	Statement of Condition (as of period end):																Statement of Condition (as of period end):
Total assets	Total assets	$	50,742,692		$	48,021,238		$	45,516,223		$	46,310,400		$	48,500,428		Total assets	$	57,499,300		$	50,742,692		$	48,021,238		$	45,516,223		$	46,310,400
Investments1	Investments1	16,867,881			16,058,574			15,459,093			16,248,714			18,361,631			Investments1	19,367,647			16,867,881			16,058,574			15,459,093			16,248,714
Advances	Advances	25,487,576			23,484,288			21,411,103			20,995,508			21,068,366			Advances	29,522,840			25,487,576			23,484,288			21,411,103			20,995,508
Mortgage loans, net	Mortgage loans, net	8,021,949			8,135,046			8,315,791			8,328,063			8,667,085			Mortgage loans, net	8,018,930			8,021,949			8,135,046			8,315,791			8,328,063
Total liabilities	Total liabilities	47,964,812			45,306,972			42,945,027			43,663,829			45,809,375			Total liabilities	54,504,534			47,964,812			45,306,972			42,945,027			43,663,829
Deposits	Deposits	936,691			946,207			1,033,557			1,088,865			1,262,945			Deposits	781,845			936,691			946,207			1,033,557			1,088,865

Consolidated obligations, net2	Consolidated obligations, net2	46,804,372			44,199,598			41,755,017			42,418,168			44,386,696			Consolidated obligations, net2	53,004,477			46,804,372			44,199,598			41,755,017			42,418,168

Total capital	Total capital	2,777,880			2,714,266			2,571,196			2,646,571			2,691,053			Total capital	2,994,766			2,777,880			2,714,266			2,571,196			2,646,571
Capital stock	Capital stock	1,574,157			1,499,301			1,382,482			1,456,736			1,540,365			Capital stock	1,821,016			1,574,157			1,499,301			1,382,482			1,456,736
Retained earnings	Retained earnings	1,172,573			1,142,650			1,117,560			1,096,291			1,079,074			Retained earnings	1,197,103			1,172,573			1,142,650			1,117,560			1,096,291

Statement of Income (for the quarterly period ended):	Statement of Income (for the quarterly period ended):																Statement of Income (for the quarterly period ended):
Net interest income	Net interest income	85,075			82,789			73,260			67,230			73,369			Net interest income	83,226			85,075			82,789			73,260			67,230

Other income (loss)	Other income (loss)	(9,509)			(10,638)			(14,758)			(10,146)			(5,892)			Other income (loss)	(7,652)			(9,509)			(10,638)			(14,758)			(10,146)
Other expenses	Other expenses	19,878			22,051			18,628			18,145			18,705			Other expenses	19,725			19,878			22,051			18,628			18,145
Income before assessments	Income before assessments	55,995			51,488			41,534			36,627			48,786			Income before assessments	55,957			55,995			51,488			41,534			36,627
Affordable Housing Program (AHP) assessments	Affordable Housing Program (AHP) assessments	5,600			5,148			4,154			3,663			4,880			Affordable Housing Program (AHP) assessments	5,596			5,600			5,148			4,154			3,663
Net income	Net income	50,395			46,340			37,380			32,964			43,906			Net income	50,361			50,395			46,340			37,380			32,964
Selected Financial Ratios and Other Financial Data (for the quarterly period ended):	Selected Financial Ratios and Other Financial Data (for the quarterly period ended):																Selected Financial Ratios and Other Financial Data (for the quarterly period ended):

Dividends paid	Dividends paid	20,472			21,250			16,111			15,747			16,287			Dividends paid	25,831			20,472			21,250			16,111			15,747
Weighted average dividend rate3	Weighted average dividend rate3	4.88		%	5.62		%	4.15		%	4.06		%	4.15		%	Weighted average dividend rate3	5.63		%	4.88		%	5.62		%	4.15		%	4.06		%
Dividend payout ratio4	Dividend payout ratio4	40.62		%	45.86		%	43.10		%	47.77		%	37.10		%	Dividend payout ratio4	51.29		%	40.62		%	45.86		%	43.10		%	47.77		%
Return on average equity	Return on average equity	6.98		%	6.77		%	5.40		%	4.83		%	6.55		%	Return on average equity	6.60		%	6.98		%	6.77		%	5.40		%	4.83		%
Return on average assets	Return on average assets	0.39		%	0.38		%	0.31		%	0.27		%	0.35		%	Return on average assets	0.35		%	0.39		%	0.38		%	0.31		%	0.27		%
Average equity to average assets	Average equity to average assets	5.59		%	5.58		%	5.71		%	5.56		%	5.32		%	Average equity to average assets	5.37		%	5.59		%	5.58		%	5.71		%	5.56		%
Net interest margin5	Net interest margin5	0.66		%	0.68		%	0.61		%	0.55		%	0.59		%	Net interest margin5	0.59		%	0.66		%	0.68		%	0.61		%	0.55		%
Total capital ratio6	Total capital ratio6	5.47		%	5.65		%	5.65		%	5.71		%	5.55		%	Total capital ratio6	5.21		%	5.47		%	5.65		%	5.65		%	5.71		%
Regulatory capital ratio7	Regulatory capital ratio7	5.41		%	5.50		%	5.49		%	5.52		%	5.40		%	Regulatory capital ratio7	5.25		%	5.41		%	5.50		%	5.49		%	5.52		%

1 Includes trading securities, available-for-sale securities, held-to-maturity securities, interest-bearing deposits, securities purchased under agreements to resell and Federal funds sold.

2 Consolidated obligations are bonds and discount notes that we are primarily liable to repay. See Note 13 to the financial statements for a description of the total consolidated obligations of all FHLBanks for which we are jointly and severally liable.

3 Dividends paid in cash and stock on both classes of stock as a percentage of average capital stock eligible for dividends.

4 Ratio disclosed represents dividends declared and paid during the period as a percentage of net income for the period presented, although FHFA regulation requires dividends be paid out of known income prior to declaration date.

5 Net interest income as a percentage of average earning assets.

6 GAAP capital stock, which excludes mandatorily redeemable capital stock, plus retained earnings and AOCI as a percentage of total assets.

7 Regulatory capital (i.e., Class A Common Stock, Class B Common Stock and retained earnings) as a percentage of total assets.

Executive Level Overview

We are a regional wholesale bank that makes advances (loans) to, purchases mortgage loans from, and provides limited other financial services primarily to our members. Our mission is to be a reliable source of liquidity and low-cost funding for our members in support of residential mortgage lending and related housing and economic development needs of the communities served by our members. As an independent, member-owned cooperative, we seek to maintain a balance between our public purpose and our ability to provide adequate returns on the capital supplied by our members. Our members include commercial banks, savings institutions, credit unions, insurance companies, and community development financial institutions.

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During the ~~first~~second quarter of 2022, concerns about inflation ~~the ongoing Russian invasion of Ukraine,~~ and recession risks, combined with the Federal Open Market Committee’s (FOMC) increase in the Federal funds target rate and speculation about the size and frequency of future rate increases, have caused market volatility ~~to a degree similar to that of March 2020,~~as reflected in increases in sovereign debt yields and credit spreads. Mortgage rates have also increased in response to market conditions, which has slowed mortgage prepayments and related premium amortization and increased spreads on mortgage-related assets. ~~Members are still experiencing high levels of liquidity as a result of COVID-19 pandemic-related economic stimulus which continues to impact~~Advance demand ~~for advances, but advance demand began rebounding~~rebounded during the ~~second~~first half of ~~2021 and has continued~~2022, as average advance balances returned to ~~increase through~~pre-pandemic levels during the ~~first~~second quarter of 2022. Management continues to actively manage our funding composition in response to market conditions, which includes efforts to increase our issuance of floating rate term debt, swapped fixed rate debt, and callable debt. Floating rate debt more closely matches asset composition and reprices to market interest rates faster than unswapped fixed rate debt, and callable debt has had favorable funding spreads in recent periods.

~~First~~Second Quarter 2022 Financial Highlights:

•Net interest income/margin: Net interest income increased ~~$11.7~~$16.0 million to ~~$85.1~~$83.2 million for the quarter ended ~~March 31,~~June 30, 2022 compared to ~~$73.4~~$67.2 million for the quarter ended ~~March 31,~~June 30, 2021. Net interest margin increased 74 basis points for the current quarter, from 0.55 percent for the quarter ended June 30, 2021 to 0.59 percent for the quarter ended ~~March 31, 2021 to 0.66 percent for the quarter ended March 31,~~June 30, 2022. This improvement reflects the ~~decrease~~increase in ~~the cost of debt,~~advance interest income, the decrease in premium amortization on mortgage loans and MBS, ~~and the increase in advance interest income~~ for the quarter ended ~~March 31,~~June 30, 2022 compared to the prior year ~~period.~~period, all of which were partially offset by an increase in the cost of debt. The increase in interest income on advances was driven by higher average balances and yields. Prepayments continued to slow on mortgage related assets, which increased interest income due to less premium amortization between periods. The increase in the cost of debt reflects the increase in market interest rates.

•Total assets: Total assets increased from $48.0 billion as of December 31, 2021 to ~~$50.7~~$57.5 billion as of ~~March 31,~~June 30, 2022, predominantly driven ~~largely~~ by the ~~$2.0~~$6.0 billion increase in advances between ~~periods.~~periods and a $2.9 billion increase in overnight investments.

•Advances: Advances increased from $23.5 billion at December 31, 2021 to ~~$25.5~~$29.5 billion at ~~March 31,~~June 30, 2022. The average balance of advances increased ~~$4.6~~$8.0 billion, or ~~19.5~~35.7 percent, for the three months ended ~~March 31,~~June 30, 2022 when compared to the prior year period.

•Mortgage loans: Mortgage loans decreased slightly from year end, from $8.1 billion as of December 31, 2021 to $8.0 billion as of ~~March 31,~~June 30, 2022, representing ~~15.8~~14.0 percent of total assets as of ~~March 31,~~June 30, 2022, compared to 16.9 percent as of December 31, 2021. The average balance of mortgage loans decreased ~~$0.8~~$0.4 billion, or ~~9.3~~5.1 percent, for the three months ended ~~March 31,~~June 30, 2022 when compared to the prior year period.

•Performance ratios: Return on average equity (ROE) increased to ~~6.98~~6.60 percent for the quarter ended ~~March 31,~~June 30, 2022 compared to ~~6.55~~4.83 percent for the prior year quarter due ~~primarily~~ to the increase in net income for the current ~~quarter.~~quarter, partially offset by the increase in average capital.

•Dividends: The Class A Common Stock dividend rate of ~~0.25~~1.00 percent per annum and the Class B Common Stock dividend rate of ~~5.75~~6.50 percent per annum combined for a weighted average dividend rate for the quarter ended ~~March 31,~~June 30, 2022 of ~~4.88~~5.63 percent, compared to a weighted average dividend rate of ~~4.15~~4.06 percent for the same period in 2021.

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Financial Market Trends

The primary external factors that affect net interest income are market interest rates and the general state of the economy.

General discussion of the level of market interest rates:

Table 2 presents selected market interest rates as of the dates or for the periods shown.

Table 2


		03/31/2022		03/31/2021		03/31/2022		12/31/2021		03/31/2021			06/30/2022		06/30/2021		06/30/2022		06/30/2021		06/30/2022		12/31/2021		06/30/2021
Market Instrument	Market Instrument	Three-month				Ending				Ending		Market Instrument	Three-month				Six-month				Ending				Ending
		Average				Rate				Rate			Average								Rate				Rate
Secured Overnight Financing Rate1	Secured Overnight Financing Rate1	0.09	%	0.04	%	0.29	%	0.05	%	0.01	%	Secured Overnight Financing Rate1	0.71	%	0.02	%	0.40	%	0.03	%	1.50	%	0.05	%	0.05	%
Federal funds effective rate1	Federal funds effective rate1	0.12		0.08		0.33		0.07		0.06		Federal funds effective rate1	0.76		0.07		0.44		0.07		1.58		0.07		0.08
Federal Reserve interest rate on excess reserves1		0.19		0.10		0.40		0.15		0.10
Federal Reserve interest rate on reserve balances1												Federal Reserve interest rate on reserve balances1	0.84		0.11		0.52		0.10		1.65		0.15		0.15
3-month U.S. Treasury bill1	3-month U.S. Treasury bill1	0.29		0.04		0.50		0.04		0.02		3-month U.S. Treasury bill1	1.07		0.02		0.68		0.03		1.67		0.04		0.04
3-month LIBOR1	3-month LIBOR1	0.52		0.20		0.96		0.21		0.19		3-month LIBOR1	1.53		0.16		1.01		0.18		2.29		0.21		0.15
2-year U.S. Treasury note1	2-year U.S. Treasury note1	1.45		0.13		2.34		0.73		0.16		2-year U.S. Treasury note1	2.72		0.17		2.08		0.15		2.96		0.73		0.25
5-year U.S. Treasury note1	5-year U.S. Treasury note1	1.83		0.61		2.46		1.26		0.94		5-year U.S. Treasury note1	2.95		0.83		2.39		0.72		3.04		1.26		0.89
10-year U.S. Treasury note1	10-year U.S. Treasury note1	1.95		1.32		2.34		1.51		1.74		10-year U.S. Treasury note1	2.93		1.58		2.43		1.45		3.02		1.51		1.47
30-year residential mortgage note rate1,2	30-year residential mortgage note rate1,2	4.03		3.10		4.80		3.33		3.33		30-year residential mortgage note rate1,2	5.43		3.19		4.71		3.13		5.84		3.33		3.20

1 Source is Bloomberg.

2 Mortgage Bankers Association weekly 30-year fixed rate mortgage contract rate.

~~Table of Contents~~

During the ~~first~~second quarter of 2022, market volatility, concerns about inflation ~~the announcement~~and recession risks, and interest rate hikes by the FOMC ~~to raise the federal funds rate as well as speculation about future FOMC actions, and further market volatility caused by Russia’s invasion of Ukraine~~ were ~~dominant~~central themes. At its July 2022 meeting, ~~in May 2022,~~ the FOMC raised the target for the Federal funds rate to a range of ~~0.75~~2.25 percent to ~~1.00~~2.50 percent, noting in its statement that while indicators of spending and production have softened, inflationary pressures continue, driven by supply chain pressures related to the pandemic, higher energy and food prices, and Russia’s ongoing war against Ukraine. The FOMC further indicated that ~~ongoing~~additional rate increases ~~will~~should be ~~appropriate in order to support~~expected at the ~~goals of a reduction in inflation and a strong labor market.~~next two meetings. In addition, the FOMC ~~indicated that it would begin~~began to reduce its balance sheet beginning June 1, ~~2022.~~2022 and will continue reducing its holdings of Treasury securities, Agency debt and Agency MBS. Supply chain disruptions and other economic factors caused increases in prices of commodities and consumer goods and wages, contributing to the highest rate of inflation in 40 years. The unemployment rate continues to decline, as demand for labor remains elevated. Mortgage rates continued trending upward relative to the historical lows at earlier points in 2021, which has reduced refinancing incentive for borrowers and slowed prepayments and reduced refinance incentive. Financial institutions continued to experience high levels of liquidity and lower relative loan demand resulting from continued fiscal and monetary policy support and competition among lenders.prepayments.

Spreads to comparative intermediate and long-term U.S. Treasury instruments for FHLBank consolidated ~~obligations widened~~obligation bonds narrowed during the ~~first~~second quarter of ~~2022, resulting~~2022. However, spreads on short-term debt remained wide relative to the respective short-term U.S. Treasury instruments due to supply/demand dynamics in ~~higher costs~~money markets. The cost of issuing short-term debt has remained low despite the wide spreads to ~~issue consolidated obligations despite robust market~~short-term U.S. Treasury instruments due to high demand for the instruments and lower issuance needs by the FHLBanks due to lower advance demand. The FOMC will continue quantitative easing, repurchase agreement, and overnight lending programs and purchases of U.S. Treasuries andshort-term Agency MBS, but announced the planned pace of the reduction of monthly net asset purchases. The improvement in the economic outlook in early 2022 combined with anticipation of FOMC removal of monetary accommodation could result in additional interest rate increases.debt. We issue debt at a spread above U.S. Treasury securities; as a result, the level of interest rates impacts the cost of issuing FHLBank consolidated obligations and the cost of advances to our members and housing associates. The markets have continued to experience volatility due to Russia’s invasion of Ukraine, and the level and volatility of interest rates and credit spreads may continue to be affected by the geopolitical conflict, government actions (including sanctions) taken in response to the conflict, and resulting economic and market uncertainties.

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Russia’s invasion of Ukraine ~~has~~initially led to elevated market volatility and additional inflationary pressures through increased commodity prices and exacerbated supply chain disruptions, especially relative to the global economic recovery from the COVID-19 pandemic that was in its early stages at the end of 2021. Our ability to obtain funds through the issuance of consolidated obligations depends in part on prevailing conditions in the capital markets (including investor demand), such as the effects of any reduced liquidity in global financial markets. Financing conditions remain favorable, although borrowing costs have increased. Volatility in the capital markets ~~caused by the Russian invasion of Ukraine, on top of the lingering economic disruptions from the COVID-19 pandemic,~~ can impact demand for FHLBank debt and the cost of the debt the FHLBanks issue. The outlook for 2022 isremains uncertain, and the aforementioned FOMC actions could impact the efficiency of our asset and liability management activities. Supply chain disruptions and labor market constraints are expected to keep inflation elevated into 2022 despite FOMC intervention, which could impact economic ~~growth.~~growth and member demand for advances. Higher levels of inflation and higher inflation expectations could result in higher interest rates, especially short- and intermediate-term interest ~~rates.~~rates, although the risk of recession during the second half of 2022 could temper rate increases, especially towards the end of 2023. For further discussion, see this Item 2 – “Financial Condition – Consolidated Obligations.”

The publication of LIBOR on a representative basis ceased for one-week and two-month LIBOR effective January 1, 2022, and the remaining LIBOR tenors will cease immediately after June 30, 2023. As noted throughout this quarterly report, many of our ~~assets and liabilities, including~~variable rate investments, derivative assets, ~~and~~ derivative liabilities, and related collateral are indexed to one-month or three-month tenors of LIBOR, some of which have maturity dates that extend beyond June 30, 2023. For additional information on our LIBOR transition efforts and LIBOR exposure, see “Risk Management – Interest Rate Risk Management” under this Item 2.

Critical Accounting Policies and Estimates

The preparation of our financial statements in accordance with GAAP requires management to make a number of judgments and assumptions that affect our reported results and disclosures. Several of our accounting policies are inherently subject to valuation assumptions and other subjective assessments and are more critical than others in terms of their importance to results. These assumptions and assessments include: (1) the accounting related to derivatives and hedging activities; and (2) fair value determinations.

Changes in any of the estimates and assumptions underlying critical accounting policies could have a material effect on our financial statements.

The accounting policies that management believes are the most critical to an understanding of our financial results and condition and require complex management judgment are described under Part II, Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates” in our annual report on Form 10-K, incorporated by reference herein. There were no material changes to our critical accounting policies and estimates during the quarter ended ~~March 31,~~June 30, 2022.

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Results of Operations

Earnings Analysis: Table 3 presents changes in the major components of our net income (dollar amounts in thousands):

Table 3


		Increase (Decrease) in Earnings Components
		2022 vs. 2021

						Increase (Decrease) in Earnings Components
				Three Months Ended				Six Months Ended
				06/30/2022 vs. 06/30/2021				06/30/2022 vs. 06/30/2021
		Dollar Change			Percentage Change			Dollar Change		Percentage Change		Dollar Change		Percentage Change
Total interest income	Total interest income	$	1,802		1.5	%	Total interest income	$	83,477	76.7	%	$	85,279	36.9	%
Total interest expense	Total interest expense	(9,904)			(20.3)		Total interest expense	67,481		162.3		57,577		63.6
Net interest income	Net interest income	11,706			16.0		Net interest income	15,996		23.8		27,702		19.7
Provision (reversal) for credit losses on mortgage loans	Provision (reversal) for credit losses on mortgage loans	(293)			(2,092.9)		Provision (reversal) for credit losses on mortgage loans	(2,420)		(104.7)		(2,713)		(118.1)
Net interest income after mortgage loan loss provision	Net interest income after mortgage loan loss provision	11,999			16.4		Net interest income after mortgage loan loss provision	18,416		28.4		30,415		22.0
Net gains (losses) on trading securities	Net gains (losses) on trading securities	(32,741)			(122.4)		Net gains (losses) on trading securities	(9,928)		(74.0)		(42,669)		(106.3)
Net gains (losses) on derivatives	Net gains (losses) on derivatives	28,982			164.8		Net gains (losses) on derivatives	12,829		85,526.7		41,811		238.0
Other non-interest income	Other non-interest income	142			4.3		Other non-interest income	(407)		(12.4)		(265)		(4.0)
Total other income (loss)	Total other income (loss)	(3,617)			(61.4)		Total other income (loss)	2,494		24.6		(1,123)		(7.0)
Operating expenses	Operating expenses	990			6.8		Operating expenses	1,385		9.7		2,375		8.2
Other non-interest expenses	Other non-interest expenses	183			4.4		Other non-interest expenses	195		5.0		378		4.7
Total other expenses	Total other expenses	1,173			6.3		Total other expenses	1,580		8.7		2,753		7.5
AHP assessments	AHP assessments	720			14.8		AHP assessments	1,933		52.8		2,653		31.1
NET INCOME	NET INCOME	$	6,489		14.8	%	NET INCOME	$	17,397	52.8	%	$	23,886	31.1	%

Net income increased ~~$6.5~~$17.4 million, or ~~14.8~~52.8 percent, to $50.4 million for the three months ended ~~March 31,~~June 30, 2022 compared to ~~$43.9~~$33.0 million for the three months ended ~~March 31,~~June 30, 2021. For the six months ended June 30, 2022, net income increased $23.9 million, or 31.1 percent, to $100.8 million compared to $76.9 million for the same period in the prior year. The ~~$6.5~~$17.4 million increase in net income for the quarter ended June 30, 2022 was primarily the result of an increase in net interest income. The $23.9 million increase in net income for the current six-month period was primarily a result of an increase in net interest income, partially offset by ~~unrealized net losses on trading securities and economic derivatives (i.e., derivatives not qualifying for hedge accounting) and~~ an increase in other expenses. For detailed discussion relating to these fluctuations, see “Net ~~Gains (Losses) on Derivatives,” “Net Gains (Losses) On Trading Securities”~~Interest Income and Net Interest Margin” and “Other Expenses” under this Item 2.

Net Interest Income and Net Interest Margin: Net interest income increased ~~$11.7~~$16.0 million for the quarter, from ~~$73.4~~$67.2 million for the three months ended ~~March 31,~~June 30, 2021 to ~~$85.1~~$83.2 million for the three months ended ~~March 31,~~June 30, 2022. Net interest income increased $27.7 million for the current year-to-date period, from $140.6 million for the six months ended June 30, 2021 to $168.3 million for the six months ended June 30, 2022. The increase for both the quarter and year-to-date periods was due largely to an increase in the average yield and balance of advances, partially offset by an increase in the cost of debt. Market interest rates and trends affect net interest income and net interest margin on earning assets, including advances, mortgage loans, and investments. The increase in net interest income and net interest margin for the quarter was largely the result of a decrease in the cost of debt between periods, combined with an increase in interest income. The decrease in the cost of debt was due to the increase in net interest settlement income on the interest rate swaps hedging consolidated obligation bonds and discount notes, and lower concession amortization in the current period, partially offset by the upward repricing of variable rate debt.

The increase in interest income was primarily a result of ~~a $4.6 billion~~an increase in the average balance and yield of advances for both the quarter and year-to-date periods, combined with the decrease in premium amortization on mortgage-related assets (see ~~Table 6)~~Tables 8 and 10), and was partially offset by ~~a decline~~an increase in the cost of debt due to the upward repricing of variable rate debt and the issuance of debt at higher market interest ~~income on investment securities resulting from a decline in average balances.~~rates. Mortgage loans and MBS are typically the highest net spread assets on our balance sheet, so the decline in premium amortization positively impacted net interest margin despite the decline in the average balance of mortgage-related assets. The increase in mortgage interest rates that has occurred between periods has resulted in slower mortgage prepayments which, along with purchases at rates higher than the existing portfolio, has widened the spread on mortgage-related assets. We expect prepayments to remain at these lower levels, but the level of prepayments is highly dependent on the level of interest rates. For further discussion of ~~investments,~~ advances, ~~and~~ mortgage loans, and consolidated obligations see this Item 2 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Financial Condition.”

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Net interest income and net interest margin are also impacted by derivative and hedging activities, as net interest settlements on derivatives and the changes in fair values of hedged assets and liabilities and the corresponding derivative instruments designated in fair value hedging relationships are recorded in net interest income. For the current quarter and year-to-date periods, net interest income was decreased by net interest settlements paid on fair value hedges but to a smaller extent compared to the same ~~period~~periods in 2021 because of changes in interest rates between periods. Tables 4 ~~and 5~~through 7 present the impact of derivatives and hedging activities recorded in net interest income (in thousands):

Table 4


	Three Months Ended 06/30/2022
	Advances		Investments		Mortgage Loans		Consolidated Obligation Discount Notes		Consolidated Obligation Bonds		Total
Unrealized gains (losses) due to fair value changes	$	77	$	3,120	$	—	$	1,224	$	(377)	$	4,044
Net amortization/accretion of hedging activities	(559)		—		138		—		—		(421)
Net interest received (paid)	(7,947)		(15,149)		—		6,251		11,777		(5,068)
Price alignment amount	(378)		(330)		—		10		5		(693)
TOTAL	$	(8,807)	$	(12,359)	$	138	$	7,485	$	11,405	$	(2,138)

Table 5


	Three Months Ended 06/30/2021
	Advances		Investments		Mortgage Loans		Consolidated Obligation Discount Notes		Consolidated Obligation Bonds		Total
Unrealized gains (losses) due to fair value changes	$	(755)	$	(971)	$	—	$	(32)	$	(173)	$	(1,931)
Net amortization/accretion of hedging activities	(708)		—		(817)		—		—		(1,525)
Net interest received (paid)	(16,534)		(25,907)		—		3		8,524		(33,914)
Price alignment amount	3		6		—		—		—		9
TOTAL	$	(17,994)	$	(26,872)	$	(817)	$	(29)	$	8,351	$	(37,361)

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Table 46


		Three Months Ended 03/31/2022												Six Months Ended 06/30/2022
		Advances		Investments		Mortgage Loans		Consolidated Obligation Discount Notes		Consolidated Obligation Bonds		Total				Advances		Investments		Mortgage Loans		Consolidated Obligation Discount Notes		Consolidated Obligation Bonds		Total
Unrealized gains (losses) due to fair value changes	Unrealized gains (losses) due to fair value changes	$	2,129	$	2,467	$	—	$	232	$	2,067	$	6,895		Unrealized gains (losses) due to fair value changes	$	2,206	$	5,587	$	—	$	1,456	$	1,690	$	10,939
Net amortization/accretion of hedging activities	Net amortization/accretion of hedging activities	(560)		—		172		—		—		(388)			Net amortization/accretion of hedging activities	(1,119)		—		310		—		—		(809)
Net interest received (paid)	Net interest received (paid)	(15,288)		(22,341)		—		392		15,933		(21,304)			Net interest received (paid)	(23,235)		(37,490)		—		6,643		27,710		(26,372)
Price alignment amount	Price alignment amount	(17)		(7)		—		—		—		(24)			Price alignment amount	(395)		(337)		—		10		5		(717)
TOTAL	TOTAL	$	(13,736)	$	(19,881)	$	172	$	624	$	18,000	$	(14,821)		TOTAL	$	(22,543)	$	(32,240)	$	310	$	8,109	$	29,405	$	(16,959)

Table 57


		Three Months Ended 03/31/2021												Six Months Ended 06/30/2021
		Advances		Investments		Mortgage Loans		Consolidated Obligation Discount Notes		Consolidated Obligation Bonds		Total				Advances		Investments		Mortgage Loans		Consolidated Obligation Discount Notes		Consolidated Obligation Bonds		Total
Unrealized gains (losses) due to fair value changes	Unrealized gains (losses) due to fair value changes	$	2,293	$	3,854	$	—	$	1	$	13	$	6,161		Unrealized gains (losses) due to fair value changes	$	1,538	$	2,883	$	—	$	(31)	$	(160)	$	4,230
Net amortization/accretion of hedging activities	Net amortization/accretion of hedging activities	(634)		—		(86)		—		—		(720)			Net amortization/accretion of hedging activities	(1,342)		—		(903)		—		—		(2,245)
Net interest received (paid)	Net interest received (paid)	(16,313)		(27,241)		—		8		7,317		(36,229)			Net interest received (paid)	(32,847)		(53,148)		—		11		15,841		(70,143)
Price alignment amount	Price alignment amount	14		22		—		—		(3)		33			Price alignment amount	17		28		—		—		(3)		42
TOTAL	TOTAL	$	(14,640)	$	(23,365)	$	(86)	$	9	$	7,327	$	(30,755)		TOTAL	$	(32,634)	$	(50,237)	$	(903)	$	(20)	$	15,678	$	(68,116)

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Average Balances and Yields: Table 68 presents average balances and annualized yields of major earning asset categories and the sources funding those earning assets (dollar amounts in thousands):

Table 68


		Three Months Ended													Three Months Ended
		03/31/2022						03/31/2021							06/30/2022						06/30/2021
		Average Balance		Interest Income/ Expense		Yield		Average Balance		Interest Income/ Expense		Yield			Average Balance		Interest Income/ Expense		Yield		Average Balance		Interest Income/ Expense		Yield
Interest-earning assets:	Interest-earning assets:													Interest-earning assets:
Interest-bearing deposits	Interest-bearing deposits	$	1,118,709	$	376	0.14	%	$	1,082,671	$	269	0.10	%	Interest-bearing deposits	$	1,289,312	$	2,367	0.74	%	$	901,716	$	215	0.10	%
Securities purchased under agreements to resell	Securities purchased under agreements to resell	1,648,378		536		0.13		2,294,456		489		0.09		Securities purchased under agreements to resell	2,531,978		5,251		0.83		2,358,308		401		0.07
Federal funds sold	Federal funds sold	2,471,089		794		0.13		2,742,911		520		0.08		Federal funds sold	3,069,626		6,360		0.83		2,688,560		460		0.07
Investment securities1,2	Investment securities1,2	10,802,293		29,720		1.12		12,132,519		31,800		1.06		Investment securities1,2	11,391,789		43,758		1.54		12,066,850		25,741		0.86
Advances1,2	Advances1,2	28,022,749		37,881		0.55		23,459,275		35,443		0.61		Advances1,2	30,410,190		77,874		1.03		22,402,746		30,309		0.54
Mortgage loans3,4	Mortgage loans3,4	8,078,576		54,554		2.74		8,904,264		53,478		2.44		Mortgage loans3,4	8,035,822		56,383		2.81		8,469,116		51,443		2.44
Other interest-earning assets	Other interest-earning assets	39,375		197		2.03		39,985		257		2.60		Other interest-earning assets	73,781		295		1.60		40,365		242		2.41
Total earning assets	Total earning assets	52,181,169		124,058		0.96		50,656,081		122,256		0.98		Total earning assets	56,802,498		192,288		1.36		48,927,661		108,811		0.89
Other non-interest-earning assets	Other non-interest-earning assets	221,892						403,464						Other non-interest-earning assets	211,092						296,479
Total assets	Total assets	$	52,403,061					$	51,059,545					Total assets	$	57,013,590					$	49,224,140

Interest-bearing liabilities:	Interest-bearing liabilities:													Interest-bearing liabilities:
Deposits	Deposits	$	973,169	$	126	0.05	%	$	1,112,236	$	108	0.04	%	Deposits	$	795,061	$	997	0.50	%	$	1,057,511	$	103	0.04	%
Consolidated obligations1:	Consolidated obligations1:													Consolidated obligations1:
Discount Notes	Discount Notes	8,008,243		2,036		0.10		10,680,579		1,998		0.08		Discount Notes	16,321,410		27,998		0.69		12,150,372		1,069		0.04
Bonds	Bonds	39,920,996		36,556		0.37		35,824,080		46,515		0.53		Bonds	36,083,770		79,776		0.89		32,691,953		40,151		0.49
Other borrowings	Other borrowings	51,114		265		2.10		43,804		266		2.46		Other borrowings	48,889		291		2.39		55,703		258		1.86
Total interest-bearing liabilities	Total interest-bearing liabilities	48,953,522		38,983		0.32		47,660,699		48,887		0.42		Total interest-bearing liabilities	53,249,130		109,062		0.82		45,955,539		41,581		0.36
Capital and other non-interest-bearing funds	Capital and other non-interest-bearing funds	3,449,539						3,398,846						Capital and other non-interest-bearing funds	3,764,460						3,268,601
Total funding	Total funding	$	52,403,061					$	51,059,545					Total funding	$	57,013,590					$	49,224,140

Net interest income and net interest spread5	Net interest income and net interest spread5			$	85,075	0.64	%			$	73,369	0.56	%	Net interest income and net interest spread5			$	83,226	0.54	%			$	67,230	0.53	%

Net interest margin6	Net interest margin6					0.66	%					0.59	%	Net interest margin6					0.59	%					0.55	%

1 Interest income/expense and average rates include the effect of associated derivatives that qualify for fair value hedge accounting treatment.

2 Interest income includes prepayment/yield maintenance fees.

3 Credit enhancement fee payments are netted against interest earnings on the mortgage loans. The expense related to credit enhancement fee payments to PFIs was $1.6 million ~~and $1.7 million~~ for the three months ended ~~March 31,~~June 30, 2022 and ~~2021, respectively.~~2021.

4 Mortgage loans average balance includes outstanding principal for non-performing conventional loans. However, these loans no longer accrue interest.

5 Net interest spread is the difference between the yield on interest-earning assets and the cost of interest-bearing liabilities.

6 Net interest margin is defined as net interest income as a percentage of average interest-earning assets.

5056

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Changes in the volume of interest-earning assets and the level of interest rates influence changes in net interest income, net interest spread and net interest margin. Table 79 summarizes changes in interest income and interest expense (in thousands):

Table 79


		Three Months Ended							Three Months Ended
		03/31/2022 vs. 03/31/2021							06/30/2022 vs. 06/30/2021
		Increase (Decrease) Due to							Increase (Decrease) Due to
		Volume1,2		Rate1,2		Total			Volume1,2		Rate1,2		Total
Interest Income3:	Interest Income3:							Interest Income3:
Interest-bearing deposits	Interest-bearing deposits	$	9	$	98	$	107	Interest-bearing deposits	$	129	$	2,023	$	2,152
Securities purchased under agreements to resell	Securities purchased under agreements to resell	(163)		210		47		Securities purchased under agreements to resell	32		4,818		4,850
Federal funds sold	Federal funds sold	(56)		330		274		Federal funds sold	74		5,826		5,900
Investment securities	Investment securities	(3,606)		1,526		(2,080)		Investment securities	(1,515)		19,532		18,017
Advances	Advances	6,423		(3,985)		2,438		Advances	13,598		33,967		47,565
Mortgage loans	Mortgage loans	(5,222)		6,298		1,076		Mortgage loans	(2,733)		7,673		4,940
Other assets	Other assets	(4)		(56)		(60)		Other assets	153		(100)		53
Total interest-earning assets	Total interest-earning assets	(2,619)		4,421		1,802		Total interest-earning assets	9,738		73,739		83,477
Interest Expense3:	Interest Expense3:							Interest Expense3:
Deposits	Deposits	(14)		32		18		Deposits	(32)		926		894
Consolidated obligations:	Consolidated obligations:							Consolidated obligations:
Discount notes	Discount notes	(574)		612		38		Discount notes	490		26,439		26,929
Bonds	Bonds	4,881		(14,840)		(9,959)		Bonds	4,549		35,076		39,625
Other borrowings	Other borrowings	41��		(42)		(1)		Other borrowings	(35)		68		33
Total interest-bearing liabilities	Total interest-bearing liabilities	4,334		(14,238)		(9,904)		Total interest-bearing liabilities	4,972		62,509		67,481
Change in net interest income	Change in net interest income	$	(6,953)	$	18,659	$	11,706	Change in net interest income	$	4,766	$	11,230	$	15,996

1 Changes in interest income and interest expense not identifiable as either volume-related or rate-related have been allocated to volume and rate based upon the proportion of the absolute value of the volume and rate changes.

2 Amounts used to calculate volume and rate changes are based on numbers in dollars. Accordingly, recalculations using the amounts in thousands as disclosed in this report may not produce the same results.

3 Interest income/expense and average rates include the effect of associated derivatives that qualify for fair value hedge accounting treatment.

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Table 10 presents average balances and yields of major earning asset categories and the sources funding those earning assets (dollar amounts in thousands):

Table 10



	Six Months Ended
	06/30/2022						06/30/2021
	Average Balance		Interest Income/Expense		Yield		Average Balance		Interest Income/Expense		Yield
Interest-earning assets:
Interest-bearing deposits	$	1,204,481	$	2,743	0.46	%	$	991,694	$	484	0.10	%
Securities purchased under agreements to resell	2,092,619		5,787		0.56		2,326,558		890		0.08
Federal funds sold	2,772,011		7,154		0.52		2,715,586		980		0.07
Investment securities1,2	11,098,669		73,478		1.34		12,099,503		57,541		0.96
Advances1,2	29,223,064		115,755		0.80		22,928,092		65,752		0.58
Mortgage loans3,4	8,057,081		110,937		2.78		8,685,488		104,921		2.44
Other interest-earning assets	56,674		492		1.75		40,176		499		2.50
Total earning assets	54,504,599		316,346		1.17		49,787,097		231,067		0.94
Other non-interest-earning assets	216,463						349,675
Total assets	$	54,721,062					$	50,136,772

Interest-bearing liabilities:
Deposits	$	883,623	1,123		0.26		$	1,084,722	211		0.04
Consolidated obligations1:
Discount Notes	12,187,791		30,034		0.50		11,419,536		3,067		0.05
Bonds	37,991,783		116,332		0.62		34,249,365		86,666		0.51
Other borrowings	49,996		556		2.24		49,786		524		2.12
Total interest-bearing liabilities	51,113,193		148,045		0.58		46,803,409		90,468		0.39
Capital and other non-interest-bearing funds	3,607,869						3,333,363
Total funding	$	54,721,062					$	50,136,772

Net interest income and net interest spread5			$	168,301	0.59	%			$	140,599	0.55	%

Net interest margin6					0.62	%					0.57	%

1 Interest income/expense and average rates include the effect of associated derivatives that qualify for fair value hedge accounting treatment.

2 Interest income includes prepayment/yield maintenance fees.

3 Credit enhancement fee payments are netted against interest earnings on the mortgage loans. The expense related to credit enhancement fee payments to PFIs was $3.2 million and $3.3 million for the six months ended June 30, 2022 and 2021, respectively.

4 Mortgage loans average balance includes outstanding principal for non-performing conventional loans. However, these loans no longer accrue interest.

5 Net interest spread is the difference between the yield on interest-earning assets and the cost of interest-bearing liabilities.

6 Net interest margin is defined as net interest income as a percentage of average interest-earning assets.

Table of Contents

Changes in the volume of interest-earning assets and the level of interest rates influence changes in net interest income, net interest spread and net interest margin. Table 11 summarizes changes in interest income and interest expense (in thousands):

Table 11



	Six Months Ended
	06/30/2022 vs. 06/30/2021
	Increase (Decrease) Due to
	Volume1,2		Rate1,2		Total
Interest Income3:
Interest-bearing deposits	$	125	$	2,134	$	2,259
Securities purchased under agreements to resell	(98)		4,995		4,897
Federal funds sold	21		6,153		6,174
Investment securities	(5,084)		21,021		15,937
Advances	20,933		29,070		50,003
Mortgage loans	(7,953)		13,969		6,016
Other assets	169		(176)		(7)
Total earning assets	8,113		77,166		85,279
Interest Expense3:
Deposits	(46)		958		912
Consolidated obligations:
Discount notes	220		26,747		26,967
Bonds	10,151		19,515		29,666
Other borrowings	2		30		32
Total interest-bearing liabilities	10,327		47,250		57,577
Change in net interest income	$	(2,214)	$	29,916	$	27,702

3 Interest income/expense and average rates include the effect of associated derivatives that qualify for fair value hedge accounting treatment.

Net Gains (Losses) on Derivatives: Tables ~~8 and 9~~12 through 15 present the earnings impact of derivatives by financial instrument as recorded in other non-interest income (in thousands):

~~Table 8~~

Three Months Ended 03/31/2022
Advances Investments Mortgage Loans Consolidated Obligation Discount Notes Total
Derivatives not designated as hedging instruments:
Economic hedges – unrealized gains (losses) due to fair value changes $ 2,119 $ 59,749 $ — $ — $ 61,868
Mortgage delivery commitments — — (4,935) — (4,935)
Economic hedges – net interest received (paid) (183) (10,193) — 2 (10,374)
Price alignment amount — 4 — — 4
Net gains (losses) on derivatives 1,936 49,560 (4,935) 2 46,563
Net gains (losses) on trading securities hedged on an economic basis with derivatives — (59,583) — — (59,583)
TOTAL $ 1,936 $ (10,023) $ (4,935) $ 2 $ (13,020)

Table of Contents

Table 912


		Three Months Ended 03/31/2021						Three Months Ended 06/30/2022
		Advances		Investments		Mortgage Loans			Total			Advances		Investments		Mortgage Loans		Consolidated Obligation Discount Notes		Consolidated Obligation Bonds		Total
Derivatives not designated as hedging instruments:	Derivatives not designated as hedging instruments:										Derivatives not designated as hedging instruments:
Economic hedges – unrealized gains (losses) due to fair value changes	Economic hedges – unrealized gains (losses) due to fair value changes	$	2,302	$	32,301	$	—		$	34,603	Economic hedges – unrealized gains (losses) due to fair value changes	$	1,241	$	21,831	$	—	$	(3,081)	$	213	$	20,204
Mortgage delivery commitments	Mortgage delivery commitments	—		—		(4,189)			(4,189)		Mortgage delivery commitments	—		—		(1,919)		—		—		(1,919)

Economic hedges – net interest received (paid)	Economic hedges – net interest received (paid)	(202)		(12,639)		—			(12,841)		Economic hedges – net interest received (paid)	(122)		(6,544)		—		1,175		21		(5,470)
Price alignment amount	Price alignment amount	—		8		—			8		Price alignment amount	(1)		(2)		—		2		—		(1)
Net gains (losses) on derivatives	Net gains (losses) on derivatives	2,100		19,670		(4,189)			17,581		Net gains (losses) on derivatives	1,118		15,285		(1,919)		(1,904)		234		12,814
Net gains (losses) on trading securities hedged on an economic basis with derivatives	Net gains (losses) on trading securities hedged on an economic basis with derivatives	—		(26,794)		—			(26,794)		Net gains (losses) on trading securities hedged on an economic basis with derivatives	—		(22,814)		—		—		—		(22,814)
TOTAL	TOTAL	$	2,100	$	(7,124)	$	(4,189)		$	(9,213)	TOTAL	$	1,118	$	(7,529)	$	(1,919)	$	(1,904)	$	234	$	(10,000)

Table 13


	Three Months Ended 06/30/2021
	Advances		Investments		Mortgage Loans		Total
Derivatives not designated as hedging instruments:
Economic hedges – unrealized gains (losses) due to fair value changes	$	(645)	$	11,524	$	—	$	10,879
Mortgage delivery commitments	—		—		2,157		2,157

Economic hedges – net interest received (paid)	(203)		(12,851)		—		(13,054)
Price alignment amount	—		3		—		3
Net gains (losses) on derivatives	(848)		(1,324)		2,157		(15)
Net gains (losses) on trading securities hedged on an economic basis with derivatives	—		(13,459)		—		(13,459)
TOTAL	$	(848)	$	(14,783)	$	2,157	$	(13,474)

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Table 14



	Six Months Ended 06/30/2022
	Advances		Investments		Mortgage Loans		Consolidated Obligation Discount Notes		Consolidated Obligation Bonds		Total
Derivatives not designated as hedging instruments:
Economic hedges – unrealized gains (losses) due to fair value changes	$	3,360	$	81,580	$	—	$	(3,081)	$	213	$	82,072
Mortgage delivery commitments	—		—		(6,854)		—		—		(6,854)

Economic hedges – net interest received (paid)	(305)		(16,737)		—		1,177		21		(15,844)
Price alignment amount	(1)		2		—		2		—		3
Net gains (losses) on derivatives	3,054		64,845		(6,854)		(1,902)		234		59,377
Net gains (losses) on trading securities hedged on an economic basis with derivatives	—		(82,397)		—		—		—		(82,397)
TOTAL	$	3,054	$	(17,552)	$	(6,854)	$	(1,902)	$	234	$	(23,020)

Table 15



	Six Months Ended 06/30/2021
	Advances		Investments		Mortgage Loans		Total
Derivatives not designated as hedging instruments:
Economic hedges – unrealized gains (losses) due to fair value changes	$	1,657	$	43,825	$	—	$	45,482
Mortgage delivery commitments	—		—		(2,032)		(2,032)

Economic hedges – net interest received (paid)	(405)		(25,490)		—		(25,895)
Price alignment amount	—		11		—		11
Net gains (losses) on derivatives	1,252		18,346		(2,032)		17,566
Net gains (losses) on trading securities hedged on an economic basis with derivatives	—		(40,253)		—		(40,253)
TOTAL	$	1,252	$	(21,907)	$	(2,032)	$	(22,687)

Table of Contents

For the three months ended ~~March 31,~~June 30, 2022, net gains and losses on derivatives resulted in an increase in net income of ~~$46.6~~$12.8 million compared to ~~an increase~~a decrease of ~~$17.6 million~~$15 thousand for the prior year period. For the six months ended June 30, 2022 and 2021, net gains and losses on derivatives resulted in increases in net income of $59.4 million and $17.6 million, respectively. The improvement for both the ~~current three month period is due primarily~~three- and six-month periods was attributed to positive fair value fluctuations resulting from an increase in the level of swap ~~rates and in the spreads between investments and their associated swaps.~~rates. Furthermore, the increase in swap index rates between ~~the three month periods ended March 31,~~June 30, 2021 and ~~March 31,~~June 30, 2022 positively impacted the net interest settlements on economic hedges, although they are still in a pay position. These settlements decreased net income by ~~$10.4~~$5.5 million and ~~$12.8~~$13.1 million for the three months ended ~~March 31,~~June 30, 2022 and 2021, respectively, and decreased net income by $15.8 million and $25.9 million for the six months ended June 30, 2022 and 2021, respectively.

~~Table 10 presents~~Tables 16 and 17 present the relationship between the hedged trading securities and the associated interest rate swaps that do not qualify for hedge accounting treatment by investment type (in thousands):

Table 1016


		Three Months Ended													Three Months Ended
		03/31/2022						03/31/2021							06/30/2022						06/30/2021
		Gains (Losses) on Derivatives		Gains (Losses) on Trading Securities		Net		Gains (Losses) on Derivatives		Gains (Losses) on Trading Securities		Net			Gains (Losses) on Derivatives		Gains (Losses) on Trading Securities		Net		Gains (Losses) on Derivatives		Gains (Losses) on Trading Securities		Net
U.S. Treasury obligations	U.S. Treasury obligations	$	11,581	$	(12,434)	$	(853)	$	7,052	$	(7,624)	$	(572)	U.S. Treasury obligations	$	6,150	$	(5,931)	$	219	$	6,580	$	(7,750)	$	(1,170)
GSE debentures	GSE debentures	14,067		(14,003)		64		5,767		(4,997)		770		GSE debentures	4,308		(5,428)		(1,120)		1,657		(2,363)		(706)
GSE MBS	GSE MBS	33,161		(33,146)		15		19,322		(14,173)		5,149		GSE MBS	11,228		(11,455)		(227)		3,519		(3,346)		173
TOTAL	TOTAL	$	58,809	$	(59,583)	$	(774)	$	32,141	$	(26,794)	$	5,347	TOTAL	$	21,686	$	(22,814)	$	(1,128)	$	11,756	$	(13,459)	$	(1,703)

Table 17



	Six Months Ended
	06/30/2022						06/30/2021
	Gains (Losses) on Derivatives		Gains (Losses) on Trading Securities		Net		Gains (Losses) on Derivatives		Gains (Losses) on Trading Securities		Net
U.S. Treasury obligations	$	17,731	$	(18,365)	$	(634)	$	13,632	$	(15,374)	$	(1,742)
GSE debentures	18,375		(19,431)		(1,056)		7,424		(7,360)		64
GSE MBS	44,389		(44,601)		(212)		22,841		(17,519)		5,322
TOTAL	$	80,495	$	(82,397)	$	(1,902)	$	43,897	$	(40,253)	$	3,644

For additional detail regarding gains and losses on trading securities, see Table 1118 and related discussion under this Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Results of Operations.”

See Tables 3644 and 3745 under Item 3 – “Quantitative and Qualitative Disclosures About Market Risk” for additional detail regarding notional and fair value amounts of derivative instruments.

5262

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Net Gains (Losses) on Trading Securities: Our trading portfolio is comprised primarily of fixed rate U.S. Treasury obligations, GSE debentures, and multifamily GSE MBS, with a small percentage of variable rate GSE MBS. Periodically, we also invest in short-term securities classified as trading. In general, the fixed rate securities are related to economic hedges in the form of interest rate swaps that convert fixed rates to variable rates on the fixed rate securities and the related economic hedges. The fair values of the fixed rate GSE debentures are affected by changes in intermediate term interest rates and credit spreads and are swapped on an economic basis to three-month LIBOR. The fair values of the fixed rate multifamily GSE MBS are affected by changes in mortgage rates and credit spreads, and most of these securities ~~are~~were swapped on an economic basis to one-month LIBOR. The fair values of the U.S. Treasury obligations are affected by changes in intermediate term Treasury rates and swapped on an economic basis to the Overnight Index Swap rate (OIS) or the Secured Overnight Financing Rate (SOFR). We are no longer entering into interest rate swaps that reference LIBOR to hedge fixed rate assets or ~~liabilities, but we may use a LIBOR-indexed interest rate swap to reduce basis risk between LIBOR and SOFR.~~liabilities. For information on LIBOR transition efforts and LIBOR exposure, see “Risk Management – Interest Rate Risk Management” under this Item 2.

All unrealized gains and losses related to trading securities are recorded in other income (loss) as net gains (losses) on trading securities; however, only gains and losses relating to trading securities that are related to economic hedges are included in ~~Table 10.~~Tables 16 and 17. Unrealized gains (losses) fluctuate as the fair value of our trading portfolio fluctuates. There are a number of factors that can impact the fair value of a trading security including the movement in interest rates, changes in credit spreads, the passage of time, and changes in price volatility. Table 1118 presents the major components of the net gains (losses) on trading securities (in thousands):

Table 1118


		Three Months Ended					Three Months Ended				Six Months Ended
			03/31/2022		03/31/2021				06/30/2022		06/30/2021		06/30/2022		06/30/2021
Trading securities not hedged:	Trading securities not hedged:							Trading securities not hedged:

U.S. obligation MBS and GSE MBS	U.S. obligation MBS and GSE MBS		$	(93)	$	16		U.S. obligation MBS and GSE MBS	$	(101)	$	70	$	(194)	$	86
Short-term securities	Short-term securities		188		31			Short-term securities	(424)		(22)		(236)		9
Total trading securities not hedged	Total trading securities not hedged		95		47			Total trading securities not hedged	(525)		48		(430)		95
Trading securities hedged on an economic basis with derivatives:	Trading securities hedged on an economic basis with derivatives:							Trading securities hedged on an economic basis with derivatives:
U.S. Treasury obligations	U.S. Treasury obligations		(12,434)		(7,624)			U.S. Treasury obligations	(5,931)		(7,750)		(18,365)		(15,374)
GSE debentures	GSE debentures		(14,003)		(4,997)			GSE debentures	(5,428)		(2,363)		(19,431)		(7,360)
GSE MBS	GSE MBS		(33,146)		(14,173)			GSE MBS	(11,455)		(3,346)		(44,601)		(17,519)
Total trading securities hedged on an economic basis with derivatives	Total trading securities hedged on an economic basis with derivatives		(59,583)		(26,794)			Total trading securities hedged on an economic basis with derivatives	(22,814)		(13,459)		(82,397)		(40,253)
TOTAL	TOTAL		$	(59,488)	$	(26,747)		TOTAL	$	(23,339)	$	(13,411)	$	(82,827)	$	(40,158)

The unrealized losses on the securities in the trading portfolio for the current period reflect the increase in intermediate term Treasury and mortgage rates relative to the prevailing yields at the end of the prior period. In addition to interest rates and credit spreads, the value of these securities is affected by time decay. The fixed rate GSE debentures possess coupons that are well above current market rates for similar securities and, therefore, are currently valued at substantial premiums. As these securities approach maturity, their prices will convergeprice convergence to par ~~resulting~~which results in a decrease in their current premium price (i.e., time decay).

Other Expenses: Other expenses, which include compensation and benefits and other operating expenses, ~~were $19.9~~increased $1.6 million and ~~$18.7~~$2.8 million for the three and six months ended ~~March 31,~~June 30, 2022, ~~and 2021, respectively. The $1.2 million increase between~~respectively, compared to the prior year periods ~~was~~primarily due to ~~an increase~~increases in operating expenses, ~~primarily~~specifically compensation, employee benefits, ~~and~~ professional fees, travel, and ~~FHLBank System-related expenses. We also experienced a slight increase in costs~~FHFA expense assessments. Some of the increased expense in the first ~~quarter~~half of 2022 related to the resumption of in-person business activities, compared to remote operations in the first ~~quarter~~half of 2021. We expect modest increases in compensation and benefits expense for 2022 in anticipation of hiring for new and open positions. We also expect an increase in operating expense for 2022 due to planned multi-year software implementations.

~~Table of Contents~~

Non-GAAP Measures: We believe that certain non-GAAP financial measures are helpful in understanding our operating results and provide meaningful period-to-period comparison of our long-term economic value in contrast to GAAP results, which are impacted by temporary fair value changes and other factors driven by market volatility, gains/losses on instrument sales, or transactions that are considered unpredictable or non-routine that reduce comparability between periods. We report the following non-GAAP financial measures that we believe are useful to stakeholders as key measures of our operating performance: (1) adjusted income; (2) adjusted net interest income; (3) adjusted net interest margin; (4) adjusted ROE; and (5) adjusted ROE spread. Reconciliations of these non-GAAP financial measures to the most comparable GAAP measure are included below.

Table of Contents

Although we calculate our non-GAAP financial measures consistently from period to period using appropriate GAAP components, non-GAAP financial measures are not required to be uniformly applied and are not audited. Another material limitation associated with the use of non-GAAP financial measures is that they have no standardized measurement prescribed by GAAP and may not be comparable to similar non-GAAP financial measures used by other companies. While we believe the non-GAAP measures contained in this report are frequently used by our stakeholders in the evaluation of our performance, such non-GAAP measures have limitations as analytical tools and should not be considered in isolation or as a substitute for analyses of financial information prepared in accordance with GAAP.

As part of evaluating our financial performance, we adjust net income reported in accordance with GAAP for the impact of: (1) AHP assessments (equivalent to an effective minimum income tax rate of 10 percent); (2) fair value changes on trading securities and derivatives and hedging activities (net interest settlements and price alignment amount (interest paid or received on variation margin), which represent actual cash inflows or outflows and do not create fair value volatility, are not excluded); (3) non-routine items, such as prepayment and yield maintenance fees and gains/losses on sales of securities; and (4) unpredictable items, such as gains/losses on retirement of debt and gains/losses on mortgage loans held for sale. The results are referred to as “adjusted income” and “adjusted net interest ~~income”,~~income,” which are non-GAAP measures of income. Adjusted income is used to compute an adjusted ROE.

Table 1219 presents a reconciliation of GAAP net income to adjusted income (in thousands):

Table 1219


		Three Months Ended					Three Months Ended				Six Months Ended
			03/31/2022		03/31/2021				06/30/2022		06/30/2021		06/30/2022		06/30/2021
Net income, as reported under GAAP	Net income, as reported under GAAP		$	50,395	$	43,906		Net income, as reported under GAAP	$	50,361	$	32,964	$	100,756	$	76,870
AHP assessments	AHP assessments		5,600		4,880			AHP assessments	5,596		3,663		11,196		8,543
Income before AHP assessments	Income before AHP assessments		55,995		48,786			Income before AHP assessments	55,957		36,627		111,952		85,413
Derivative (gains) losses1	Derivative (gains) losses1		(63,828)		(36,575)			Derivative (gains) losses1	(22,329)		(11,105)		(86,157)		(47,680)
Trading (gains) losses	Trading (gains) losses		59,488		26,747			Trading (gains) losses	23,339		13,411		82,827		40,158
Prepayment/yield maintenance fees2	Prepayment/yield maintenance fees2		(3,724)		(1,132)			Prepayment/yield maintenance fees2	(2,425)		(1,864)		(6,149)		(2,996)

Total excluded items	Total excluded items		(8,064)		(10,960)			Total excluded items	(1,415)		442		(9,479)		(10,518)
Adjusted income (a non-GAAP measure)	Adjusted income (a non-GAAP measure)		$	47,931	$	37,826		Adjusted income (a non-GAAP measure)	$	54,542	$	37,069	$	102,473	$	74,895

1 Consists of fair value changes on all derivatives and hedging activities excluding net interest settlements on economic hedges and price alignment amount.

2 Includes prepayment fees on advances and yield maintenance fees on debt securities.

Table ~~of Contents~~

~~Table 13~~20 presents a reconciliation of GAAP net interest income and GAAP net interest margin to adjusted net interest income and adjusted net interest margin (in thousands):

Table 1320


		Three Months Ended						Three Months Ended					Six Months Ended
			03/31/2022			03/31/2021				06/30/2022			06/30/2021			06/30/2022			06/30/2021
Net interest income, as reported under GAAP	Net interest income, as reported under GAAP		$	85,075		$	73,369		Net interest income, as reported under GAAP	$	83,226		$	67,230		$	168,301		$	140,599
(Gains) losses on derivatives qualifying for hedge accounting recorded in net interest income	(Gains) losses on derivatives qualifying for hedge accounting recorded in net interest income		(6,895)			(6,161)			(Gains) losses on derivatives qualifying for hedge accounting recorded in net interest income	(4,044)			1,931			(10,939)			(4,230)
Net interest settlements on derivatives not qualifying for hedge accounting	Net interest settlements on derivatives not qualifying for hedge accounting		(10,374)			(12,841)			Net interest settlements on derivatives not qualifying for hedge accounting	(5,470)			(13,054)			(15,844)			(25,895)
Prepayment/yield maintenance fees1	Prepayment/yield maintenance fees1		(3,724)			(1,132)			Prepayment/yield maintenance fees1	(2,425)			(1,864)			(6,149)			(2,996)
Adjusted net interest income (a non-GAAP measure)	Adjusted net interest income (a non-GAAP measure)		$	64,082		$	53,235		Adjusted net interest income (a non-GAAP measure)	$	71,287		$	54,243		$	135,369		$	107,478

Net interest margin, as calculated under GAAP	Net interest margin, as calculated under GAAP		0.66		%	0.59		%	Net interest margin, as calculated under GAAP	0.59		%	0.55		%	0.62		%	0.57		%
Adjusted net interest margin (a non-GAAP measure)	Adjusted net interest margin (a non-GAAP measure)		0.50		%	0.43		%	Adjusted net interest margin (a non-GAAP measure)	0.50		%	0.44		%	0.50		%	0.44		%

1 Includes prepayment fees on advances and yield maintenance fees on debt securities.

Table 14of Contents

Table 21 presents a comparison of adjusted ROE (a non-GAAP measure) to the average overnight Federal funds rate, which we use as a key measure of effective utilization and management of members’ capital. Adjusted ROE spread is calculated as follows (dollar amounts in thousands):

Table 1421


		2022			2021
							Three Months Ended					Six Months Ended
									06/30/2022			06/30/2021			06/30/2022			06/30/2021
Average GAAP total capital	Average GAAP total capital	$	2,927,294		$	2,718,579		Average GAAP total capital	$	3,060,294		$	2,738,120		$	2,994,161		$	2,728,403
ROE, based upon GAAP net income	ROE, based upon GAAP net income	6.98		%	6.55		%	ROE, based upon GAAP net income	6.60		%	4.83		%	6.79		%	5.68		%
Adjusted ROE, based upon adjusted income (a non-GAAP measure)	Adjusted ROE, based upon adjusted income (a non-GAAP measure)	6.64		%	5.64		%	Adjusted ROE, based upon adjusted income (a non-GAAP measure)	7.15		%	5.43		%	6.90		%	5.54		%
Average overnight Federal funds effective rate	Average overnight Federal funds effective rate	0.12		%	0.08		%	Average overnight Federal funds effective rate	0.76		%	0.07		%	0.44		%	0.07		%
GAAP ROE as a spread to average overnight Federal funds effective rate	GAAP ROE as a spread to average overnight Federal funds effective rate	6.86		%	6.47		%	GAAP ROE as a spread to average overnight Federal funds effective rate	5.84		%	4.76		%	6.35		%	5.61		%
Adjusted ROE as a spread to average overnight Federal funds effective rate (a non-GAAP measure)	Adjusted ROE as a spread to average overnight Federal funds effective rate (a non-GAAP measure)	6.52		%	5.56		%	Adjusted ROE as a spread to average overnight Federal funds effective rate (a non-GAAP measure)	6.39		%	5.36		%	6.46		%	5.47		%

~~Table of Contents~~

Financial Condition

Overall: Table 1522 presents the percentage concentration of the major components of our Statements of Condition:

Table 1522


		Component Concentration					Component Concentration
		03/31/2022		12/31/2021			06/30/2022		12/31/2021
Assets:	Assets:					Assets:
Cash and due from banks	Cash and due from banks	0.1	%	0.1	%	Cash and due from banks	0.1	%	0.1	%
Interest-bearing deposits, securities purchased under agreements to resell and Federal funds sold	Interest-bearing deposits, securities purchased under agreements to resell and Federal funds sold	11.5		11.6		Interest-bearing deposits, securities purchased under agreements to resell and Federal funds sold	14.7		11.6
Investment securities	Investment securities	21.8		21.9		Investment securities	19.0		21.9
Advances	Advances	50.2		48.9		Advances	51.3		48.9
Mortgage loans, net	Mortgage loans, net	15.8		16.9		Mortgage loans, net	14.0		16.9

Overnight loans to other FHLBanks						Overnight loans to other FHLBanks	0.3		—
Other assets	Other assets	0.6		0.6		Other assets	0.6		0.6
Total assets	Total assets	100.0	%	100.0	%	Total assets	100.0	%	100.0	%

Liabilities:	Liabilities:					Liabilities:
Deposits	Deposits	1.8	%	2.0	%	Deposits	1.4	%	2.0	%
Consolidated obligation discount notes, net	Consolidated obligation discount notes, net	15.5		13.7		Consolidated obligation discount notes, net	34.9		13.7
Consolidated obligation bonds, net	Consolidated obligation bonds, net	76.8		78.4		Consolidated obligation bonds, net	57.3		78.4
Overnight loans from other FHLBanks						Overnight loans from other FHLBanks	0.9		—
Other liabilities	Other liabilities	0.4		0.3		Other liabilities	0.3		0.3
Total liabilities	Total liabilities	94.5		94.4		Total liabilities	94.8		94.4

Capital:	Capital:					Capital:
Capital stock outstanding	Capital stock outstanding	3.1		3.1		Capital stock outstanding	3.2		3.1
Retained earnings	Retained earnings	2.3		2.4		Retained earnings	2.1		2.4
Accumulated other comprehensive income (loss)	Accumulated other comprehensive income (loss)	0.1		0.1		Accumulated other comprehensive income (loss)	(0.1)		0.1
Total capital	Total capital	5.5		5.6		Total capital	5.2		5.6
Total liabilities and capital	Total liabilities and capital	100.0	%	100.0	%	Total liabilities and capital	100.0	%	100.0	%

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Table 1623 presents changes in the major components of our Statements of Condition (dollar amounts in thousands):

Table 1623


		Increase (Decrease) in Components					Increase (Decrease) in Components
		03/31/2022 vs. 12/31/2021					06/30/2022 vs. 12/31/2021
		Dollar Change		Percent Change			Dollar Change		Percent Change
Assets:	Assets:					Assets:
Cash and due from banks	Cash and due from banks	$	3,423	13.2	%	Cash and due from banks	$	5,509	21.3	%
Interest-bearing deposits, securities purchased under agreements to resell and Federal funds sold	Interest-bearing deposits, securities purchased under agreements to resell and Federal funds sold	270,896		4.9		Interest-bearing deposits, securities purchased under agreements to resell and Federal funds sold	2,911,022		52.4
Investment securities	Investment securities	538,411		5.1		Investment securities	398,051		3.8
Advances	Advances	2,003,288		8.5		Advances	6,038,552		25.7
Mortgage loans, net	Mortgage loans, net	(113,097)		(1.4)		Mortgage loans, net	(116,116)		(1.4)

Overnight loans to other FHLBanks						Overnight loans to other FHLBanks	200,000		100.0
Other assets	Other assets	18,533		5.8		Other assets	41,044		12.9
Total assets	Total assets	$	2,721,454	5.7	%	Total assets	$	9,478,062	19.7	%

Liabilities:	Liabilities:					Liabilities:
Deposits	Deposits	$	(9,516)	(1.0)	%	Deposits	$	(164,362)	(17.4)	%
Consolidated obligation discount notes, net	Consolidated obligation discount notes, net	1,274,662		19.4		Consolidated obligation discount notes, net	13,507,342		205.6
Consolidated obligation bonds, net	Consolidated obligation bonds, net	1,330,112		3.5		Consolidated obligation bonds, net	(4,702,463)		(12.5)
Overnight loans from other FHLBanks						Overnight loans from other FHLBanks	500,000		100.0
Other liabilities	Other liabilities	62,582		38.8		Other liabilities	57,045		35.4
Total liabilities	Total liabilities	2,657,840		5.9		Total liabilities	9,197,562		20.3

Capital:	Capital:					Capital:
Capital stock outstanding	Capital stock outstanding	74,856		5.0		Capital stock outstanding	321,715		21.5
Retained earnings	Retained earnings	29,923		2.6		Retained earnings	54,453		4.8
Accumulated other comprehensive income (loss)	Accumulated other comprehensive income (loss)	(41,165)		(56.9)		Accumulated other comprehensive income (loss)	(95,668)		(132.3)
Total capital	Total capital	63,614		2.3		Total capital	280,500		10.3
Total liabilities and capital	Total liabilities and capital	$	2,721,454	5.7	%	Total liabilities and capital	$	9,478,062	19.7	%

Total assets increased between periods, from $48.0 billion at December 31, 2021 to ~~$50.7~~$57.5 billion at ~~March 31,~~June 30, 2022, driven by an increase in advances and overnight investments between those periods. Advances increased ~~$2.0~~$6.0 billion from December 31, 2021 to ~~March 31,~~June 30, 2022, from $23.5 billion to ~~$25.5~~$29.5 billion, representing ~~50.2~~51.3 percent of total assets as of ~~March 31,~~June 30, 2022 compared to 48.9 percent as of December 31, 2021. Overnight investments increased $2.9 billion, representing 14.7 percent of total assets as of June 30, 2022, compared to 11.6 percent as of December 31, 2021. Mortgage loans decreased by $0.1 billion from December 31, ~~2020~~2021 to ~~December 31, 2021,~~June 30, 2022, representing ~~15.8~~14.0 percent of total assets as of ~~March 31,~~June 30, 2022, compared to 16.9 percent as of December 31, 2021. Total liabilities increased ~~$2.7~~$9.2 billion from December 31, 2021 to ~~March 31,~~June 30, 2022, which corresponded to the increase in assets. Total capital increased ~~$63.6~~$280.5 million, or ~~2.3~~10.3 percent, from December 31, 2021 to ~~March 31,~~June 30, 2022 due to an increase in capital stock related to the increase in advances and net income in excess of dividends paid, partially offset by ~~decreases in~~ unrealized ~~gains~~losses on available-for-sale ~~securities and excess stock.~~securities.

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Advances: Advances are one of the primary ways we fulfill our mission of providing liquidity to our members and constituted the largest asset on our balance sheet at ~~March 31,~~June 30, 2022 and December 31, 2021. Advance par value increased by ~~9.4~~27.0 percent, from $23.4 billion at December 31, 2021 to ~~$25.6~~$29.8 billion at ~~March 31,~~June 30, 2022 (see Table ~~17)~~24). The majority of the growth was in our overnight line of credit product, followed by ~~short-term~~ fixed rate term advances. The composition of the advance portfolio remains concentrated in advances that either reprice or mature on a relatively short-term basis. InMembers typically prefer shorter-term advances that reprice relative to short-term interest rates, especially in the current ~~flat yield curve~~rising interest rate environment, ~~members are expressing a preference for short-term advances.~~as these advances provide efficient funding relative to member assets and will reprice to lower costs if interest rates decline.

As of ~~March 31,~~June 30, 2022 and December 31, 2021, ~~53.5~~55.9 percent and 54.4 percent, respectively, of our members carried outstanding advance balances. Additional volatility in advance balances may occur in 2022 ~~based on several factors related~~due to the ~~lingering~~ impact of rising interest rates intended to curb inflationary pressures and the ~~COVID-19 pandemic~~related inflationary effects on member balance sheets, including decreased loan demand and the ability to grow or ~~geopolitical events, including large members with relatively strong~~retain deposit ~~growth and~~balances. Members also have access to other wholesale funding sources which ~~could cause advance balances to decline. Advances~~ may ~~also decline if advance rates rise faster than other funding sources or~~impact the ~~asset yields where members are deploying advance funding.~~demand for advances on the basis of relative cost.

Rather than match-funding long-term, fixed rate, large dollar advances, we elect to swap a significant portion of large dollar advances with longer maturities to short-term indices to synthetically create adjustable rate advances. When coupled with the volume of our short-term advances, advances that effectively re-price at least every three months represent ~~91.0~~90.2 percent and 89.6 percent of our total advance portfolio as of ~~March 31,~~June 30, 2022 and December 31, 2021, respectively. We anticipate continuing the practice of swapping large dollar advances with longer maturities to short-term indices. As part of our LIBOR transition plan, we began offering adjustable rate advances indexed to SOFR in late 2020 and had ~~$2.0~~$2.2 billion of SOFR-indexed advances outstanding as of ~~March 31,~~June 30, 2022. For additional information on our LIBOR transition efforts and LIBOR exposure, see “Risk Management – Interest Rate Risk Management” under this Item 2.

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Table 1724 summarizes advances outstanding by product (dollar amounts in thousands). An individual advance may be reclassified to a different product type between periods due to the occurrence of a triggering event such as the passing of a call date (i.e., from fixed rate callable advance to regular fixed rate advance) or conversion of an advance (i.e., from fixed rate convertible advance to adjustable rate callable advance).

Table 1724


		03/31/2022				12/31/2021					06/30/2022				12/31/2021
		Dollar		Percent		Dollar		Percent			Dollar		Percent		Dollar		Percent
Line of Credit:	Line of Credit:									Line of Credit:
Overnight line of credit1	Overnight line of credit1	$	2,707,849	10.6	%	$	1,630,399	7.0	%	Overnight line of credit1	$	6,038,569	20.3	%	$	1,630,399	7.0	%

Adjustable rate:	Adjustable rate:									Adjustable rate:
Standard advance products:	Standard advance products:									Standard advance products:
Regular adjustable rate advances	Regular adjustable rate advances	1,981,250		7.7		1,732,250		7.4		Regular adjustable rate advances	2,174,250		7.3		1,732,250		7.4
Adjustable rate callable advances	Adjustable rate callable advances	1,335,300		5.2		1,354,300		5.8		Adjustable rate callable advances	1,442,300		4.8		1,354,300		5.8

Standard housing and community development advances:	Standard housing and community development advances:									Standard housing and community development advances:

Adjustable rate callable advances	Adjustable rate callable advances	25,712		0.1		29,712		0.1		Adjustable rate callable advances	25,712		0.1		29,712		0.1
Total adjustable rate term advances	Total adjustable rate term advances	3,342,262		13.0		3,116,262		13.3		Total adjustable rate term advances	3,642,262		12.2		3,116,262		13.3
Fixed rate:	Fixed rate:									Fixed rate:
Standard advance products:	Standard advance products:									Standard advance products:
Short-term fixed rate advances2	Short-term fixed rate advances2	10,639,110		41.5		10,006,622		42.7		Short-term fixed rate advances2	10,889,684		36.6		10,006,622		42.7
Regular fixed rate advances	Regular fixed rate advances	6,515,247		25.4		6,161,167		26.3		Regular fixed rate advances	7,343,599		24.7		6,161,167		26.3
Fixed rate callable advances	Fixed rate callable advances	65,846		0.2		65,846		0.3		Fixed rate callable advances	64,071		0.2		65,846		0.3
Standard housing and community development advances:	Standard housing and community development advances:									Standard housing and community development advances:
Regular fixed rate advances	Regular fixed rate advances	382,436		1.5		395,366		1.7		Regular fixed rate advances	359,101		1.2		395,366		1.7
Fixed rate callable advances	Fixed rate callable advances	458		—		831		—		Fixed rate callable advances	458		—		831		—
Total fixed rate term advances	Total fixed rate term advances	17,603,097		68.6		16,629,832		71.0		Total fixed rate term advances	18,656,913		62.7		16,629,832		71.0
Convertible:	Convertible:									Convertible:
Standard advance products:	Standard advance products:									Standard advance products:
Fixed rate convertible advances	Fixed rate convertible advances	1,333,150		5.2		1,385,150		5.9		Fixed rate convertible advances	728,600		2.5		1,385,150		5.9
Amortizing:	Amortizing:									Amortizing:
Standard advance products:	Standard advance products:									Standard advance products:
Fixed rate amortizing advances	Fixed rate amortizing advances	345,074		1.3		364,912		1.5		Fixed rate amortizing advances	400,067		1.3		364,912		1.5
Fixed rate callable amortizing advances	Fixed rate callable amortizing advances	20,639		0.1		21,009		0.1		Fixed rate callable amortizing advances	20,196		0.1		21,009		0.1
Standard housing and community development advances:	Standard housing and community development advances:									Standard housing and community development advances:
Fixed rate amortizing advances	Fixed rate amortizing advances	276,998		1.1		275,381		1.2		Fixed rate amortizing advances	269,530		0.9		275,381		1.2
Fixed rate callable amortizing advances	Fixed rate callable amortizing advances	11,786		0.1		9,883		—		Fixed rate callable amortizing advances	11,785		—		9,883		—
Total amortizing advances	Total amortizing advances	654,497		2.6		671,185		2.8		Total amortizing advances	701,578		2.3		671,185		2.8
TOTAL PAR VALUE	TOTAL PAR VALUE	$	25,640,855	100.0	%	$	23,432,828	100.0	%	TOTAL PAR VALUE	$	29,767,922	100.0	%	$	23,432,828	100.0	%

1 Represents fixed rate line of credit advances with daily maturities.

2 Represents non-amortizing, non-prepayable loans with terms to maturity from 3 to 93 days.

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Table 1825 presents information on our five largest borrowers (dollar amounts in thousands). If the borrower was not one of our top five borrowers for one of the periods presented, the applicable columns are left blank. Based on no historical loss experience on advances since the inception of FHLBank, along with our rights to collateral with an estimated fair value in excess of the book value of these advances, we do not expect to incur any credit losses on these advances.

Table 1825


		03/31/2022				12/31/2021					06/30/2022				12/31/2021
Borrower Name	Borrower Name	Advance Par Value		Percent of Total Advance Par		Advance Par Value		Percent of Total Advance Par		Borrower Name	Advance Par Value		Percent of Total Advance Par		Advance Par Value		Percent of Total Advance Par
MidFirst Bank	MidFirst Bank	$	9,810,000	38.3	%	$	9,045,000	38.6	%	MidFirst Bank	$	8,815,000	29.6	%	$	9,045,000	38.6	%
Capitol Federal Savings Bank										Capitol Federal Savings Bank	1,875,700		6.3		1,590,000		6.8
Pacific Life Insurance Co.										Pacific Life Insurance Co.	1,785,766		6.0
Security Life of Denver Insurance Co.										Security Life of Denver Insurance Co.	1,600,000		5.4		1,445,000		6.2
United of Omaha Life Insurance Co.	United of Omaha Life Insurance Co.	1,842,820		7.2		1,597,502		6.8		United of Omaha Life Insurance Co.	1,537,455		5.2		1,597,502		6.8
Capitol Federal Savings Bank		1,590,000		6.2		1,590,000		6.8
Security Life of Denver Insurance Co.		1,520,000		5.9		1,445,000		6.2
Pacific Life Insurance Co.		939,216		3.7
Colorado Federal Savings	Colorado Federal Savings					745,000		3.2		Colorado Federal Savings					745,000		3.2

TOTAL	TOTAL	$	15,702,036	61.3	%	$	14,422,502	61.6	%	TOTAL	$	15,613,921	52.5	%	$	14,422,502	61.6	%

Table 1926 presents the accrued interest income associated with the five borrowers with the highest interest income for the periods presented (dollar amounts in thousands). If the borrower was not one of our top five borrowers for whom we accrued the highest amount of interest income for one of the periods presented, the applicable columns are left blank.

Table 26


	Three Months Ended
	06/30/2022				06/30/2021
Borrower Name	Advance Income		Percent of Total Advance Income1		Advance Income		Percent of Total Advance Income1
MidFirst Bank	$	17,737	20.7	%	$	4,441	9.7	%
Capitol Federal Savings Bank	9,567		11.1		4,667		10.2
Pacific Life Insurance Co.	4,354		5.1
United of Omaha Life Insurance Co.	3,949		4.6		1,719		3.8
First United Bank & Trust Co.	3,526		4.1
American Fidelity Assurance Co.					2,662		5.8
WEOKIE Federal Credit Union					1,483		3.2

TOTAL	$	39,133	45.6	%	$	14,972	32.7	%

1 Total advance income by borrower excludes: (1) changes in unrealized gains (losses) from qualifying fair value hedging relationships; (2) net interest settlements on derivatives hedging the advances; and (3) prepayment fees received.

Table of Contents

Table 27 presents accrued interest income associated with the five borrowers with the highest interest income for the periods presented (dollar amounts in thousands). If the borrower was not one of our top five borrowers for whom we accrued the highest amount of interest income for one of the periods presented, the applicable columns are left blank.

Table 1927


					Six Months Ended
		03/31/2022				03/31/2021					06/30/2022				06/30/2021
Borrower Name	Borrower Name	Advance Income		Percent of Total Advance Income1		Advance Income		Percent of Total Advance Income1		Borrower Name	Advance Income		Percent of Total Advance Income1		Advance Income		Percent of Total Advance Income1
MidFirst Bank	MidFirst Bank	$	6,894	14.0	%	$	5,682	11.8	%	MidFirst Bank	$	24,631	18.2	%	$	10,123	10.8	%
Capitol Federal Savings Bank	Capitol Federal Savings Bank	6,116		12.4		4,650		9.6		Capitol Federal Savings Bank	15,683		11.6		9,317		9.9
United of Omaha Life Insurance Co.										United of Omaha Life Insurance Co.	6,044		4.5		3,500		3.7
American Fidelity Assurance Co.	American Fidelity Assurance Co.	2,762		5.6		2,793		5.8		American Fidelity Assurance Co.	5,556		4.1		5,455		5.8
United of Omaha Life Insurance Co.		2,095		4.2		1,781		3.7
Security Life of Denver Insurance Co.		1,681		3.4
First United Bank & Trust Co.										First United Bank & Trust Co.	5,114		3.8
WEOKIE Federal Credit Union	WEOKIE Federal Credit Union					1,470		3.0		WEOKIE Federal Credit Union					2,953		3.1

TOTAL	TOTAL	$	19,548	39.6	%	$	16,376	33.9	%	TOTAL	$	57,028	42.2	%	$	31,348	33.3	%

MPF Program: The MPF Program is a secondary mortgage market alternative for our members, ~~especially~~predominately utilized by the smaller institutions in our district. We participate in the MPF Program through the MPF Provider, a division of FHLBank Chicago. Under the MPF Program, participating members can sell us conventional and government ~~single-family~~ residential mortgage loans.

Refinance volume has slowed significantly since the boom caused by the historical lows in mortgage rates that began in 2020, thereby creating more competition in the mortgage market for purchases and cash-out refinances. Despite slowing prepayments in response to higher interest rates, loan repayments have exceeded purchases in recent periods, which has contributed to a decrease of 1.4 percent in the outstanding net balance of our mortgage loan portfolio, from $8.1 billion at December 31, 2021 to $8.0 billion at ~~March 31,~~June 30, 2022. Net mortgage loans as a percentage of total assets decreased, from 16.9 percent as of December 31, 2021 to ~~15.8~~14.0 percent as of ~~March 31,~~June 30, 2022. Mortgage loans are one of the highest net spread assets on our balance sheet so shifts in the balance sheet concentration of mortgage loans will impact net interest income. The principal amount of new mortgage loans acquired and held on our balance sheet from our PFIs during the ~~three~~six months ended ~~March 31,~~June 30, 2022 was ~~$0.3~~$0.6 billion.

~~Table of Contents~~

~~We continue to monitor our Acquired Member Assets (AMA) risk tolerance and manage the growth rate of the mortgage loan portfolio.~~ Future growth in the MPF portfolio is a function of asset size and composition, most notably the balance of advances, and a multiple of capital, as growth in advances impacts our total assets and capital level, which allows the balance of mortgage loans to increase while maintaining our targeted ~~AMA~~Acquired Member Assets (AMA) risk tolerance. The other factors that may influence future growth in our mortgage loans held for portfolio include: (1) the number of new and delivering PFIs; (2) the mortgage loan origination volume of current PFIs; (3) refinancing activity; (4) the level of interest rates and the shape of the yield curve; (5) the relative competitiveness of MPF pricing to the prices offered by other buyers of residential mortgage loans; and (6) a PFI's level of excess risk-based capital relative to the required risk-based capital charge associated with the PFI's credit enhancement obligations on MPF mortgage loans. ~~The MPF Program is evaluating additional liquidity options that may help participating FHLBanks manage the size of their mortgage loan portfolios in the future.~~

Table of Contents

Table 2028 presents the outstanding balances of mortgage loans sold to us, net of participations, from our top five PFIs and the percentage of those loans to total mortgage loans outstanding (dollar amounts in thousands).

Table 2028


		03/31/2022				12/31/2021					06/30/2022				12/31/2021
		Mortgage Loan Balance		Percent of Total Mortgage Loans		Mortgage Loan Balance		Percent of Total Mortgage Loans			Mortgage Loan Balance		Percent of Total Mortgage Loans		Mortgage Loan Balance		Percent of Total Mortgage Loans
Tulsa Teachers Credit Union	Tulsa Teachers Credit Union	$	344,127	4.3	%	$	344,847	4.3	%	Tulsa Teachers Credit Union	$	337,892	4.3	%	$	344,847	4.3	%
Fidelity Bank	Fidelity Bank	302,114		3.8		299,229		3.7		Fidelity Bank	317,270		4.0		299,229		3.7
Community National Bank & Trust										Community National Bank & Trust	237,669		3.0		232,272		2.9
West Gate Bank	West Gate Bank	243,617		3.1		253,506		3.2		West Gate Bank	233,684		2.9		253,506		3.2
Community National Bank & Trust		236,710		3.0		232,272		2.9
NBKC Bank	NBKC Bank	188,054		2.4		206,585		2.6		NBKC Bank	179,160		2.3		206,585		2.6

TOTAL	TOTAL	$	1,314,622	16.6	%	$	1,336,439	16.7	%	TOTAL	$	1,305,675	16.5	%	$	1,336,439	16.7	%

Two indications of credit quality are scores provided by Fair Isaac Corporation (FICO®) and loan-to-value (LTV) ratios. FICO is a widely used credit industry indicator to assess borrower credit quality with scores typically ranging from 300 to 850 with the low end of the scale indicating greater credit risk. The MPF Program requires a minimum FICO score of 620 for all conventional loans. LTV is a primary variable in credit performance. Generally speaking, a higher LTV ratio means greater risk of loss in the event of a default and also means higher loss severity. The weighted average FICO score and LTV recorded at origination for conventional mortgage loans outstanding as of ~~March 31,~~June 30, 2022 was 750 and ~~73.5~~73.7 percent, respectively. See Note 5 of the Notes to Financial Statements under Part I, Item 1 for additional information regarding credit quality indicators.

Allowance for Credit Losses on Mortgage Loans Held for Portfolio – The allowance for credit losses on mortgage loans declined ~~$0.3~~$0.1 million from December 31, 2021 to ~~March 31,~~June 30, 2022. The ~~decline in forecasted losses~~change is ~~attributable~~attributed to ~~an improved outlook for~~stable home price ~~growth, which was~~appreciation forecasts, partially offset by ~~higher interest rate expectations which extend~~ the ~~weighted average life~~net effect of new originations and the ~~portfolio. The~~ migration of loans with forecasted losses out of the ~~portfolio also contributed to the reduction in the allowance.~~portfolio. Delinquencies of conventional loans remained at low levels relative to the portfolio, at ~~1.1~~0.9 percent of the amortized cost of total conventional loans at both ~~March 31,~~June 30, 2022 and December 31, 2021. We believe that policies and procedures are in place to effectively manage the credit risk on mortgage loans held for portfolio. See Note 5 of the Notes to Financial Statements under Part I, Item 1 for a summary of the allowance for credit losses on mortgage loans as well as payment status and other delinquency statistics for our mortgage loan portfolio.

Investments: Investments are used to manage interest rate and duration risk, enhance income, and provide liquidity and primary and secondary market support for the U.S. housing securities market. Total investments increased ~~$0.8~~$3.3 billion from December 31, 2021 to ~~March 31,~~June 30, 2022 primarily due to an increase in short-term investments.

Short-term Investments – Short-term investments, which are used to provide funds ~~to meet the credit needs of~~for our members, maintain liquidity, meet other financial obligations such as debt servicing, and enhance income, consist primarily of reverse repurchase agreements, interest-bearing deposits, Federal funds sold, and certificates of deposit.

~~Table of Contents~~

Within our portfolio of short-term investments, counterparty credit risk arises from unsecured exposures. Our short-term unsecured credit investments have maturities generally ranging between overnight and three months and may include the following types:

•Interest-bearing deposits. Unsecured deposits that earn interest.

•Federal funds sold. Unsecured loans of reserve balances at the Federal Reserve Banks between financial institutions that are made on either an overnight or term basis, but typically made on an overnight basis.

•Certificates of deposit. Unsecured negotiable promissory notes issued by banks and payable to the bearer at maturity.

Table 21of Contents

Table 29 presents the carrying value of our unsecured credit exposure with private counterparties by investment type (in thousands). The unsecured investment credit exposure presented may not reflect the average or maximum exposure during the period as the balances presented reflect the balances at period end.

Table 2129


		03/31/2022		12/31/2021			06/30/2022		12/31/2021
Interest-bearing deposits	Interest-bearing deposits	$	623,989	$	692,159	Interest-bearing deposits	$	854,242	$	692,159
Federal funds sold	Federal funds sold	3,100,000		3,360,000		Federal funds sold	5,360,000		3,360,000

Certificates of deposit	Certificates of deposit	700,211		200,023		Certificates of deposit	639,786		200,023
TOTAL UNSECURED INVESTMENT CREDIT EXPOSURE1	TOTAL UNSECURED INVESTMENT CREDIT EXPOSURE1	$	4,424,200	$	4,252,182	TOTAL UNSECURED INVESTMENT CREDIT EXPOSURE1	$	6,854,028	$	4,252,182

1 Excludes unsecured investment credit exposure to U.S. government, U.S. government agencies, instrumentalities, GSEs and supranational entities and does not include related accrued interest.

We actively monitor our credit exposures and the credit quality of our counterparties, including an assessment of each counterparty’s financial performance, capital adequacy, sovereign support and the current market perceptions of the counterparties. General macro-economic, political and market conditions may also be considered when deciding on unsecured exposure. As a result, we may further limit existing exposures.

FHFA regulations: (1) include limits on the amount of unsecured credit an individual FHLBank may extend to a counterparty or to a group of affiliated counterparties; (2) permit us to extend additional unsecured credit for overnight extensions of credit, subject to limitations; and (3) prohibit us 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. For additional information on our management of unsecured credit exposure, see Part II, Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Financial Condition – Investments” in our annual report on Form 10-K for the year ended December 31, 2021. As of ~~March 31,~~June 30, 2022, we were in compliance with all FHFA regulations relating to unsecured credit exposure.

We manage our credit risk by conducting pre-purchase credit due diligence and ongoing surveillance described previously and generally investing in unsecured investments of highly-rated counterparties. From time to time, we extend unsecured credit to qualified members by investing in overnight Federal funds issued by them. As of ~~March 31,~~June 30, 2022, all unsecured investments were rated as investment grade based on NRSROs (see Table ~~24)~~32).

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Table 2230 presents the amount of our unsecured investment credit exposure by remaining contractual maturity and by the domicile of the counterparty or the domicile of the counterparty’s parent for U.S. branches and agency offices of foreign commercial banks as of ~~March 31,~~June 30, 2022 (in thousands). We also mitigate the credit risk on investments by purchasing instruments that have short-term maturities.

Table 2230


Domicile of Counterparty	Domicile of Counterparty	Overnight		Due 2 – 30 days		Due 31 – 90 days		Total		Domicile of Counterparty	Overnight		Due 2 – 30 days		Due 31 – 90 days		Total
Domestic	Domestic	$	623,989	$	—	$	—	$	623,989	Domestic	$	1,379,242	$	—	$	—	$	1,379,242

U.S. subsidiaries of foreign commercial banks										U.S. subsidiaries of foreign commercial banks	—		—		249,910		249,910
Total domestic and U.S. subsidiaries of foreign commercial banks										Total domestic and U.S. subsidiaries of foreign commercial banks	1,379,242		—		249,910		1,629,152
U.S. Branches and agency offices of foreign commercial banks:	U.S. Branches and agency offices of foreign commercial banks:									U.S. Branches and agency offices of foreign commercial banks:
Canada	Canada	700,000		—		300,146		1,000,146		Canada	2,490,000		—		—		2,490,000
Australia	Australia	825,000		—		—		825,000		Australia	815,000		—		—		815,000
Germany	Germany	325,000		199,991		—		524,991		Germany	280,000		239,949		—		519,949
Finland		200,000		—		200,074		400,074
Netherlands	Netherlands	400,000		—		—		400,000		Netherlands	400,000		—		—		400,000
United Kingdom	United Kingdom	350,000		—		—		350,000		United Kingdom	400,000		—		—		400,000
Norway		300,000		—		—		300,000

Finland										Finland	350,000		—		—		350,000
Sweden										Sweden	—		—		149,927		149,927
France										France	100,000		—		—		100,000
											—		—		—		—
Total U.S. Branches and agency offices of foreign commercial banks	Total U.S. Branches and agency offices of foreign commercial banks	3,100,000		199,991		500,220		3,800,211		Total U.S. Branches and agency offices of foreign commercial banks	4,835,000		239,949		149,927		5,224,876
TOTAL UNSECURED INVESTMENT CREDIT EXPOSURE1	TOTAL UNSECURED INVESTMENT CREDIT EXPOSURE1	$	3,723,989	$	199,991	$	500,220	$	4,424,200	TOTAL UNSECURED INVESTMENT CREDIT EXPOSURE1	$	6,214,242	$	239,949	$	399,837	$	6,854,028

1 Excludes unsecured investment credit exposure to U.S. government, U.S. government agencies, instrumentalities, GSEs and supranational entities, and does not include related accrued interest.

Unsecured credit exposure continues to be conservatively placed. In addition, we anticipate continued future investment in reverse repurchase agreements, which are secured investments. To enhance our liquidity position, we classify our unsecured short-term investment securities in our trading portfolio, which allows us to sell these securities if necessary.

Long-term investments – Our long-term investment portfolio consists primarily of GSE MBS and U.S. Treasury obligations. Our Risk Management Policy (RMP) restricts the acquisition of investments to highly rated long-term securities. Generally, fixed-rate U.S. Treasury obligations are either classified as trading securities and economically swapped to variable rates or classified as available-for-sale securities and swapped to variable rates in qualifying fair value hedging relationships. In addition to serving as excellent collateral, U.S. Treasury obligations also satisfy regulatory liquidity requirements. We also ~~position~~purchase fixed rate securities for duration and interest rate risk management. Currently, the majority of our variable rate investment securities are indexed to LIBOR but we ~~are no longer~~stopped purchasing LIBOR-indexed ~~investments.~~investments in 2018. For additional information on our LIBOR transition efforts and LIBOR exposure, see “Risk Management – Interest Rate Risk Management” under this Item 2.

According to FHFA regulation, no additional MBS purchases may be made if the aggregate value of our MBS exceeds 300 percent of our regulatory capital. Further, quarterly increases in holdings of MBS are restricted to no more than 50 percent of regulatory capital. As of ~~March 31,~~June 30, 2022, the aggregate value of our MBS portfolio represented ~~226~~215 percent of our regulatory capital. We were below our regulatory limit at ~~March 31,~~June 30, 2022 but prefer to to remain at or near the regulatory limit so we are remaining opportunistic about future MBS purchases as market conditions change.

Table of Contents

Major Security Types – Securities for which we have the ability and intent to hold to maturity are classified as held-to-maturity securities and recorded at carrying value, which is the net total of par, premiums, and discounts. We classify certain investments as trading or available-for-sale securities and carry them at fair value, generally for liquidity purposes, to provide a fair value offset to the gains (losses) on the interest rate swaps associated with swapped securities, and for asset/liability management purposes. Liquidity or other asset/liability management strategies, such as reducing our LIBOR exposure, may require periodic sale of these securities but they are not actively traded; most often, they are held until maturity or call date. Securities acquired as asset/liability management tools to manage duration risk, which are likely to be sold when the duration exposure is within risk tolerances, are classified as trading or available-for-sale securities. Changes in the fair values of investments classified as trading are recorded through other income and the original premiums/discounts on these investments are not amortized.

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See Note 3 of the Notes to Financial Statements under Part I, Item 1 of this quarterly report for additional information on our different investment classifications including the types of securities held under each classification. The carrying values by contractual maturities of our investments as of ~~March 31,~~June 30, 2022 are summarized by security type in Table 2331 (dollar amounts in thousands) ~~along~~ with certain weighted average yield metrics ~~and~~along with carrying values as of ~~March~~December 31, 2021. Expected maturities of certain securities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or yield maintenance fees.

Table 2331


		03/31/2022														12/31/2021			06/30/2022														12/31/2021
		Due in one year or less			Due after one year through five years			Due after five years through 10 years			Due after 10 years			Carrying Value		Carrying Value			Due in one year or less			Due after one year through five years			Due after five years through 10 years			Due after 10 years			Carrying Value		Carrying Value
Trading securities:	Trading securities:																	Trading securities:

Certificates of deposit	Certificates of deposit	$	700,211		$	—		$	—		$	—		$	700,211	$	200,023	Certificates of deposit	$	639,786		$	—		$	—		$	—		$	639,786	$	200,023
U.S. Treasury obligations	U.S. Treasury obligations	501,135			403,903			—			—			905,038		917,472		U.S. Treasury obligations	499,442			149,666			—						649,108		917,472
GSE debentures	GSE debentures	—			401,915			—			—			401,915		415,918		GSE debentures	105,814			290,673			—						396,487		415,918

GSE MBS	GSE MBS	—			567,064			172,629			28,961			768,654		806,542		GSE MBS	—			612,666			35,141			27,049			674,856		806,542
Total trading securities	Total trading securities	1,201,346			1,372,882			172,629			28,961			2,775,818		2,339,955		Total trading securities	1,245,042			1,053,005			35,141			27,049			2,360,237		2,339,955

Available-for-sale securities:	Available-for-sale securities:																	Available-for-sale securities:
U.S. Treasury obligations	U.S. Treasury obligations	1,201,645			1,354,151			232,263			—			2,788,059		2,816,437		U.S. Treasury obligations	945,807			1,665,306			224,326			—			2,835,439		2,816,437
U.S. obligation MBS	U.S. obligation MBS	—			—			—			46,817			46,817		50,767		U.S. obligation MBS	—									43,690			43,690		50,767
GSE MBS	GSE MBS	35,678			1,236,370			2,909,153			830,258			5,011,459		4,851,981		GSE MBS	81,706			1,356,606			3,087,409			738,981			5,264,702		4,851,981
Total available-for-sale securities	Total available-for-sale securities	1,237,323			2,590,521			3,141,416			877,075			7,846,335		7,719,185		Total available-for-sale securities	1,027,513			3,021,912			3,311,735			782,671			8,143,831		7,719,185

Held-to-maturity securities:	Held-to-maturity securities:																	Held-to-maturity securities:
State or local housing agency obligations	State or local housing agency obligations	—			—			44,865			30,000			74,865		74,865		State or local housing agency obligations	—						43,940			30,000			73,940		74,865

GSE MBS	GSE MBS	—			—			76,119			270,599			346,718		371,320		GSE MBS	—						73,331			252,037			325,368		371,320
Total held-to-maturity securities	Total held-to-maturity securities	—			—			120,984			300,599			421,583		446,185		Total held-to-maturity securities	—						117,271			282,037			399,308		446,185

Total securities	Total securities	2,438,669			3,963,403			3,435,029			1,206,635			11,043,736		10,505,325		Total securities	2,272,555			4,074,917			3,464,147			1,091,757			10,903,376		10,505,325

Interest-bearing deposits	Interest-bearing deposits	624,145			—			—			—			624,145		693,249		Interest-bearing deposits	854,271			—									854,271		693,249

Federal funds sold	Federal funds sold	3,100,000			—			—			—			3,100,000		3,360,000		Federal funds sold	5,360,000			—									5,360,000		3,360,000

Securities purchased under agreements to resell	Securities purchased under agreements to resell	2,100,000			—			—			—			2,100,000		1,500,000		Securities purchased under agreements to resell	2,250,000			—									2,250,000		1,500,000
TOTAL INVESTMENTS	TOTAL INVESTMENTS	$	8,262,814		$	3,963,403		$	3,435,029		$	1,206,635		$	16,867,881	$	16,058,574	TOTAL INVESTMENTS	$	10,736,826		$	4,074,917		$	3,464,147		$	1,091,757		$	19,367,647	$	16,058,574

Weighted average yields1:	Weighted average yields1:																	Weighted average yields1:
Available-for-sale securities	Available-for-sale securities	1.47		%	1.83		%	2.28		%	1.56		%					Available-for-sale securities	1.37		%	2.06		%	2.48		%	1.86		%
Held-to-maturity securities	Held-to-maturity securities	—		%	—		%	1.56		%	1.60		%					Held-to-maturity securities	—		%	—		%	2.03		%	1.64		%

1 The weighted average yields are calculated as the sum of each debt security using the period end balances multiplied by the coupon rate adjusted by the impact of amortization and accretion of premiums and discounts, divided by the total debt securities in the applicable portfolio. The result is then multiplied by 100 to express it as a percentage.

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Securities Ratings – Tables 2432 and 2533 present the carrying value of our investments by rating as of ~~March 31,~~June 30, 2022 and December 31, 2021 (in thousands). The ratings presented are the lowest ratings available for the security, issuer, or counterparty based on NRSROs, where available. Some counterparties for collateralized overnight borrowing are not rated by an NRSRO because they are not issuers of debt or are otherwise not required to be rated by an NRSRO. We also utilize other credit quality factors when analyzing potential investments including, but not limited to, collateral performance, marketability, asset class or sector considerations, local and regional economic conditions, and/or the financial health of the underlying issuer.

Table 2432


		03/31/2022									06/30/2022
		Carrying Value1									Carrying Value1
		Investment Grade						Unrated	Total					Investment Grade								Unrated	Total
		Triple-A		Double-A		Single-A								Triple-A		Double-A		Single-A
Interest-bearing deposits2	Interest-bearing deposits2	$	—	$	156	$	623,989		$	—		$	624,145		Interest-bearing deposits2	$	—	$	29	$	854,242			$	—	$	854,271

Federal funds sold2	Federal funds sold2	—		500,000		2,600,000			—			3,100,000			Federal funds sold2	—		350,000		5,010,000				—		5,360,000

Securities purchased under agreements to resell3	Securities purchased under agreements to resell3	—		—		100,000			2,000,000			2,100,000			Securities purchased under agreements to resell3	—		150,000		100,000				2,000,000		2,250,000

Investment securities:	Investment securities:														Investment securities:
Non-mortgage-backed securities:	Non-mortgage-backed securities:														Non-mortgage-backed securities:

Certificates of deposit2	Certificates of deposit2	—		200,073		500,138			—			700,211			Certificates of deposit2	—		149,927		489,859				—		639,786
U.S. Treasury obligations	U.S. Treasury obligations	—		3,693,097		—			—			3,693,097			U.S. Treasury obligations	—		3,484,547		—				—		3,484,547
GSE debentures	GSE debentures	—		401,915		—			—			401,915			GSE debentures	—		396,487		—				—		396,487
State or local housing agency obligations	State or local housing agency obligations	44,865		30,000		—			—			74,865			State or local housing agency obligations	43,940		30,000		—				—		73,940
Total non-mortgage-backed securities	Total non-mortgage-backed securities	44,865		4,325,085		500,138			—			4,870,088			Total non-mortgage-backed securities	43,940		4,060,961		489,859				—		4,594,760
Mortgage-backed securities:	Mortgage-backed securities:														Mortgage-backed securities:
U.S. obligation MBS	U.S. obligation MBS	—		46,817		—			—			46,817			U.S. obligation MBS	—		43,690		—				—		43,690
GSE MBS	GSE MBS	—		6,126,831		—			—			6,126,831			GSE MBS	—		6,264,926		—				—		6,264,926
Total mortgage-backed securities	Total mortgage-backed securities	—		6,173,648		—			—			6,173,648			Total mortgage-backed securities	—		6,308,616		—				—		6,308,616

TOTAL INVESTMENTS	TOTAL INVESTMENTS	$	44,865	$	10,998,889	$	3,824,127		$	2,000,000		$	16,867,881		TOTAL INVESTMENTS	$	43,940	$	10,869,606	$	6,454,101			$	2,000,000	$	19,367,647

1 Investment amounts represent the carrying value and do not include related accrued interest receivable of ~~$28.2~~$29.5 million at ~~March 31,~~June 30, 2022.

2 Amounts include unsecured credit exposure with original maturities from overnight to 9692 days.

3 Amounts represent collateralized overnight borrowings.

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Table 2533


	12/31/2021
	Carrying Value1
	Investment Grade						Unrated	Total
	Triple-A		Double-A		Single-A
Interest-bearing deposits2	$	311	$	1,090	$	691,848		$	—	$	693,249

Federal funds sold2	—		175,000		3,185,000			—		3,360,000

Securities purchased under agreements to resell3	—		—		—			1,500,000		1,500,000

Investment securities:
Non-mortgage-backed securities:

Certificates of deposit2	—		—		200,023			—		200,023
U.S. Treasury obligations	—		3,733,909		—			—		3,733,909
GSE debentures	—		415,918		—			—		415,918
State or local housing agency obligations	44,865		30,000		—			—		74,865
Total non-mortgage-backed securities	44,865		4,179,827		200,023			—		4,424,715
Mortgage-backed securities:
U.S. obligation MBS	—		50,767		—			—		50,767
GSE MBS	—		6,029,843		—			—		6,029,843
Total mortgage-backed securities	—		6,080,610		—			—		6,080,610

TOTAL INVESTMENTS	$	45,176	$	10,436,527	$	4,076,871		$	1,500,000	$	16,058,574

1 Investment amounts represent the carrying value and do not include related accrued interest receivable of $27.9 million at December 31, 2021.

2 Amounts include unsecured credit exposure with original maturities from overnight to 94 days.

3 Amounts represent collateralized overnight borrowings.

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Table 2634 details interest rate payment terms for the carrying value of our investment securities as of ~~March 31,~~June 30, 2022 and December 31, 2021 (in thousands). We generally manage the interest rate risk associated with our fixed rate trading and available-for-sale securities by entering into interest rate swaps that convert the investment's fixed rate to a variable rate index (see Tables 3644 and 3745 under Part I, Item 3 – “Quantitative and Qualitative Disclosures About Market Risk).”

Table 2634


		03/31/2022		12/31/2021			06/30/2022		12/31/2021
Trading securities:	Trading securities:					Trading securities:
Non-mortgage-backed securities:	Non-mortgage-backed securities:					Non-mortgage-backed securities:
Fixed rate	Fixed rate	$	2,007,164	$	1,533,413	Fixed rate	$	1,685,381	$	1,533,413

Non-mortgage-backed securities	Non-mortgage-backed securities	2,007,164		1,533,413		Non-mortgage-backed securities	1,685,381		1,533,413
Mortgage-backed securities:	Mortgage-backed securities:					Mortgage-backed securities:
Fixed rate	Fixed rate	739,020		775,050		Fixed rate	647,192		775,050
Variable rate	Variable rate	29,634		31,492		Variable rate	27,664		31,492
Mortgage-backed securities	Mortgage-backed securities	768,654		806,542		Mortgage-backed securities	674,856		806,542
Total trading securities	Total trading securities	2,775,818		2,339,955		Total trading securities	2,360,237		2,339,955
Available-for-sale securities:	Available-for-sale securities:					Available-for-sale securities:
Non-mortgage-backed securities:	Non-mortgage-backed securities:					Non-mortgage-backed securities:
Fixed rate	Fixed rate	2,788,059		2,816,437		Fixed rate	2,835,439		2,816,437
Non-mortgage-backed securities	Non-mortgage-backed securities	2,788,059		2,816,437		Non-mortgage-backed securities	2,835,439		2,816,437
Mortgage-backed securities:	Mortgage-backed securities:					Mortgage-backed securities:
Fixed rate	Fixed rate	3,086,266		3,322,673		Fixed rate	3,105,413		3,322,673
Variable rate	Variable rate	1,972,010		1,580,075		Variable rate	2,202,979		1,580,075
Mortgage-backed securities	Mortgage-backed securities	5,058,276		4,902,748		Mortgage-backed securities	5,308,392		4,902,748
Total available-for-sale securities	Total available-for-sale securities	7,846,335		7,719,185		Total available-for-sale securities	8,143,831		7,719,185
Held-to-maturity securities:	Held-to-maturity securities:					Held-to-maturity securities:
Non-mortgage-backed securities:	Non-mortgage-backed securities:					Non-mortgage-backed securities:

Variable rate	Variable rate	74,865		74,865		Variable rate	73,940		74,865
Non-mortgage-backed securities	Non-mortgage-backed securities	74,865		74,865		Non-mortgage-backed securities	73,940		74,865
Mortgage-backed securities:	Mortgage-backed securities:					Mortgage-backed securities:
Fixed rate	Fixed rate	44,131		48,399		Fixed rate	39,899		48,399
Variable rate	Variable rate	302,587		322,921		Variable rate	285,469		322,921
Mortgage-backed securities	Mortgage-backed securities	346,718		371,320		Mortgage-backed securities	325,368		371,320
Total held-to-maturity securities	Total held-to-maturity securities	421,583		446,185		Total held-to-maturity securities	399,308		446,185
TOTAL	TOTAL	$	11,043,736	$	10,505,325	TOTAL	$	10,903,376	$	10,505,325

Deposits: Deposits are generally an insignificant source of funding. Total deposits decreased ~~$9.5~~$164.4 million from December 31, 2021 to ~~March 31,~~June 30, 2022 primarily as a result of decreases in overnight and ~~term~~demand deposits, offset by ~~increases~~an increase in term deposits. The level of deposits is driven by member demand ~~deposits.~~for deposit products, which in turn is a function of the liquidity position of members. Factors that influence deposit levels include turnover in member investment and loan portfolios, changes in members’ customer deposit balances, changes in members’ demand for liquidity, and our deposit pricing as compared to other short-term market rates. Further declines in the level of deposits could occur during 2022 if the level of member liquidity should decrease due to loan demand outpacing deposit funding growth at member institutions, or if depositor investment options improve as interest rates rise. Fluctuations in deposits have little impact on our ability to obtain liquidity. We historically have had stable and ready access to the capital markets through consolidated obligations and can replace any reduction in deposits with similarly or even lower priced borrowings.

Table of Contents

Consolidated Obligations: Consolidated obligations are the joint and several debt obligations of the FHLBanks and consist of bonds and discount notes. Consolidated obligations represent the primary source of liabilities we use to fund advances, mortgage loans and investments. As noted under Part I, Item 3 – “Quantitative and Qualitative Disclosures About Market Risk,” we use debt with a variety of maturities and option characteristics to manage our interest rate risk profile. We make use of derivative transactions, executed in conjunction with specific consolidated obligation debt issues, to synthetically structure funding terms and costs.

Table ~~of Contents~~

~~Table 27~~35 presents the carrying value of consolidated obligation bonds and discounts notes as of ~~March 31,~~June 30, 2022 and December 31, 2021 (in thousands).

Table 2735


		03/31/2022		12/31/2021			06/30/2022		12/31/2021
Bonds:	Bonds:					Bonds:
Par value	Par value	$	39,262,850	$	37,658,250	Par value	$	33,341,545	$	37,658,250
Premiums	Premiums	26,015		27,470		Premiums	23,786		27,470
Discounts	Discounts	(2,604)		(2,720)		Discounts	(2,537)		(2,720)
Concession fees	Concession fees	(11,463)		(11,877)		Concession fees	(11,375)		(11,877)
Hedging adjustments	Hedging adjustments	(314,077)		(40,514)		Hedging adjustments	(423,273)		(40,514)
Total bonds	Total bonds	38,960,721		37,630,609		Total bonds	32,928,146		37,630,609
Discount Notes:	Discount Notes:					Discount Notes:
Par value	Par value	7,848,461		6,569,580		Par value	20,185,211		6,569,580
Discounts	Discounts	(3,457)		(469)		Discounts	(87,305)		(469)
Concession fees	Concession fees	(123)		(122)		Concession fees	(748)		(122)
Hedging adjustments	Hedging adjustments	(1,230)		—		Hedging adjustments	(20,827)		—
Total discount notes	Total discount notes	7,843,651		6,568,989		Total discount notes	20,076,331		6,568,989
TOTAL	TOTAL	$	46,804,372	$	44,199,598	TOTAL	$	53,004,477	$	44,199,598

Total consolidated obligations increased ~~$2.6~~$8.8 billion, or ~~5.9~~19.9 percent, from December 31, 2021 to ~~March 31, 2022.~~June 30, 2022 aligning with growth in our short-term assets. The distribution between consolidated obligation bonds and discount notes ~~remained relatively consistent~~shifted between periods, from 85.1 percent and 14.9 percent, respectively, at December 31, 2021 to ~~83.2~~62.1 percent and ~~16.8~~37.9 percent at ~~March 31,~~June 30, 2022, respectively. Management increased issuance of discount notes, floating rate term debt, and swapped fixed rate ~~debt, and callable~~ debt as floating rate debt more closely matches asset composition and reprices faster than unswapped fixed rate ~~debt and callable debt has had favorable funding spreads in recent periods.~~debt. Our funding mix generally is driven by asset composition, but we may also shift our debt composition as a result of market conditions that impact the cost of consolidated obligations swapped or indexed to SOFR, Treasury bills, or OIS. All floating rate bonds issued during 2021 and during the first ~~quarter~~half of 2022 were indexed to SOFR as we continue to transition away from LIBOR and maintain ~~our~~an allocation of floating rate bonds funding short-term advances and short-term investments. Management is monitoring the relationship between SOFR-indexed debt and our remaining LIBOR-based assets. For additional information on market trends impacting the cost of issuing debt, including discussion of the transition from LIBOR to an alternate reference rate, see “Financial Market Trends”, “Liquidity and Capital Resources — Liquidity — Sources of Liquidity” and “Risk Management – Interest Rate Risk Management” under this Item 2.

Liquidity and Capital Resources

Liquidity: We maintain high levels of liquidity to achieve our mission of serving as an economical funding source for our members and housing associates. As part of fulfilling our mission, we also maintain minimum liquidity requirements in accordance with certain FHFA regulations and guidelines and in accordance with policies established by management and the board of directors. Our business model enables us to manage the levels of our assets, liabilities, and capital in response to member credit demand, membership composition, and market conditions. As such, assets and liabilities utilized for liquidity purposes can vary significantly in the normal course of business due to the amount and timing of cash flows as a result of these factors.

Table of Contents

Sources and Uses of Liquidity – A primary source of our liquidity is the issuance of consolidated obligations. The capital markets traditionally have treated FHLBank obligations as U.S. government agency debt. As a result, even though the U.S. government does not guarantee FHLBank debt, we generally have comparatively stable access to funding at relatively favorable spreads to U.S. Treasury rates. We are primarily and directly liable for our portion of consolidated obligations (i.e., those obligations issued on our behalf). In addition, we are jointly and severally liable with the other FHLBanks for the payment of principal and interest on the consolidated obligations of all FHLBanks. Our uses of liquidity primarily include issuing advances, purchasing investments and mortgage loans, and repaying called and maturing consolidated obligations for which we are the primary obligor. We also use liquidity to repay member deposits, pledge collateral to derivative counterparties, and redeem or repurchase capital stock. Our other sources of liquidity include our short-term liquidity portfolio, deposit inflows, repayments of advances and mortgage loans, maturing investments, trading and available-for-sale investments, interest income, or the sale of unencumbered assets.

~~Table of Contents~~

During the ~~three~~six months ended ~~March 31,~~June 30, 2022, proceeds (net of premiums and discounts) from the issuance of bonds and discount notes were ~~$12.7~~$19.0 billion and ~~$39.9~~$123.8 billion, respectively, compared to ~~$9.3~~$20.8 billion and ~~$53.6~~$150.6 billion for the ~~three~~six months ended ~~March 31,~~June 30, 2021. The difference between the proceeds from bonds and discount notes reflects the cumulative effect of using short-term discount notes to fund short-term advances and our short-term liquidity portfolio. ~~The change in these issuances year over year reflects the decrease in asset balances and also reflects our composition shift from discount notes to the use of term funding indexed to SOFR.~~

Our short-term liquidity portfolio consists of cash, short-term investments, and long-term investments with remaining maturities of one year or less. Short-term investments may include Federal funds sold, interest-bearing demand deposits, certificates of deposit, and reverse repurchase agreements. The short-term liquidity portfolio increased between periods, from $7.2 billion as of December 31, 2021 to ~~$8.3~~$10.8 billion as of ~~March 31,~~June 30, 2022. The maturities of our short-term investments are structured to provide periodic cash flows to support our ongoing liquidity needs. To enhance our liquidity position, short-term investment securities (i.e., marketable certificates of deposit) are also classified as trading when held so that they can be readily sold should liquidity be needed immediately.

WeInvestment securities on our balance sheet are also ~~maintain~~ a ~~portfolio~~source of potential liquidity. GSE debentures, U.S. Treasury obligations, and GSE MBS ~~that~~ can be sold or pledged as collateral for financing in the securities repurchase agreement market and are classified as trading to enhance our liquidity position. The par value of these debentures and U.S. Treasury obligations was $1.3 billion as of March 31, 2022 and December 31, 2021. The par value of these MBS was $0.8 billion as of March 31, 2022 and December 31, 2021. We also held $2.9 billion and $2.8 billion in par value of U.S. Treasury obligations classified as available-for-sale as of March 31, 2022 and December 31, 2021, respectively, as an additional source of liquidity to satisfy regulatory liquidity requirements.market. In addition to ~~the~~ balance sheet sources of liquidity, ~~discussed previously,~~ we have established lines of credit with numerous counterparties in the Federal funds market as well as with the other FHLBanks. ~~Accordingly,~~To maintain our normal intraday excess liquidity position, we borrowed $500.0 million overnight from another FHLBank based on an unexpected intraday indication of member needs on the last day of the quarter, $200.0 million of which was sold to another FHLBank when the funding need dissipated. We expect to maintain a sufficient level of liquidity for the foreseeable future.

During the ~~three~~six months ended ~~March 31,~~June 30, 2022, advance disbursements totaled ~~$161.3~~$291.8 billion compared to ~~$134.4~~$249.6 billion for the prior year period which reflects increased member utilization of short-term advances. During the ~~three~~six months ended ~~March 31,~~June 30, 2022, investment purchases (excluding overnight investments) totaled ~~$1.6~~$3.4 billion compared to ~~$0.9~~$2.1 billion for the same period in the prior year. During the ~~three~~six months ended ~~March 31,~~June 30, 2022, payments on consolidated obligation bonds and discount notes were ~~$11.1~~$23.3 billion and ~~$38.6~~$110.3 billion, respectively, compared to ~~$12.6~~$26.3 billion and ~~$54.4~~$151.2 billion for the prior year period.

Capital: Total capital increased ~~$63.6~~$280.5 million, or ~~2.3~~10.3 percent, from December 31, 2021 to ~~March 31,~~June 30, 2022 due to an increase in capital stock primarily related to the increase in advances and net income in excess of dividends paid, partially offset by ~~decreases in~~ unrealized ~~gains~~losses on available-for-sale securities ~~and excess stock~~ (see Table ~~28)~~36). We strive to manage our average capital ratio ~~to remain~~ above our minimum regulatory and RMP requirements in an effort to ensure that we have the ability to issue additional consolidated obligations should the need arise. Excess capital capacity ensures we are able to meet the liquidity needs of our members and/or repurchase excess stock either upon the submission of a redemption request by a member or at our discretion for balance sheet or capital management purposes.

Our activity-based stock purchase requirements are consistent with our cooperative structure; members’ stock ownership requirements and the dollar amount of dividends paid to members generally increase as their activities with us increase. To the extent that a member’s asset-based stock purchase requirement is insufficient to cover the member’s activity-based stock purchase requirement, the member is required to purchase Class B Common Stock. We believe the value of our products and services is enhanced by dividend yields that exceed the return available from other investments with similar terms and credit quality. Factors that affect members’ willingness to enter into activity with us and purchase additional required activity-based stock include, but are not limited to, our dividend rates, the risk-based capital weighting of our capital stock, and alternative investment or borrowing opportunities available to our members.

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Table 2836 provides a summary of member capital requirements under our current capital plan as of ~~March 31,~~June 30, 2022 and December 31, 2021 (in thousands):

Table 2836


Requirement	Requirement	03/31/2022		12/31/2021		Requirement	06/30/2022		12/31/2021
Asset-based (Class A Common Stock only)	Asset-based (Class A Common Stock only)	$	172,672	$	172,913	Asset-based (Class A Common Stock only)	$	179,927	$	172,913
Activity-based (additional Class B Common Stock)1	Activity-based (additional Class B Common Stock)1	1,292,190		1,192,421		Activity-based (additional Class B Common Stock)1	1,468,940		1,192,421
Total Required Stock2	Total Required Stock2	1,464,862		1,365,334		Total Required Stock2	1,648,867		1,365,334
Excess Stock (Class A and B Common Stock)	Excess Stock (Class A and B Common Stock)	109,854		134,549		Excess Stock (Class A and B Common Stock)	172,686		134,549
Total Regulatory Capital Stock2	Total Regulatory Capital Stock2	$	1,574,716	$	1,499,883	Total Regulatory Capital Stock2	$	1,821,553	$	1,499,883

Activity-based Requirements:	Activity-based Requirements:					Activity-based Requirements:
Advances3	Advances3	$	1,150,177	$	1,047,866	Advances3	$	1,335,921	$	1,047,866
Letters of credit	Letters of credit	12,094		13,020		Letters of credit	12,264		13,020
AMA assets (mortgage loans)4	AMA assets (mortgage loans)4	236,513		239,577		AMA assets (mortgage loans)4	236,696		239,577
Total Activity-based Requirement	Total Activity-based Requirement	1,398,784		1,300,463		Total Activity-based Requirement	1,584,881		1,300,463
Asset-based Requirement (Class A Common Stock) not supporting member activity1	Asset-based Requirement (Class A Common Stock) not supporting member activity1	66,078		64,871		Asset-based Requirement (Class A Common Stock) not supporting member activity1	63,986		64,871
Total Required Stock2	Total Required Stock2	$	1,464,862	$	1,365,334	Total Required Stock2	$	1,648,867	$	1,365,334

1 Class A Common Stock, up to a member’s asset-based stock requirement, will be used to satisfy a member’s activity-based stock requirement before any Class B Common Stock is purchased by the member.

2 Includes mandatorily redeemable capital stock.

3 Advances to housing associates have no activity-based requirements because housing associates cannot own FHLBank stock.

4 Non-members previously required to purchase AMA activity-based stock are subject to the stock requirement in place at the time their membership ended as long as there are unpaid principal balances outstanding.

We are subject to various capital requirements under provisions of the GLB Act, the FHFA’s capital structure regulation and our RMP. See Item 1 – “Business – Capital, Capital Rules and Dividends” in our annual report on Form 10-K for the year ended December 31, 2021 for details on the various capital requirements. We have been in compliance with each of the capital rules and requirements at all times, as applicable, since the implementation of our capital plan. See Note 10 of the Notes to Financial Statements under Part I, Item 1 for additional information and compliance as of ~~March 31,~~June 30, 2022 and December 31, 2021.

Capital Distributions: Dividends may be paid in cash or capital stock as authorized by our board of directors. Quarterly dividends can be paid out of current and previous unrestricted retained earnings, subject to FHFA regulation and our capital plan.

Dividends paid to members totaled ~~$20.5~~$46.3 million for the ~~three~~six months ended ~~March 31,~~June 30, 2022 compared to ~~$16.3~~$32.0 million for the same period in the prior year. The weighted average dividend rate for the three and six months ended ~~March 31,~~June 30, 2022 was ~~4.88~~5.63 percent and 5.27 percent, respectively, which represented a dividend payout ratio of ~~40.6~~51.3 percent and 46.0 percent, respectively, compared to a weighted average dividend rate of ~~4.15~~4.06 percent and 4.10 percent, and a payout ratio of ~~37.1~~47.8 percent and 41.7 percent for the three and six months ended ~~March 31, 2021.~~June 30, 2021, respectively. The dividend payout ratio represents dividends declared and paid during a period as a percentage of net income for the period, although FHFA regulation requires dividends be paid out of known income prior to the declaration date. For example, dividends declared and paid in ~~March~~June 2022 were based on income during the three months ended ~~February 28,~~May 31, 2022. (See Part I, Item 1 – “Business – Capital, Capital Rules and Dividends” in our annual report on Form 10-K for the year ended December 31, 2021 for other factors that contribute to the level of dividends paid.)

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In accordance with our capital plan, we must pay holders of Class A Common Stock the dividend parity threshold rate before paying a higher rate to holders of Class B Common Stock. The current dividend parity threshold is equal to the average effective overnight Federal funds rate for a dividend period minus 100 basis points and was effective for all dividends paid in 2021 and 2022. The dividend parity threshold is floored at zero percent when the current overnight Federal funds target rate is less than one percent. Table 2937 presents the dividend rates per annum paid on capital stock under our capital plan for the quarterly periods listed below:

Table 2937


Applicable Rate per Annum	Applicable Rate per Annum	03/31/2022		12/31/2021		09/30/2021		06/30/2021		03/31/2021		Applicable Rate per Annum	06/30/2022		03/31/2022		12/31/2021		09/30/2021		06/30/2021
Class A Common Stock	Class A Common Stock	0.25	%	0.25	%	0.25	%	0.25	%	0.25	%	Class A Common Stock	1.00	%	0.25	%	0.25	%	0.25	%	0.25	%
Class B Common Stock1	Class B Common Stock1	5.75		6.75		5.25		5.25		5.25		Class B Common Stock1	6.50		5.75		6.75		5.25		5.25
Weighted Average2	Weighted Average2	4.88		5.62		4.15		4.06		4.15		Weighted Average2	5.63		4.88		5.62		4.15		4.06
Dividend Parity Threshold:	Dividend Parity Threshold:											Dividend Parity Threshold:
Average effective overnight Federal funds rate	Average effective overnight Federal funds rate	0.12	%	0.08	%	0.09	%	0.07	%	0.08	%	Average effective overnight Federal funds rate	0.76	%	0.12	%	0.08	%	0.09	%	0.07	%
Spread to index	Spread to index	(1.00)		(1.00)		(1.00)		(1.00)		(1.00)		Spread to index	(1.00)		(1.00)		(1.00)		(1.00)		(1.00)
TOTAL (floored at zero percent)	TOTAL (floored at zero percent)	0.00	%	0.00	%	0.00	%	0.00	%	0.00	%	TOTAL (floored at zero percent)	0.00	%	0.00	%	0.00	%	0.00	%	0.00	%

1 Includes a special dividend rate of 1.00 percent for the quarterly period ended December 31, 2021 in recognition of the improvement in financial performance.

2 Weighted average dividend rates are dividends paid in cash and stock on both classes of stock divided by the average of capital stock eligible for dividends.

We anticipate that our base stock dividends on Class A Common Stock and Class B Common Stock will remain at or above 2021 levels throughout 2022. Dividend rates typically move directionally with short-term market rates and we expect that trend to continue. Adverse market conditions may result in lower dividend rates in future quarters. While there is no assurance that our board of directors will not change the dividend parity threshold in the future, the capital plan requires that we provide members with 90 days' notice prior to the end of a dividend period in which a different dividend parity threshold is utilized in the payment of a dividend.

Under the capital plan, all dividends paid in the form of capital stock must be paid in the form of Class B Common Stock. We expect to continue paying dividends primarily in the form of capital stock, but future dividends may be paid in cash. The payment of cash dividends instead of stock dividends should not have a significant impact from a liquidity perspective, as the subsequent redemption of excess stock created by stock dividends would utilize liquidity resources in the same manner as a cash dividend.

Risk Management

Active risk management continues to be an essential part of our operations and a key determinant of our ability to maintain earnings to return an acceptable dividend to our members and meet retained earnings thresholds. See Part II, Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Risk Management” in our Form 10-K for information on our enterprise risk management program. A separate discussion of market risk is included under Part I, Item 3 – “Quantitative and Qualitative Disclosures About Market Risk” of this Form 10-Q.

Interest Rate Risk Management: Interest rate risk is the risk that relative and absolute changes in interest rates may adversely affect an institution's financial condition and performance. The goal of an interest rate risk management strategy is not necessarily to eliminate interest rate risk, but to manage it by setting, and operating within, an appropriate framework and limits. We generally manage interest rate risk by acquiring and maintaining a portfolio of assets and liabilities and entering into related derivative transactions to limit the expected mismatches in duration and market value of equity (MVE) sensitivity. See Part I, Item 3 - “Quantitative and Qualitative Disclosures About Market Risk” for additional information on interest rate risk measurement.

Transition from LIBOR to an Alternative Reference Rate – Some of our ~~assets, liabilities,~~investments, derivatives, and collateral pledged are indexed to LIBOR, with exposure extending past June 30, 2023. We have assessed our current LIBOR exposure, which included evaluating the fallback language of derivative and investment contracts indexed to LIBOR, and have developed a transition plan for the eventual replacement of LIBOR that includes strategies to manage and reduce exposure, operating under the assumption that SOFR will become the dominant replacement in the capital markets. On July 1, 2021, the FHFA issued a Supervisory Letter to the FHLBanks regarding an FHLBank’s use of alternative rates other than SOFR. The Supervisory Letter provides guidance on considerations such as volume of underlying transactions, credit sensitivity and modeling risk, among others, that an FHLBank should consider prior to using an alternative reference rate.

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The publication of LIBOR on a representative basis ceased for one-week and two-month LIBOR as of January 1, 2022, and the remaining LIBOR tenors will cease immediately after June 30, 2023. Although the Financial Conduct Authority does not expect LIBOR to become unrepresentative before the 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 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. As of ~~March 31,~~June 30, 2022, all of our exposure to LIBOR was in investments and in derivatives hedging ~~investments and~~ consolidated obligation bonds and investments (indexed to the one-month and three-month tenors). We are prohibited by our regulator ~~to enter~~from entering into new financial assets, liabilities, or derivatives that reference ~~LIBOR but we may use a LIBOR-indexed interest rate swap to reduce basis risk between LIBOR and SOFR.~~LIBOR.

As part of our transition plan, we transferred LIBOR-indexed MBS with an amortized cost of $2.0 billion from held-to-maturity to available-for-sale during the second quarter of 2021. This transfer will enable us to sell these securities to reduce LIBOR exposure when market conditions and reinvestment opportunities are favorable. Market activity in SOFR-based financial instruments continues to develop. We offer advances indexed to SOFR and issue variable rate consolidated obligation bonds indexed to SOFR. In addition, we have been using SOFR- and OIS-based derivatives to manage interest-rate risk and reduce funding costs.

All variable rate advances indexed to LIBOR ~~have~~ matured ~~as of March~~prior to December 31, ~~2022.~~2021. We ~~have $2.0~~had $2.2 billion in advances indexed to SOFR outstanding as of ~~March 31,~~June 30, 2022.

Table 3038 presents the par value of variable rate investment securities by the related interest rate index as of ~~March 31,~~June 30, 2022 (dollar amounts in thousands):

Table 3038


03/31/2022
06/30/2022						06/30/2022
Index	Index	Amount		Percent		Index	Amount		Percent
Non-mortgage-backed securities:	Non-mortgage-backed securities:					Non-mortgage-backed securities:
LIBOR	LIBOR	$	74,865	3.1	%	LIBOR	$	73,940	2.8	%

Non-mortgage-backed securities	Non-mortgage-backed securities	74,865		3.1		Non-mortgage-backed securities	73,940		2.8
Mortgage-backed securities:	Mortgage-backed securities:					Mortgage-backed securities:
LIBOR	LIBOR	1,771,822		74.4		LIBOR	1,662,382		64.0
SOFR	SOFR	533,659		22.4		SOFR	863,193		33.2

Other	Other	19		0.1		Other	18		—
Mortgage-backed securities	Mortgage-backed securities	2,305,500		96.9		Mortgage-backed securities	2,525,593		97.2
TOTAL	TOTAL	$	2,380,365	100.0	%	TOTAL	$	2,599,533	100.0	%

Table 3139 presents the par value of investment securities indexed to LIBOR outstanding by year of contractual maturity as of ~~March 31,~~June 30, 2022 (in thousands):

Table 3139

03/31/2022

06/30/2022

Year of Contractual Maturity

Amount

Year of Contractual Maturity

Amount

Non-mortgage-backed securities:

After June 30, 2023

74,865

After June 30, 2023

73,940

Non-mortgage-backed securities

74,865

Non-mortgage-backed securities

73,940

Mortgage-backed securities:

2022

35,690

2022

20,300

Through June 30, 2023

76,257

Through June 30, 2023

61,482

Thereafter

1,659,875

Thereafter

1,580,600

Mortgage-backed securities

1,771,822

Mortgage-backed securities

1,662,382

TOTAL

1,846,687

TOTAL

1,736,322

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Table 3240 presents the notional amount of interest rate swaps (excludes interest rate caps and mortgage delivery commitments) by related interest rate index as of ~~March 31,~~June 30, 2022 (amounts in thousands):

Table 3240


03/31/2022
06/30/2022						06/30/2022
Index	Index	Pay Side		Receive Side		Index	Pay Side		Receive Side
Fixed rate	Fixed rate	$	14,395,497	$	11,108,244	Fixed rate	$	13,953,230	$	21,249,130
LIBOR	LIBOR	25,000		4,769,475		LIBOR	25,000		4,076,484
SOFR	SOFR	9,448,244		7,739,722		SOFR	19,393,956		8,086,551
OIS	OIS	1,635,000		1,886,300		OIS	1,830,173		1,790,194

TOTAL	TOTAL	$	25,503,741	$	25,503,741	TOTAL	$	35,202,359	$	35,202,359

Table 3341 presents the notional amount of interest rate swaps (excludes interest rate caps and mortgage delivery commitments) indexed to LIBOR outstanding by termination date as of ~~March 31,~~June 30, 2022 (in thousands). Actual terminations of certain derivatives will differ from contractual termination dates because derivative counterparties may have call options within the derivative contracts. Likewise, if the financial instrument being hedged by the derivative (either as a qualifying fair value hedge or as an economic hedge) is called or paid off prior to contractual maturity, we could potentially call or terminate the corresponding derivative prior to the termination date.

Table 3341


03/31/2022
06/30/2022										06/30/2022
Year	Year	Pay Side				Receive Side				Year	Pay Side				Receive Side
		Cleared		Bilateral		Cleared		Bilateral			Cleared		Bilateral		Cleared		Bilateral

2022	2022	$	—	$	—	$	71,230	$	35,000	2022	$	—	$	—	$	31,330	$	2,850
Prior to June 30, 2023	Prior to June 30, 2023	—		—		301,065		—		Prior to June 30, 2023	—		—		301,023		—
Thereafter	Thereafter	—		25,000		887,647		3,474,533		Thereafter	—		25,000		870,301		2,870,980
TOTAL	TOTAL	$	—	$	25,000	$	1,259,942	$	3,509,533	TOTAL	$	—	$	25,000	$	1,202,654	$	2,873,830

As of ~~March 31,~~June 30, 2022, all ~~$18.7~~$13.7 billion of variable rate consolidated obligation bonds were indexed to SOFR. As of December 31, 2021, all LIBOR-indexed consolidated obligation bonds had matured.

Recently Issued Accounting Standards

See Note 2 of the Notes to Financial Statements under Part I, Item 1 – "Financial Statements" for a discussion of recently issued accounting standards.

Table of Contents

Legislative and Regulatory Developments

FHFA Director’s Testimony to the House Financial Services Committee on a Planned Review of the FHLBank System. On July 20, 2022, FHFA Director Sandra Thompson gave testimony to the House Financial Services Committee indicating that the FHFA intends to review the FHLBank System. Director Thompson’s testimony indicated that the FHFA plans to engage a variety of stakeholders in addition to holding public listening sessions throughout the country as part of the review. The Director’s testimony also indicated that the review would examine matters ranging from the System’s membership base, operational efficiency, and effectiveness to more foundational questions about their mission, purpose, and organization. At this time, it is not possible to determine when these events will occur, whether any actions will result from these events, and how these events will ultimately impact us or the FHLBank System as a whole.

Proposed Rule Implementing the Adjustable Interest Rate (LIBOR) ~~Act.~~Act. On ~~March 15,~~July 28, 2022, ~~President Biden signed into law~~ the ~~Economic Continuity and Stability Act, which act includes~~Board of Governors of the Federal Reserve System (Board) published a proposed rule with a comment deadline of August 29, 2022 that would implement the LIBOR Act. The proposed rule would provide default rules for certain contracts (covered contracts) that reference LIBOR, ~~Act addresses certain issues of contractual uncertainty arising from the phase out of the publication of LIBOR. The LIBOR Act provides a national, uniform approach to legacy contracts with inadequate~~are governed by U.S. law, do not mature on or ~~unworkable fallback provisions commencing from~~before the LIBOR replacement ~~date.~~date, and lack adequate provisions to identify a replacement rate for LIBOR. The LIBOR replacement date is currently July 3, 2023. The proposed rule identifies separate Board-selected replacement rates for derivatives transactions, covered GSE contracts, and all other covered contracts. The proposed rule defines covered GSE contracts to include FHLBank advances. We are reviewing the ~~first London banking date after June 30, 2023 or such other date~~proposed rule; however, it is not possible to determine the extent to which the rule will be adopted as proposed and, as a result, the ~~Federal Reserve Board~~impact the final rule 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 replace 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 take steps to mitigate the risks that arise from the phase out of LIBOR.have on us.

Amendment to FINRA Rule 4210: Margining of Covered Agency ~~Transactions~~Transactions. . On ~~February 25,~~July 29, 2022, the Financial Industries Regulatory Authority (FINRA) ~~extended~~filed a proposed rule with the SEC that will extend the implementation date of its amendments to FINRA Rule 4210 delaying the effectiveness of margining requirements for covered agency transactions ~~until~~from October 26, ~~2022.~~2022 until at least April 24, 2023. Once the margining requirements are effective, we may be required to collateralize our transactions that are covered agency transactions, which include to be announced transactions (TBAs). These collateralization requirements could have the effect of reducing the overall profitability of engaging in covered agency transactions, including TBAs. ~~Further, any collateralization requirements would expose us~~We do not expect this rule to ~~credit risk from our counterparties to such transactions.~~

~~Table of Contents~~

~~Proposed SEC Rule on Climate-related Disclosures. On March 21, 2022, the SEC issued~~have a proposed rule on climate-related disclosures that would require us to expand the breadth, specificity and rigor of climate-related disclosures in our periodic reports. More specifically, the proposed rule would require us to disclose our:

•~~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~~material effect on our ~~business;~~

•~~Climate-related risks in qualitative and quantitative terms in the notes to our~~ financial ~~statements; and~~

•~~Corporate governance~~condition or results of ~~climate-related risks and risk management processes.~~operations.

Compliance would be phased-in with us becoming subject to certain disclosure requirements for our annual report for fiscal year 2024 and additional disclosure requirements for our annual report for fiscal year 2025.

We continue to review the proposed rule, but expect that it would result in increased costs and complexity associated with our 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; the extent to which any final rule will deviate from the proposed rule; and the extent to which we would be required to comply with any final rule.

Item 3: Quantitative and Qualitative Disclosures About Market Risk

We measure interest rate risk exposure by various methods, including the calculation of duration of equity (DOE) and MVE in different interest rate scenarios. We manage DOE and MVE within limits approved by the board of directors as described under Part II, Item 7A - "Quantitative and Qualitative Disclosures About Market Risk" in the annual report on Form 10-K, incorporated by reference herein

Duration of Equity

DOE measures the price sensitivity of our financial assets and liabilities to changes in interest rates. Higher DOE numbers, whether positive or negative, indicate greater volatility of MVE in response to changing interest rates.

While our DOE is generally limited by policy to a range of ±5.0 in the base case, we typically manage our DOE in the base scenario to remain in the range of ±2.5, assuming an instantaneous parallel increase or decrease in market rates. All DOE measurements were in compliance with board of director established policy limits and operating ranges as of ~~March 31,~~June 30, 2022. On an ongoing basis, we actively monitor portfolio relationships and overall DOE dynamics as a part of our evaluation processes for determining acceptable future asset/liability management actions.

This lower operating range for DOE is considered prudent and reasonable by management and the board of directors and can change depending upon market conditions and other factors. However, when DOE exceeds either the limits established by the RMP or the more narrowly defined ranges to which we manage DOE, corrective actions taken may include: (1) the purchase of interest rate caps, interest rate floors or other derivatives; (2) the sale of assets or calling of debt; and/or (3) the addition to the balance sheet of assets or liabilities having characteristics that allow for the management of the duration profile. We regularly evaluate balance sheet composition along with strategic alternatives to manage the relative position of DOE.

Table 34of Contents

Table 42 presents the DOE in the base case and the up and down 200 basis point interest rate shock scenarios as of the periods noted:

Table 3442


Duration of Equity	Duration of Equity			Duration of Equity
Date	Date	Up 200 Basis Points	Base		Down 200 Basis Points	Date	Up 200 Basis Points	Base	Down 200 Basis Points
06/30/2022						06/30/2022	1.6	2.2	3.3
03/31/2022	03/31/2022	1.5	0.7		3.4	03/31/2022	1.5	0.7	3.4
12/31/2021	12/31/2021	0.6	-0.4		1.5	12/31/2021	0.6	-0.4	1.5
09/30/2021	09/30/2021	0.4	-2.7		1.5	09/30/2021	0.4	-2.7	1.5
06/30/2021	06/30/2021	-0.1	-2.4		1.2	06/30/2021	-0.1	-2.4	1.2
03/31/2021		-0.4	-4.0		1.7

~~Table of Contents~~

The absolute value of the DOE of the portfolio as of ~~March 31,~~June 30, 2022 increased in ~~all~~the base scenario and was relatively unchanged in the up and down 200 basis point interest rate shock scenarios from ~~December~~March 31, ~~2021.~~2022. The primary factors contributing to these changes in duration during the period were: (1) the significant increase in interest rates and the relative level of mortgage prices and rates during the period; (2) the ~~increase~~relative decrease in the weighted contribution of the mortgage loan portfolio and the unswapped callable consolidated obligation bond portfolio as a percent of the overall balance sheet duration during the period; and (3) asset/liability actions taken by management throughout the period, including the continued issuance of discount notes and short-term variable rate consolidated obligations to fund ~~changes in~~new advance ~~balances.~~activity. The increase in interest rates during the period caused the mortgage loan portfolio duration to lengthen more than the associated liabilities, contributing to the increasing asset sensitive DOE profile in the base ~~case scenario.~~case. The mortgage loan portfolio generally has a longer duration profile in the interest rate shock scenarios contributing to ~~an increasing asset sensitive~~the asset-sensitive DOE in the up and down 200 basis point shock scenarios. However, the prepayment sensitivity and market value changes in our mortgage portfolio currently align well with our non-swapped callable debt portfolio in these scenarios generating a relatively stable sensitivity profile in the interest rate shock scenarios. This sensitivity, or convexity, is further described under Part II, Item 7A – “Quantitative and Qualitative Disclosures About Market Risk” in the annual report on Form 10-K for the year ended December 31, 2021.

Market Value of Equity

MVE is the net value of our assets and liabilities. Estimating sensitivity of MVE to changes in interest rates is another measure of interest rate risk. The RMP measures our market value risk in terms of the MVE in relation to total regulatory capital stock outstanding (TRCS). TRCS includes all capital stock outstanding, including stock subject to mandatory redemption. As a cooperative, we believe using the TRCS results is an appropriate measure because it reflects our market value relative to the book value of our capital stock. Our RMP stipulates MVE shall not be less than: (1) 100 percent of TRCS under the base case scenario; or (2) 90 percent of TRCS under a ±200 basis point instantaneous parallel shock in interest rates. Table 3543 presents MVE as a percent of TRCS. As of ~~March 31,~~June 30, 2022, all scenarios are well above the specified limits and much of the relative level in the ratios during the periods covered by the table can be attributed to the relative level of the fixed rate mortgage loan and associated funding portfolio market values along with the relative level of outstanding capital.

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The MVE to TRCS ratios can be ~~greatly~~ impacted by the market value of equity sensitivity and level of capital outstanding based on our capital management approach. The relative level of advance, mortgage loan, and letters of credit balances, which trigger required stock, and excess stock as of ~~March 31,~~June 30, 2022 (see Table 2836 under Part I, Item 2 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources - Capital”) contributed to the MVE levels as of ~~March 31,~~June 30, 2022. These relationships and associated risk sensitivity primarily generate the changes in the MVE/TRCS levels and produce the changes in the ratios in all interest rate scenarios in the table below.

Generally, a positive duration position accompanied by rising interest rates would negatively impact the base market value of equity (numerator). Likewise, as capital increases, the MVE/TRCS ratio declines since the capital level is the denominator in the ratio. While rising interest rates contributed to a negative impact on base MVE during the quarter, the declining trend in the following ratios in the second quarter of 2022 and over the past few quarters is primarily the result of the increasing capital position as discussed and referenced above.

Table 3543


Market Value of Equity as a Percent of Total Regulatory Capital Stock	Market Value of Equity as a Percent of Total Regulatory Capital Stock			Market Value of Equity as a Percent of Total Regulatory Capital Stock
Date	Date	Up 200 Basis Points	Base		Down 200 Basis Points	Date	Up 200 Basis Points	Base	Down 200 Basis Points
06/30/2022						06/30/2022	154	159	168
03/31/2022	03/31/2022	176	177		182	03/31/2022	176	177	182
12/31/2021	12/31/2021	186	184		195	12/31/2021	186	184	195
09/30/2021	09/30/2021	209	201		206	09/30/2021	209	201	206
06/30/2021	06/30/2021	201	192		196	06/30/2021	201	192	196
03/31/2021		205	194		191

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Detail of Derivative Instruments by Type of Instrument by Type of Risk

Various types of derivative instruments are utilized to mitigate the interest rate risks described in the preceding sections as well as to better match the terms of assets and liabilities. Tables 3644 and 3745 present the notional amount and fair value amount (fair value includes net accrued interest receivable or payable on the derivative) for derivative instruments by hedged item, hedging instrument, hedging objective and accounting designation (in thousands):

Table 3644

03/31/2022

06/30/2022

Hedged Item

Hedging Instrument

Hedging Objective

Accounting Designation

Notional Amount

Fair Value Amount

Hedged Item

Hedging Instrument

Hedging Objective

Accounting Designation

Notional Amount

Fair Value Amount

Advances

Fixed rate non-callable advances

Pay fixed, receive variable interest rate swap

Convert the advance’s fixed rate to a variable rate index

Fair Value Hedge

5,278,642

8,993

Fixed rate non-callable advances

Pay fixed, receive variable interest rate swap

Convert the advance’s fixed rate to a variable rate index

Fair Value Hedge

5,502,629

(2,132)

Fixed rate convertible advances

Pay fixed, receive variable interest rate swap

Convert the advance’s fixed rate to a variable rate index and offset option risk in the advance

Fair Value Hedge

1,333,150

(7,712)

Fixed rate convertible advances

Pay fixed, receive variable interest rate swap

Convert the advance’s fixed rate to a variable rate index and offset option risk in the advance

Fair Value Hedge

728,600

3,598

Firm commitment to issue a fixed rate advance

Forward settling interest rate swap

Protect against fair value risk

Economic Hedge

2,490

—

Fixed rate non-callable advances

Pay fixed, receive variable interest rate swap

Convert the advance’s fixed rate to a variable rate index

Economic Hedge

31,977

(251)

Fixed rate non-callable advances

Pay fixed, receive variable interest rate swap

Convert the advance’s fixed rate to a variable rate index

Economic Hedge

34,362

263

Firm commitment to issue a fixed rate advance

Forward settling interest rate swap

Protect against fair value risk

Fair Value Hedge

29,316

494

Firm commitment to issue a fixed rate advance

Forward settling interest rate swap

Protect against fair value risk

Fair Value Hedge

26,370

766

Investments

Fixed rate non-MBS available-for-sale investments

Pay fixed, receive variable interest rate swap

Convert the investment’s fixed rate to a variable rate index

Fair Value Hedge

2,750,000

(1,173)

Fixed rate non-MBS available-for-sale investments

Pay fixed, receive variable interest rate swap

Convert the investment’s fixed rate to a variable rate index

Fair Value Hedge

2,850,000

(9,058)

Fixed rate MBS available-for-sale investments

Pay fixed, receive variable interest rate swap

Convert the investment’s fixed rate to a variable rate index

Fair Value Hedge

2,933,444

6,075

Fixed rate MBS available-for-sale investments

Pay fixed, receive variable interest rate swap

Convert the investment’s fixed rate to a variable rate index

Fair Value Hedge

3,105,163

23,193

Fixed rate non-MBS trading investments

Pay fixed, receive variable interest rate swap

Convert the investment’s fixed rate to a variable rate index

Economic Hedge

1,298,500

482

Fixed rate non-MBS trading investments

Pay fixed, receive variable interest rate swap

Convert the investment’s fixed rate to a variable rate index

Economic Hedge

1,048,500

(1,342)

Fixed rate MBS trading investments

Pay fixed, receive variable interest rate swap

Convert the investment’s fixed rate to a variable rate index

Economic Hedge

737,978

5,589

Fixed rate MBS trading investments

Pay fixed, receive variable interest rate swap

Convert the investment’s fixed rate to a variable rate index

Economic Hedge

657,605

15,141

Adjustable rate MBS with embedded caps

Interest rate cap

Offset the interest rate cap embedded in a variable rate investment

Economic Hedge

354,000

1,276

Adjustable rate MBS with embedded caps

Interest rate cap

Offset the interest rate cap embedded in a variable rate investment

Economic Hedge

329,000

1,421

Mortgage Loans Held for Portfolio

Fixed rate mortgage purchase commitments

Mortgage purchase commitment

Protect against fair value risk

Economic Hedge

129,831

(1,906)

Fixed rate mortgage purchase commitments

Mortgage purchase commitment

Protect against fair value risk

Economic Hedge

101,659

(17)

Consolidated Obligation Discount Notes

Fixed rate non-callable consolidated obligation discount notes with tenors less than 6 months

Receive fixed, pay variable interest rate swap

Convert the discount note's fixed rate to a variable rate

Economic Hedge

3,714,902

268

Fixed rate non-callable consolidated obligation discount notes with tenors of 6 to 12 months

Receive fixed, pay variable interest rate swap

Convert the discount note's fixed rate to a variable rate

Fair Value Hedge

698,244

(102)

Fixed rate non-callable consolidated obligation discount notes with tenors of 6 to 12 months

Receive fixed, pay variable interest rate swap

Convert the discount note's fixed rate to a variable rate

Fair Value Hedge

6,913,228

2,530

Consolidated Obligation Bonds

Fixed rate non-callable consolidated obligation bonds

Receive fixed, pay variable interest rate swap

Convert the bond’s fixed rate to a variable rate index

Fair Value Hedge

2,707,000

5,044

Fixed rate non-callable consolidated obligation bonds

Receive fixed, pay variable interest rate swap

Convert the bond’s fixed rate to a variable rate index

Fair Value Hedge

432,000

(644)

Fixed rate callable consolidated obligation bonds

Receive fixed, pay variable interest rate swap

Convert the bond’s fixed rate to a variable rate index and offset option risk in the bond

Fair Value Hedge

6,201,000

(230,703)

Fixed rate callable consolidated obligation bonds

Receive fixed, pay variable interest rate swap

Convert the bond’s fixed rate to a variable rate index and offset option risk in the bond

Fair Value Hedge

8,037,000

(309,546)

Variable rate consolidated obligation bonds

Receive variable interest rate, pay variable interest rate swap

Reduce basis risk by converting an undesirable variable rate index in the bond to a more desirable variable rate index

Economic Hedge

50,000

125

Callable step-up/step-down consolidated obligation bonds

Receive variable interest rate with embedded features, pay variable interest rate swap

Reduce interest rate sensitivity and repricing gaps by converting the bond’s variable rate to a different variable rate index and/or to offset embedded options risk in the bond

Fair Value Hedge

2,102,000

(86,251)

Callable step-up/step-down consolidated obligation bonds

Receive variable interest rate with embedded features, pay variable interest rate swap

Reduce interest rate sensitivity and repricing gaps by converting the bond’s variable rate to a different variable rate index and/or to offset embedded options risk in the bond

Fair Value Hedge

1,487,000

(63,208)

Firm commitment to issue a consolidated obligation bond

Receive fixed, pay variable interest rate swap

Protect against fair value risk

Fair Value Hedge

15,000

(165)

TOTAL

25,987,572

(277,267)

TOTAL

35,633,018

(361,685)

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Table 3745

12/31/2021

Hedged Item

Hedging Instrument

Hedging Objective

Accounting Designation

Notional Amount

Fair Value Amount

Advances

Fixed rate non-callable advances

Pay fixed, receive variable interest rate swap

Convert the advance’s fixed rate to a variable rate index

Fair Value Hedge

4,808,953

(7,734)

Fixed rate convertible advances

Pay fixed, receive variable interest rate swap

Convert the advance’s fixed rate to a variable rate index and offset option risk in the advance

Fair Value Hedge

1,385,150

(38,292)

Fixed rate non-callable advances

Pay fixed, receive variable interest rate swap

Convert the advance’s fixed rate to a variable rate index

Economic Hedge

37,977

(1,189)

Firm commitment to issue a fixed rate advance

Forward settling interest rate swap

Protect against fair value risk

Fair Value Hedge

18,316

232

Firm commitment to issue a fixed rate advance

Forward settling interest rate swap

Protect against fair value risk

Economic Hedge

2,490

—

Investments

Fixed rate MBS available-for-sale investments

Pay fixed, receive variable interest rate swap

Convert the investment’s fixed rate to a variable rate index

Fair Value Hedge

2,970,019

(57,966)

Fixed rate non-MBS available-for-sale investments

Pay fixed, receive variable interest rate swap

Convert the investment’s fixed rate to a variable rate index

Fair Value Hedge

2,700,000

(424)

Fixed rate non-MBS trading investments

Pay fixed, receive variable interest rate swap

Convert the investment’s fixed rate to a variable rate index

Economic Hedge

1,298,500

(115)

Fixed rate MBS trading investments

Pay fixed, receive variable interest rate swap

Convert the investment’s fixed rate to a variable rate index

Economic Hedge

740,863

(27,654)

Adjustable rate MBS with embedded caps

Interest rate cap

Offset the interest rate cap embedded in a variable rate investment

Economic Hedge

477,500

335

Mortgage Loans Held for Portfolio

Fixed rate mortgage purchase commitments

Mortgage purchase commitment

Protect against fair value risk

Economic Hedge

72,025

(13)

Consolidated Obligation Bonds

Fixed rate callable consolidated obligation bonds

Receive fixed, pay variable interest rate swap

Convert the bond’s fixed rate to a variable rate index and offset option risk in the bond

Fair Value Hedge

4,682,000

(35,627)

Fixed rate non-callable consolidated obligation bonds

Receive fixed, pay variable interest rate swap

Convert the bond’s fixed rate to a variable rate index

Fair Value Hedge

1,187,000

14,261

Callable step-up/step-down consolidated obligation bonds

Receive variable interest rate with embedded features, pay variable interest rate swap

Reduce interest rate sensitivity and repricing gaps by converting the bond’s variable rate to a different variable rate index and/or to offset embedded options risk in the bond

Fair Value Hedge

924,000

(10,017)

Firm commitment to issue a consolidated obligation bond

Receive fixed, pay variable interest rate swap

Protect against fair value risk

Fair Value Hedge

20,000

(57)

TOTAL

21,324,793

(164,260)

7789

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Item 4: Controls and Procedures

Disclosure Controls and Procedures

Senior management is responsible for establishing and maintaining a system of disclosure controls and procedures designed to ensure that information required to be disclosed in the reports filed or submitted under the Securities Exchange Act of 1934 (Exchange Act) is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. Our disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is accumulated and communicated to management, including our principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Our disclosure controls and procedures are designed to provide a reasonable level of assurance in achieving their desired objectives; however, in designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

Management, with the participation of the President and Chief Executive Officer (CEO), our principal executive officer, and the Chief Financial Officer (CFO), our principal financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of ~~March 31,~~June 30, 2022. Based upon that evaluation, the CEO and CFO have concluded that our disclosure controls and procedures were effective at a reasonable assurance level as of ~~March 31,~~June 30, 2022.

Changes in Internal Control Over Financial Reporting

There has been no change in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the fiscal quarter ended ~~March 31,~~June 30, 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Part II. OTHER INFORMATION

Item 1: Legal Proceedings

We are subject to various pending legal proceedings arising in the normal course of business. After consultation with legal counsel, management does not anticipate that the ultimate liability, if any, arising out of these matters will have a material adverse effect on our financial condition or results of operations. Additionally, management does not believe that we are subject to any material pending legal proceedings outside of ordinary litigation incidental to our business.

Item 1A: Risk Factors

There have been no material changes to the risk factors previously disclosed in our annual report on Form 10-K filed on March 21, 2022, and such risk factors are incorporated by reference herein.

Item 2: Unregistered Sales of Equity Securities and Use of Proceeds

Not applicable.

Item 3: Defaults Upon Senior Securities

Not applicable.

Item 4: Mine Safety Disclosures

Not applicable.

Item 5: Other Information

None.

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Item 6: Exhibits


Exhibit No.			Description
3.1			Exhibit 3.1 to the FHLBank’s registration statement on Form 10, filed May 15, 2006, and made effective on July 14, 2006 (File No. 000-52004), Federal Home Loan Bank of Topeka Articles and Organization Certificate, is incorporated herein by reference as Exhibit 3.1.
3.2			Exhibit 3.1 to the Current Report on Form 8-K, filed September 24, 2021, Federal Home Loan Bank of Topeka Amended and Restated Bylaws, is incorporated herein by reference as Exhibit 3.2.
4.1			Exhibit 4.1 to the Annual Report on Form 10-K, filed March 20, 2020, Federal Home Loan Bank of Topeka Capital Plan.
31.1			Certification of President and Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2			Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32			Certification of President and Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer) pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS			Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)
101.SCH			Inline XBRL Taxonomy Extension Schema Document
101.CAL			Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB			Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE			Inline XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF			Inline XBRL Taxonomy Extension Definition Linkbase Document
104			Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

* Represents a management contract or a compensatory plan or arrangement.

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SIGNATURES

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


			Federal Home Loan Bank of Topeka


~~May 10,~~August 11, 2022			By: /s/ Mark E. Yardley
Date			Mark E. Yardley
			President and Chief Executive Officer

8092