UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended ~~September 30, 2022~~March 31, 2023

☐ 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
			~~October 31, 2022~~April 28, 2023
Class A Stock, par value $100 per share			~~2,592,816~~4,661,973
Class B Stock, par value $100 per share			~~20,207,779~~23,334,215

.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	1211
	Statements of Cash Flows	1312
	Notes to Financial Statements	1514
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4944
	Executive Level Overview	5045
	Financial Market Trends	5247
	Critical Accounting Policies and Estimates	5348
	Results of Operations	5349
	Financial Condition	6556
	Liquidity and Capital Resources	7869
	Risk Management	8172
	Recently Issued Accounting Standards	8474
	Legislative and Regulatory Developments	8474
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	8475
Item 4.	Controls and Procedures	8880
Part II	OTHER INFORMATION	8880
Item 1.	Legal Proceedings	8880
Item 1A.	Risk Factors	8880
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	8880
Item 3.	Defaults Upon Senior Securities	8880
Item 4.	Mine Safety Disclosures	8880
Item 5.	Other Information	8880
Item 6.	Exhibits	8981

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, 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, pandemics, 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 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,~~2022, 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)
		09/30/2022		12/31/2021			03/31/2023		12/31/2022
ASSETS	ASSETS					ASSETS
Cash and due from banks	Cash and due from banks	$	25,689	$	25,841	Cash and due from banks	$	25,295	$	25,964
Interest-bearing deposits	Interest-bearing deposits	780,741		693,249		Interest-bearing deposits	2,113,940		2,039,852
Securities purchased under agreements to resell (Note 9)	Securities purchased under agreements to resell (Note 9)	3,250,000		1,500,000		Securities purchased under agreements to resell (Note 9)	3,600,000		2,350,000
Federal funds sold	Federal funds sold	4,705,000		3,360,000		Federal funds sold	2,975,000		3,750,000

Investment securities:	Investment securities:					Investment securities:
Trading securities (Note 3)	Trading securities (Note 3)	2,173,995		2,339,955		Trading securities (Note 3)	1,427,002		1,421,453
Available-for-sale securities, amortized cost of $8,499,573 and $7,644,496 (Note 3)		8,449,382		7,719,185
Held-to-maturity securities, fair value of $358,456 and $450,771 (Note 3)		361,018		446,185
Available-for-sale securities, amortized cost of $9,466,345 and $9,438,859 (Note 3)						Available-for-sale securities, amortized cost of $9,466,345 and $9,438,859 (Note 3)	9,383,789		9,354,416
Held-to-maturity securities, fair value of $327,896 and $340,259 (Note 3)						Held-to-maturity securities, fair value of $327,896 and $340,259 (Note 3)	331,735		345,430
Total investment securities	Total investment securities	10,984,395		10,505,325		Total investment securities	11,142,526		11,121,299

Advances (Note 4)	Advances (Note 4)	35,318,980		23,484,288		Advances (Note 4)	46,456,748		44,262,750

Mortgage loans held for portfolio, net of allowance for credit losses of $5,368 and $5,317 (Note 5)		7,998,911		8,135,046
Mortgage loans held for portfolio, net of allowance for credit losses of $5,836 and $6,378 (Note 5)						Mortgage loans held for portfolio, net of allowance for credit losses of $5,836 and $6,378 (Note 5)	7,925,256		7,905,135

Accrued interest receivable	Accrued interest receivable	124,579		78,032		Accrued interest receivable	196,675		186,594

Derivative assets, net (Notes 6, 9)	Derivative assets, net (Notes 6, 9)	234,177		156,926		Derivative assets, net (Notes 6, 9)	321,958		272,076
Other assets	Other assets	77,801		82,531		Other assets	80,797		79,172

TOTAL ASSETS	TOTAL ASSETS	$	63,500,273	$	48,021,238	TOTAL ASSETS	$	74,838,195	$	71,992,842

LIABILITIES	LIABILITIES					LIABILITIES
Deposits (Note 7)	Deposits (Note 7)	$	667,970	$	946,207	Deposits (Note 7)	$	955,321	$	711,061

Consolidated obligations, net:	Consolidated obligations, net:					Consolidated obligations, net:
Discount notes (Note 8)	Discount notes (Note 8)	22,661,403		6,568,989		Discount notes (Note 8)	20,972,372		24,775,405
Bonds (Note 8)	Bonds (Note 8)	36,575,211		37,630,609		Bonds (Note 8)	48,514,875		42,505,839
Total consolidated obligations, net	Total consolidated obligations, net	59,236,614		44,199,598		Total consolidated obligations, net	69,487,247		67,281,244

Mandatorily redeemable capital stock (Note 10)	Mandatorily redeemable capital stock (Note 10)	292		582		Mandatorily redeemable capital stock (Note 10)	269		280
Accrued interest payable	Accrued interest payable	118,862		42,753		Accrued interest payable	266,118		197,175
Affordable Housing Program payable	Affordable Housing Program payable	47,864		42,224		Affordable Housing Program payable	61,439		53,635
Derivative liabilities, net (Notes 6, 9)	Derivative liabilities, net (Notes 6, 9)	14,852		4,580		Derivative liabilities, net (Notes 6, 9)	2,452		2,359
Other liabilities	Other liabilities	118,308		71,028		Other liabilities	199,902		70,544

TOTAL LIABILITIES	TOTAL LIABILITIES	60,204,762		45,306,972		TOTAL LIABILITIES	70,972,748		68,316,298

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

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)
		09/30/2022		12/31/2021			03/31/2023		12/31/2022

CAPITAL	CAPITAL					CAPITAL
Capital stock outstanding - putable:	Capital stock outstanding - putable:					Capital stock outstanding - putable:
Class A ($100 par value; 2,753 and 2,342 shares issued and outstanding) (Note 10)		$	275,296	$	234,190
Class B ($100 par value; 18,450 and 12,651 shares issued and outstanding) (Note 10)		1,844,977		1,265,111
Class A ($100 par value; 2,924 and 2,388 shares issued and outstanding) (Note 10)						Class A ($100 par value; 2,924 and 2,388 shares issued and outstanding) (Note 10)	$	292,424	$	238,777
Class B ($100 par value; 23,697 and 22,689 shares issued and outstanding) (Note 10)						Class B ($100 par value; 23,697 and 22,689 shares issued and outstanding) (Note 10)	2,369,665		2,268,932
Total capital stock	Total capital stock	2,120,273		1,499,301		Total capital stock	2,662,089		2,507,709

Retained earnings:	Retained earnings:					Retained earnings:
Unrestricted	Unrestricted	903,839		852,408		Unrestricted	930,383		914,716
Restricted	Restricted	323,777		290,242		Restricted	355,358		338,389
Total retained earnings	Total retained earnings	1,227,616		1,142,650		Total retained earnings	1,285,741		1,253,105

Accumulated other comprehensive income (loss) (Note 11)	Accumulated other comprehensive income (loss) (Note 11)	(52,378)		72,315		Accumulated other comprehensive income (loss) (Note 11)	(82,383)		(84,270)

TOTAL CAPITAL	TOTAL CAPITAL	3,295,511		2,714,266		TOTAL CAPITAL	3,865,447		3,676,544

TOTAL LIABILITIES AND CAPITAL	TOTAL LIABILITIES AND CAPITAL	$	63,500,273	$	48,021,238	TOTAL LIABILITIES AND CAPITAL	$	74,838,195	$	71,992,842

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				Nine Months Ended					Three Months Ended
		09/30/2022		09/30/2021		09/30/2022		09/30/2021				03/31/2023		03/31/2022
INTEREST INCOME:	INTEREST INCOME:									INTEREST INCOME:
Interest-bearing deposits	Interest-bearing deposits	$	7,538	$	230	$	10,281	$	714	Interest-bearing deposits		$	30,697	$	376
Securities purchased under agreements to resell	Securities purchased under agreements to resell	14,870		460		20,657		1,350		Securities purchased under agreements to resell		30,282		536
Federal funds sold	Federal funds sold	22,017		567		29,171		1,547		Federal funds sold		47,356		794
Trading securities	Trading securities	15,651		16,122		45,882		48,990		Trading securities		10,360		13,883
Available-for-sale securities	Available-for-sale securities	59,920		10,701		100,664		29,589		Available-for-sale securities		116,836		14,784
Held-to-maturity securities	Held-to-maturity securities	2,559		996		5,062		6,781		Held-to-maturity securities		4,106		1,053
Advances	Advances	211,173		29,925		326,928		95,677		Advances		536,594		37,881

Mortgage loans held for portfolio	Mortgage loans held for portfolio	58,045		53,438		168,982		158,359		Mortgage loans held for portfolio		60,808		54,554
Other	Other	217		228		709		727		Other		760		197
Total interest income	Total interest income	391,990		112,667		708,336		343,734		Total interest income		837,799		124,058

INTEREST EXPENSE:	INTEREST EXPENSE:									INTEREST EXPENSE:
Deposits	Deposits	3,353		101		4,476		312		Deposits		7,569		126
Consolidated obligations:	Consolidated obligations:									Consolidated obligations:
Discount notes	Discount notes	117,644		1,326		147,678		4,393		Discount notes		263,521		2,036
Bonds	Bonds	175,920		37,729		292,252		124,395		Bonds		461,882		36,556
Mandatorily redeemable capital stock	Mandatorily redeemable capital stock	3		1		5		19		Mandatorily redeemable capital stock		3		1
Other	Other	275		250		829		756		Other		421		264
Total interest expense	Total interest expense	297,195		39,407		445,240		129,875		Total interest expense		733,396		38,983

NET INTEREST INCOME	NET INTEREST INCOME	94,795		73,260		263,096		213,859		NET INTEREST INCOME		104,403		85,075
Provision (reversal) for credit losses on mortgage loans	Provision (reversal) for credit losses on mortgage loans	115		(1,660)		(300)		638		Provision (reversal) for credit losses on mortgage loans		(402)		(307)
NET INTEREST INCOME AFTER LOAN LOSS PROVISION (REVERSAL)	NET INTEREST INCOME AFTER LOAN LOSS PROVISION (REVERSAL)	94,680		74,920		263,396		213,221		NET INTEREST INCOME AFTER LOAN LOSS PROVISION (REVERSAL)		104,805		85,382

OTHER INCOME (LOSS):	OTHER INCOME (LOSS):									OTHER INCOME (LOSS):
Net gains (losses) on trading securities	Net gains (losses) on trading securities	(30,249)		(16,369)		(113,076)		(56,527)		Net gains (losses) on trading securities		8,984		(59,488)

Net gains (losses) on sale of held-to-maturity securities		(89)		—		(89)		—

Net gains (losses) on derivatives	Net gains (losses) on derivatives	26,198		(1,396)		85,575		16,170		Net gains (losses) on derivatives		(525)		46,563

Standby bond purchase agreement commitment fees	Standby bond purchase agreement commitment fees	682		627		1,958		1,878		Standby bond purchase agreement commitment fees		681		625
Letters of credit fees	Letters of credit fees	1,625		1,429		4,746		4,700		Letters of credit fees		1,910		1,570
Other	Other	659		951		2,551		2,983		Other		563		1,221
Total other income (loss)	Total other income (loss)	(1,174)		(14,758)		(18,335)		(30,796)		Total other income (loss)		11,613		(9,509)

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				Nine Months Ended					Three Months Ended
		09/30/2022		09/30/2021		09/30/2022		09/30/2021				03/31/2023		03/31/2022
OTHER EXPENSES:	OTHER EXPENSES:									OTHER EXPENSES:
Compensation and benefits	Compensation and benefits	$	9,743	$	9,429	$	31,051	$	29,180	Compensation and benefits		$	11,707	$	10,558
Other operating	Other operating	5,112		5,144		14,976		14,190		Other operating		5,679		5,003
Federal Housing Finance Agency	Federal Housing Finance Agency	1,328		1,110		4,068		3,329		Federal Housing Finance Agency		1,531		1,413
Office of Finance	Office of Finance	1,080		1,161		3,223		3,255		Office of Finance		1,096		1,224

Mortgage loans transaction service fees	Mortgage loans transaction service fees	1,523		1,583		4,566		4,832		Mortgage loans transaction service fees		1,564		1,521
Other	Other	363		201		868		692		Other		568		159
Total other expenses	Total other expenses	19,149		18,628		58,752		55,478		Total other expenses		22,145		19,878

INCOME BEFORE ASSESSMENTS	INCOME BEFORE ASSESSMENTS	74,357		41,534		186,309		126,947		INCOME BEFORE ASSESSMENTS		94,273		55,995

Affordable Housing Program	Affordable Housing Program	7,436		4,154		18,632		12,697		Affordable Housing Program		9,428		5,600

NET INCOME	NET INCOME	$	66,921	$	37,380	$	167,677	$	114,250	NET INCOME		$	84,845	$	50,395

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				Nine Months Ended					Three Months Ended
		09/30/2022		09/30/2021		09/30/2022		09/30/2021				03/31/2023		03/31/2022
Net income	Net income	$	66,921	$	37,380	$	167,677	$	114,250	Net income		$	84,845	$	50,395

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	(29,088)		(22,482)		(124,880)		28,604		Net unrealized gains (losses) on available-for-sale securities		1,887		(41,227)

Defined benefit pension plan	Defined benefit pension plan	63		92		187		242		Defined benefit pension plan		—		62
Total other comprehensive income (loss)	Total other comprehensive income (loss)	(29,025)		(22,390)		(124,693)		28,846		Total other comprehensive income (loss)		1,887		(41,165)

TOTAL COMPREHENSIVE INCOME (LOSS)	TOTAL COMPREHENSIVE INCOME (LOSS)	$	37,896	$	14,990	$	42,984	$	143,096	TOTAL COMPREHENSIVE INCOME (LOSS)		$	86,732	$	9,230

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 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

Balance at December 31, 2021																					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	Comprehensive income										29,904		7,476		37,380		(22,390)		14,990		Comprehensive income										40,316		10,079		50,395		(41,165)		9,230
Proceeds from issuance of capital stock	Proceeds from issuance of capital stock	—	21		3,555	355,550		3,555	355,571										355,571		Proceeds from issuance of capital stock	—	—		6,387	638,709		6,387	638,709										638,709
Repurchase/redemption of capital stock	Repurchase/redemption of capital stock	(3,785)	(378,548)		(669)	(66,866)		(4,454)	(445,414)										(445,414)		Repurchase/redemption of capital stock	(3,607)	(360,704)		(605)	(60,520)		(4,212)	(421,224)										(421,224)
Net reclassification of shares to mandatorily redeemable capital stock	Net reclassification of shares to mandatorily redeemable capital stock	(1)	(109)		(3)	(351)		(4)	(460)										(460)		Net reclassification of shares to mandatorily redeemable capital stock	(604)	(60,397)		(1,027)	(102,650)		(1,631)	(163,047)										(163,047)
Net transfer of shares between Class A and Class B	Net transfer of shares between Class A and Class B	2,725	272,575		(2,725)	(272,575)		—	—										—		Net transfer of shares between Class A and Class B	4,071	407,133		(4,071)	(407,133)		—	—										—

Dividends on capital stock (Class A - 0.3%, Class B - 5.3%):
Dividends on capital stock (Class A - 0.3%, Class B - 5.8%):																					Dividends on capital stock (Class A - 0.3%, Class B - 5.8%):
Cash payment	Cash payment										(62)				(62)				(62)		Cash payment										(54)				(54)				(54)
Stock issued	Stock issued				161	16,049		161	16,049		(16,049)				(16,049)				—		Stock issued				204	20,418		204	20,418		(20,418)				(20,418)				—
Balance at September 30, 2021		2,218	$	221,824	11,607	$	1,160,658	13,825	$	1,382,482	$	836,586	$	280,974	$	1,117,560	$	71,154	$	2,571,196
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

		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 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
Balance at December 31, 2022																					Balance at December 31, 2022	2,388	$	238,777	22,689	$	2,268,932	25,077	$	2,507,709	$	914,716	$	338,389	$	1,253,105	$	(84,270)	$	3,676,544

Comprehensive income	Comprehensive income										53,537		13,384		66,921		(29,025)		37,896		Comprehensive income										67,876		16,969		84,845		1,887		86,732
Proceeds from issuance of capital stock	Proceeds from issuance of capital stock	—	—		9,963	996,320		9,963	996,320										996,320		Proceeds from issuance of capital stock	—	—		10,230	1,023,010		10,230	1,023,010										1,023,010
Repurchase/redemption of capital stock	Repurchase/redemption of capital stock	(5,198)	(519,803)		(689)	(68,922)		(5,887)	(588,725)										(588,725)		Repurchase/redemption of capital stock	(6,448)	(644,851)		(647)	(64,683)		(7,095)	(709,534)										(709,534)
Net reclassification of shares to mandatorily redeemable capital stock	Net reclassification of shares to mandatorily redeemable capital stock	(168)	(16,805)		(1,279)	(127,875)		(1,447)	(144,680)										(144,680)		Net reclassification of shares to mandatorily redeemable capital stock	(779)	(77,852)		(1,334)	(133,385)		(2,113)	(211,237)										(211,237)
Net transfer of shares between Class A and Class B	Net transfer of shares between Class A and Class B	5,403	540,283		(5,403)	(540,283)		—	—										—		Net transfer of shares between Class A and Class B	7,763	776,350		(7,763)	(776,350)		—	—										—

Dividends on capital stock (Class A - 2.3%, Class B - 7.7%):
Dividends on capital stock (Class A - 3.7%, Class B - 8.8%):																					Dividends on capital stock (Class A - 3.7%, Class B - 8.8%):
Cash payment	Cash payment										(66)				(66)				(66)		Cash payment										(68)				(68)				(68)
Stock issued	Stock issued				364	36,342		364	36,342		(36,342)				(36,342)				—		Stock issued				522	52,141		522	52,141		(52,141)				(52,141)				—
Balance at September 30, 2022		2,753	$	275,296	18,450	$	1,844,977	21,203	$	2,120,273	$	903,839	$	323,777	$	1,227,616	$	(52,378)	$	3,295,511
Balance at March 31, 2023																					Balance at March 31, 2023	2,924	$	292,424	23,697	$	2,369,665	26,621	$	2,662,089	$	930,383	$	355,358	$	1,285,741	$	(82,383)	$	3,865,447

1 Putable

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

Table of Contents

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 91,400 22,850 114,250 28,846 143,096
Proceeds from issuance of capital stock 35 3,492 11,722 1,172,239 11,757 1,175,731 1,175,731
Repurchase/redemption of capital stock (7,323) (732,322) (984) (98,373) (8,307) (830,695) (830,695)
Net reclassification of shares to mandatorily redeemable capital stock (4,661) (466,079) (1,184) (118,433) (5,845) (584,512) (584,512)
Net transfer of shares between Class A and Class B 10,045 1,004,508 (10,045) (1,004,508) — — —
Dividends on capital stock (Class A - 0.3%, Class B - 5.3%):
Cash payment (191) (191) (191)
Stock issued 480 47,954 480 47,954 (47,954) (47,954) —
Balance at September 30, 2021 2,218 $ 221,824 11,607 $ 1,160,658 13,825 $ 1,382,482 $ 836,586 $ 280,974 $ 1,117,560 $ 71,154 $ 2,571,196
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 134,142 33,535 167,677 (124,693) 42,984
Proceeds from issuance of capital stock 20 2,019 25,494 2,549,443 25,514 2,551,462 2,551,462
Repurchase/redemption of capital stock (12,102) (1,210,207) (1,997) (199,771) (14,099) (1,409,978) (1,409,978)
Net reclassification of shares to mandatorily redeemable capital stock (2,796) (279,625) (3,234) (323,418) (6,030) (603,043) (603,043)
Net transfer of shares between Class A and Class B 15,289 1,528,919 (15,289) (1,528,919) — — —
Dividends on capital stock (Class A - 1.2%, Class B - 6.7%):
Cash payment (180) (180) (180)
Stock issued 825 82,531 825 82,531 (82,531) (82,531) —
Balance at September 30, 2022 2,753 $ 275,296 18,450 $ 1,844,977 21,203 $ 2,120,273 $ 903,839 $ 323,777 $ 1,227,616 $ (52,378) $ 3,295,511

1 ~~Putable~~


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


	Three Months Ended
	03/31/2023		03/31/2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	84,845	$	50,395
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization:
Premiums and discounts on consolidated obligations, net	37,341		(1,789)
Concessions on consolidated obligations	1,573		964
Premiums and discounts on investments, net	(5,042)		1,673
Premiums, discounts and commitment fees on advances, net	(839)		(1,113)
Premiums, discounts and deferred loan costs on mortgage loans, net	2,963		6,527
Fair value adjustments on hedged assets or liabilities	343		388
Premises, software and equipment	711		808
Other	—		62
Provision (reversal) for credit losses on mortgage loans	(402)		(307)
Non-cash interest on mandatorily redeemable capital stock	2		—



Net realized (gains) losses on disposal of premises, software and equipment	—		1

Other adjustments, net	29		(162)
Net (gains) losses on trading securities	(8,984)		59,488
Net change in derivatives and hedging activities	(100,606)		303,292
(Increase) decrease in accrued interest receivable	(10,279)		(1,684)
Change in net accrued interest included in derivative assets	372		(19,212)
(Increase) decrease in other assets	238		904
Increase (decrease) in accrued interest payable	68,780		5,892
Change in net accrued interest included in derivative liabilities	580		6,042
Increase (decrease) in Affordable Housing Program liability	7,804		2,881
Increase (decrease) in other liabilities	(6,979)		(5,694)
Total adjustments	(12,395)		358,961
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES	72,450		409,356

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)
Nine Months Ended
09/30/2022 09/30/2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 167,677 $ 114,250
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization:
Premiums and discounts on consolidated obligations, net 79,424 (12,044)
Concessions on consolidated obligations 3,537 4,794
Premiums and discounts on investments, net 1,279 12,138
Premiums, discounts and commitment fees on advances, net (2,876) (4,055)
Premiums, discounts and deferred loan costs on mortgage loans, net 16,484 41,102
Fair value adjustments on hedged assets or liabilities 1,126 3,296
Premises, software and equipment 2,409 2,466
Other 187 242
Provision (reversal) for credit losses on mortgage loans (300) 638
Non-cash interest on mandatorily redeemable capital stock 3 18
Net realized (gains) losses on sale of held-to-maturity securities 89 —
Net realized (gains) losses on disposal of premises, software and equipment 16 —
Other adjustments, net (207) (312)
Net (gains) losses on trading securities 113,076 56,527
Net change in derivatives and hedging activities 706,873 186,782
(Increase) decrease in accrued interest receivable (46,922) 15,242
Change in net accrued interest included in derivative assets (36,850) (9,707)
(Increase) decrease in other assets 949 2,024
Increase (decrease) in accrued interest payable 75,642 (8,064)
Change in net accrued interest included in derivative liabilities 72 (2,848)
Increase (decrease) in Affordable Housing Program liability 5,640 (941)
Increase (decrease) in other liabilities (1,204) (1,469)
Total adjustments 918,447 285,829
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 1,086,124 400,079


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


	Three Months Ended
	03/31/2023		03/31/2022
CASH FLOWS FROM INVESTING ACTIVITIES:
Net (increase) decrease in interest-bearing deposits	$	(88,565)	$	(72,681)
Net (increase) decrease in securities purchased under resale agreements	(1,250,000)		(600,000)
Net (increase) decrease in Federal funds sold	775,000		260,000

Proceeds from maturities of and principal repayments on trading securities	3,435		404,650
Purchases of trading securities	—		(900,000)

Proceeds from maturities of and principal repayments on available-for-sale securities	813,082		351,543
Purchases of available-for-sale securities	(587,682)		(697,435)

Proceeds from maturities of and principal repayments on held-to-maturity securities	13,689		24,646

Advances repaid	216,804,077		159,083,449
Advances originated	(218,878,795)		(161,291,476)
Principal collected on mortgage loans	162,277		390,204
Purchases of mortgage loans	(185,411)		(286,235)
Net proceeds from sale of foreclosed assets	(43)		70

Other investing activities	—		930


Purchases of premises, software and equipment	(2,241)		(133)
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES	(2,421,177)		(3,332,468)

CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits	224,016		(1,513)
Net proceeds from issuance of consolidated obligations:
Discount notes	100,994,078		39,888,155
Bonds	18,963,090		12,747,640
Payments for maturing, retired and transferred consolidated obligations:
Discount notes	(104,863,347)		(38,614,004)
Bonds	(12,076,813)		(11,141,400)
Bonds transferred to other FHLBanks	(999,987)		—






Net interest payments received (paid) for financing derivatives	4,863		(6,704)
Proceeds from issuance of capital stock	1,023,010		638,709
Payments for repurchase/redemption of capital stock	(709,534)		(421,224)
Payments for repurchase of mandatorily redeemable capital stock	(211,250)		(163,070)
Cash dividends paid	(68)		(54)

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES	2,348,058		2,926,535
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	(669)		3,423
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	25,964		25,841
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	25,295	$	29,264

Supplemental disclosures:
Interest paid	$	196,661	$	44,786
Affordable Housing Program payments	$	1,644	$	2,764
Net transfers of mortgage loans to other assets	$	447	$	67

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)
Nine Months Ended
09/30/2022 09/30/2021
CASH FLOWS FROM INVESTING ACTIVITIES:
Net (increase) decrease in interest-bearing deposits $ (474,438) $ 316,633
Net (increase) decrease in securities purchased under resale agreements (1,750,000) 500,000
Net (increase) decrease in Federal funds sold (1,345,000) (178,000)
Proceeds from sale of trading securities 12,448 —
Proceeds from maturities of and principal repayments on trading securities 2,830,436 1,644,453
Purchases of trading securities (2,790,000) (1,700,000)
Proceeds from maturities of and principal repayments on available-for-sale securities 1,145,236 1,869,039
Purchases of available-for-sale securities (2,515,529) (1,028,471)
Proceeds from sale of held-to-maturity securities 19,930 —
Proceeds from maturities of and principal repayments on held-to-maturity securities 65,164 298,161
Advances repaid 439,317,026 351,412,211
Advances originated (451,622,266) (351,732,390)
Principal collected on mortgage loans 970,568 2,591,290
Purchases of mortgage loans (858,581) (1,746,333)
Proceeds from sale of foreclosed assets 687 1,251
Other investing activities 1,876 2,653
Purchases of premises, software and equipment (1,349) (1,116)
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (16,993,792) 2,249,381
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits (223,283) (196,104)
Net proceeds from issuance of consolidated obligations:
Discount notes 245,269,430 239,623,829
Bonds 31,195,723 28,680,364
Payments for maturing and retired consolidated obligations:
Discount notes (229,225,415) (240,229,128)
Bonds (31,636,400) (34,809,900)
Net interest payments received (paid) for financing derivatives (10,507) (18,494)
Proceeds from issuance of capital stock 2,551,462 1,175,731
Payments for repurchase/redemption of capital stock (1,409,978) (830,695)
Payments for repurchase of mandatorily redeemable capital stock (603,336) (585,547)
Cash dividends paid (180) (191)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 15,907,516 (7,190,135)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (152) (4,540,675)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 25,841 4,570,415
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 25,689 $ 29,740
Supplemental disclosures:
Interest paid $ 299,832 $ 145,606
Affordable Housing Program payments $ 13,131 $ 13,978
Net transfers of mortgage loans to other assets $ 213 $ 449
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.~~

Table of Contents

FEDERAL HOME LOAN BANK OF TOPEKA

Notes to Financial Statements - Unaudited

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

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.~~2022. 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~~20, 2023 (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~~FHLBank adopted this guidance as of January 1, 2023. While this guidance is ~~effective for annual periods and interim periods within those annual periods beginning after December 15, 2022. Early~~intended to enhance disclosures, the adoption ~~is permitted. FHLBank is evaluating~~of this guidance ~~and its~~did not have a material 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~~adopted this guidance ~~and its~~as of January 1, 2023. FHLBank does not currently hedge interest rate risk for portfolios of financial assets so adoption of this guidance had no effect on FHLBank’s financial condition, results of operations, cash flows, ~~and disclosures.~~or disclosures given current strategies.

1514

Table of Contents

~~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.~~2024 (as amended by ASU 2022-06). FHLBank has transitioned certain interest rate swaps in designated hedges to a new reference rate, all of which met the scope requirements of ASC 848 for the application of expedients. As such, FHLBank made the elections to not reassess a previous accounting determination and to not dedesignate a hedging relationship due to a change in a critical term. These transactions did not have a material effect on FHLBank’s financial condition, results of operations, or cash flows. While FHLBank is still evaluating other transition options, FHLBank does not expect this guidance to have a material effect on its financial condition, results of operations, or cash flows.

In December 2022, the FASB issued an amendment to defer the sunset date of Topic 848 from December 31, 2022 to December 31, 2024. Topic 848 provides temporary relief during the reference rate reform transition period. The intended cessation date of several remaining tenors of LIBOR was postponed until June 30, 2023 so the amendments recognize that a significant number of modifications may take place up to and after LIBOR cessation. The amendments were effective immediately.

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 ~~September 30, 2022,~~March 31, 2023, approximately 2027 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 ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, 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 ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021.~~2022. Carrying values of interest-bearing deposits and Federal funds sold exclude accrued interest receivable of ~~$1,258,000~~$2,690,000 and ~~$403,000,~~$400,000, respectively, as of ~~September 30, 2022,~~March 31, 2023, and ~~$51,000~~$2,278,000 and ~~$7,000,~~$903,000, respectively, as of December 31, ~~2021.~~2022.

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 ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021.~~2022. The carrying value of securities purchased under agreements to resell excludes accrued interest receivable of ~~$277,000~~$485,000 and ~~$3,000~~$565,000 as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively.

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, but FHLBank is not required to divest instruments that experience credit deterioration after their purchase.

1615

Table of Contents

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 ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 are summarized in Table 3.1 (in thousands):

Table 3.1


		Fair Value					Fair Value
		09/30/2022		12/31/2021			03/31/2023		12/31/2022
Non-mortgage-backed securities:	Non-mortgage-backed securities:					Non-mortgage-backed securities:

Certificates of deposit		$	499,904	$	200,023

U.S. Treasury obligations	U.S. Treasury obligations	645,589		917,472		U.S. Treasury obligations	398,007		396,233
GSE debentures	GSE debentures	389,244		415,918		GSE debentures	390,978		388,955
Non-mortgage-backed securities	Non-mortgage-backed securities	1,534,737		1,533,413		Non-mortgage-backed securities	788,985		785,188
Mortgage-backed securities:	Mortgage-backed securities:					Mortgage-backed securities:

GSE MBS	GSE MBS	639,258		806,542		GSE MBS	638,017		636,265
Mortgage-backed securities	Mortgage-backed securities	639,258		806,542		Mortgage-backed securities	638,017		636,265
TOTAL	TOTAL	$	2,173,995	$	2,339,955	TOTAL	$	1,427,002	$	1,421,453

Net gains (losses) on trading securities during the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ are shown in Table 3.2 (in thousands):

Table 3.2

Three Months Ended Nine Months Ended
09/30/2022 09/30/2021 09/30/2022 09/30/2021
Net gains (losses) on trading securities held as of September 30, 2022 $ (30,361) $ (11,809) $ (106,531) $ (39,649)
Net gains (losses) on trading securities sold or matured prior to September 30, 2022 112 (4,560) (6,545) (16,878)
NET GAINS (LOSSES) ON TRADING SECURITIES $ (30,249) $ (16,369) $ (113,076) $ (56,527)



	Three Months Ended
		03/31/2023		03/31/2022
Net gains (losses) on trading securities held as of March 31, 2023		$	8,984	$	(52,044)
Net gains (losses) on trading securities sold or matured prior to March 31, 2023		—		(7,444)
NET GAINS (LOSSES) ON TRADING SECURITIES		$	8,984	$	(59,488)

1716

Table of Contents

Available-for-sale Securities: Available-for-sale securities by major security type as of ~~September 30, 2022~~March 31, 2023 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 ~~$21,914,000~~$29,426,000 as of ~~September 30, 2022.~~March 31, 2023.

Table 3.3


		09/30/2022									03/31/2023
		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	$	3,089,096	$	1,488	$	(17,750)	$	3,072,834	U.S. Treasury obligations	$	2,979,315	$	1,009	$	(21,735)	$	2,958,589
Non-mortgage-backed securities	Non-mortgage-backed securities	3,089,096		1,488		(17,750)		3,072,834		Non-mortgage-backed securities	2,979,315		1,009		(21,735)		2,958,589
Mortgage-backed securities:	Mortgage-backed securities:									Mortgage-backed securities:
U.S. obligation MBS	U.S. obligation MBS	41,997		—		(564)		41,433		U.S. obligation MBS	117,955		—		(859)		117,096
GSE MBS	GSE MBS	5,368,480		34,532		(67,897)		5,335,115		GSE MBS	6,369,075		27,104		(88,075)		6,308,104
Mortgage-backed securities	Mortgage-backed securities	5,410,477		34,532		(68,461)		5,376,548		Mortgage-backed securities	6,487,030		27,104		(88,934)		6,425,200
TOTAL	TOTAL	$	8,499,573	$	36,020	$	(86,211)	$	8,449,382	TOTAL	$	9,466,345	$	28,113	$	(110,669)	$	9,383,789

Available-for-sale securities by major security type as of December 31, ~~2021~~2022 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~~$28,784,000 as of December 31, ~~2021.~~2022.

Table 3.4


		12/31/2021									12/31/2022
		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	$	2,814,519	$	3,377	$	(1,459)	$	2,816,437	U.S. Treasury obligations	$	3,332,244	$	1,493	$	(18,381)	$	3,315,356
Non-mortgage-backed securities	Non-mortgage-backed securities	2,814,519		3,377		(1,459)		2,816,437		Non-mortgage-backed securities	3,332,244		1,493		(18,381)		3,315,356
Mortgage-backed securities:	Mortgage-backed securities:									Mortgage-backed securities:
U.S. obligation MBS	U.S. obligation MBS	50,512		261		(6)		50,767		U.S. obligation MBS	40,881		—		(842)		40,039
GSE MBS	GSE MBS	4,779,465		78,246		(5,730)		4,851,981		GSE MBS	6,065,734		26,457		(93,170)		5,999,021
Mortgage-backed securities	Mortgage-backed securities	4,829,977		78,507		(5,736)		4,902,748		Mortgage-backed securities	6,106,615		26,457		(94,012)		6,039,060
TOTAL	TOTAL	$	7,644,496	$	81,884	$	(7,195)	$	7,719,185	TOTAL	$	9,438,859	$	27,950	$	(112,393)	$	9,354,416

1817

Table of Contents

Table 3.5 summarizes the available-for-sale securities with gross unrealized losses as of ~~September 30, 2022~~March 31, 2023 (in thousands). The gross 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


		09/30/2022													03/31/2023
		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		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
Non-mortgage-backed securities:	Non-mortgage-backed securities:													Non-mortgage-backed securities:
U.S. Treasury obligations	U.S. Treasury obligations	$	1,747,025	$	(6,267)	$	87,737	$	(11,483)	$	1,834,762	$	(17,750)	U.S. Treasury obligations	$	1,870,195	$	(11,868)	$	542,951	$	(9,867)	$	2,413,146	$	(21,735)
Non-mortgage-backed securities	Non-mortgage-backed securities	1,747,025		(6,267)		87,737		(11,483)		1,834,762		(17,750)		Non-mortgage-backed securities	1,870,195		(11,868)		542,951		(9,867)		2,413,146		(21,735)
Mortgage-backed securities:	Mortgage-backed securities:													Mortgage-backed securities:
U.S. obligation MBS	U.S. obligation MBS	36,182		(502)		5,251		(62)		41,433		(564)		U.S. obligation MBS	4,844		(74)		34,272		(785)		39,116		(859)
GSE MBS	GSE MBS	2,695,261		(32,288)		842,075		(35,609)		3,537,336		(67,897)		GSE MBS	2,599,164		(29,841)		1,892,855		(58,234)		4,492,019		(88,075)
Mortgage-backed securities	Mortgage-backed securities	2,731,443		(32,790)		847,326		(35,671)		3,578,769		(68,461)		Mortgage-backed securities	2,604,008		(29,915)		1,927,127		(59,019)		4,531,135		(88,934)
TOTAL	TOTAL	$	4,478,468	$	(39,057)	$	935,063	$	(47,154)	$	5,413,531	$	(86,211)	TOTAL	$	4,474,203	$	(41,783)	$	2,470,078	$	(68,886)	$	6,944,281	$	(110,669)

Table 3.6 summarizes the available-for-sale securities with gross unrealized losses as of December 31, ~~2021~~2022 (in thousands). The gross 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													12/31/2022
		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		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
Non-mortgage-backed securities:	Non-mortgage-backed securities:													Non-mortgage-backed securities:
U.S. Treasury obligations	U.S. Treasury obligations	$	786,606	$	(1,459)	$	—	$	—	$	786,606	$	(1,459)	U.S. Treasury obligations	$	1,540,880	$	(6,384)	$	532,968	$	(11,997)	$	2,073,848	$	(18,381)
Non-mortgage-backed securities	Non-mortgage-backed securities	786,606		(1,459)		—		—		786,606		(1,459)		Non-mortgage-backed securities	1,540,880		(6,384)		532,968		(11,997)		2,073,848		(18,381)
Mortgage-backed securities:	Mortgage-backed securities:													Mortgage-backed securities:
U.S. obligation MBS	U.S. obligation MBS	—		—		6,191		(6)		6,191		(6)		U.S. obligation MBS	35,008		(766)		5,032		(76)		40,040		(842)
GSE MBS	GSE MBS	331,546		(4,166)		740,451		(1,564)		1,071,997		(5,730)		GSE MBS	3,743,089		(56,545)		881,963		(36,625)		4,625,052		(93,170)
Mortgage-backed securities	Mortgage-backed securities	331,546		(4,166)		746,642		(1,570)		1,078,188		(5,736)		Mortgage-backed securities	3,778,097		(57,311)		886,995		(36,701)		4,665,092		(94,012)
TOTAL	TOTAL	$	1,118,152	$	(5,625)	$	746,642	$	(1,570)	$	1,864,794	$	(7,195)	TOTAL	$	5,318,977	$	(63,695)	$	1,419,963	$	(48,698)	$	6,738,940	$	(112,393)

1918

Table of Contents

The amortized cost and fair values of available-for-sale securities by contractual maturity as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 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


		09/30/2022				12/31/2021					03/31/2023				12/31/2022
		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	$	990,983	$	991,773	$	907,110	$	907,908	Due in one year or less	$	544,435	$	545,443	$	1,240,015	$	1,241,508
Due after one year through five years	Due after one year through five years	1,884,663		1,868,144		1,660,664		1,661,260		Due after one year through five years	2,213,543		2,192,711		1,876,301		1,858,697
Due after five years through ten years	Due after five years through ten years	213,450		212,917		246,745		247,269		Due after five years through ten years	221,337		220,435		215,928		215,151
Due after ten years	Due after ten years	—		—		—		—		Due after ten years	—		—		—		—
Non-mortgage-backed securities	Non-mortgage-backed securities	3,089,096		3,072,834		2,814,519		2,816,437		Non-mortgage-backed securities	2,979,315		2,958,589		3,332,244		3,315,356
Mortgage-backed securities	Mortgage-backed securities	5,410,477		5,376,548		4,829,977		4,902,748		Mortgage-backed securities	6,487,030		6,425,200		6,106,615		6,039,060
TOTAL	TOTAL	$	8,499,573	$	8,449,382	$	7,644,496	$	7,719,185	TOTAL	$	9,466,345	$	9,383,789	$	9,438,859	$	9,354,416

Held-to-maturity Securities: Held-to-maturity securities by major security type as of ~~September 30, 2022~~March 31, 2023 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 ~~$736,000~~$1,310,000 as of ~~September 30, 2022.~~March 31, 2023.

Table 3.8


		09/30/2022									03/31/2023
		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	$	73,940	$	—	$	(1,109)	$	72,831	State or local housing agency obligations	$	70,505	$	—	$	(1,672)	$	68,833
Non-mortgage-backed securities	Non-mortgage-backed securities	73,940		—		(1,109)		72,831		Non-mortgage-backed securities	70,505		—		(1,672)		68,833
Mortgage-backed securities:	Mortgage-backed securities:									Mortgage-backed securities:

GSE MBS	GSE MBS	287,078		1,849		(3,302)		285,625		GSE MBS	261,230		948		(3,115)		259,063
Mortgage-backed securities	Mortgage-backed securities	287,078		1,849		(3,302)		285,625		Mortgage-backed securities	261,230		948		(3,115)		259,063
TOTAL	TOTAL	$	361,018	$	1,849	$	(4,411)	$	358,456	TOTAL	$	331,735	$	948	$	(4,787)	$	327,896

2019

Table of Contents

Held-to-maturity securities by major security type as of December 31, ~~2021~~2022 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~~$896,000 as of December 31, ~~2021.~~2022.

Table 3.9


		12/31/2021									12/31/2022
		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	$	—	$	(1,250)	$	73,615	State or local housing agency obligations	$	70,505	$	—	$	(1,737)	$	68,768
Non-mortgage-backed securities	Non-mortgage-backed securities	74,865		—		(1,250)		73,615		Non-mortgage-backed securities	70,505		—		(1,737)		68,768
Mortgage-backed securities:	Mortgage-backed securities:									Mortgage-backed securities:

GSE MBS	GSE MBS	371,320		5,913		(77)		377,156		GSE MBS	274,925		695		(4,129)		271,491
Mortgage-backed securities	Mortgage-backed securities	371,320		5,913		(77)		377,156		Mortgage-backed securities	274,925		695		(4,129)		271,491
TOTAL	TOTAL	$	446,185	$	5,913	$	(1,327)	$	450,771	TOTAL	$	345,430	$	695	$	(5,866)	$	340,259

The amortized cost and fair values of held-to-maturity securities by contractual maturity as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 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

09/30/2022 12/31/2021
Amortized
Cost Fair
Value Amortized
Cost Fair
Value
Non-mortgage-backed securities:
Due in one year or less $ — $ — $ — $ —
Due after one year through five years — — — —
Due after five years through ten years 43,940 43,842 44,865 44,736
Due after ten years 30,000 28,989 30,000 28,879
Non-mortgage-backed securities 73,940 72,831 74,865 73,615
Mortgage-backed securities 287,078 285,625 371,320 377,156
TOTAL $ 361,018 $ 358,456 $ 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.

~~Table of Contents~~

Net gains (losses) were realized on the sale of held-to-maturity securities as presented below and are recorded as net gains (losses) on sale of held-to-maturity securities in other income (loss) on the Statements of Income. All securities sold had paid down below 15 percent of the principal outstanding at acquisition and were therefore considered maturities under GAAP. Table 3.11 presents details of the sales (in thousands). There were no sales of held-to-maturity securities during the three and nine months ended September 30, 2021.

~~Table 3.11~~

Three Months Ended Nine Months Ended
09/30/2022 09/30/2022
Proceeds from sale of held-to-maturity securities $ 19,930 $ 19,930
Carrying value of held-to-maturity securities sold (20,019) (20,019)
NET REALIZED GAINS (LOSSES) $ (89) $ (89)


	03/31/2023		12/31/2022
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Non-mortgage-backed securities:
Due in one year or less	$	—	$	—	$	—	$	—
Due after one year through five years	—		—		—		—
Due after five years through ten years	40,505		40,053		40,505		40,036
Due after ten years	30,000		28,780		30,000		28,732
Non-mortgage-backed securities	70,505		68,833		70,505		68,768
Mortgage-backed securities	261,230		259,063		274,925		271,491
TOTAL	$	331,735	$	327,896	$	345,430	$	340,259

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

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~~issuers’ obligation to pay principal and ~~able to intervene~~interest on ~~behalf of investors during a financial crisis.~~those securities will be honored, taking into account their status as GSEs.

2220

Table of Contents

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 ~~September 30, 2022~~both March 31, 2023 and December 31, ~~2021,~~2022, FHLBank had advances outstanding at interest rates ranging from 0.29 percent to 7.20 ~~percent and 0.12 percent to 7.20 percent, respectively.~~percent. Table 4.1 presents advances summarized by redemption term as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 (dollar amounts in thousands). The redemption term represents the period in which principal amounts are contractually due. Carrying amounts exclude accrued interest receivable of ~~$51,213,000~~$116,716,000 and ~~$13,140,000~~$108,891,000 as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively.

Table 4.1


		09/30/2022				12/31/2021					03/31/2023				12/31/2022
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	$	25,010,340	3.03	%	$	13,279,735	0.34	%	Due in one year or less	$	32,735,144	4.81	%	$	31,796,396	4.31	%
Due after one year through two years	Due after one year through two years	2,537,574		2.39		1,825,235		1.31		Due after one year through two years	3,750,021		3.66		3,147,406		3.24
Due after two years through three years	Due after two years through three years	2,347,763		2.52		2,359,249		0.98		Due after two years through three years	2,948,707		3.44		2,784,200		3.30
Due after three years through four years	Due after three years through four years	1,771,941		2.29		1,511,691		1.18		Due after three years through four years	3,049,610		3.95		2,625,365		3.64
Due after four years through five years	Due after four years through five years	1,513,544		2.68		1,314,949		1.09		Due after four years through five years	2,016,375		3.97		1,894,308		3.52
Thereafter	Thereafter	2,556,906		2.69		3,141,969		1.76		Thereafter	2,229,576		3.22		2,407,040		3.07
Total par value	Total par value	35,738,068		2.87	%	23,432,828		0.77	%	Total par value	46,729,433		4.46	%	44,654,715		4.03	%
Discounts	Discounts	(13,977)				(16,856)				Discounts	(12,301)				(13,141)
Hedging adjustments	Hedging adjustments	(405,111)				68,316				Hedging adjustments	(260,384)				(378,824)
TOTAL	TOTAL	$	35,318,980			$	23,484,288			TOTAL	$	46,456,748			$	44,262,750

~~FHLBank’s outstanding~~FHLBank offers advances ~~include advances that contain call options~~ that may be ~~exercised with or~~prepaid without prepayment or termination fees ~~at the borrower’s discretion~~ on ~~specific~~predetermined exercise dates (call dates) ~~before~~prior to the stated advance ~~maturities~~maturity (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). Other advances are prepayable with a prepayment fee that makes FHLBank economically indifferent to the prepayment.

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, ~~$480,150,000~~$240,650,000 remain outstanding at ~~September 30, 2022.~~March 31, 2023.

Table of Contents

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 ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 (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	09/30/2022		12/31/2021		09/30/2022		12/31/2021		Redemption Term	03/31/2023		12/31/2022		03/31/2023		12/31/2022
Due in one year or less	Due in one year or less	$	26,445,331	$	14,582,991	$	25,334,590	$	14,324,735	Due in one year or less	$	34,223,061	$	33,289,458	$	32,862,394	$	31,992,646
Due after one year through two years	Due after one year through two years	2,172,772		1,552,690		2,620,074		2,034,485		Due after one year through two years	3,102,841		2,709,465		3,863,421		3,240,306
Due after two years through three years	Due after two years through three years	1,950,558		1,821,308		2,418,163		2,452,148		Due after two years through three years	2,899,077		2,552,756		2,948,707		2,801,700
Due after three years through four years	Due after three years through four years	1,653,780		1,280,597		1,771,941		1,507,341		Due after three years through four years	2,826,721		2,403,502		3,049,610		2,625,365
Due after four years through five years	Due after four years through five years	1,242,148		1,308,086		1,513,544		1,314,949		Due after four years through five years	1,703,380		1,568,168		2,006,375		1,884,308
Thereafter	Thereafter	2,273,479		2,887,156		2,079,756		1,799,170		Thereafter	1,974,353		2,131,366		1,998,926		2,110,390
TOTAL PAR VALUE	TOTAL PAR VALUE	$	35,738,068	$	23,432,828	$	35,738,068	$	23,432,828	TOTAL PAR VALUE	$	46,729,433	$	44,654,715	$	46,729,433	$	44,654,715

~~Table of Contents~~

Interest Rate Payment Terms: Table 4.3 details additional interest rate payment and redemption terms for advances as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 (in thousands):

Table 4.3


Redemption Term	Redemption Term	09/30/2022		12/31/2021		Redemption Term	03/31/2023		12/31/2022
Fixed rate:	Fixed rate:					Fixed rate:
Due in one year or less	Due in one year or less	$	24,499,990	$	13,061,185	Due in one year or less	$	32,158,044	$	31,307,096
Due after one year through three years	Due after one year through three years	2,959,037		2,593,884		Due after one year through three years	4,739,978		3,984,356
Due after three years through five years	Due after three years through five years	2,036,890		1,871,575		Due after three years through five years	3,674,126		3,050,314
Due after five years through fifteen years	Due after five years through fifteen years	2,145,055		2,752,551		Due after five years through fifteen years	1,895,710		2,050,428
Due after fifteen years	Due after fifteen years	32,885		37,371		Due after fifteen years	32,114		35,010
Total fixed rate	Total fixed rate	31,673,857		20,316,566		Total fixed rate	42,499,972		40,427,204
Variable rate:	Variable rate:					Variable rate:
Due in one year or less	Due in one year or less	510,350		218,550		Due in one year or less	577,100		489,300
Due after one year through three years	Due after one year through three years	1,926,300		1,590,600		Due after one year through three years	1,958,750		1,947,250
Due after three years through five years	Due after three years through five years	1,248,595		955,065		Due after three years through five years	1,391,860		1,469,360
Due after five years through fifteen years	Due after five years through fifteen years	376,466		349,547		Due after five years through fifteen years	299,251		319,101
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	4,064,211		3,116,262		Total variable rate	4,229,461		4,227,511
TOTAL PAR VALUE	TOTAL PAR VALUE	$	35,738,068	$	23,432,828	TOTAL PAR VALUE	$	46,729,433	$	44,654,715

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 ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, 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 ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, 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 nine months ended September 30, 2022 and 2021.~~

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 ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, and therefore no allowance for credit losses on advances was recorded.

Table of Contents

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 participating financial institutions (PFI). These mortgage loans are credit-enhanced by PFIs or are guaranteed or insured by Federal agencies.

~~Table of Contents~~

Mortgage Loans Held for Portfolio: Table 5.1 presents information as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 on mortgage loans held for portfolio (in thousands). Carrying amounts exclude accrued interest receivable of ~~$37,620,000~~$39,072,000 and ~~$36,959,000~~$38,358,000 as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively.

Table 5.1


		09/30/2022		12/31/2021			03/31/2023		12/31/2022
Real estate:	Real estate:					Real estate:
Fixed rate, medium-term1, single-family mortgages	Fixed rate, medium-term1, single-family mortgages	$	1,233,097	$	1,375,318	Fixed rate, medium-term1, single-family mortgages	$	1,150,331	$	1,189,428
Fixed rate, long-term, single-family mortgages	Fixed rate, long-term, single-family mortgages	6,686,643		6,664,654		Fixed rate, long-term, single-family mortgages	6,701,191		6,640,750
Total unpaid principal balance	Total unpaid principal balance	7,919,740		8,039,972		Total unpaid principal balance	7,851,522		7,830,178
Premiums	Premiums	99,866		107,697		Premiums	95,786		97,210
Discounts	Discounts	(2,060)		(1,371)		Discounts	(2,558)		(2,230)
Deferred loan costs, net	Deferred loan costs, net	49		76		Deferred loan costs, net	44		46

Hedging adjustments	Hedging adjustments	(13,316)		(6,011)		Hedging adjustments	(13,702)		(13,691)
Total before allowance for credit losses on mortgage loans	Total before allowance for credit losses on mortgage loans	8,004,279		8,140,363		Total before allowance for credit losses on mortgage loans	7,931,092		7,911,513
Allowance for credit losses on mortgage loans	Allowance for credit losses on mortgage loans	(5,368)		(5,317)		Allowance for credit losses on mortgage loans	(5,836)		(6,378)
MORTGAGE LOANS HELD FOR PORTFOLIO, NET	MORTGAGE LOANS HELD FOR PORTFOLIO, NET	$	7,998,911	$	8,135,046	MORTGAGE LOANS HELD FOR PORTFOLIO, NET	$	7,925,256	$	7,905,135

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

Table 5.2 presents information as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 on the outstanding unpaid principal balance of mortgage loans held for portfolio (in thousands):

Table 5.2


		09/30/2022		12/31/2021			03/31/2023		12/31/2022
Conventional loans	Conventional loans	$	7,569,242	$	7,644,184	Conventional loans	$	7,509,341	$	7,486,591
Government-guaranteed or -insured loans	Government-guaranteed or -insured loans	350,498		395,788		Government-guaranteed or -insured loans	342,181		343,587
TOTAL UNPAID PRINCIPAL BALANCE	TOTAL UNPAID PRINCIPAL BALANCE	$	7,919,740	$	8,039,972	TOTAL UNPAID PRINCIPAL BALANCE	$	7,851,522	$	7,830,178

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.

2523

Table of Contents

Table 5.3 presents the payment status based on amortized cost as well as other delinquency statistics for FHLBank’s mortgage loans as of ~~September 30, 2022~~March 31, 2023 (dollar amounts in thousands):

Table 5.3


		09/30/2022																						03/31/2023
		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 2019		2019		2020		2021		2022		2023
Amortized Cost:1	Amortized Cost:1																						Amortized Cost:1
Past due 30-59 days delinquent	Past due 30-59 days delinquent	$	18,489	$	3,694	$	6,139	$	3,473	$	6,910	$	1,830	$	40,535		$	8,197		$	48,732		Past due 30-59 days delinquent	$	23,653	$	9,137	$	3,361	$	10,170	$	4,161	$	—	$	50,482		$	11,029		$	61,511
Past due 60-89 days delinquent	Past due 60-89 days delinquent	3,609		1,111		801		623		1,148		61		7,353			2,369			9,722			Past due 60-89 days delinquent	3,971		2,117		569		1,022		1,561		—		9,240			1,375			10,615
Past due 90 days or more delinquent	Past due 90 days or more delinquent	7,709		4,136		7,455		1,185		445		—		20,930			4,226			25,156			Past due 90 days or more delinquent	9,264		4,724		1,459		508		566		—		16,521			4,518			21,039
Total past due	Total past due	29,807		8,941		14,395		5,281		8,503		1,891		68,818			14,792			83,610			Total past due	36,888		15,978		5,389		11,700		6,288		—		76,243			16,922			93,165
Total current loans	Total current loans	1,810,965		290,806		1,109,096		1,685,384		1,894,652		789,332		7,580,235			340,434			7,920,669			Total current loans	1,963,149		1,052,130		1,616,407		1,824,623		890,239		161,670		7,508,218			329,709			7,837,927
Total mortgage loans	Total mortgage loans	$	1,840,772	$	299,747	$	1,123,491	$	1,690,665	$	1,903,155	$	791,223	$	7,649,053		$	355,226		$	8,004,279		Total mortgage loans	$	2,000,037	$	1,068,108	$	1,621,796	$	1,836,323	$	896,527	$	161,670	$	7,584,461		$	346,631		$	7,931,092

Other delinquency statistics:	Other delinquency statistics:																						Other delinquency statistics:
In process of foreclosure2	In process of foreclosure2													$	8,797		$	1,193		$	9,990		In process of foreclosure2													$	5,574		$	1,187		$	6,761
Serious delinquency rate3	Serious delinquency rate3													0.3		%	1.2		%	0.3		%	Serious delinquency rate3													0.2		%	1.3		%	0.3		%
Past due 90 days or more and still accruing interest	Past due 90 days or more and still accruing interest													$	—		$	4,226		$	4,226		Past due 90 days or more and still accruing interest													$	—		$	4,518		$	4,518
Loans on nonaccrual status4	Loans on nonaccrual status4													$	22,734		$	—		$	22,734		Loans on nonaccrual status4													$	19,373		$	—		$	19,373

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 ~~$14,285,000~~$11,829,000 of conventional mortgage loans on nonaccrual status that did not have an associated allowance for credit losses because either 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.

2624

Table of Contents

Table 5.4 presents the payment status based on amortized cost as well as other delinquency statistics for FHLBank’s mortgage loans as of December 31, ~~2021~~2022 (dollar amounts in thousands):

Table 5.4


		12/31/2021																						12/31/2022
		Conventional Loans															Government Loans			Total				Conventional Loans															Government Loans			Total
		Origination Year												Subtotal										Origination Year												Subtotal
		Prior to 2017		2017		2018		2019		2020		2021												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	$	17,460	$	4,799	$	6,567	$	9,385	$	3,472	$	2,743	$	44,426		$	8,539		$	52,965		Past due 30-59 days delinquent	$	18,393	$	3,969	$	7,382	$	4,264	$	8,120	$	4,437	$	46,565		$	10,381		$	56,946
Past due 60-89 days delinquent	Past due 60-89 days delinquent	2,908		1,258		1,653		2,408		1,063		—		9,290			2,187			11,477			Past due 60-89 days delinquent	3,586		1,125		1,023		674		920		698		8,026			1,460			9,486
Past due 90 days or more delinquent	Past due 90 days or more delinquent	8,530		3,271		6,241		13,199		353		1,103		32,697			13,290			45,987			Past due 90 days or more delinquent	6,546		3,930		6,810		1,509		928		—		19,723			4,169			23,892
Total past due	Total past due	28,898		9,328		14,461		24,992		4,888		3,846		86,413			24,016			110,429			Total past due	28,525		9,024		15,215		6,447		9,968		5,135		74,314			16,010			90,324
Total current loans	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 current loans	1,744,631		280,448		1,074,312		1,646,404		1,857,020		886,268		7,489,083			332,106			7,821,189
Total mortgage loans	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		Total mortgage loans	$	1,773,156	$	289,472	$	1,089,527	$	1,652,851	$	1,866,988	$	891,403	$	7,563,397		$	348,116		$	7,911,513

Other delinquency statistics:	Other delinquency statistics:																						Other delinquency statistics:
In process of foreclosure2	In process of foreclosure2													$	3,065		$	1,868		$	4,933		In process of foreclosure2													$	8,431		$	920		$	9,351
Serious delinquency rate3	Serious delinquency rate3													0.4		%	3.3		%	0.6		%	Serious delinquency rate3													0.3		%	1.2		%	0.3		%
Past due 90 days or more and still accruing interest	Past due 90 days or more and still accruing interest													$	—		$	13,290		$	13,290		Past due 90 days or more and still accruing interest													$	—		$	4,169		$	4,169
Loans on nonaccrual status4	Loans on nonaccrual status4													$	37,867		$	—		$	37,867		Loans on nonaccrual status4													$	22,542		$	—		$	22,542

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~~$13,288,000 of conventional mortgage loans on nonaccrual status that did not have an associated allowance for credit losses because either 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 September 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~~allowance for credit losses on conventional loans through analyses that include consideration of various loan portfolio and collateral-related characteristics, such as past performance, current economic conditions, and reasonable and supportable forecasts of expected economic conditions. FHLBank uses a ~~model that projects~~third-party projected cash ~~flows~~flow model 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.~~behavior. The forecasts used in the calculation of expected credit losses cover the contractual terms of the loans rather than a reversion to historical trends after a forecasted period. 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 by 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.

2725

Table of Contents

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 nine~~ months ended ~~September 30, 2022~~March 31, 2023 and ~~2021.~~2022.

Table 5.5


		Three Months Ended				Nine Months Ended					Three Months Ended
Conventional Loans	Conventional Loans	09/30/2022		09/30/2021		09/30/2022		09/30/2021		Conventional Loans		03/31/2023		03/31/2022
Balance, beginning of the period	Balance, beginning of the period	$	5,202	$	7,552	$	5,317	$	5,177	Balance, beginning of the period		$	6,378	$	5,317

Net (charge-offs) recoveries	Net (charge-offs) recoveries	51		432		351		509		Net (charge-offs) recoveries		(140)		28
Provision (reversal) for credit losses	Provision (reversal) for credit losses	115		(1,660)		(300)		638		Provision (reversal) for credit losses		(402)		(307)
Balance, end of the period	Balance, end of the period	$	5,368	$	6,324	$	5,368	$	6,324	Balance, end of the period		$	5,836	$	5,038

Government-Guaranteed or -Insured Mortgage Loans: FHLBank invests in ~~fixed-rate~~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 ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021.~~2022. Furthermore, none of these mortgage loans ~~has~~have 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 ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 (in thousands). Total derivative assets and liabilities include the effect of netting adjustments and cash collateral.

Table 6.1


		09/30/2022						12/31/2021							03/31/2023						12/31/2022
		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	$	34,250,323	$	164,887	$	632,976	$	18,695,438	$	16,678	$	152,302	Interest rate swaps	$	44,302,136	$	78,359	$	533,065	$	34,967,420	$	134,299	$	609,555
Total derivatives designated as hedging relationships	Total derivatives designated as hedging relationships	34,250,323		164,887		632,976		18,695,438		16,678		152,302		Total derivatives designated as hedging relationships	44,302,136		78,359		533,065		34,967,420		134,299		609,555
Derivatives not designated as hedging instruments:	Derivatives not designated as hedging instruments:													Derivatives not designated as hedging instruments:
Interest rate swaps	Interest rate swaps	7,458,715		36,808		459		2,079,830		5		28,963		Interest rate swaps	10,152,252		27,593		504		14,149,543		34,187		1,257
Interest rate caps/floors	Interest rate caps/floors	329,000		2,200		—		477,500		335		—		Interest rate caps/floors	304,000		1,377		—		304,000		1,727		—
Mortgage delivery commitments	Mortgage delivery commitments	41,745		39		676		72,025		32		45		Mortgage delivery commitments	46,347		116		37		33,882		24		173

Total derivatives not designated as hedging instruments	Total derivatives not designated as hedging instruments	7,829,460		39,047		1,135		2,629,355		372		29,008		Total derivatives not designated as hedging instruments	10,502,599		29,086		541		14,487,425		35,938		1,430
TOTAL	TOTAL	$	42,079,783	203,934		634,111		$	21,324,793	17,050		181,310		TOTAL	$	54,804,735	107,445		533,606		$	49,454,845	170,237		610,985
Netting adjustments and cash collateral1	Netting adjustments and cash collateral1			30,243		(619,259)				139,876		(176,730)		Netting adjustments and cash collateral1			214,513		(531,154)				101,839		(608,626)
DERIVATIVE ASSETS AND LIABILITIES	DERIVATIVE ASSETS AND LIABILITIES			$	234,177	$	14,852			$	156,926	$	4,580	DERIVATIVE ASSETS AND LIABILITIES			$	321,958	$	2,452			$	272,076	$	2,359

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 ~~$704,514,000~~$776,675,000 and ~~$316,606,000~~$761,704,000 as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively. Cash collateral received was ~~$55,012,000~~$31,008,000 and $0$51,239,000 as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively.

2826

Table of Contents

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 ~~September 30,~~March 31, 2023 and 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
		09/30/2022									03/31/2023
		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	$	211,173	$	59,920	$	117,644	$	175,920	Total amounts presented in the Statements of Income	$	536,594	$	116,836	$	263,521	$	461,882
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	$	184,879	$	215,644	$	(21,255)	$	(240,632)	Derivatives1	$	(78,806)	$	(71,218)	$	16,658	$	54,901
Hedged items2	Hedged items2	(174,839)		(204,404)		21,121		224,576		Hedged items2	118,441		111,500		(25,891)		(124,178)
NET GAINS (LOSSES) ON FAIR VALUE HEDGING RELATIONSHIPS	NET GAINS (LOSSES) ON FAIR VALUE HEDGING RELATIONSHIPS	$	10,040	$	11,240	$	(134)	$	(16,056)	NET GAINS (LOSSES) ON FAIR VALUE HEDGING RELATIONSHIPS	$	39,635	$	40,282	$	(9,233)	$	(69,277)


		Three Months Ended									Three Months Ended
		09/30/2021									03/31/2022
		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	$	29,925	$	10,701	$	1,326	$	37,729	Total amounts presented in the Statements of Income	$	37,881	$	14,784	$	2,036	$	36,556
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	$	1,516	$	1,446	$	—	$	(403)	Derivatives1	$	193,430	$	215,804	$	(606)	$	(255,563)
Hedged items2	Hedged items2	(18,744)		(23,862)		—		6,982		Hedged items2	(207,166)		(235,685)		1,230		273,563
NET GAINS (LOSSES) ON FAIR VALUE HEDGING RELATIONSHIPS	NET GAINS (LOSSES) ON FAIR VALUE HEDGING RELATIONSHIPS	$	(17,228)	$	(22,416)	$	—	$	6,579	NET GAINS (LOSSES) ON FAIR VALUE HEDGING RELATIONSHIPS	$	(13,736)	$	(19,881)	$	624	$	18,000

1 Includes net interest settlements in interest income/expense.

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

~~Table of Contents~~

For the nine months ended September 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~~

Nine Months Ended
09/30/2022
Interest Income/Expense
Advances Available-for-sale Securities Consolidated Obligation Discount Notes Consolidated Obligation Bonds
Total amounts presented in the Statements of Income $ 326,928 $ 100,664 $ 147,678 $ 292,252
Gains (losses) on fair value hedging relationships:
Interest rate contracts:
Derivatives1
$ 462,228 $ 541,165 $ (33,973) $ (593,986)
Hedged items2
(474,731) (562,165) 41,948 607,335
NET GAINS (LOSSES) ON FAIR VALUE HEDGING RELATIONSHIPS $ (12,503) $ (21,000) $ 7,975 $ 13,349

Nine Months Ended
9/30/2021
Interest Income/Expense
Advances Available-for-sale Securities Consolidated Obligation Discount Notes Consolidated Obligation Bonds
Total amounts presented in the Statements of Income $ 95,677 $ 29,589 $ 4,393 $ 124,395
Gains (losses) on fair value hedging relationships:
Interest rate contracts:
Derivatives1
$ 84,116 $ 81,276 $ 13 $ (11,167)
Hedged items2
(133,978) (153,929) (33) 33,424
NET GAINS (LOSSES) ON FAIR VALUE HEDGING RELATIONSHIPS $ (49,862) $ (72,653) $ (20) $ 22,257

1 ~~Includes net interest settlements in interest income/expense.~~

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

3027

Table of Contents

Table ~~6.4~~6.3 presents the cumulative basis adjustments on hedged items designated as fair value hedges and the related amortized cost of the hedged items as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 (in thousands):

Table ~~6.4~~6.3


09/30/2022
03/31/2023										03/31/2023
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	$	5,741,307	$	(414,693)	$	9,582	$	(405,111)	Advances	$	9,513,738	$	(250,523)	$	(9,861)	$	(260,384)
Available-for-sale securities	Available-for-sale securities	5,725,066		(462,976)		—		(462,976)		Available-for-sale securities	5,973,141		(307,485)		—		(307,485)
Consolidated obligation discount notes	Consolidated obligation discount notes	(10,259,327)		41,948		—		41,948		Consolidated obligation discount notes	(10,452,989)		4,973		—		4,973
Consolidated obligation bonds	Consolidated obligation bonds	(10,712,039)		647,849		—		647,849		Consolidated obligation bonds	(17,226,468)		486,643		(6,226)		480,417

12/31/2021
12/31/2022										12/31/2022
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	$	6,268,057	$	57,055	$	11,261	$	68,316	Advances	$	8,161,351	$	(387,377)	$	8,553	$	(378,824)
Available-for-sale securities	Available-for-sale securities	5,785,963		100,372		—		100,372		Available-for-sale securities	5,959,781		(418,984)		—		(418,984)

Consolidated discount notes										Consolidated discount notes	(7,562,117)		30,865		—		30,865
Consolidated obligation bonds	Consolidated obligation bonds	(6,754,140)		40,514		—		40,514		Consolidated obligation bonds	(11,657,093)		604,595		—		604,595

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~~accumulated other comprehensive income (AOCI) is excluded).

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

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

Table ~~6.5~~6.4


		Three Months Ended				Nine Months Ended					Three Months Ended
		09/30/2022		09/30/2021		09/30/2022		09/30/2021				03/31/2023		03/31/2022

Derivatives not designated as hedging instruments:										Derivatives not designated as hedging instruments:
Economic hedges:	Economic hedges:									Economic hedges:
Interest rate swaps	Interest rate swaps	$	28,284	$	11,900	$	109,271	$	57,454	Interest rate swaps		$	(8,286)	$	60,927
Interest rate caps/floors	Interest rate caps/floors	780		252		1,865		180		Interest rate caps/floors		(350)		941
Net interest settlements	Net interest settlements	(1,201)		(12,878)		(17,045)		(38,773)		Net interest settlements		8,298		(10,374)
Price alignment interest	Price alignment interest	(36)		8		(33)		19		Price alignment interest		(210)		4
Mortgage delivery commitments	Mortgage delivery commitments	(1,629)		(678)		(8,483)		(2,710)		Mortgage delivery commitments		23		(4,935)

NET GAINS (LOSSES) ON DERIVATIVES	NET GAINS (LOSSES) ON DERIVATIVES	$	26,198	$	(1,396)	$	85,575	$	16,170	NET GAINS (LOSSES) ON DERIVATIVES		$	(525)	$	46,563

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 $24,126,000 as of September 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.

3128

Table of Contents

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 ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021.~~2022.

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 ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 (in thousands):

Table 7.1


		09/30/2022		12/31/2021			03/31/2023		12/31/2022
Interest-bearing:	Interest-bearing:					Interest-bearing:
Demand	Demand	$	260,472	$	317,911	Demand	$	349,602	$	301,073
Overnight	Overnight	336,400		530,100		Overnight	547,700		352,400
Term	Term	18,000		2,750		Term	6,250		12,000

Total interest-bearing	Total interest-bearing	614,872		850,761		Total interest-bearing	903,552		665,473
Non-interest-bearing:	Non-interest-bearing:					Non-interest-bearing:
Other	Other	53,098		95,446		Other	51,769		45,588

Total non-interest-bearing	Total non-interest-bearing	53,098		95,446		Total non-interest-bearing	51,769		45,588
TOTAL DEPOSITS	TOTAL DEPOSITS	$	667,970	$	946,207	TOTAL DEPOSITS	$	955,321	$	711,061

3229

Table of Contents

NOTE 8 – CONSOLIDATED OBLIGATIONS

Consolidated Obligation Bonds: Table 8.1 presents FHLBank’s participation in consolidated obligation bonds outstanding as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 (dollar amounts in thousands):

Table 8.1


		09/30/2022				12/31/2021					03/31/2023				12/31/2022
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	$	17,376,950	2.38	%	$	21,821,300	0.13	%	Due in one year or less	$	26,873,000	4.39	%	$	21,936,100	3.77	%
Due after one year through two years	Due after one year through two years	4,953,115		1.94		2,582,600		1.02		Due after one year through two years	9,082,790		3.61		7,074,505		2.97
Due after two years through three years	Due after two years through three years	4,210,230		1.67		2,435,700		0.90		Due after two years through three years	3,107,785		2.07		3,508,370		1.95
Due after three years through four years	Due after three years through four years	3,138,500		1.32		1,927,100		0.86		Due after three years through four years	4,080,125		1.90		4,254,750		1.74
Due after four years through five years	Due after four years through five years	2,827,750		1.62		3,766,500		0.89		Due after four years through five years	1,615,100		1.96		1,694,660		1.79
Thereafter	Thereafter	4,709,550		1.83		5,125,050		1.57		Thereafter	4,235,150		2.11		4,638,150		1.99
Total par value	Total par value	37,216,095		2.03	%	37,658,250		0.55	%	Total par value	48,993,950		3.62	%	43,106,535		3.02	%
Premiums	Premiums	20,673				27,470				Premiums	17,260				18,950
Discounts	Discounts	(2,381)				(2,720)				Discounts	(4,991)				(3,789)
Concession fees	Concession fees	(11,327)				(11,877)				Concession fees	(10,927)				(11,262)
Hedging adjustments	Hedging adjustments	(647,849)				(40,514)				Hedging adjustments	(480,417)				(604,595)
TOTAL	TOTAL	$	36,575,211			$	37,630,609			TOTAL	$	48,514,875			$	42,505,839

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 ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 includes callable bonds totaling ~~$16,848,000,000~~$18,743,600,000 and ~~$11,224,000,000,~~$16,008,000,000, 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 ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 (in thousands):

Table 8.2


Year of Maturity or Next Call Date	Year of Maturity or Next Call Date	09/30/2022		12/31/2021		Year of Maturity or Next Call Date	03/31/2023		12/31/2022
Due in one year or less	Due in one year or less	$	31,211,450	$	32,612,800	Due in one year or less	$	42,910,500	$	35,682,600
Due after one year through two years	Due after one year through two years	3,243,615		2,224,600		Due after one year through two years	3,604,290		4,789,005
Due after two years through three years	Due after two years through three years	1,153,230		1,024,200		Due after two years through three years	900,785		940,370
Due after three years through four years	Due after three years through four years	639,500		565,100		Due after three years through four years	906,125		1,067,750
Due after four years through five years	Due after four years through five years	556,750		684,500		Due after four years through five years	330,100		256,660
Thereafter	Thereafter	411,550		547,050		Thereafter	342,150		370,150
TOTAL PAR VALUE	TOTAL PAR VALUE	$	37,216,095	$	37,658,250	TOTAL PAR VALUE	$	48,993,950	$	43,106,535

~~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.

~~Table of Contents~~

Table 8.3 summarizes interest rate payment terms for consolidated obligation bonds as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 (in thousands):

Table 8.3


		09/30/2022		12/31/2021			03/31/2023		12/31/2022
Fixed rate	Fixed rate	$	18,200,595	$	20,957,250	Fixed rate	$	24,340,950	$	19,194,535
Simple variable rate	Simple variable rate	16,728,500		15,752,000		Simple variable rate	22,366,000		21,625,000
Step	Step	2,287,000		949,000		Step	2,287,000		2,287,000

TOTAL PAR VALUE	TOTAL PAR VALUE	$	37,216,095	$	37,658,250	TOTAL PAR VALUE	$	48,993,950	$	43,106,535

Table of Contents

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
September 30, 2022 $ 22,661,403 $ 22,859,242 2.46 %
December 31, 2021 $ 6,568,989 $ 6,569,580 0.04 %


	Carrying Value		Par Value		Weighted Average Interest Rate1
March 31, 2023	$	20,972,372	$	21,261,788	4.40	%

December 31, 2022	$	24,775,405	$	24,997,018	3.81	%

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.

~~Table of Contents~~

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 ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 (in thousands):

Table 9.1


09/30/2022
03/31/2023												03/31/2023
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	$	171,216	$	(167,508)	$	3,708	$	(39)	$	3,669	Uncleared derivatives	$	101,113	$	(93,142)	$	7,971	$	(116)	$	7,855
Cleared derivatives	Cleared derivatives	32,718		197,751		230,469		—		230,469		Cleared derivatives	6,332		307,655		313,987		—		313,987
Total derivative assets	Total derivative assets	203,934		30,243		234,177		(39)		234,138		Total derivative assets	107,445		214,513		321,958		(116)		321,842
Securities purchased under agreements to resell	Securities purchased under agreements to resell	3,250,000		—		3,250,000		(3,250,000)		—		Securities purchased under agreements to resell	3,600,000		—		3,600,000		(3,600,000)		—
TOTAL	TOTAL	$	3,453,934	$	30,243	$	3,484,177	$	(3,250,039)	$	234,138	TOTAL	$	3,707,445	$	214,513	$	3,921,958	$	(3,600,116)	$	321,842

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 of Contents

Table 9.2


12/31/2021
12/31/2022												12/31/2022
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	$	16,855	$	(16,522)	$	333	$	(32)	$	301	Uncleared derivatives	$	154,844	$	(153,125)	$	1,719	$	(24)	$	1,695
Cleared derivatives	Cleared derivatives	195		156,398		156,593		—		156,593		Cleared derivatives	15,393		254,964		270,357		—		270,357
Total derivative assets	Total derivative assets	17,050		139,876		156,926		(32)		156,894		Total derivative assets	170,237		101,839		272,076		(24)		272,052
Securities purchased under agreements to resell	Securities purchased under agreements to resell	1,500,000		—		1,500,000		(1,500,000)		—		Securities purchased under agreements to resell	2,350,000		—		2,350,000		(2,350,000)		—
TOTAL	TOTAL	$	1,517,050	$	139,876	$	1,656,926	$	(1,500,032)	$	156,894	TOTAL	$	2,520,237	$	101,839	$	2,622,076	$	(2,350,024)	$	272,052

~~Table of Contents~~

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 ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 (in thousands):

Table 9.3


09/30/2022
03/31/2023												03/31/2023
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	$	633,051	$	(618,199)	$	14,852	$	(676)	$	14,176	Uncleared derivatives	$	502,930	$	(500,478)	$	2,452	$	(37)	$	2,415
Cleared derivatives	Cleared derivatives	1,060		(1,060)		—		—		—		Cleared derivatives	30,676		(30,676)		—		—		—
Total derivative liabilities	Total derivative liabilities	634,111		(619,259)		14,852		(676)		14,176		Total derivative liabilities	533,606		(531,154)		2,452		(37)		2,415

TOTAL	TOTAL	$	634,111	$	(619,259)	$	14,852	$	(676)	$	14,176	TOTAL	$	533,606	$	(531,154)	$	2,452	$	(37)	$	2,415

Table of Contents

Table 9.4


12/31/2021
12/31/2022												12/31/2022
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	$	179,338	$	(174,758)	$	4,580	$	(45)	$	4,535	Uncleared derivatives	$	609,169	$	(606,810)	$	2,359	$	(173)	$	2,186
Cleared derivatives	Cleared derivatives	1,972		(1,972)		—		—		—		Cleared derivatives	1,816		(1,816)		—		—		—
Total derivative liabilities	Total derivative liabilities	181,310		(176,730)		4,580		(45)		4,535		Total derivative liabilities	610,985		(608,626)		2,359		(173)		2,186

TOTAL	TOTAL	$	181,310	$	(176,730)	$	4,580	$	(45)	$	4,535	TOTAL	$	610,985	$	(608,626)	$	2,359	$	(173)	$	2,186

~~Table of Contents~~

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 the amounts paid-in for 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 ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 (dollar amounts in thousands):

Table 10.1


		09/30/2022						12/31/2021							03/31/2023						12/31/2022
		Required			Actual			Required			Actual				Required			Actual			Required			Actual
Regulatory capital requirements:	Regulatory capital requirements:													Regulatory capital requirements:
Risk-based capital	Risk-based capital	$	571,096		$	3,072,595		$	363,108		$	2,407,762		Risk-based capital	$	518,010		$	3,655,409		$	481,076		$	3,522,040
Total regulatory capital-to-asset ratio	Total regulatory capital-to-asset ratio	4.0		%	5.3		%	4.0		%	5.5		%	Total regulatory capital-to-asset ratio	4.0		%	5.3		%	4.0		%	5.2		%
Total regulatory capital	Total regulatory capital	$	2,540,011		$	3,348,181		$	1,920,850		$	2,642,533		Total regulatory capital	$	2,993,528		$	3,948,099		$	2,879,714		$	3,761,094
Leverage capital ratio	Leverage capital ratio	5.0		%	7.7		%	5.0		%	8.0		%	Leverage capital ratio	5.0		%	7.7		%	5.0		%	7.7		%
Leverage capital	Leverage capital	$	3,175,014		$	4,884,478		$	2,401,062		$	3,846,414		Leverage capital	$	3,741,910		$	5,775,804		$	3,599,642		$	5,522,115

Table of Contents

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 nine~~ months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ (in thousands):

Table 10.2


		Three Months Ended				Nine Months Ended					Three Months Ended
		09/30/2022		09/30/2021		09/30/2022		09/30/2021				03/31/2023		03/31/2022
Balance, beginning of period	Balance, beginning of period	$	537	$	1,543	$	582	$	1,624	Balance, beginning of period		$	280	$	582
Capital stock subject to mandatory redemption reclassified from equity during the period	Capital stock subject to mandatory redemption reclassified from equity during the period	144,680		460		603,043		584,512		Capital stock subject to mandatory redemption reclassified from equity during the period		211,237		163,047

Redemption or repurchase of mandatorily redeemable capital stock during the period	Redemption or repurchase of mandatorily redeemable capital stock during the period	(144,926)		(1,397)		(603,336)		(585,547)		Redemption or repurchase of mandatorily redeemable capital stock during the period		(211,250)		(163,070)
Stock dividend classified as mandatorily redeemable capital stock during the period	Stock dividend classified as mandatorily redeemable capital stock during the period	1		1		3		18		Stock dividend classified as mandatorily redeemable capital stock during the period		2		—
Balance, end of period	Balance, end of period	$	292	$	607	$	292	$	607	Balance, end of period		$	269	$	559

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 one percent of its total assets or if the issuance of excess stock would cause FHLBank’s excess stock to exceed one percent of its total assets. As of ~~September 30, 2022,~~March 31, 2023, FHLBank’s excess stock was less than one 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.

Stock Dividends: FHLBank’s board of directors may declare and pay non-cumulative dividends, expressed as a percentage rate per annum based upon the par value of capital stock on shares of Class A Common Stock outstanding and on shares of Class B Common Stock outstanding, out of previously unrestricted retained earnings and current earnings in either cash or Class B Common Stock. There is no dividend preference between Class A Common Stockholders and Class B Common Stockholders up to the Dividend Parity Threshold (DPT). Dividend rates in excess of the DPT may be paid on Class A Common Stock or Class B Common Stock at the discretion of the board of directors, provided, however, that the dividend rate paid per annum on the Class B Common Stock equals or exceeds the dividend rate per annum paid on the Class A Common Stock for any dividend period. The DPT can be changed at any time by the board of directors but will only be effective for dividends paid at least 90 days after the date members are notified by FHLBank. The DPT effective for dividends paid during 2022 and the first quarter of 2023 was equal to the average overnight Federal funds effective rate minus 100 basis points. On March 24, 2023, the board of directors revised the DPT as the average effective overnight Federal funds rate for a dividend period minus 200 basis points. This DPT will be effective for the second quarter of 2023 and continue to be effective until such time as it may be changed by the board of directors. When the overnight Federal funds effective rate is below 2.00 percent, the DPT is zero for that dividend period (DPT is floored at zero).

3834

Table of Contents

NOTE 11 – ACCUMULATED OTHER COMPREHENSIVE INCOME

Table 11.1 summarizes the changes in AOCI for the three months ended ~~September 30,~~March 31, 2023 and 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 June 30, 2021		$	96,282	$	(2,738)	$	93,544

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

Unrealized gains (losses)	Unrealized gains (losses)	(22,482)				(22,482)			Unrealized gains (losses)	(41,227)				(41,227)

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	Amortization of net losses - defined benefit pension plan1			92		92			Amortization of net losses - defined benefit pension plan1			62		62
Net current period other comprehensive income (loss)	Net current period other comprehensive income (loss)	(22,482)		92		(22,390)			Net current period other comprehensive income (loss)	(41,227)		62		(41,165)
Balance at September 30, 2021		$	73,800	$	(2,646)	$	71,154
Balance at March 31, 2022									Balance at March 31, 2022	$	33,462	$	(2,312)	$	31,150

Balance at June 30, 2022		$	(21,103)	$	(2,250)	$	(23,353)

Balance at December 31, 2022									Balance at December 31, 2022	$	(84,443)	$	173	$	(84,270)
Other comprehensive income (loss) before reclassification:	Other comprehensive income (loss) before reclassification:								Other comprehensive income (loss) before reclassification:
Unrealized gains (losses)	Unrealized gains (losses)	(29,088)				(29,088)			Unrealized gains (losses)	1,887				1,887

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

Amortization of net losses - defined benefit pension plan1				63		63

Net current period other comprehensive income (loss)	Net current period other comprehensive income (loss)	(29,088)		63		(29,025)			Net current period other comprehensive income (loss)	1,887		—		1,887
Balance at September 30, 2022		$	(50,191)	$	(2,187)	$	(52,378)
Balance at March 31, 2023									Balance at March 31, 2023	$	(82,556)	$	173	$	(82,383)

1~~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 nine months ended September 30, 2022 and 2021 (in thousands):~~

~~Table 11.2~~

Nine 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
28,604 28,604
Reclassifications from other comprehensive income (loss) to net income:
Amortization of net losses - defined benefit pension plan2
242 242
Net current period other comprehensive income (loss) 28,604 242 28,846
Balance at September 30, 2021 $ 73,800 $ (2,646) $ 71,154
Balance at December 31, 2021 $ 74,689 $ (2,374) $ 72,315
Other comprehensive income (loss) before reclassification:
Unrealized gains (losses) (124,880) (124,880)
Reclassifications from other comprehensive income (loss) to net income:
Amortization of net losses - defined benefit pension plan2
187 187
Net current period other comprehensive income (loss) (124,880) 187 (124,693)
Balance at September 30, 2022 $ (50,191) $ (2,187) $ (52,378)

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).

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 ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021.~~2022. 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, and 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.

4035

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 nine~~ months ended ~~September 30, 2022~~March 31, 2023 and ~~2021.~~2022.

Tables 12.1 and 12.2 present the carrying value, fair value and fair value hierarchy of financial assets and liabilities as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021.~~2022. 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.

4136

Table of Contents

The carrying value, fair value and fair value hierarchy of FHLBank’s financial assets and liabilities as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 are summarized in Tables 12.1 and 12.2 (in thousands):

Table 12.1


		09/30/2022													03/31/2023
		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	$	25,689	$	25,689	$	25,689	$	—	$	—	$	—	Cash and due from banks	$	25,295	$	25,295	$	25,295	$	—	$	—	$	—
Interest-bearing deposits	Interest-bearing deposits	780,741		780,741		—		780,741		—		—		Interest-bearing deposits	2,113,940		2,113,940		—		2,113,940		—		—
Securities purchased under agreements to resell	Securities purchased under agreements to resell	3,250,000		3,250,000		—		3,250,000		—		—		Securities purchased under agreements to resell	3,600,000		3,600,000		—		3,600,000		—		—
Federal funds sold	Federal funds sold	4,705,000		4,705,000		—		4,705,000		—		—		Federal funds sold	2,975,000		2,975,000		—		2,975,000		—		—
Trading securities	Trading securities	2,173,995		2,173,995		—		2,173,995		—		—		Trading securities	1,427,002		1,427,002		—		1,427,002		—		—
Available-for-sale securities	Available-for-sale securities	8,449,382		8,449,382		—		8,449,382		—		—		Available-for-sale securities	9,383,789		9,383,789		—		9,383,789		—		—
Held-to-maturity securities	Held-to-maturity securities	361,018		358,456		—		285,625		72,831		—		Held-to-maturity securities	331,735		327,896		—		259,063		68,833		—
Advances	Advances	35,318,980		35,249,896		—		35,249,896		—		—		Advances	46,456,748		46,392,673		—		46,392,673		—		—
Mortgage loans held for portfolio, net of allowance	Mortgage loans held for portfolio, net of allowance	7,998,911		6,642,564		—		6,641,642		922		—		Mortgage loans held for portfolio, net of allowance	7,925,256		6,791,998		—		6,790,773		1,225		—

Accrued interest receivable	Accrued interest receivable	124,579		124,579		—		124,579		—		—		Accrued interest receivable	196,675		196,675		—		196,675		—		—
Derivative assets	Derivative assets	234,177		234,177		—		203,934		—		30,243		Derivative assets	321,958		321,958		—		107,445		—		214,513
Liabilities:	Liabilities:													Liabilities:
Deposits	Deposits	667,970		667,944		—		667,944		—		—		Deposits	955,321		955,322		—		955,322		—		—
Consolidated obligation discount notes	Consolidated obligation discount notes	22,661,403		22,576,178		—		22,576,178		—		—		Consolidated obligation discount notes	20,972,372		20,786,465		—		20,786,465		—		—
Consolidated obligation bonds	Consolidated obligation bonds	36,575,211		35,315,514		—		35,315,514		—		—		Consolidated obligation bonds	48,514,875		47,424,206		—		47,424,206		—		—

Mandatorily redeemable capital stock	Mandatorily redeemable capital stock	292		292		292		—		—		—		Mandatorily redeemable capital stock	269		269		269		—		—		—
Accrued interest payable	Accrued interest payable	118,862		118,862		—		118,862		—		—		Accrued interest payable	266,118		266,118		—		266,118		—		—
Derivative liabilities	Derivative liabilities	14,852		14,852		—		634,111		—		(619,259)		Derivative liabilities	2,452		2,452		—		533,606		—		(531,154)
Other Asset (Liability):	Other Asset (Liability):													Other Asset (Liability):
Industrial revenue bonds	Industrial revenue bonds	35,000		31,851		—		31,851		—		—		Industrial revenue bonds	35,000		32,414		—		32,414		—		—
Financing obligation payable	Financing obligation payable	(35,000)		(31,851)		—		(31,851)		—		—		Financing obligation payable	(35,000)		(32,414)		—		(32,414)		—		—

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.

4237

Table of Contents

Table 12.2


		12/31/2021													12/31/2022
		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	$	25,841	$	25,841	$	25,841	$	—	$	—	$	—	Cash and due from banks	$	25,964	$	25,964	$	25,964	$	—	$	—	$	—
Interest-bearing deposits	Interest-bearing deposits	693,249		693,249		—		693,249		—		—		Interest-bearing deposits	2,039,852		2,039,852		—		2,039,852		—		—
Securities purchased under agreements to resell	Securities purchased under agreements to resell	1,500,000		1,500,000		—		1,500,000		—		—		Securities purchased under agreements to resell	2,350,000		2,350,000		—		2,350,000		—		—
Federal funds sold	Federal funds sold	3,360,000		3,360,000		—		3,360,000		—		—		Federal funds sold	3,750,000		3,750,000		—		3,750,000		—		—
Trading securities	Trading securities	2,339,955		2,339,955		—		2,339,955		—		—		Trading securities	1,421,453		1,421,453		—		1,421,453		—		—
Available-for-sale securities	Available-for-sale securities	7,719,185		7,719,185		—		7,719,185		—		—		Available-for-sale securities	9,354,416		9,354,416		—		9,354,416		—		—
Held-to-maturity securities	Held-to-maturity securities	446,185		450,771		—		377,156		73,615		—		Held-to-maturity securities	345,430		340,259		—		271,491		68,768		—
Advances	Advances	23,484,288		23,567,860		—		23,567,860		—		—		Advances	44,262,750		44,173,791		—		44,173,791		—		—
Mortgage loans held for portfolio, net of allowance	Mortgage loans held for portfolio, net of allowance	8,135,046		8,064,657		—		8,060,200		4,457		—		Mortgage loans held for portfolio, net of allowance	7,905,135		6,639,257		—		6,638,132		1,125		—

Accrued interest receivable	Accrued interest receivable	78,032		78,032		—		78,032		—		—		Accrued interest receivable	186,594		186,594		—		186,594		—		—
Derivative assets	Derivative assets	156,926		156,926		—		17,050		—		139,876		Derivative assets	272,076		272,076		—		170,237		—		101,839
Liabilities:	Liabilities:													Liabilities:
Deposits	Deposits	946,207		946,207		—		946,207		—		—		Deposits	711,061		711,052		—		711,052		—		—
Consolidated obligation discount notes	Consolidated obligation discount notes	6,568,989		6,568,645		—		6,568,645		—		—		Consolidated obligation discount notes	24,775,405		24,630,686		—		24,630,686		—		—
Consolidated obligation bonds	Consolidated obligation bonds	37,630,609		37,565,481		—		37,565,481		—		—		Consolidated obligation bonds	42,505,839		41,258,883		—		41,258,883		—		—
Mandatorily redeemable capital stock	Mandatorily redeemable capital stock	582		582		582		—		—		—		Mandatorily redeemable capital stock	280		280		280		—		—		—
Accrued interest payable	Accrued interest payable	42,753		42,753		—		42,753		—		—		Accrued interest payable	197,175		197,175		—		197,175		—		—
Derivative liabilities	Derivative liabilities	4,580		4,580		—		181,310		—		(176,730)		Derivative liabilities	2,359		2,359		—		610,985		—		(608,626)
Other Asset (Liability):	Other Asset (Liability):													Other Asset (Liability):
Industrial revenue bonds	Industrial revenue bonds	35,000		36,114		—		36,114		—		—		Industrial revenue bonds	35,000		31,948		—		31,948		—		—
Financing obligation payable	Financing obligation payable	(35,000)		(36,114)		—		(36,114)		—		—		Financing obligation payable	(35,000)		(31,948)		—		(31,948)		—		—

4338

Table of Contents

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 ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 (in thousands).

Table 12.3


		09/30/2022											03/31/2023
		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		$	499,904	$	—	$	499,904	$	—	$	—

U.S. Treasury obligations	U.S. Treasury obligations	645,589		—		645,589		—		—		U.S. Treasury obligations	$	398,007	$	—	$	398,007	$	—	$	—
GSE debentures	GSE debentures	389,244		—		389,244		—		—		GSE debentures	390,978		—		390,978		—		—

GSE MBS	GSE MBS	639,258		—		639,258		—		—		GSE MBS	638,017		—		638,017		—		—
Total trading securities	Total trading securities	2,173,995		—		2,173,995		—		—		Total trading securities	1,427,002		—		1,427,002		—		—
Available-for-sale securities:	Available-for-sale securities:											Available-for-sale securities:
U.S. Treasury obligations	U.S. Treasury obligations	3,072,834		—		3,072,834		—		—		U.S. Treasury obligations	2,958,589		—		2,958,589		—		—
U.S. obligation MBS	U.S. obligation MBS	41,433		—		41,433		—		—		U.S. obligation MBS	117,096		—		117,096		—		—
GSE MBS	GSE MBS	5,335,115		—		5,335,115		—		—		GSE MBS	6,308,104		—		6,308,104		—		—
Total available-for-sale securities	Total available-for-sale securities	8,449,382		—		8,449,382		—		—		Total available-for-sale securities	9,383,789		—		9,383,789		—		—
Derivative assets:	Derivative assets:											Derivative assets:
Interest-rate related	Interest-rate related	234,138		—		203,895		—		30,243		Interest-rate related	321,842		—		107,329		—		214,513
Mortgage delivery commitments	Mortgage delivery commitments	39		—		39		—		—		Mortgage delivery commitments	116		—		116		—		—
Total derivative assets	Total derivative assets	234,177		—		203,934		—		30,243		Total derivative assets	321,958		—		107,445		—		214,513
TOTAL RECURRING FAIR VALUE MEASUREMENTS - ASSETS	TOTAL RECURRING FAIR VALUE MEASUREMENTS - ASSETS	$	10,857,554	$	—	$	10,827,311	$	—	$	30,243	TOTAL RECURRING FAIR VALUE MEASUREMENTS - ASSETS	$	11,132,749	$	—	$	10,918,236	$	—	$	214,513

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	$	14,176	$	—	$	633,435	$	—	$	(619,259)	Interest-rate related	$	2,415	$	—	$	533,569	$	—	$	(531,154)
Mortgage delivery commitments	Mortgage delivery commitments	676		—		676		—		—		Mortgage delivery commitments	37		—		37		—		—
Total derivative liabilities	Total derivative liabilities	14,852		—		634,111		—		(619,259)		Total derivative liabilities	2,452		—		533,606		—		(531,154)
TOTAL RECURRING FAIR VALUE MEASUREMENTS - LIABILITIES	TOTAL RECURRING FAIR VALUE MEASUREMENTS - LIABILITIES	$	14,852	$	—	$	634,111	$	—	$	(619,259)	TOTAL RECURRING FAIR VALUE MEASUREMENTS - LIABILITIES	$	2,452	$	—	$	533,606	$	—	$	(531,154)

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

Impaired mortgage loans	Impaired mortgage loans	$	938	$	—	$	—	$	938	$	—	Impaired mortgage loans	$	1,242	$	—	$	—	$	1,242	$	—
Real estate owned	Real estate owned	35		—		—		35		—		Real estate owned	285		—		—		285		—
TOTAL NONRECURRING FAIR VALUE MEASUREMENTS - ASSETS	TOTAL NONRECURRING FAIR VALUE MEASUREMENTS - ASSETS	$	973	$	—	$	—	$	973	$	—	TOTAL NONRECURRING FAIR VALUE MEASUREMENTS - ASSETS	$	1,527	$	—	$	—	$	1,527	$	—

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 ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 and still outstanding as of ~~September 30, 2022.~~March 31, 2023.

4439

Table of Contents

Table 12.4


		12/31/2021											12/31/2022
		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		$	200,023	$	—	$	200,023	$	—	$	—

U.S. Treasury obligations	U.S. Treasury obligations	917,472		—		917,472		—		—		U.S. Treasury obligations	$	396,233	$	—	$	396,233	$	—	$	—
GSE debentures	GSE debentures	415,918		—		415,918		—		—		GSE debentures	388,955		—		388,955		—		—

GSE MBS	GSE MBS	806,542		—		806,542		—		—		GSE MBS	636,265		—		636,265		—		—
Total trading securities	Total trading securities	2,339,955		—		2,339,955		—		—		Total trading securities	1,421,453		—		1,421,453		—		—
Available-for-sale securities:	Available-for-sale securities:											Available-for-sale securities:
U.S. Treasury obligations	U.S. Treasury obligations	2,816,437		—		2,816,437		—		—		U.S. Treasury obligations	3,315,356		—		3,315,356		—		—
U.S. obligation MBS	U.S. obligation MBS	50,767		—		50,767		—		—		U.S. obligation MBS	40,039		—		40,039		—		—
GSE MBS	GSE MBS	4,851,981		—		4,851,981		—		—		GSE MBS	5,999,021		—		5,999,021		—		—
Total available-for-sale securities	Total available-for-sale securities	7,719,185		—		7,719,185		—		—		Total available-for-sale securities	9,354,416		—		9,354,416		—		—
Derivative assets:	Derivative assets:											Derivative assets:
Interest-rate related	Interest-rate related	156,894		—		17,018		—		139,876		Interest-rate related	272,052		—		170,213		—		101,839
Mortgage delivery commitments	Mortgage delivery commitments	32		—		32		—		—		Mortgage delivery commitments	24		—		24		—		—
Total derivative assets	Total derivative assets	156,926		—		17,050		—		139,876		Total derivative assets	272,076		—		170,237		—		101,839
TOTAL RECURRING FAIR VALUE MEASUREMENTS - ASSETS	TOTAL RECURRING FAIR VALUE MEASUREMENTS - ASSETS	$	10,216,066	$	—	$	10,076,190	$	—	$	139,876	TOTAL RECURRING FAIR VALUE MEASUREMENTS - ASSETS	$	11,047,945	$	—	$	10,946,106	$	—	$	101,839

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	$	4,535	$	—	$	181,265	$	—	$	(176,730)	Interest-rate related	$	2,186	$	—	$	610,812	$	—	$	(608,626)
Mortgage delivery commitments	Mortgage delivery commitments	45		—		45		—		—		Mortgage delivery commitments	173		—		173		—		—
Total derivative liabilities	Total derivative liabilities	4,580		—		181,310		—		(176,730)		Total derivative liabilities	2,359		—		610,985		—		(608,626)
TOTAL RECURRING FAIR VALUE MEASUREMENTS - LIABILITIES	TOTAL RECURRING FAIR VALUE MEASUREMENTS - LIABILITIES	$	4,580	$	—	$	181,310	$	—	$	(176,730)	TOTAL RECURRING FAIR VALUE MEASUREMENTS - LIABILITIES	$	2,359	$	—	$	610,985	$	—	$	(608,626)

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

Impaired mortgage loans	Impaired mortgage loans	$	4,510	$	—	$	—	$	4,510	$	—	Impaired mortgage loans	$	1,164	$	—	$	—	$	1,164	$	—
Real estate owned		52		—		—		52		—

TOTAL NONRECURRING FAIR VALUE MEASUREMENTS - ASSETS	TOTAL NONRECURRING FAIR VALUE MEASUREMENTS - ASSETS	$	4,562	$	—	$	—	$	4,562	$	—	TOTAL NONRECURRING FAIR VALUE MEASUREMENTS - ASSETS	$	1,164	$	—	$	—	$	1,164	$	—

2 Includes assets adjusted to fair value during the year ended December 31, ~~2021~~2022 and still outstanding as of December 31, ~~2021.~~2022.

~~Table of Contents~~

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 ~~$971,834,286,000~~$1,407,411,991,000 and ~~$608,633,999,000~~$1,113,638,974,000 as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, 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 September 30, 2022, FHLBank Topeka has concluded that a loss accrual is not necessary at this time.

Table of Contents

Off-balance Sheet Commitments: ~~As of September 30, 2022~~Table 13.1 presents off-balance sheet commitments at March 31, 2023 and December 31, ~~2021, off-balance sheet~~2022 (in thousands). No allowance for credit losses was recorded on these commitments ~~are presented in Table 13.1 (in thousands):~~at March 31, 2023 and December 31, 2022.

Table 13.1


		09/30/2022						12/31/2021							03/31/2023						12/31/2022
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	$	5,399,509	$	11,342	$	5,410,851	$	5,206,182	$	1,983	$	5,208,165	Standby letters of credit outstanding	$	6,374,228	$	3,604	$	6,377,832	$	6,475,917	$	250	$	6,476,167

Advance commitments outstanding	Advance commitments outstanding	31,370		4,005		35,375		21,001		3,905		24,906		Advance commitments outstanding	57,964		2,615		60,579		173,959		2,505		176,464
Principal commitments for standby bond purchase agreements	Principal commitments for standby bond purchase agreements	298,470		543,450		841,920		—		727,200		727,200		Principal commitments for standby bond purchase agreements	282,830		603,580		886,410		212,705		646,165		858,870
Commitments to fund or purchase mortgage loans	Commitments to fund or purchase mortgage loans	41,745		—		41,745		72,025		—		72,025		Commitments to fund or purchase mortgage loans	46,347		—		46,347		33,882		—		33,882
Commitments to issue consolidated bonds, at par	Commitments to issue consolidated bonds, at par	1,105,000		—		1,105,000		635,000		—		635,000		Commitments to issue consolidated bonds, at par	—		—		—		501,000		—		501,000
Commitments to issue consolidated discount notes, at par	Commitments to issue consolidated discount notes, at par	123,647		—		123,647		—		—		—		Commitments to issue consolidated discount notes, at par	389,098		—		389,098		7,500		—		7,500

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 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 ~~$1,605,000~~$1,914,000 and ~~$1,336,000~~$1,878,000 as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, 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.

~~Table of Contents~~

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,~~2026, though some are renewable at the option of FHLBank. As of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, the total commitments for bond purchases included agreements with two in-district state housing authorities. FHLBank was not required to purchase any bonds under any agreements during the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 and ~~2021.~~2022.

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 ~~$(637,000)~~$79,000 and ~~$(13,000)~~$(149,000) as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, 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.

Table of Contents

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 ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 (dollar amounts in thousands). None of the officers or directors of this member currently serve on FHLBank’s board of directors.

Table 14.1


09/30/2022
03/31/2023															03/31/2023
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	%	$	453,923	24.6	%	$	454,423	21.4	%	MidFirst Bank	OK	$	500	0.2	%	$	608,151	25.7	%	$	608,651	22.9	%

TOTAL	TOTAL		$	500	0.2	%	$	453,923	24.6	%	$	454,423	21.4	%	TOTAL		$	500	0.2	%	$	608,151	25.7	%	$	608,651	22.9	%

Table 14.2


12/31/2021
12/31/2022															12/31/2022
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	%	$	413,430	32.7	%	$	413,930	27.6	%	MidFirst Bank	OK	$	500	0.2	%	$	493,412	21.7	%	$	493,912	19.7	%

TOTAL	TOTAL		$	500	0.2	%	$	413,430	32.7	%	$	413,930	27.6	%	TOTAL		$	500	0.2	%	$	493,412	21.7	%	$	493,912	19.7	%

~~Table of Contents~~

Advance and deposit balances with members that owned more than 10 percent of outstanding FHLBank regulatory capital stock as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 are summarized in Table 14.3 (dollar amounts in thousands).

Table 14.3


		09/30/2022				12/31/2021				09/30/2022				12/31/2021					03/31/2023				12/31/2022				03/31/2023				12/31/2022
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	$	9,920,000	27.8	%	$	9,045,000	38.6	%	$	901	0.1	%	$	517	0.1	%	MidFirst Bank	$	13,370,000	28.6	%	$	10,740,000	24.1	%	$	1,073	0.1	%	$	530	0.1	%

TOTAL	TOTAL	$	9,920,000	27.8	%	$	9,045,000	38.6	%	$	901	0.1	%	$	517	0.1	%	TOTAL	$	13,370,000	28.6	%	$	10,740,000	24.1	%	$	1,073	0.1	%	$	530	0.1	%

MidFirst Bank did not sell any mortgage loans into the MPF Program during the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 and ~~2021.~~2022.

Table of Contents

Transactions with FHLBank Directors’ Financial Institutions: Table 14.4 presents information as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 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


		09/30/2022				12/31/2021					03/31/2023				12/31/2022
		Outstanding Amount		Percent of Total		Outstanding Amount		Percent of Total			Outstanding Amount		Percent of Total		Outstanding Amount		Percent of Total
Advances	Advances	$	182,367	0.5	%	$	180,099	0.8	%	Advances	$	418,483	0.9	%	$	185,535	0.4	%

Deposits	Deposits	$	7,431	1.1	%	$	15,613	1.6	%	Deposits	$	8,237	0.9	%	$	7,322	1.0	%

Class A Common Stock	Class A Common Stock	$	4,470	1.6	%	$	4,655	2.0	%	Class A Common Stock	$	4,658	1.6	%	$	4,151	1.7	%
Class B Common Stock	Class B Common Stock	11,133		0.6		17,056		1.3		Class B Common Stock	21,314		0.9		11,793		0.5
TOTAL CAPITAL STOCK	TOTAL CAPITAL STOCK	$	15,603	0.7	%	$	21,711	1.4	%	TOTAL CAPITAL STOCK	$	25,972	1.0	%	$	15,944	0.6	%

Table 14.5 presents mortgage loans acquired during the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ for members that had an officer or director serving on FHLBank’s board of directors in ~~2022~~2023 or ~~2021~~2022 (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 Nine Months Ended
09/30/2022 09/30/2021 09/30/2022 09/30/2021
Amount Percent of Total Amount Percent of Total Amount Percent of Total Amount Percent of Total
Mortgage loans acquired $ 4,736 1.9 % $ 13,563 2.2 % $ 16,032 1.9 % $ 32,534 1.9 %



	Three Months Ended
		03/31/2023	03/31/2022
			Amount		Percent of Total		Amount		Percent of Total
Mortgage loans acquired			$	4,512	2.5	%	$	5,577	2.0	%

NOTE 15 – TRANSACTIONS WITH OTHER FHLBANKS

From time to time, one FHLBank may transfer to another FHLBank the consolidated obligations for which the transferring FHLBank was originally the primary obligor but upon transfer the assuming FHLBank becomes the primary obligor. During the three months ended March 31, 2023, FHLBank Topeka transferred debt obligations with a par amount of $1,000,000,000 to another FHLBank. There were no transfers of debt obligations to other FHLBanks during the same period in the prior year.

Table of Contents

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,~~2022, which includes audited financial statements and related notes for the year ended December 31, ~~2021.~~2022. 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.

4944

Table of Contents

~~Selected Financial Data~~Executive Level Overview

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

Table 1


		09/30/2022			06/30/2022			03/31/2022			12/31/2021			09/30/2021				03/31/2023			12/31/2022			09/30/2022			06/30/2022			03/31/2022
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	$	63,500,273		$	57,499,300		$	50,742,692		$	48,021,238		$	45,516,223		Total assets	$	74,838,195		$	71,992,842		$	63,500,273		$	57,499,300		$	50,742,692
Investments1	Investments1	19,720,136			19,367,647			16,867,881			16,058,574			15,459,093			Investments1	19,831,466			19,261,151			19,720,136			19,367,647			16,867,881
Advances	Advances	35,318,980			29,522,840			25,487,576			23,484,288			21,411,103			Advances	46,456,748			44,262,750			35,318,980			29,522,840			25,487,576
Mortgage loans, net	Mortgage loans, net	7,998,911			8,018,930			8,021,949			8,135,046			8,315,791			Mortgage loans, net	7,925,256			7,905,135			7,998,911			8,018,930			8,021,949
Total liabilities	Total liabilities	60,204,762			54,504,534			47,964,812			45,306,972			42,945,027			Total liabilities	70,972,748			68,316,298			60,204,762			54,504,534			47,964,812
Deposits	Deposits	667,970			781,845			936,691			946,207			1,033,557			Deposits	955,321			711,061			667,970			781,845			936,691

Consolidated obligations, net2	Consolidated obligations, net2	59,236,614			53,004,477			46,804,372			44,199,598			41,755,017			Consolidated obligations, net2	69,487,247			67,281,244			59,236,614			53,004,477			46,804,372

Total capital	Total capital	3,295,511			2,994,766			2,777,880			2,714,266			2,571,196			Total capital	3,865,447			3,676,544			3,295,511			2,994,766			2,777,880
Capital stock	Capital stock	2,120,273			1,821,016			1,574,157			1,499,301			1,382,482			Capital stock	2,662,089			1,168,835			2,120,273			1,821,016			1,574,157
Retained earnings	Retained earnings	1,227,616			1,197,103			1,172,573			1,142,650			1,117,560			Retained earnings	1,285,741			1,253,105			1,227,616			1,197,103			1,172,573

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	94,795			83,226			85,075			82,789			73,260			Net interest income	104,403			99,895			94,795			83,226			85,075

Other income (loss)	Other income (loss)	(1,174)			(7,652)			(9,509)			(10,638)			(14,758)			Other income (loss)	11,613			4,393			(1,174)			(7,652)			(9,509)
Other expenses	Other expenses	19,149			19,725			19,878			22,051			18,628			Other expenses	22,145			22,102			19,149			19,725			19,878
Income before assessments	Income before assessments	74,357			55,957			55,995			51,488			41,534			Income before assessments	94,273			81,176			74,357			55,957			55,995
Affordable Housing Program (AHP) assessments	Affordable Housing Program (AHP) assessments	7,436			5,596			5,600			5,148			4,154			Affordable Housing Program (AHP) assessments	9,428			8,117			7,436			5,596			5,600
Net income	Net income	66,921			50,361			50,395			46,340			37,380			Net income	84,845			73,059			66,921			50,361			50,395
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	36,408			25,831			20,472			21,250			16,111			Dividends paid	52,209			47,570			36,408			25,831			20,472
Weighted average dividend rate3	Weighted average dividend rate3	6.94		%	5.63		%	4.88		%	5.62		%	4.15		%	Weighted average dividend rate3	8.12		%	7.79		%	6.94		%	5.63		%	4.88		%
Dividend payout ratio4	Dividend payout ratio4	54.40		%	51.29		%	40.62		%	45.86		%	43.10		%	Dividend payout ratio4	61.53		%	65.11		%	54.40		%	51.29		%	40.62		%
Return on average equity	Return on average equity	8.07		%	6.60		%	6.98		%	6.77		%	5.40		%	Return on average equity	8.96		%	8.04		%	8.07		%	6.60		%	6.98		%
Return on average assets	Return on average assets	0.42		%	0.35		%	0.39		%	0.38		%	0.31		%	Return on average assets	0.46		%	0.41		%	0.42		%	0.35		%	0.39		%
Average equity to average assets	Average equity to average assets	5.21		%	5.37		%	5.59		%	5.58		%	5.71		%	Average equity to average assets	5.09		%	5.06		%	5.21		%	5.37		%	5.59		%
Net interest margin5	Net interest margin5	0.60		%	0.59		%	0.66		%	0.68		%	0.61		%	Net interest margin5	0.56		%	0.56		%	0.60		%	0.59		%	0.66		%
Total capital ratio6	Total capital ratio6	5.19		%	5.21		%	5.47		%	5.65		%	5.65		%	Total capital ratio6	5.17		%	5.11		%	5.19		%	5.21		%	5.47		%
Regulatory capital ratio7	Regulatory capital ratio7	5.27		%	5.25		%	5.41		%	5.50		%	5.49		%	Regulatory capital ratio7	5.28		%	5.22		%	5.27		%	5.25		%	5.41		%

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~~par amount of 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~~presented. 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., permanent capital and Class A Common ~~Stock, Class B Common Stock and retained earnings)~~Stock) 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.~~institutions (CDFI).

5045

Table of Contents

~~During~~Since March 2023, members have increased their on-balance sheet liquidity due to market turmoil caused by the ~~third quarter~~financial difficulties and failures of ~~2022, concerns about inflation, recession, and the Federal Open Market Committee’s (FOMC) increases~~multiple U.S. banks. Continued concern over stress in the ~~Federal funds target rate continued to be~~banking sector has kept the ~~primary drivers~~demand for liquidity elevated. The purpose and mission of the ~~persistent~~FHLBank System is to serve as a reliable source of liquidity for members, the demand for which can expand in times of uncertainty and market ~~volatility~~stress. As this stress subsides, demand for advances as ~~reflected in increases in sovereign debt yields and credit spreads. As rates continued to rise during~~additional on-balance sheet liquidity also typically subsides, along with the third quarter of 2022, yields on U.S. Treasuries were higher relative to the prevailing yields at the end of the second quarter of 2022. Mortgage rates continued to rise in response to market conditions, which has slowed mortgage prepayments and related premium amortization and increased spreads on mortgage-related assets. Average advance balances reached historically high levels during the third quarter of 2022, as deposits at member banks are beginning to decline from 2020 highs and members are returning to advances for funding. Management continues to actively manage our funding composition in response to market conditions, resulting in increases in floating rate term debt and swapped fixed rate debt. Floating rate and swapped fixed rate debt more closely match asset repricing characteristics. We also continue to issue swapped callable debt, as funding spreads have been favorable in recent periods. Callable debt is typically fixed- or structured-rate debt that provides a higher coupon to investors because of the optionality held by the issuer.

~~Third~~First Quarter ~~2022~~2023 Financial Highlights:

•Net interest income/margin: Net interest income increased ~~$21.5~~$19.3 million to ~~$94.8~~$104.4 million for the quarter ended ~~September 30, 2022~~March 31, 2023 compared to ~~$73.3~~$85.1 million for the quarter ended September 30, 2021. Net interest margin declined one basis point for the current quarter, from 0.61 percent for the quarter ended September 30, 2021 to 0.60 percent for the quarter ended September 30, 2022, which primarily reflects the increase in short-term borrowing costs.March 31, 2022. The increase in net interest income resulted from higher rates and average balances on advances ~~was driven by an increase in yield~~ and ~~average balance, as discussed below. Prepayments~~investments, combined with the impact of higher interest rates on fair value hedges. Additionally, prepayments continued to slow on mortgage-related assets, which increased interest income due to less premium amortization between periods. ~~The~~Despite the increase in net interest income from higher rates and an increase in interest-earning assets, our net interest margin declined 10 basis points for the current quarter, from 0.66 percent for the quarter ended March 31, 2022 to 0.56 percent for the quarter ended March 31, 2023. This decline was due to compression in net interest spread between the yield on interest-earning assets and the cost of interest-bearing liabilities, primarily on our mortgage loan portfolio. The mortgage loan portfolio is fixed rate and funded with a combination of callable debt, ~~reflects~~fixed rate debt, and short-term debt, and the increase in ~~market~~funding costs between periods exceeded the increase in yield on the portfolio. Further, changes in balance sheet composition, notably an increase in advances as a percentage of total assets, has negatively impacted net interest ~~rates.~~margin. Advances are our lowest spread asset, so net interest margin declines as advance balances comprise a larger percentage of total assets.

•Total assets: Total assets increased from ~~$48.0~~$72.0 billion as of December 31, ~~2021~~2022 to ~~$63.5~~$74.8 billion as of ~~September 30, 2022, predominantly~~March 31, 2023, driven by the ~~$11.8~~$2.2 billion increase in advances between ~~periods and a $3.2 billion increase in liquid investments.~~periods.

•Primary Mission Assets: Advances to members and housing associates and mortgage loans purchased from members are Primary Mission Assets because they are fundamental to the business and mission of FHLBank. The Primary Mission Asset ratio, as defined by the FHFA under its core mission achievement guidance, is calculated as average advances and average mortgage loans to average consolidated obligations (less certain U.S. Treasury securities), based on year-to-date averages. As of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, our Primary Mission Asset ratio was 82 percent and 80 percent, ~~and 77 percent, respectively, which exceeds the FHFA’s recommended minimum ratio of 70 percent.~~respectively.

•Advances: Advances increased from ~~$23.5~~$44.3 billion at December 31, ~~2021~~2022 to ~~$35.3~~$46.5 billion at ~~September 30,~~March 31, 2023, representing 62.1 percent of total assets as of March 31, 2023, compared to 61.5 percent as of December 31, 2022. The average balance of advances increased ~~$12.6~~$18.5 billion, or ~~54.7~~66.1 percent, ~~and the average yield increased 184 basis points~~ for the three months ended ~~September 30, 2022~~March 31, 2023 when compared to the prior year period. Advance demand has increased as ~~members’~~members' earning assets have grown and deposit outflows have increased throughout our district. Members have also increased advance utilization as a source of on-balance sheet liquidity and to manage funding costs in a rising interest rate environment.

•Mortgage loans: Mortgage loans ~~decreased slightly, from $8.1~~held steady at $7.9 billion as of March 31, 2023 and December 31, ~~2021 to $8.0 billion as of September 30,~~ 2022, representing ~~12.6~~10.6 percent of total assets as of ~~September 30, 2022,~~March 31, 2023, compared to ~~16.9~~11.0 percent as of December 31, ~~2021.~~2022. The average balance of mortgage loans decreased ~~$0.3~~$0.2 billion, or ~~3.6~~2.2 percent, for the three months ended ~~September 30, 2022~~March 31, 2023 when compared to the prior year ~~period.~~period, but the interest income impact of this decrease was offset by lower premium amortization and originations at interest rates higher than that of the existing portfolio.

•Performance ratios: Return on average equity (ROE) increased to ~~8.07~~8.96 percent for the quarter ended ~~September 30, 2022~~March 31, 2023 compared to ~~5.40~~6.98 percent for the prior year quarter due to the increase in net income for the current quarter, partially offset by the increase in average capital.

•Dividends: The Class A Common Stock dividend rate of ~~2.25~~3.75 percent per annum and the Class B Common Stock dividend rate of ~~7.75~~8.75 percent per annum combined for a weighted average dividend rate for the quarter ended ~~September 30, 2022~~March 31, 2023 of ~~6.94~~8.12 percent, which is ~~468~~353 basis points above the average daily interest rate on reserve balances for the quarter.

Table of Contents

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


		09/30/2022		09/30/2021		09/30/2022		09/30/2021		09/30/2022		12/31/2021		09/30/2021			03/31/2023		03/31/2022		03/31/2023		12/31/2022
Market Instrument	Market Instrument	Three-month				Nine-month				Ending				Ending		Market Instrument	Three-month				Ending		Ending
		Average								Rate				Rate			Average				Rate		Rate
Secured Overnight Financing Rate1	Secured Overnight Financing Rate1	2.15	%	0.05	%	0.99	%	0.04	%	2.98	%	0.05	%	0.05	%	Secured Overnight Financing Rate1	4.50	%	0.09	%	4.87	%	4.30	%
Federal funds effective rate1	Federal funds effective rate1	2.20		0.09		1.03		0.08		3.08		0.07		0.06		Federal funds effective rate1	4.52		0.12		4.83		4.33
Federal Reserve interest rate on reserve balances1	Federal Reserve interest rate on reserve balances1	2.26		0.15		1.11		0.12		3.15		0.15		0.15		Federal Reserve interest rate on reserve balances1	4.59		0.19		4.90		4.40
3-month U.S. Treasury bill1	3-month U.S. Treasury bill1	2.67		0.04		1.35		0.04		3.27		0.04		0.04		3-month U.S. Treasury bill1	4.71		0.29		4.75		4.37
3-month LIBOR1	3-month LIBOR1	3.00		0.13		1.69		0.16		3.75		0.21		0.13		3-month LIBOR1	4.92		0.52		5.19		4.77
2-year U.S. Treasury note1	2-year U.S. Treasury note1	3.38		0.22		2.51		0.18		4.28		0.73		0.28		2-year U.S. Treasury note1	4.36		1.45		4.03		4.43
5-year U.S. Treasury note1	5-year U.S. Treasury note1	3.23		0.80		2.67		0.75		4.09		1.26		0.97		5-year U.S. Treasury note1	3.81		1.83		3.57		4.00
10-year U.S. Treasury note1	10-year U.S. Treasury note1	3.10		1.32		2.66		1.41		3.83		1.51		1.49		10-year U.S. Treasury note1	3.65		1.95		3.47		3.88
30-year residential mortgage note rate1,2	30-year residential mortgage note rate1,2	5.81		3.05		5.08		3.10		6.52		3.33		3.10		30-year residential mortgage note rate1,2	6.44		4.03		6.40		6.58

1 Source is Bloomberg.

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

The recent deposit outflows and financial difficulties experienced by multiple U.S. banks has created stress for the banking industry and the financial markets. On March 12, 2023, the Federal Reserve announced a plan to make available additional funding to eligible depository institutions to help assure that they have the ability to meet the needs of all their depositors, through eased access to the discount window and the creation of a new Bank Term Funding Program (BTFP). The BTFP offers eligible banks an additional source of liquidity collateralized with high-quality securities at par to eliminate the need to sell securities to meet the needs of depositors. The BTFP is currently scheduled to end on March 11, 2024. During this time, we continued to execute our mission by serving as a reliable source of liquidity and funding for our members (See “Financial Condition - Advances” under this Item 2 for additional information.) While the BTFP is a temporary measure and is intended to be utilized in conjunction with other liquidity sources to ensure banks have the ability meet liquidity needs resulting from the loss of deposits, it could replace advance demand for on-balance sheet liquidity for some members. We continue to monitor these and related developments and assess any effect on our business, results of operations, and financial condition.

Yields on U.S. Treasuries remained inverted at the end of the first quarter of 2023, as the two-year Treasury note remained above the ten-year Treasury note. Treasury yields were higher on the short-end of the curve relative to the prevailing yields at the end of 2022. Treasury yields on terms of two years and longer have declined since year-end 2022 in response to the March Federal Open Market Committee (FOMC) policy decisions and outlook. During the ~~third~~first quarter of ~~2022,~~2023, the FOMC announced rate hikes of 25 basis points at the February, March, and May meetings amidst market volatility but in line with market expectations. The FOMC’s statement indicated that, despite some improvements in economic indicators, concerns about inflation ~~and recession risks, and interest rate hikes by the FOMC continued to be central themes. At its November 2022 meeting, the FOMC raised~~persist so ongoing increases in the target ~~for the Federal funds rate~~range will be required to a range of 3.75 percent to 4.00 percent, continuing to cite persistent inflationary pressures attributed to lingering pandemic-related supply and demand imbalances and Russia’s ongoing war against Ukraine, despite modest growth in spending and production. The FOMC further indicated that additional rate increases would be appropriate in order to returnreduce inflation to the FOMC’s two percent objective. Mortgage rates ~~continued trending upward,~~remained elevated compared to market conditions one year ago, which has reduced ~~refinancing incentive for borrowers~~mortgage prepayments and ~~slowed prepayments. The housing sector continued~~related premium amortization and increased yields on mortgage-related assets compared to ~~weaken in response. The FOMC began to reduce its balance sheet beginning June 1, 2022 and will continue reducing its holdings~~the first quarter of ~~Treasury securities, Agency debt and Agency MBS. The unemployment rate remains low relative to historical averages, as demand for labor remains elevated.~~2022.

~~Spreads to comparative intermediate and long-term U.S. Treasury instruments for FHLBank consolidated obligation bonds narrowed during the third quarter~~

Table of 2022. The yield curve remains inverted, as the two-year Treasury note has been above the ten-year Treasury note since July 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 money markets. The cost of issuing short-term debt has remained reasonable despite the wide spreads to short-term U.S. Treasury instruments due to high demand for short-term Agency debt. Contents

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.

~~Russia’s invasion~~ The cost of ~~Ukraine initially led~~issuing short-term debt has increased since the same period in the prior year, but the high demand for short-term Agency debt due to ~~elevated market volatility and additional inflationary pressures through increased commodity prices and exacerbated supply chain disruptions, especially relative to~~concerns over the ~~global economic recovery from the COVID-19 pandemic that was in its early stages at the end of 2021.~~federal debt ceiling has kept this spread relatively narrow. 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. Volatilityissue debt remains robust, but volatility in the capital markets can impact the demand for ~~FHLBank debt~~ and ~~the~~ cost of debt issued by the ~~debt~~FHLBanks. Recent efforts of the ~~FHLBanks issue. The~~Federal Reserve Board to ease inflation, such as continued increases in policy interest rates, have contributed to volatility in the financial markets, financial difficulties experienced by some depository institutions, and uncertainties about the economic outlook, for the remainder of 2022 remains uncertain, and the aforementioned FOMC actions could result in increased interest rate volatility and impact the efficiency of our asset and liability management activities. Supply chain disruptions and laborincluding concerns about a possible recession. Labor market constraints are expected to keep inflation elevated ~~into~~throughout 2023 despite FOMC intervention, which could impact economic growth and member demand for advances. If the level of inflation and inflation expectations continue to trend higher, it could result in higher interest rates, especially short- and intermediate-term interest rates, although the heightened risk of recession could temper rate increases, especially towards the end of 2023. For further discussion, see this Item 2 – “Financial Condition – Consolidated Obligations.”

~~Table of Contents~~

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~~some of our variable rate investments, derivative assets, derivative liabilities, and related collateral are indexed to one-month or three-month tenors of LIBOR, ~~some~~most 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 ~~September 30, 2022.~~March 31, 2023.

Table of Contents

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

		Increase (Decrease) in Earnings Components
		Three Months Ended				Nine Months Ended					Three Months Ended
		09/30/2022 vs. 09/30/2021				09/30/2022 vs. 09/30/2021					03/31/2023 vs. 03/31/2022
		Dollar Change		Percentage Change		Dollar Change		Percentage Change				Dollar Change		Percentage Change
Total interest income	Total interest income	$	279,323	247.9	%	$	364,602	106.1	%	Total interest income		$	713,741	575.3	%
Total interest expense	Total interest expense	257,788		654.2		315,365		242.8		Total interest expense		694,413		1,781.3
Net interest income	Net interest income	21,535		29.4		49,237		23.0		Net interest income		19,328		22.7
Provision (reversal) for credit losses on mortgage loans	Provision (reversal) for credit losses on mortgage loans	1,775		106.9		(938)		(147.0)		Provision (reversal) for credit losses on mortgage loans		(95)		(30.9)
Net interest income after mortgage loan loss provision	Net interest income after mortgage loan loss provision	19,760		26.4		50,175		23.5		Net interest income after mortgage loan loss provision		19,423		22.7
Net gains (losses) on trading securities	Net gains (losses) on trading securities	(13,880)		(84.8)		(56,549)		(100.0)		Net gains (losses) on trading securities		68,472		115.1
Net gains (losses) on derivatives	Net gains (losses) on derivatives	27,594		1,976.6		69,405		429.2		Net gains (losses) on derivatives		(47,088)		(101.1)
Other non-interest income	Other non-interest income	(130)		(4.3)		(395)		(4.1)		Other non-interest income		(262)		(7.7)
Total other income (loss)	Total other income (loss)	13,584		92.0		12,461		40.5		Total other income (loss)		21,122		222.1
Operating expenses	Operating expenses	282		1.9		2,657		6.1		Operating expenses		1,825		11.7
Other non-interest expenses	Other non-interest expenses	239		5.9		617		5.1		Other non-interest expenses		442		10.2
Total other expenses	Total other expenses	521		2.8		3,274		5.9		Total other expenses		2,267		11.4
AHP assessments	AHP assessments	3,282		79.0		5,935		46.7		AHP assessments		3,828		68.4
NET INCOME	NET INCOME	$	29,541	79.0	%	$	53,427	46.8	%	NET INCOME		$	34,450	68.4	%

~~Table of Contents~~

Net income increased ~~$29.5~~$34.4 million, or ~~79.0~~68.4 percent, to ~~$66.9~~$84.8 million for the three months ended ~~September 30, 2022~~March 31, 2023 compared to ~~$37.4~~$50.4 million for the three months ended ~~September 30, 2021. For the nine months ended September 30, 2022, net income increased $53.4~~March 31, 2022. The $34.4 million ~~or 46.8 percent, to $167.7 million compared to $114.3 million for the same period in the prior year. The increases~~increase in net income for the ~~three- and nine-month periods, respectively, were~~current quarter was primarily a result of increases in net interest income and fluctuations in fair value of derivatives and trading securities, partially offset by increases in operating expenses driven by compensation and benefits and an ~~increase in other expenses.~~increased allocation of funds available to members for affordable housing. For detailed discussion relating to these fluctuations, see “Net Interest Income and Net Interest Margin,” “Net Gains (Losses) on Derivatives,” and “Other Expenses” under this Item 2.

Net Interest Income and Net Interest Margin: Net interest income increased ~~$21.5~~$19.3 million for the quarter, or 22.7 percent, from ~~$73.3~~$85.1 million for the three months ended ~~September 30, 2021~~March 31, 2022 to ~~$94.8~~$104.4 million for the three months ended ~~September 30, 2022. Net~~March 31, 2023. Despite this increase, net interest ~~income increased $49.2 million~~margin declined 10 basis points for the current ~~year-to-date period,~~quarter, from ~~$213.9 million~~0.66 percent for the ~~nine months~~quarter ended ~~September 30, 2021~~March 31, 2022 to ~~$263.1 million~~0.56 percent for the ~~nine months~~quarter ended ~~September 30, 2022. The~~March 31, 2023 (see Table 6). This decline was caused by compression in net interest spread between the yield on interest-earning assets and the cost of interest-bearing liabilities, primarily on the mortgage loan portfolio. Further, changes in balance sheet composition, notably an increase ~~for both~~in advances as a percentage of total assets, has negatively impacted net interest margin. Advances are typically our lowest spread asset, so net interest margin declines as advance balances comprise a larger percentage of total assets.

Interest income increased primarily due to the ~~quarterly and year-to-date periods was due largely to an~~ increase in the average yield and balance of advances ~~partially~~and, to a lesser extent, investments. The income impact of the slight decline in the average balance of the mortgage loan portfolio was offset by anthe decline in premium amortization due to slower prepayments; however, the mortgage loan portfolio is fixed rate and funded with a combination of callable debt, fixed rate debt, and short-term debt, and the increase in funding costs, especially short-term debt, between periods exceeded the ~~cost of debt~~increase in yield on the portfolio. The increase in funding costs was due ~~primarily~~ to ~~the~~ upward repricing of variable rate debt, including fixed rate debt swapped to a variable rate, and the issuance of fixed rate debt at higher market interest rates. ~~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 interest income was primarily a result of an increase in the average balance and yield of advances for both the quarterly and year-to-date periods (see Tables 8 and 10). The increase in interest income was also due to larger spreads on mortgage loans, as slower loan prepayments caused premium amortization to decline for both the quarterly and year-to-date periods. 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 our mortgage loan portfolio. 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 advances, mortgage loans, and consolidated obligations, see this Item 2 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Financial Condition.” Overnight investments also provided a positive contribution, as the yield increased more than the cost of the associated short-term debt.

Table of Contents

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 ~~quarterly and year-to-date periods,~~quarter, net interest income ~~was decreased by~~increased $26.0 million due to net interest settlements ~~paid~~received on fair value hedges ~~but to a smaller extent when~~ compared to net interest paid for the same ~~periods~~period in ~~2021 because of changes~~the prior year due to increases in interest rates between periods. Tables 4 ~~through 7~~and 5 present the impact of derivatives and hedging activities recorded in net interest income (in thousands):

Table 4


		Three Months Ended 09/30/2022												Three Months Ended 03/31/2023
		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	$	1,481	$	6,606	$	—	$	2,174	$	3,821	$	14,082		Unrealized gains (losses) due to fair value changes	$	(5,169)	$	6,073	$	—	$	4,363	$	(1,028)	$	4,239
Net amortization/accretion of hedging activities	Net amortization/accretion of hedging activities	(560)		—		243		—		—		(317)			Net amortization/accretion of hedging activities	(536)		—		193		—		—		(343)
Net interest received (paid)	Net interest received (paid)	10,478		5,877		—		(2,429)		(19,899)		(5,973)			Net interest received (paid)	49,018		37,890		—		(13,893)		(68,288)		4,727
Price alignment amount	Price alignment amount	(1,359)		(1,243)		—		121		22		(2,459)			Price alignment amount	(3,678)		(3,681)		—		297		39		(7,023)
TOTAL	TOTAL	$	10,040	$	11,240	$	243	$	(134)	$	(16,056)	$	5,333		TOTAL	$	39,635	$	40,282	$	193	$	(9,233)	$	(69,277)	$	1,600

Table 5



	Three Months Ended 03/31/2022
	Advances		Investments		Mortgage Loans		Consolidated Obligation Discount Notes		Consolidated Obligation Bonds		Total
Unrealized gains (losses) due to fair value changes	$	2,129	$	2,467	$	—	$	232	$	2,067	$	6,895
Net amortization/accretion of hedging activities	(560)		—		172		—		—		(388)
Net interest received (paid)	(15,288)		(22,341)		—		392		15,933		(21,304)
Price alignment amount	(17)		(7)		—		—		—		(24)
TOTAL	$	(13,736)	$	(19,881)	$	172	$	624	$	18,000	$	(14,821)

~~Table of Contents~~

~~Table 5~~

Three Months Ended 09/30/2021
Advances Investments Mortgage Loans Consolidated Obligation Bonds Total
Unrealized gains (losses) due to fair value changes $ 30 $ 1,698 $ — $ 295 $ 2,023
Net amortization/accretion of hedging activities (830) — (221) — (1,051)
Net interest received (paid) (16,438) (24,133) — 6,285 (34,286)
Price alignment amount 10 19 — (1) 28
TOTAL $ (17,228) $ (22,416) $ (221) $ 6,579 $ (33,286)

~~Table 6~~

Nine Months Ended 09/30/2022
Advances Investments Mortgage Loans Consolidated Obligation Discount Notes Consolidated Obligation Bonds Total
Unrealized gains (losses) due to fair value changes $ 3,687 $ 12,193 $ — $ 3,630 $ 5,511 $ 25,021
Net amortization/accretion of hedging activities (1,679) — 553 — — (1,126)
Net interest received (paid) (12,757) (31,613) — 4,214 7,811 (32,345)
Price alignment amount (1,754) (1,580) — 131 27 (3,176)
TOTAL $ (12,503) $ (21,000) $ 553 $ 7,975 $ 13,349 $ (11,626)

~~Table 7~~

Nine Months Ended 09/30/2021
Advances Investments Mortgage Loans Consolidated Obligation Discount Notes Consolidated Obligation Bonds Total
Unrealized gains (losses) due to fair value changes $ 1,568 $ 4,581 $ — $ (31) $ 135 $ 6,253
Net amortization/accretion of hedging activities (2,172) — (1,124) — — (3,296)
Net interest received (paid) (49,285) (77,281) — 11 22,126 (104,429)
Price alignment amount 27 47 — — (4) 70
TOTAL $ (49,862) $ (72,653) $ (1,124) $ (20) $ 22,257 $ (101,402)

5550

Table of Contents

Average Balances and Yields: Table 86 presents average balances and annualized yields of major earning asset categories and the sources funding those earning assets (dollar amounts in thousands):

Table 86


		Three Months Ended													Three Months Ended
		09/30/2022						09/30/2021							03/31/2023						03/31/2022
		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	$	1,383,035	$	7,538	2.16	%	$	904,796	$	230	0.10	%	Interest-bearing deposits	$	2,723,021	$	30,697	4.57	%	$	1,118,709	$	376	0.14	%
Securities purchased under agreements to resell	Securities purchased under agreements to resell	2,666,315		14,870		2.21		2,017,391		460		0.09		Securities purchased under agreements to resell	2,679,444		30,282		4.58		1,648,378		536		0.13
Federal funds sold	Federal funds sold	3,939,293		22,017		2.22		2,525,435		567		0.09		Federal funds sold	4,185,333		47,356		4.59		2,471,089		794		0.13
Investment securities1,2	Investment securities1,2	11,307,414		78,130		2.74		10,962,475		27,819		1.01		Investment securities1,2	11,001,216		131,302		4.84		10,802,293		29,720		1.12
Advances1,2	Advances1,2	35,552,050		211,173		2.36		22,985,280		29,925		0.52		Advances1,2	46,539,507		536,594		4.68		28,022,749		37,881		0.55
Mortgage loans3,4	Mortgage loans3,4	8,021,512		58,045		2.87		8,317,439		53,438		2.55		Mortgage loans3,4	7,903,480		60,808		3.12		8,078,576		54,554		2.74
Other interest-earning assets	Other interest-earning assets	41,522		217		2.07		38,761		228		2.32		Other interest-earning assets	86,112		760		3.58		39,375		197		2.03
Total earning assets	Total earning assets	62,911,141		391,990		2.47		47,751,577		112,667		0.94		Total earning assets	75,118,113		837,799		4.52		52,181,169		124,058		0.96
Other non-interest-earning assets	Other non-interest-earning assets	221,691						315,746						Other non-interest-earning assets	354,894						221,892
Total assets	Total assets	$	63,132,832					$	48,067,323					Total assets	$	75,473,007					$	52,403,061

Interest-bearing liabilities:	Interest-bearing liabilities:													Interest-bearing liabilities:
Deposits	Deposits	$	694,256	$	3,353	1.92	%	$	1,032,579	$	101	0.04	%	Deposits	$	711,639	$	7,569	4.31	%	$	973,169	$	126	0.05	%
Consolidated obligations1:	Consolidated obligations1:													Consolidated obligations1:
Discount Notes	Discount Notes	23,390,351		117,644		2.00		11,749,008		1,326		0.04		Discount Notes	24,155,363		263,521		4.42		8,008,243		2,036		0.10
Bonds	Bonds	34,967,317		175,920		2.00		31,968,498		37,729		0.47		Bonds	45,744,729		461,882		4.09		39,920,996		36,556		0.37
Other borrowings	Other borrowings	43,539		278		2.52		44,673		251		2.23		Other borrowings	54,997		424		3.13		51,114		265		2.10
Total interest-bearing liabilities	Total interest-bearing liabilities	59,095,463		297,195		1.99		44,794,758		39,407		0.35		Total interest-bearing liabilities	70,666,728		733,396		4.21		48,953,522		38,983		0.32
Capital and other non-interest-bearing funds	Capital and other non-interest-bearing funds	4,037,369						3,272,565						Capital and other non-interest-bearing funds	4,806,279						3,449,539
Total funding	Total funding	$	63,132,832					$	48,067,323					Total funding	$	75,473,007					$	52,403,061

Net interest income and net interest spread5	Net interest income and net interest spread5			$	94,795	0.48	%			$	73,260	0.59	%	Net interest income and net interest spread5			$	104,403	0.31	%			$	85,075	0.64	%

Net interest margin6	Net interest margin6					0.60	%					0.61	%	Net interest margin6					0.56	%					0.66	%

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 for the three months ended ~~September 30, 2022~~March 31, 2023 and ~~2021.~~2022.

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.

5651

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 97 summarizes changes in interest income and interest expense (in thousands):

Table 97

Three Months Ended
09/30/2022 vs. 09/30/2021
Increase (Decrease) Due to

Volume1,2
Rate1,2
Total
Interest Income3:

Interest-bearing deposits $ 184 $ 7,124 $ 7,308
Securities purchased under agreements to resell 195 14,215 14,410
Federal funds sold 491 20,959 21,450
Investment securities 903 49,408 50,311
Advances 24,116 157,132 181,248
Mortgage loans (1,954) 6,561 4,607
Other assets 15 (26) (11)
Total interest-earning assets 23,950 255,373 279,323
Interest Expense3:

Deposits (44) 3,296 3,252
Consolidated obligations:
Discount notes 2,587 113,731 116,318
Bonds 3,862 134,329 138,191
Other borrowings (6) 33 27
Total interest-bearing liabilities 6,399 251,389 257,788
Change in net interest income $ 17,551 $ 3,984 $ 21,535

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.~~

~~Table of Contents~~

~~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~~

Nine Months Ended
09/30/2022 09/30/2021
Average
Balance Interest
Income/Expense Yield Average
Balance Interest
Income/Expense Yield
Interest-earning assets:
Interest-bearing deposits $ 1,264,653 $ 10,281 1.09 % $ 962,409 $ 714 0.10 %
Securities purchased under agreements to resell 2,285,952 20,657 1.21 2,222,370 1,350 0.08
Federal funds sold 3,165,381 29,171 1.23 2,651,505 1,547 0.08
Investment securities1,2
11,169,015 151,608 1.81 11,716,329 85,360 0.97
Advances1,2
31,355,909 326,928 1.39 22,947,364 95,677 0.56
Mortgage loans3,4
8,045,095 168,982 2.81 8,561,457 158,359 2.47
Other interest-earning assets 51,568 709 1.84 39,699 727 2.45
Total earning assets 57,337,573 708,336 1.65 49,101,133 343,734 0.94
Other non-interest-earning assets 218,225 338,242
Total assets $ 57,555,798 $ 49,439,375
Interest-bearing liabilities:
Deposits $ 819,807 4,476 0.73 $ 1,067,150 312 0.04
Consolidated obligations1:

Discount Notes 15,963,013 147,678 1.24 11,530,566 4,393 0.05
Bonds 36,972,549 292,252 1.06 33,480,721 124,395 0.50
Other borrowings 47,819 834 2.33 48,063 775 2.16
Total interest-bearing liabilities 53,803,188 445,240 1.10 46,126,500 129,875 0.38
Capital and other non-interest-bearing funds 3,752,610 3,312,875
Total funding $ 57,555,798 $ 49,439,375
Net interest income and net interest spread5
$ 263,096 0.55 % $ 213,859 0.56 %
Net interest margin6
0.61 % 0.58 %

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 $4.8 million and $4.9 million for the nine months ended September 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~~


		Nine Months Ended						Three Months Ended
		09/30/2022 vs. 09/30/2021						03/31/2023 vs. 03/31/2022
		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	$	292	$	9,275	$	9,567		Interest-bearing deposits	$	1,281	$	29,040	$	30,321
Securities purchased under agreements to resell	Securities purchased under agreements to resell	40		19,267		19,307			Securities purchased under agreements to resell	542		29,204		29,746
Federal funds sold	Federal funds sold	358		27,266		27,624			Federal funds sold	925		45,637		46,562
Investment securities	Investment securities	(4,164)		70,412		66,248			Investment securities	557		101,025		101,582
Advances	Advances	45,384		185,867		231,251			Advances	40,237		458,476		498,713
Mortgage loans	Mortgage loans	(9,950)		20,573		10,623			Mortgage loans	(1,204)		7,458		6,254
Other assets	Other assets	187		(205)		(18)			Other assets	342		221		563
Total earning assets		32,147		332,455		364,602
Total interest-earning assets									Total interest-earning assets	42,680		671,061		713,741
Interest Expense3:	Interest Expense3:								Interest Expense3:
Deposits	Deposits	(89)		4,253		4,164			Deposits	(43)		7,486		7,443
Consolidated obligations:	Consolidated obligations:								Consolidated obligations:
Discount notes	Discount notes	2,328		140,957		143,285			Discount notes	12,002		249,483		261,485
Bonds	Bonds	14,212		153,645		167,857			Bonds	6,100		419,226		425,326
Other borrowings	Other borrowings	(4)		63		59			Other borrowings	21		138		159
Total interest-bearing liabilities	Total interest-bearing liabilities	16,447		298,918		315,365			Total interest-bearing liabilities	18,080		676,333		694,413
Change in net interest income	Change in net interest income	$	15,700	$	33,537	$	49,237		Change in net interest income	$	24,600	$	(5,272)	$	19,328

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

5952

Table of Contents

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

Table 128


		Three Months Ended 09/30/2022													Three Months Ended 03/31/2023
		Advances		Investments		Mortgage Loans		Consolidated Obligation Discount Notes		Consolidated Obligation Bonds		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	$	1,556	$	30,014	$	—	$	(1,584)	$	(922)	$	29,064	Economic hedges – unrealized gains (losses) due to fair value changes	$	(169)	$	(11,423)	$	—	$	2,639	$	317	$	(8,636)
Mortgage delivery commitments	Mortgage delivery commitments	—		—		(1,629)		—		—		(1,629)		Mortgage delivery commitments	—		—		23		—		—		23

Economic hedges – net interest received (paid)	Economic hedges – net interest received (paid)	2		(297)		—		(1,069)		163		(1,201)		Economic hedges – net interest received (paid)	299		8,014		—		253		(268)		8,298
Price alignment amount	Price alignment amount	(3)		(50)		—		16		1		(36)		Price alignment amount	(15)		(186)		—		(16)		7		(210)
Net gains (losses) on derivatives	Net gains (losses) on derivatives	1,555		29,667		(1,629)		(2,637)		(758)		26,198		Net gains (losses) on derivatives	115		(3,595)		23		2,876		56		(525)
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	—		(30,195)		—		—		—		(30,195)		Net gains (losses) on trading securities hedged on an economic basis with derivatives	—		8,953		—		—		—		8,953
TOTAL	TOTAL	$	1,555	$	(528)	$	(1,629)	$	(2,637)	$	(758)	$	(3,997)	TOTAL	$	115	$	5,358	$	23	$	2,876	$	56	$	8,428

Table 139

Three Months Ended 09/30/2021
Advances Investments Mortgage Loans Total
Derivatives not designated as hedging instruments:
Economic hedges – unrealized gains (losses) due to fair value changes $ 186 $ 11,966 $ — $ 12,152
Mortgage delivery commitments — — (678) (678)
Economic hedges – net interest received (paid) (211) (12,667) — (12,878)
Price alignment amount — 8 — 8
Net gains (losses) on derivatives (25) (693) (678) (1,396)
Net gains (losses) on trading securities hedged on an economic basis with derivatives — (16,340) — (16,340)
TOTAL $ (25) $ (17,033) $ (678) $ (17,736)

~~Table of Contents~~

~~Table 14~~

Nine Months Ended 09/30/2022
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 $ 4,916 $ 111,594 $ — $ (4,665) $ (709) $ 111,136
Mortgage delivery commitments — — (8,483) — — (8,483)
Economic hedges – net interest received (paid) (303) (17,034) — 108 184 (17,045)
Price alignment amount (4) (48) — 18 1 (33)
Net gains (losses) on derivatives 4,609 94,512 (8,483) (4,539) (524) 85,575
Net gains (losses) on trading securities hedged on an economic basis with derivatives — (112,592) — — — (112,592)
TOTAL $ 4,609 $ (18,080) $ (8,483) $ (4,539) $ (524) $ (27,017)

~~Table 15~~


		Nine Months Ended 09/30/2021						Three Months Ended 03/31/2022
		Advances		Investments		Mortgage Loans			Total			Advances		Investments		Mortgage Loans		Consolidated Obligation Discount Notes		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	$	1,843	$	55,791	$	—		$	57,634	Economic hedges – unrealized gains (losses) due to fair value changes	$	2,119	$	59,749	$	—	$	—	$	61,868
Mortgage delivery commitments	Mortgage delivery commitments	—		—		(2,710)			(2,710)		Mortgage delivery commitments	—		—		(4,935)		—		(4,935)

Economic hedges – net interest received (paid)	Economic hedges – net interest received (paid)	(616)		(38,157)		—			(38,773)		Economic hedges – net interest received (paid)	(183)		(10,193)		—		2		(10,374)
Price alignment amount	Price alignment amount	—		19		—			19		Price alignment amount	—		4		—		—		4
Net gains (losses) on derivatives	Net gains (losses) on derivatives	1,227		17,653		(2,710)			16,170		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	Net gains (losses) on trading securities hedged on an economic basis with derivatives	—		(56,593)		—			(56,593)		Net gains (losses) on trading securities hedged on an economic basis with derivatives	—		(59,583)		—		—		(59,583)
TOTAL	TOTAL	$	1,227	$	(38,940)	$	(2,710)		$	(40,423)	TOTAL	$	1,936	$	(10,023)	$	(4,935)	$	2	$	(13,020)

For the three months ended ~~September 30, 2022,~~March 31, 2023, net gains and losses on derivatives resulted in ~~an increase~~a decrease in net income of ~~$26.2~~$0.5 million compared to ~~a decrease~~an increase of ~~$1.4~~$46.6 million for the prior year period. ~~For the nine months ended September 30, 2022 and 2021, net gains and losses on derivatives resulted in increases in net income of $85.6 million and $16.2 million, respectively.~~ The ~~improvement for both the three- and nine-month~~change between periods was attributed to ~~positive~~ fair value fluctuations resulting from an increase in the level of swap index rates. ~~Furthermore, the~~The increase in swap index rates between ~~September 30, 2021~~March 31, 2022 and ~~September 30, 2022~~March 31, 2023 positively impacted the net interest settlements on economic hedges, ~~although~~as they ~~are still~~were in a pay ~~position.~~position for the prior year quarter and a receive position for the current quarter. These settlements ~~decreased~~increased net income by ~~$1.2 million and $12.9~~$8.3 million for the three months ended ~~September 30, 2022 and 2021, respectively,~~March 31, 2023, and decreased net income by ~~$17.0 million and $38.8~~$10.4 million for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2022. As part of our LIBOR transition efforts, we have elected to terminate some LIBOR-indexed swaps that were designated in a fair value hedging relationship and ~~2021, respectively.~~either economically hedge the outstanding item or leave the item unhedged, which could cause some income statement volatility until those positions mature.

6153

Table of Contents

~~Tables 16 and 17 present~~Table 10 presents 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 1610

Three Months Ended
09/30/2022 09/30/2021
Gains (Losses) on Derivatives Gains (Losses) on Trading Securities Net Gains (Losses) on Derivatives Gains (Losses) on Trading Securities Net
U.S. Treasury obligations $ 2,705 $ (3,518) $ (813) $ 5,909 $ (6,997) $ (1,088)
GSE debentures 6,798 (7,243) (445) 1,869 (2,535) (666)
GSE MBS 19,731 (19,434) 297 3,936 (6,808) (2,872)
TOTAL $ 29,234 $ (30,195) $ (961) $ 11,714 $ (16,340) $ (4,626)

~~Table 17~~

Nine Months Ended
09/30/2022 09/30/2021
Gains (Losses) on Derivatives Gains (Losses) on Trading Securities Net Gains (Losses) on Derivatives Gains (Losses) on Trading Securities Net
U.S. Treasury obligations $ 20,436 $ (21,883) $ (1,447) $ 19,541 $ (22,371) $ (2,830)
GSE debentures 25,173 (26,674) (1,501) 9,293 (9,895) (602)
GSE MBS 64,120 (64,035) 85 26,777 (24,327) 2,450
TOTAL $ 109,729 $ (112,592) $ (2,863) $ 55,611 $ (56,593) $ (982)

For additional detail regarding gains and losses on trading securities, see Table 18 and related discussion under this Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Results of Operations.”

~~See Tables 44 and 45 under Item 3 – “Quantitative and Qualitative Disclosures About Market Risk” for additional detail regarding notional and fair value amounts of derivative instruments.~~


	Three Months Ended
	03/31/2023						03/31/2022
	Gains (Losses) on Derivatives		Gains (Losses) on Trading Securities		Net		Gains (Losses) on Derivatives		Gains (Losses) on Trading Securities		Net
U.S. Treasury obligations	$	(1,930)	$	1,774	$	(156)	$	11,581	$	(12,434)	$	(853)
GSE debentures	(2,870)		2,023		(847)		14,067		(14,003)		64
GSE MBS	(6,273)		5,156		(1,117)		33,161		(33,146)		15
TOTAL	$	(11,073)	$	8,953	$	(2,120)	$	58,809	$	(59,583)	$	(774)

Net Gains (Losses) on Trading Securities: Our trading portfolio is comprised primarily of fixed rate U.S. Treasury obligations, GSE debentures, and fixed rate multifamily GSE MBS, with a small percentage of variable rate single-family 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 secured overnight financing rate (SOFR). 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 were~~are swapped on an economic basis to one-month ~~LIBOR.~~LIBOR or SOFR. 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).~~SOFR. We are no longer entering into interest rate swaps that reference LIBOR to hedge fixed rate assets or liabilities. For information on LIBOR transition efforts and LIBOR exposure, see “Risk Management – Interest Rate Risk Management” under this Item 2.

~~Table of Contents~~

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 ~~Tables 16 and 17.~~Table 10. 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 1811 presents the major components of the net gains (losses) on trading securities (in thousands):

Table 1811


		Three Months Ended				Nine Months Ended					Three Months Ended
		09/30/2022		09/30/2021		09/30/2022		09/30/2021				03/31/2023		03/31/2022
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	$	(171)	$	(29)	$	(365)	$	57	U.S. obligation MBS and GSE MBS		$	31	$	(93)
Short-term securities	Short-term securities	117		—		(119)		9		Short-term securities		—		188
Total trading securities not hedged	Total trading securities not hedged	(54)		(29)		(484)		66		Total trading securities not hedged		31		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	(3,518)		(6,997)		(21,883)		(22,371)		U.S. Treasury obligations		1,774		(12,434)
GSE debentures	GSE debentures	(7,243)		(2,535)		(26,674)		(9,895)		GSE debentures		2,023		(14,003)
GSE MBS	GSE MBS	(19,434)		(6,808)		(64,035)		(24,327)		GSE MBS		5,156		(33,146)
Total trading securities hedged on an economic basis with derivatives	Total trading securities hedged on an economic basis with derivatives	(30,195)		(16,340)		(112,592)		(56,593)		Total trading securities hedged on an economic basis with derivatives		8,953		(59,583)
TOTAL	TOTAL	$	(30,249)	$	(16,369)	$	(113,076)	$	(56,527)	TOTAL		$	8,984	$	(59,488)

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 price convergence to par which results in a decrease in their current premium price (i.e., time decay).

Table of Contents

Other Expenses:Other expenses, which ~~include~~includes compensation and benefits and other operating expenses, ~~increased $0.5~~were $22.1 million and ~~$3.3~~$19.9 million for the ~~three~~quarters ended March 31, 2023 and ~~nine months ended September 30,~~ 2022, ~~respectively, compared~~respectively. The $2.2 million increase between years is due primarily to ~~the prior year periods primarily due to increases in compensation and employee benefits, and FHFA expense assessments. The~~an increase in compensation and benefits expense ~~resulted from an increase in salaries~~and other operating expense. Compensation and benefits expense increased due to hiring for new and open positions and higher incentive accruals based on incentive plan goal ~~attainment as of September 30, 2022.~~attainment. We expect modest increases in compensation and benefits expense for ~~the remainder of 2022~~2023 in anticipation of continued hiring for new and open positions. We also expect an increase in other operating expense for the next few years due to planned multi-year software ~~implementations.~~implementation. For 2023, we have also committed a minimum of $1.0 million to a voluntary grant program for Native American Tribes and Tribally Designated Housing Entities. We have also announced an anticipated voluntary 50 percent increase to our annual contribution to affordable housing and community development initiatives throughout Colorado, Kansas, Nebraska, and Oklahoma in upcoming years.

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.

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.

~~Table of Contents~~

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,” which are non-GAAP measures of income. Adjusted income is used to compute an adjusted ROE.

Table 1912 presents a reconciliation of GAAP net income to adjusted income (a non-GAAP measure) (in thousands):

Table 1912


		Three Months Ended				Nine Months Ended					Three Months Ended
		09/30/2022		09/30/2021		09/30/2022		09/30/2021				03/31/2023		03/31/2022
Net income, as reported under GAAP	Net income, as reported under GAAP	$	66,921	$	37,380	$	167,677	$	114,250	Net income, as reported under GAAP		$	84,845	$	50,395
AHP assessments	AHP assessments	7,436		4,154		18,632		12,697		AHP assessments		9,428		5,600
Income before AHP assessments	Income before AHP assessments	74,357		41,534		186,309		126,947		Income before AHP assessments		94,273		55,995
Derivative (gains) losses1	Derivative (gains) losses1	(41,518)		(13,498)		(127,675)		(61,178)		Derivative (gains) losses1		4,374		(63,828)
Trading (gains) losses	Trading (gains) losses	30,249		16,369		113,076		56,527		Trading (gains) losses		(8,984)		59,488
Prepayment/yield maintenance fees2	Prepayment/yield maintenance fees2	(942)		(551)		(7,091)		(3,547)		Prepayment/yield maintenance fees2		(7)		(3,724)
Net (gains) losses on sale of held-to-maturity securities		89		—		89		—

Total excluded items	Total excluded items	(12,122)		2,320		(21,601)		(8,198)		Total excluded items		(4,617)		(8,064)
Adjusted income (a non-GAAP measure)	Adjusted income (a non-GAAP measure)	$	62,235	$	43,854	$	164,708	$	118,749	Adjusted income (a non-GAAP measure)		$	89,656	$	47,931

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 20of Contents

Table 13 presents a reconciliation of GAAP net interest income and GAAP net interest margin to adjusted net interest income and adjusted net interest margin (non-GAAP measures) (in thousands):

Table 2013


		Three Months Ended						Nine Months Ended							Three Months Ended
		09/30/2022			09/30/2021			09/30/2022			09/30/2021					03/31/2023			03/31/2022
Net interest income, as reported under GAAP	Net interest income, as reported under GAAP	$	94,795		$	73,260		$	263,096		$	213,859		Net interest income, as reported under GAAP		$	104,403		$	85,075
(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	(14,083)			(2,023)			(25,022)			(6,253)			(Gains) losses on derivatives qualifying for hedge accounting recorded in net interest income		(4,239)			(6,895)
Net interest settlements on derivatives not qualifying for hedge accounting		(1,201)			(12,878)			(17,045)			(38,773)
Net interest received (paid) on derivatives not qualifying for hedge accounting														Net interest received (paid) on derivatives not qualifying for hedge accounting		8,298			(10,374)
Prepayment/yield maintenance fees1	Prepayment/yield maintenance fees1	(942)			(551)			(7,091)			(3,547)			Prepayment/yield maintenance fees1		(7)			(3,724)
Adjusted net interest income (a non-GAAP measure)	Adjusted net interest income (a non-GAAP measure)	$	78,569		$	57,808		$	213,938		$	165,286		Adjusted net interest income (a non-GAAP measure)		$	108,455		$	64,082

Net interest margin, as calculated under GAAP	Net interest margin, as calculated under GAAP	0.60		%	0.61		%	0.61		%	0.58		%	Net interest margin, as calculated under GAAP		0.56		%	0.66		%
Adjusted net interest margin (a non-GAAP measure)	Adjusted net interest margin (a non-GAAP measure)	0.50		%	0.48		%	0.50		%	0.45		%	Adjusted net interest margin (a non-GAAP measure)		0.59		%	0.50		%

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

Table ~~of Contents~~

~~Table 21~~14 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 (a non-GAAP measure) is calculated as follows (dollar amounts in thousands):

Table 2114


		Three Months Ended						Nine Months Ended							Three Months Ended
		09/30/2022			09/30/2021			09/30/2022			09/30/2021					03/31/2023			03/31/2022
Average GAAP total capital	Average GAAP total capital	$	3,289,015		$	2,746,619		$	3,093,526		$	2,734,542		Average GAAP total capital		$	3,838,944		$	2,927,294
ROE, based upon GAAP net income	ROE, based upon GAAP net income	8.07		%	5.40		%	7.25		%	5.59		%	ROE, based upon GAAP net income		8.96		%	6.98		%
Adjusted ROE, based upon adjusted income (a non-GAAP measure)	Adjusted ROE, based upon adjusted income (a non-GAAP measure)	7.51		%	6.33		%	7.12		%	5.81		%	Adjusted ROE, based upon adjusted income (a non-GAAP measure)		9.47		%	6.64		%
Average overnight Federal funds effective rate	Average overnight Federal funds effective rate	2.20		%	0.09		%	1.03		%	0.08		%	Average overnight Federal funds effective rate		4.52		%	0.12		%
GAAP ROE as a spread to average overnight Federal funds effective rate	GAAP ROE as a spread to average overnight Federal funds effective rate	5.87		%	5.31		%	6.22		%	5.51		%	GAAP ROE as a spread to average overnight Federal funds effective rate		4.44		%	6.86		%
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)	5.31		%	6.24		%	6.09		%	5.73		%	Adjusted ROE as a spread to average overnight Federal funds effective rate (a non-GAAP measure)		4.95		%	6.52		%

Table of Contents

Financial Condition

Overall: Table 2215 presents the percentage concentration of the major components of our Statements of Condition:

Table 2215


		Component Concentration					Component Concentration
		09/30/2022		12/31/2021			03/31/2023		12/31/2022
Assets:	Assets:					Assets:
Cash and due from banks	Cash and due from banks	—	%	0.1	%	Cash and due from banks	—	%	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	13.8		11.6		Interest-bearing deposits, securities purchased under agreements to resell and Federal funds sold	11.6		11.3
Investment securities	Investment securities	17.3		21.9		Investment securities	14.9		15.4
Advances	Advances	55.6		48.9		Advances	62.1		61.5
Mortgage loans, net	Mortgage loans, net	12.6		16.9		Mortgage loans, net	10.6		11.0
Overnight loans to other FHLBanks		—		—

Other assets	Other assets	0.7		0.6		Other assets	0.8		0.7
Total assets	Total assets	100.0	%	100.0	%	Total assets	100.0	%	100.0	%

Liabilities:	Liabilities:					Liabilities:
Deposits	Deposits	1.1	%	2.0	%	Deposits	1.3	%	1.0	%
Consolidated obligation discount notes, net	Consolidated obligation discount notes, net	35.7		13.7		Consolidated obligation discount notes, net	28.0		34.4
Consolidated obligation bonds, net	Consolidated obligation bonds, net	57.6		78.4		Consolidated obligation bonds, net	64.8		59.0
Overnight loans from other FHLBanks		—		—

Other liabilities	Other liabilities	0.5		0.3		Other liabilities	0.7		0.5
Total liabilities	Total liabilities	94.9		94.4		Total liabilities	94.8		94.9

Capital:	Capital:					Capital:
Capital stock outstanding	Capital stock outstanding	3.3		3.1		Capital stock outstanding	3.6		3.5
Retained earnings	Retained earnings	1.9		2.4		Retained earnings	1.7		1.7
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	5.1		5.6		Total capital	5.2		5.1
Total liabilities and capital	Total liabilities and capital	100.0	%	100.0	%	Total liabilities and capital	100.0	%	100.0	%

6557

Table of Contents

Table 2316 presents changes in the major components of our Statements of Condition (dollar amounts in thousands):

Table 2316


		Increase (Decrease) in Components					Increase (Decrease) in Components
		09/30/2022 vs. 12/31/2021					03/31/2023 vs. 12/31/2022
		Dollar Change		Percent Change			Dollar Change		Percent Change
Assets:	Assets:					Assets:
Cash and due from banks	Cash and due from banks	$	(152)	(0.6)	%	Cash and due from banks	$	(669)	(2.6)	%
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	3,182,492		57.3		Interest-bearing deposits, securities purchased under agreements to resell and Federal funds sold	549,088		6.7
Investment securities	Investment securities	479,070		4.6		Investment securities	21,227		0.2
Advances	Advances	11,834,692		50.4		Advances	2,193,998		5.0
Mortgage loans, net	Mortgage loans, net	(136,135)		(1.7)		Mortgage loans, net	20,121		0.3
Overnight loans to other FHLBanks		—		100.0

Other assets	Other assets	119,068		37.5		Other assets	61,588		11.5
Total assets	Total assets	$	15,479,035	32.2	%	Total assets	$	2,845,353	4.0	%

Liabilities:	Liabilities:					Liabilities:
Deposits	Deposits	$	(278,237)	(29.4)	%	Deposits	$	244,260	34.4	%
Consolidated obligation discount notes, net	Consolidated obligation discount notes, net	16,092,414		245.0		Consolidated obligation discount notes, net	(3,803,033)		(15.4)
Consolidated obligation bonds, net	Consolidated obligation bonds, net	(1,055,398)		(2.8)		Consolidated obligation bonds, net	6,009,036		14.1
Overnight loans from other FHLBanks		—		100.0

Other liabilities	Other liabilities	139,011		86.3		Other liabilities	206,187		63.6
Total liabilities	Total liabilities	14,897,790		32.9		Total liabilities	2,656,450		3.9

Capital:	Capital:					Capital:
Capital stock outstanding	Capital stock outstanding	620,972		41.4		Capital stock outstanding	154,380		6.2
Retained earnings	Retained earnings	84,966		7.4		Retained earnings	32,636		2.6
Accumulated other comprehensive income (loss)	Accumulated other comprehensive income (loss)	(124,693)		(172.4)		Accumulated other comprehensive income (loss)	1,887		2.2
Total capital	Total capital	581,245		21.4		Total capital	188,903		5.1
Total liabilities and capital	Total liabilities and capital	$	15,479,035	32.2	%	Total liabilities and capital	$	2,845,353	4.0	%

Total assets increased between periods, from ~~$48.0~~$72.0 billion at December 31, ~~2021~~2022 to ~~$63.5~~$74.8 billion at ~~September 30, 2022,~~March 31, 2023, driven by ana $2.2 billion increase in advances ~~and overnight investments~~ between those periods. ~~Advances~~At March 31, 2023, advances comprised 62.1 percent of total assets compared to 61.5 percent as of December 31, 2022. Mortgage loans increased ~~$11.8 billion~~by $20.1 million from December 31, ~~2021~~2022 to ~~September 30,~~March 31, 2023, but declined as a percent of total assets due to the growth in advances, from 11.0 percent as of December 31, 2022 ~~from $23.5 billion~~ to ~~$35.3 billion, representing 55.6~~10.6 percent of total assets as of ~~September 30, 2022 compared to 48.9 percent as of December~~March 31, ~~2021. Overnight investments~~2023. Total liabilities increased ~~$3.2 billion, representing 13.8 percent of total assets as of September 30, 2022, compared to 11.6 percent as of December 31, 2021. Mortgage loans decreased by $0.1~~$2.7 billion from December 31, ~~2021~~2022 to ~~September 30, 2022, representing 12.6 percent of total assets as of September 30, 2022, compared to 16.9 percent as of December~~March 31, ~~2021. Total liabilities increased $14.9 billion from December 31, 2021 to September 30, 2022,~~2023, which corresponded to the increase in assets, but the composition of debt shifted between periods. Consolidated obligation bonds and discount notes represented 63.2 percent and 36.8 percent of total consolidated obligations, respectively, at December 31, 2022 compared to 69.8 percent and 30.2 percent at March 31, 2023. This composition shift is mostly due to an increase in short-term floating rate bonds funding short-term fixed rate advances and liquidity assets. Total capital increased ~~$581.2~~$188.9 million, or ~~21.4~~5.1 percent, from December 31, ~~2021~~2022 to ~~September 30, 2022~~March 31, 2023 due to an increase in capital stock related to the increase in advances and net income in excess of dividends paid, partially offset by unrealized losses on available-for-sale securities.

6658

Table of Contents

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 ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021.~~2022. Advance par value increased by ~~52.5~~4.6 percent, from ~~$23.4~~$44.7 billion at December 31, ~~2021~~2022 to ~~$35.7~~$46.7 billion at ~~September 30, 2022~~March 31, 2023 (see Table ~~24). The majority of the~~17), as members earning-asset growth was in our overnight line of credit product, followed by fixed rate term advances. Average advance balances reached historically high levels during the third quarter of 2022, as deposits at member banks are beginningcontinues to ~~decline from 2020 highs, coupled with an increase in loan demand at member banks.~~outpace deposit growth. Members are also returning to advances for funding due to the impact of financial market volatility on liquidity investments and interest rate risk management. In particular, during March 2023, our members’ demand for advances increased temporarily in response to the stress placed on the banking industry and financial markets resulting from the financial difficulties experienced by some depository institutions. The ~~composition~~majority of the ~~advance portfolio remains concentrated~~growth was in fixed rate term advances, ~~that either reprice or mature on a relatively~~primarily short-term ~~basis.~~fixed rate advances. As mentioned previously, some members are shifting from overnight advances to term advances, primarily short-term fixed rate advances. Members typically prefer shorter-term advances that reprice relative to short-term interest rates, especially in the current rising interest rate environment, as these advances provide efficient funding relative to member assets and will reprice to lower costs if interest rates decline. Despite growth of over $5.0 billion in fixed rate advances with maturities longer than 93 days in the past twelve months, the composition of the advance portfolio remains concentrated in advances that either reprice or mature on a relatively short-term basis.

As of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021, 60.1~~2022, 61.0 percent and ~~54.4~~64.4 percent, respectively, of our members carried outstanding advance balances. Additional volatility in advance balances may occur during ~~the remainder of 2022~~2023 due to the impact of rising interest rates intended to curb inflationary pressures and the related inflationary effects on member balance sheets, which could include decreased loan demand and the inability to grow or retain deposit balances. Members also have access to other wholesale funding sources, including the BTFP, which may impact the 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 ~~91.5~~93.2 percent and ~~89.6~~92.9 percent of our total advance portfolio as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, 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 ~~$2.7~~$3.0 billion of SOFR-indexed advances outstanding as of ~~September 30, 2022.~~March 31, 2023. For additional information on our LIBOR transition efforts and LIBOR exposure, see “Risk Management – Interest Rate Risk Management” under this Item 2.

6759

Table of Contents

Table 2417 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 2417


		09/30/2022				12/31/2021					03/31/2023				12/31/2022
		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	$	10,567,730	29.6	%	$	1,630,399	7.0	%	Overnight line of credit1	$	11,145,818	23.9	%	$	15,682,310	35.1	%

Adjustable rate:	Adjustable rate:									Adjustable rate:
Standard advance products:	Standard advance products:									Standard advance products:
Regular adjustable rate advances	Regular adjustable rate advances	2,455,950		6.9		1,732,250		7.4		Regular adjustable rate advances	2,649,750		5.7		2,504,950		5.6
Adjustable rate callable advances	Adjustable rate callable advances	1,582,549		4.4		1,354,300		5.8		Adjustable rate callable advances	1,557,449		3.3		1,700,299		3.8

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	22,262		—		22,262		0.1
Total adjustable rate term advances	Total adjustable rate term advances	4,064,211		11.4		3,116,262		13.3		Total adjustable rate term advances	4,229,461		9.0		4,227,511		9.5
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	11,889,340		33.3		10,006,622		42.7		Short-term fixed rate advances2	18,462,987		39.5		12,988,848		29.1
Regular fixed rate advances	Regular fixed rate advances	7,532,348		21.1		6,161,167		26.3		Regular fixed rate advances	11,530,965		24.7		10,290,760		23.1
Fixed rate callable advances	Fixed rate callable advances	64,071		0.2		65,846		0.3		Fixed rate callable advances	64,071		0.1		64,071		0.1
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	355,751		0.9		395,366		1.7		Regular fixed rate advances	345,873		0.7		356,035		0.8
Fixed rate callable advances	Fixed rate callable advances	458		—		831		—		Fixed rate callable advances	458		—		458		—
Total fixed rate term advances	Total fixed rate term advances	19,841,968		55.5		16,629,832		71.0		Total fixed rate term advances	30,404,354		65.0		23,700,172		53.1
Convertible:	Convertible:									Convertible:
Standard advance products:	Standard advance products:									Standard advance products:
Fixed rate convertible advances	Fixed rate convertible advances	480,150		1.3		1,385,150		5.9		Fixed rate convertible advances	240,650		0.5		309,650		0.7
Amortizing:	Amortizing:									Amortizing:
Standard advance products:	Standard advance products:									Standard advance products:
Fixed rate amortizing advances	Fixed rate amortizing advances	488,393		1.4		364,912		1.5		Fixed rate amortizing advances	449,793		1.0		465,181		1.0
Fixed rate callable amortizing advances	Fixed rate callable amortizing advances	19,825		0.1		21,009		0.1		Fixed rate callable amortizing advances	18,998		—		19,370		—
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	264,037		0.7		275,381		1.2		Fixed rate amortizing advances	228,920		0.6		238,773		0.6
Fixed rate callable amortizing advances	Fixed rate callable amortizing advances	11,754		—		9,883		—		Fixed rate callable amortizing advances	11,439		—		11,748		—
Total amortizing advances	Total amortizing advances	784,009		2.2		671,185		2.8		Total amortizing advances	709,150		1.6		735,072		1.6
TOTAL PAR VALUE	TOTAL PAR VALUE	$	35,738,068	100.0	%	$	23,432,828	100.0	%	TOTAL PAR VALUE	$	46,729,433	100.0	%	$	44,654,715	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.

6860

Table of Contents

Table 2518 presents information on our five largest borrowers (dollar amounts in thousands). ~~If the borrower was~~We do not ~~one of our top five borrowers for one of the periods presented, the applicable columns are left blank. Based~~expect to incur any credit losses on ~~no historical loss experience~~these advances based 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~~advances. We have not ~~expect to incur any~~experienced a credit ~~losses~~loss on ~~these advances.~~an advance since the inception of FHLBank.

Table 2518


		09/30/2022				12/31/2021					03/31/2023				12/31/2022
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	$	9,920,000	27.8	%	$	9,045,000	38.6	%	MidFirst Bank	$	13,370,000	28.6	%	$	10,740,000	24.1	%
BOKF, N.A.										BOKF, N.A.	4,700,000		10.1		4,700,000		10.5
Capitol Federal Savings Bank	Capitol Federal Savings Bank	2,137,500		6.0		1,590,000		6.8		Capitol Federal Savings Bank	2,701,064		5.8		2,650,082		5.9
United of Omaha Life Insurance Co.										United of Omaha Life Insurance Co.	2,123,463		4.5		1,946,896		4.4
Security Life of Denver Insurance Co.	Security Life of Denver Insurance Co.	1,650,000		4.6		1,445,000		6.2		Security Life of Denver Insurance Co.	1,725,000		3.7		1,650,000		3.7
Pacific Life Insurance Co.		1,648,176		4.6
United of Omaha Life Insurance Co.		1,642,833		4.6		1,597,502		6.8
Colorado Federal Savings						745,000		3.2

TOTAL	TOTAL	$	16,998,509	47.6	%	$	14,422,502	61.6	%	TOTAL	$	24,619,527	52.7	%	$	21,686,978	48.6	%

Table 26 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
09/30/2022 09/30/2021
Borrower Name Advance Income
Percent of Total
Advance Income1
Advance Income
Percent of Total
Advance Income1
MidFirst Bank $ 50,449 25.2 % $ 4,829 10.6 %
Capitol Federal Savings Bank 23,763 11.9 4,819 10.5
Pacific Life Insurance Co. 11,568 5.8
BOKF, N.A. 8,728 4.3
Security Life of Denver Insurance Co. 8,017 4.0
American Fidelity Assurance Co. 2,638 5.8
United of Omaha Life Insurance Co. 1,797 3.9
WEOKIE Federal Credit Union 1,496 3.3
TOTAL $ 102,525 51.2 % $ 15,579 34.1 %

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~~19 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 2719


		Nine Months Ended									Three Months Ended
		09/30/2022				09/30/2021					03/31/2023				03/31/2022
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	$	75,080	22.4	%	$	14,952	10.7	%	MidFirst Bank	$	136,579	27.5	%	$	6,894	14.0	%
BOKF, N.A.										BOKF, N.A.	52,275		10.5
Capitol Federal Savings Bank	Capitol Federal Savings Bank	39,446		11.8		14,136		10.1		Capitol Federal Savings Bank	32,866		6.6		6,116		12.4
Pacific Life Insurance Co.		16,433		4.9
Security Life of Denver Insurance Co.		13,126		3.9
FirstBank										FirstBank	17,031		3.4
United of Omaha Life Insurance Co.	United of Omaha Life Insurance Co.	12,650		3.7		5,297		3.8		United of Omaha Life Insurance Co.	16,928		3.4		2,095		4.2
American Fidelity Assurance Co.	American Fidelity Assurance Co.					8,093		5.8		American Fidelity Assurance Co.					2,762		5.6
WEOKIE Federal Credit Union						4,449		3.2
Security Life of Denver Insurance Co.										Security Life of Denver Insurance Co.					1,681		3.4

TOTAL	TOTAL	$	156,735	46.7	%	$	46,927	33.6	%	TOTAL	$	255,679	51.4	%	$	19,548	39.6	%

MPF Program: The MPF Program is a secondary mortgage market alternative for our members, 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 residential mortgage loans.

The mortgage loan portfolio ~~declined slightly~~remained steady between periods, ~~from $8.1~~at $7.9 billion atfor both March 31, 2023 and December 31, ~~2021 to $8.0 billion at September 30,~~ 2022. Mortgage rates continued to trend upward in response to market conditions, which has reduced refinancing incentive for borrowers and significantly slowed prepayments and origination volume. ~~Despite slowing prepayments, loan repayments continue to exceed purchases, resulting in a decrease of 1.7 percent in the outstanding net balance of our mortgage loan portfolio.~~ Net mortgage loans as a percentage of total assets decreased, from ~~16.9~~11.0 percent as of December 31, ~~2021~~2022 to ~~12.6~~10.6 percent as of ~~September 30, 2022.~~March 31, 2023. 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 ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 was ~~$0.9~~$0.2 billion.

Table of Contents

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 level, as growth in advances impacts our total assets and capital level, which allows the balance of mortgage loans to increase while maintaining our targeted 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~~level of ~~new~~interest rates and ~~delivering PFIs;~~the shape of the yield curve; (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)~~(5) 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.~~loans; and (6) the number of new and delivering PFIs.

~~Table of Contents~~

Table 2820 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). If the borrower was not one of our top five PFIs for one of the periods presented, the applicable columns are left blank.

Table 2820


		09/30/2022				12/31/2021					03/31/2023				12/31/2022
		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
Fidelity Bank										Fidelity Bank	$	331,780	4.2	%	$	325,530	4.2	%
Tulsa Teachers Credit Union	Tulsa Teachers Credit Union	$	333,068	4.2	%	$	344,847	4.3	%	Tulsa Teachers Credit Union	321,110		4.1		326,491		4.2
Fidelity Bank		327,382		4.1		299,229		3.7
West Gate Bank										West Gate Bank	234,103		3.0		227,649		2.9
Community National Bank & Trust	Community National Bank & Trust	234,972		3.0		232,272		2.9		Community National Bank & Trust	231,826		3.0		233,975		3.0
West Gate Bank		233,646		3.0		253,506		3.2
Farmers Bank & Trust										Farmers Bank & Trust	181,742		2.3
Mid-America Bank	Mid-America Bank	172,018		2.2						Mid-America Bank					176,792		2.3
NBKC Bank						206,585		2.6

TOTAL	TOTAL	$	1,301,086	16.5	%	$	1,336,439	16.7	%	TOTAL	$	1,300,561	16.6	%	$	1,290,437	16.6	%

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 ~~September 30, 2022~~March 31, 2023 was 749 and ~~73.9~~74.1 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 ~~held relatively steady~~decreased from December 31, ~~2021~~2022 to ~~September 30, 2022. Changes~~March 31, 2023. The nominal decrease is due primarily to forecasted declines in ~~macroeconomic variables reduced loss estimates, but that impact was offset by the net effect of new originations and the migration of loans with forecasted losses out of the portfolio.~~mortgage interest rates. Delinquencies of conventional loans remained at low levels relative to the portfolio, at ~~0.9~~1.0 percent of the amortized cost of total conventional loans at both ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021.~~2022. 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 ~~$3.7~~$0.6 billion from December 31, ~~2021~~2022 to ~~September 30, 2022~~March 31, 2023 primarily due to an increase in liquidity ~~investments.~~investments and MBS, partially offset by a decline in U.S. Treasuries.

Short-term Investments – Short-term investments, which are used to provide funds 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 ~~of Contents~~

~~Table 29~~21 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 2921


		09/30/2022		12/31/2021			03/31/2023		12/31/2022
Interest-bearing deposits	Interest-bearing deposits	$	779,541	$	692,159	Interest-bearing deposits	$	2,113,911	$	2,039,333
Federal funds sold	Federal funds sold	4,705,000		3,360,000		Federal funds sold	2,975,000		3,750,000

Certificates of deposit		499,904		200,023

TOTAL UNSECURED INVESTMENT CREDIT EXPOSURE1	TOTAL UNSECURED INVESTMENT CREDIT EXPOSURE1	$	5,984,445	$	4,252,182	TOTAL UNSECURED INVESTMENT CREDIT EXPOSURE1	$	5,088,911	$	5,789,333

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 September 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 ~~September 30, 2022,~~March 31, 2023, all unsecured investments were rated as investment grade based on NRSROs (see Table ~~32)~~24).

Table ~~of Contents~~

~~Table 30~~22 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 ~~September 30, 2022~~March 31, 2023 (in thousands). We also mitigate the credit risk on investments by purchasing instruments that have short-term maturities.

Table 3022

Domicile of Counterparty Overnight Due 2 – 30
days Due 31 – 90
days Total
Domestic $ 779,541 $ 750,000 $ — $ 1,529,541
U.S. subsidiaries of foreign commercial banks — — 249,927 249,927
Total domestic and U.S. subsidiaries of foreign commercial banks 779,541 750,000 249,927 1,779,468
U.S. Branches and agency offices of foreign commercial banks:
Canada — 1,965,000 — 1,965,000
Australia — 915,000 — 915,000
Netherlands — 475,000 — 475,000
Germany — 449,977 — 449,977
United Kingdom — 400,000 — 400,000
Total U.S. Branches and agency offices of foreign commercial banks — 4,204,977 — 4,204,977
TOTAL UNSECURED INVESTMENT CREDIT EXPOSURE1
$ 779,541 $ 4,954,977 $ 249,927 $ 5,984,445


Domicile of Counterparty	Overnight
Domestic	$	2,413,911


U.S. Branches and agency offices of foreign commercial banks:
Australia	1,050,000
United Kingdom	675,000
Finland	650,000
Netherlands	300,000





Total U.S. Branches and agency offices of foreign commercial banks	2,675,000
TOTAL UNSECURED INVESTMENT CREDIT EXPOSURE1	$	5,088,911

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.

Table of Contents

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~~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 purchase fixed rate securities for duration and interest rate risk management. Currently, ~~the majority~~a significant portion of our variable rate investment securities are indexed to LIBOR but we stopped purchasing LIBOR-indexed 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 ~~September 30, 2022,~~March 31, 2023, the aggregate value of our MBS portfolio represented ~~199~~193 percent of our regulatory capital. We are below our regulatory threshold primarily due to an increase in regulatory capital despite purchases of $2.7 billion in MBS since the beginning of 2022. We expect to be below our regulatory limit in the near-term but continue to remain opportunistic about future MBS ~~purchases as market conditions change.~~purchases.

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.

7364

Table of Contents

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 ~~September 30, 2022~~March 31, 2023 are summarized by security type in Table 3123 (dollar amounts in thousands) with certain weighted average yield metrics along with carrying values as of December 31, ~~2021.~~2022. 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 3123


		09/30/2022														12/31/2021			03/31/2023														12/31/2022
		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		$	499,904		$	—		$	—		$	—		$	499,904	$	200,023

U.S. Treasury obligations	U.S. Treasury obligations	645,589			—									645,589		917,472		U.S. Treasury obligations	$	398,007		$	—		$	—		$	—		$	398,007	$	396,233
GSE debentures	GSE debentures	104,846			284,398			—						389,244		415,918		GSE debentures	105,174			285,804			—						390,978		388,955

GSE MBS	GSE MBS	—			625,343			—			13,915			639,258		806,542		GSE MBS	14,070			611,168			—			12,779			638,017		636,265
Total trading securities	Total trading securities	1,250,339			909,741			—			13,915			2,173,995		2,339,955		Total trading securities	517,251			896,972			—			12,779			1,427,002		1,421,453

Available-for-sale securities:	Available-for-sale securities:																	Available-for-sale securities:
U.S. Treasury obligations	U.S. Treasury obligations	991,773			1,868,144			212,917			—			3,072,834		2,816,437		U.S. Treasury obligations	545,443			2,192,711			220,435			—			2,958,589		3,315,356
U.S. obligation MBS	U.S. obligation MBS	—									41,433			41,433		50,767		U.S. obligation MBS	—									117,096			117,096		40,039
GSE MBS	GSE MBS	92,239			1,305,883			3,223,861			713,132			5,335,115		4,851,981		GSE MBS	39,673			1,441,738			3,998,147			828,546			6,308,104		5,999,021
Total available-for-sale securities	Total available-for-sale securities	1,084,012			3,174,027			3,436,778			754,565			8,449,382		7,719,185		Total available-for-sale securities	585,116			3,634,449			4,218,582			945,642			9,383,789		9,354,416

Held-to-maturity securities:	Held-to-maturity securities:																	Held-to-maturity securities:
State or local housing agency obligations	State or local housing agency obligations	—						43,940			30,000			73,940		74,865		State or local housing agency obligations	—						40,505			30,000			70,505		70,505

GSE MBS	GSE MBS	—			4,872			62,732			219,474			287,078		371,320		GSE MBS	—			19,709			37,967			203,554			261,230		274,925
Total held-to-maturity securities	Total held-to-maturity securities	—			4,872			106,672			249,474			361,018		446,185		Total held-to-maturity securities	—			19,709			78,472			233,554			331,735		345,430

Total securities	Total securities	2,334,351			4,088,640			3,543,450			1,017,954			10,984,395		10,505,325		Total securities	1,102,367			4,551,130			4,297,054			1,191,975			11,142,526		11,121,299

Interest-bearing deposits	Interest-bearing deposits	780,741			—									780,741		693,249		Interest-bearing deposits	2,113,940			—									2,113,940		2,039,852

Federal funds sold	Federal funds sold	4,705,000			—									4,705,000		3,360,000		Federal funds sold	2,975,000			—									2,975,000		3,750,000

Securities purchased under agreements to resell	Securities purchased under agreements to resell	3,250,000			—									3,250,000		1,500,000		Securities purchased under agreements to resell	3,600,000			—									3,600,000		2,350,000
TOTAL INVESTMENTS	TOTAL INVESTMENTS	$	11,070,092		$	4,088,640		$	3,543,450		$	1,017,954		$	19,720,136	$	16,058,574	TOTAL INVESTMENTS	$	9,791,307		$	4,551,130		$	4,297,054		$	1,191,975		$	19,831,466	$	19,261,151

Weighted average yields1:	Weighted average yields1:																	Weighted average yields1:
Available-for-sale securities	Available-for-sale securities	1.68		%	2.30		%	2.66		%	1.87		%					Available-for-sale securities	2.36		%	2.63		%	3.21		%	2.98		%
Held-to-maturity securities	Held-to-maturity securities	—		%	1.01		%	2.28		%	1.71		%					Held-to-maturity securities	—		%	1.21		%	2.93		%	1.91		%

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.

7465

Table of Contents

Securities Ratings – Tables 3224 and 3325 present the carrying value of our investments by rating as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 (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 3224


		09/30/2022									03/31/2023
		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	$	—	$	1,200	$	779,541		$	—		$	780,741		Interest-bearing deposits2	$	—	$	29	$	2,113,911			$	—	$	2,113,940

Federal funds sold2	Federal funds sold2	—		—		4,705,000			—			4,705,000			Federal funds sold2	—		650,000		2,325,000				—		2,975,000

Securities purchased under agreements to resell3	Securities purchased under agreements to resell3	—		1,500,000		—			1,750,000			3,250,000			Securities purchased under agreements to resell3	—		—		1,250,000				2,350,000		3,600,000

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

Certificates of deposit2		—		—		499,904			—			499,904

U.S. Treasury obligations	U.S. Treasury obligations	—		3,718,423		—			—			3,718,423			U.S. Treasury obligations	—		3,356,596		—				—		3,356,596
GSE debentures	GSE debentures	—		389,244		—			—			389,244			GSE debentures	—		390,978		—				—		390,978
State or local housing agency obligations	State or local housing agency obligations	43,940		30,000		—			—			73,940			State or local housing agency obligations	40,505		30,000		—				—		70,505
Total non-mortgage-backed securities	Total non-mortgage-backed securities	43,940		4,137,667		499,904			—			4,681,511			Total non-mortgage-backed securities	40,505		3,777,574		—				—		3,818,079
Mortgage-backed securities:	Mortgage-backed securities:														Mortgage-backed securities:
U.S. obligation MBS	U.S. obligation MBS	—		41,433		—			—			41,433			U.S. obligation MBS	—		117,096		—				—		117,096
GSE MBS	GSE MBS	—		6,261,451		—			—			6,261,451			GSE MBS	—		7,207,351		—				—		7,207,351
Total mortgage-backed securities	Total mortgage-backed securities	—		6,302,884		—			—			6,302,884			Total mortgage-backed securities	—		7,324,447		—				—		7,324,447

TOTAL INVESTMENTS	TOTAL INVESTMENTS	$	43,940	$	11,941,751	$	5,984,445		$	1,750,000		$	19,720,136		TOTAL INVESTMENTS	$	40,505	$	11,752,050	$	5,688,911			$	2,350,000	$	19,831,466

1 Investment amounts represent the carrying value and do not include related accrued interest receivable of ~~$35.2~~$40.7 million at ~~September 30, 2022.~~March 31, 2023.

2 Amounts include unsecured credit exposure with ~~original maturities from~~ overnight ~~to 92 days.~~maturities.

3 Amounts represent collateralized overnight borrowings.

7566

Table of Contents

Table 3325


		12/31/2021									12/31/2022
		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	$	311	$	1,090	$	691,848		$	—		$	693,249		Interest-bearing deposits2	$	—	$	519	$	2,039,333			$	—	$	2,039,852

Federal funds sold2	Federal funds sold2	—		175,000		3,185,000			—			3,360,000			Federal funds sold2	—		250,000		3,500,000				—		3,750,000

Securities purchased under agreements to resell3	Securities purchased under agreements to resell3	—		—		—			1,500,000			1,500,000			Securities purchased under agreements to resell3	—		150,000		—				2,200,000		2,350,000

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

Certificates of deposit2		—		—		200,023			—			200,023

U.S. Treasury obligations	U.S. Treasury obligations	—		3,733,909		—			—			3,733,909			U.S. Treasury obligations	—		3,711,589		—				—		3,711,589
GSE debentures	GSE debentures	—		415,918		—			—			415,918			GSE debentures	—		388,955		—				—		388,955
State or local housing agency obligations	State or local housing agency obligations	44,865		30,000		—			—			74,865			State or local housing agency obligations	40,505		30,000		—				—		70,505
Total non-mortgage-backed securities	Total non-mortgage-backed securities	44,865		4,179,827		200,023			—			4,424,715			Total non-mortgage-backed securities	40,505		4,130,544		—				—		4,171,049
Mortgage-backed securities:	Mortgage-backed securities:														Mortgage-backed securities:
U.S. obligation MBS	U.S. obligation MBS	—		50,767		—			—			50,767			U.S. obligation MBS	—		40,039		—				—		40,039
GSE MBS	GSE MBS	—		6,029,843		—			—			6,029,843			GSE MBS	—		6,910,211		—				—		6,910,211
Total mortgage-backed securities	Total mortgage-backed securities	—		6,080,610		—			—			6,080,610			Total mortgage-backed securities	—		6,950,250		—				—		6,950,250

TOTAL INVESTMENTS	TOTAL INVESTMENTS	$	45,176	$	10,436,527	$	4,076,871		$	1,500,000		$	16,058,574		TOTAL INVESTMENTS	$	40,505	$	11,481,313	$	5,539,333			$	2,200,000	$	19,261,151

1 Investment amounts represent the carrying value and do not include related accrued interest receivable of ~~$27.9~~$39.3 million at December 31, ~~2021.~~2022.

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

3 Amounts represent collateralized overnight borrowings.

7667

Table of Contents

Table 3426 details interest rate payment terms for the carrying value of our investment securities as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 (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 4436 and 4537 under Part I, Item 3 – “Quantitative and Qualitative Disclosures About Market Risk).”

Table 3426


		09/30/2022		12/31/2021			03/31/2023		12/31/2022
Trading securities:	Trading securities:					Trading securities:
Non-mortgage-backed securities:	Non-mortgage-backed securities:					Non-mortgage-backed securities:
Fixed rate	Fixed rate	$	1,534,737	$	1,533,413	Fixed rate	$	788,985	$	785,188

Non-mortgage-backed securities	Non-mortgage-backed securities	1,534,737		1,533,413		Non-mortgage-backed securities	788,985		785,188
Mortgage-backed securities:	Mortgage-backed securities:					Mortgage-backed securities:
Fixed rate	Fixed rate	625,343		775,050		Fixed rate	625,238		622,984
Variable rate	Variable rate	13,915		31,492		Variable rate	12,779		13,281
Mortgage-backed securities	Mortgage-backed securities	639,258		806,542		Mortgage-backed securities	638,017		636,265
Total trading securities	Total trading securities	2,173,995		2,339,955		Total trading securities	1,427,002		1,421,453
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	3,072,834		2,816,437		Fixed rate	2,958,589		3,315,356
Non-mortgage-backed securities	Non-mortgage-backed securities	3,072,834		2,816,437		Non-mortgage-backed securities	2,958,589		3,315,356
Mortgage-backed securities:	Mortgage-backed securities:					Mortgage-backed securities:
Fixed rate	Fixed rate	2,903,746		3,322,673		Fixed rate	3,343,815		3,193,215
Variable rate	Variable rate	2,472,802		1,580,075		Variable rate	3,081,385		2,845,845
Mortgage-backed securities	Mortgage-backed securities	5,376,548		4,902,748		Mortgage-backed securities	6,425,200		6,039,060
Total available-for-sale securities	Total available-for-sale securities	8,449,382		7,719,185		Total available-for-sale securities	9,383,789		9,354,416
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	73,940		74,865		Variable rate	70,505		70,505
Non-mortgage-backed securities	Non-mortgage-backed securities	73,940		74,865		Non-mortgage-backed securities	70,505		70,505
Mortgage-backed securities:	Mortgage-backed securities:					Mortgage-backed securities:
Fixed rate	Fixed rate	36,601		48,399		Fixed rate	31,145		33,741
Variable rate	Variable rate	250,477		322,921		Variable rate	230,085		241,184
Mortgage-backed securities	Mortgage-backed securities	287,078		371,320		Mortgage-backed securities	261,230		274,925
Total held-to-maturity securities	Total held-to-maturity securities	361,018		446,185		Total held-to-maturity securities	331,735		345,430
TOTAL	TOTAL	$	10,984,395	$	10,505,325	TOTAL	$	11,142,526	$	11,121,299

Deposits: Deposits are generally an insignificant source of funding. Total deposits ~~decreased $278.2~~increased $244.3 million from December 31, ~~2021~~2022 to ~~September 30, 2022~~March 31, 2023 primarily as a result of ~~decreases~~increases in overnight and demand deposits, offset by ~~an increase~~a decrease in term deposits. The level of deposits is driven by member demand 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 the remainder of ~~2022~~2023 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. Historically, we 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.

7768

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 and maintain sufficient levels of liquidity. We make use of derivative transactions, executed in conjunction with specific consolidated obligation debt issues, to synthetically structure funding terms and costs.

Table 3527 presents the carrying value of consolidated obligation bonds and discounts notes as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 (in thousands).

Table 3527


		09/30/2022		12/31/2021			03/31/2023		12/31/2022
Bonds:	Bonds:					Bonds:
Par value	Par value	$	37,216,095	$	37,658,250	Par value	$	48,993,950	$	43,106,535
Premiums	Premiums	20,673		27,470		Premiums	17,260		18,950
Discounts	Discounts	(2,381)		(2,720)		Discounts	(4,991)		(3,789)
Concession fees	Concession fees	(11,327)		(11,877)		Concession fees	(10,927)		(11,262)
Hedging adjustments	Hedging adjustments	(647,849)		(40,514)		Hedging adjustments	(480,417)		(604,595)
Total bonds	Total bonds	36,575,211		37,630,609		Total bonds	48,514,875		42,505,839
Discount Notes:	Discount Notes:					Discount Notes:
Par value	Par value	22,859,242		6,569,580		Par value	21,261,788		24,997,018
Discounts	Discounts	(155,071)		(469)		Discounts	(283,623)		(190,034)
Concession fees	Concession fees	(820)		(122)		Concession fees	(820)		(714)
Hedging adjustments	Hedging adjustments	(41,948)		—		Hedging adjustments	(4,973)		(30,865)
Total discount notes	Total discount notes	22,661,403		6,568,989		Total discount notes	20,972,372		24,775,405
TOTAL	TOTAL	$	59,236,614	$	44,199,598	TOTAL	$	69,487,247	$	67,281,244

Total consolidated obligations increased ~~$15.0~~$2.2 billion, or ~~34.0~~3.3 percent, from December 31, ~~2021~~2022 to ~~September 30, 2022~~March 31, 2023 aligning with growth in advances and liquidity investments. The distribution between consolidated obligation bonds and discount notes shifted between periods, from ~~85.1~~63.2 percent and ~~14.9~~36.8 percent, respectively, at December 31, ~~2021~~2022 to ~~61.7~~69.8 percent and ~~38.3~~30.2 percent at ~~September 30, 2022, respectively.~~March 31, 2023, respectively due to an increase in short-term floating rate bonds funding short-term fixed rate advances and liquidity assets. Management increased issuance of ~~discount notes,~~ floating rate term debt and swapped fixed rate debt to more closely match the repricing characteristics of our assets. Issuance of swapped callable bonds also increased during the quarter due to favorable funding spreads. Callable bonds provide the FHLBank with options to replace the bonds at lower costs if interest rates decline. Callable bonds are typically fixed or structured rate debt that pay higher coupons to investors because of the optionality held by the issuer. When a swap is called by the counterparty in a swapped callable bond transaction, the FHLBank calls the hedged bond. Management also swapped more short-term fixed rate debt, including discount notes, during the first quarter of 2023 to match repricing characteristics of our assets. 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 unswapped consolidated obligations and the cost of consolidated obligations swapped or indexed to SOFR or OIS. All floating rate bonds issued ~~during~~since 2021 ~~and 2022 were~~have been indexed to SOFR as we continue to transition away from LIBOR and maintain 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.

7869

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.~~obligor, issuing advances, and purchasing investments and mortgage loans. 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.

During the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, proceeds (net of premiums and discounts) from the issuance of bonds and discount notes were ~~$31.2~~$19.0 billion and ~~$245.3~~$101.0 billion, respectively, compared to ~~$28.7~~$12.7 billion and ~~$239.6~~$39.9 billion for the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2022. 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. High demand for short-term Agency debt has kept the spread to Treasuries relatively narrow. Our ability to issue debt remains robust, but volatility in the capital markets can impact the demand for and cost of debt issued by the FHLBanks.

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~~decreased slightly between periods, from ~~$7.2~~$10.0 billion as of December 31, ~~2021~~2022 to ~~$11.1~~$9.8 billion as of ~~September 30, 2022.~~March 31, 2023. 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. The ~~increase in the~~higher levels of short-term liquidity ~~portfolio between periods was~~at March 31, 2023 and December 31, 2022 were in anticipation of ~~potential market volatility and~~ increased advance ~~demand.~~demand due to recent market volatility.

Investment securities on our balance sheet are also a source of potential liquidity. U.S. Treasury obligations, GSE debentures, and GSE MBS can be sold or pledged as collateral for financing in the securities repurchase agreement market. In addition to balance sheet sources of liquidity, we have established lines of credit with numerous counterparties in the Federal funds market as well as with the other FHLBanks. We expect to maintain a sufficient level of liquidity for the foreseeable future.

During the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, advance disbursements totaled ~~$451.6~~$218.9 billion compared to ~~$351.7~~$161.3 billion for the prior year period which reflects increased member utilization of advances, especially short-term advances. During the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, investment purchases (excluding overnight investments) totaled ~~$5.3~~$0.6 billion compared to ~~$2.7~~$1.6 billion for the same period in the prior year. During the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, payments on maturing and retired consolidated obligation bonds and discount notes were ~~$31.6~~$12.1 billion and ~~$229.2~~$104.9 billion, respectively, compared to ~~$34.8~~$11.1 billion and ~~$240.2~~$38.6 billion for the prior year period.

Capital: Total capital increased ~~$581.2~~$188.9 million, or ~~21.4~~5.1 percent, from December 31, ~~2021~~2022 to ~~September 30, 2022~~March 31, 2023 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 unrealized losses on available-for-sale securities (see Table ~~36)~~28). We strive to manage our average capital ratio 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.

7970

Table of Contents

Table 3628 provides a summary of member capital requirements under our current capital plan as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 (in thousands):

Table 3628


Requirement	Requirement	09/30/2022		12/31/2021		Requirement	03/31/2023		12/31/2022
Asset-based (Class A Common Stock only)	Asset-based (Class A Common Stock only)	$	179,682	$	172,913	Asset-based (Class A Common Stock only)	$	179,180	$	179,450
Activity-based (additional Class B Common Stock)1	Activity-based (additional Class B Common Stock)1	1,728,833		1,192,421		Activity-based (additional Class B Common Stock)1	2,222,872		2,125,885
Total Required Stock2	Total Required Stock2	1,908,515		1,365,334		Total Required Stock2	2,402,052		2,305,335
Excess Stock (Class A and B Common Stock)	Excess Stock (Class A and B Common Stock)	212,050		134,549		Excess Stock (Class A and B Common Stock)	260,306		202,654
Total Regulatory Capital Stock2	Total Regulatory Capital Stock2	$	2,120,565	$	1,499,883	Total Regulatory Capital Stock2	$	2,662,358	$	2,507,989

Activity-based Requirements:	Activity-based Requirements:					Activity-based Requirements:
Advances3	Advances3	$	1,602,288	$	1,047,866	Advances3	$	2,098,439	$	2,005,795
Letters of credit	Letters of credit	13,527		13,020		Letters of credit	15,944		16,190
AMA assets (mortgage loans)4	AMA assets (mortgage loans)4	236,106		239,577		AMA assets (mortgage loans)4	234,355		233,793
Total Activity-based Requirement	Total Activity-based Requirement	1,851,921		1,300,463		Total Activity-based Requirement	2,348,738		2,255,778
Asset-based Requirement (Class A Common Stock) not supporting member activity1	Asset-based Requirement (Class A Common Stock) not supporting member activity1	56,594		64,871		Asset-based Requirement (Class A Common Stock) not supporting member activity1	53,314		49,557
Total Required Stock2	Total Required Stock2	$	1,908,515	$	1,365,334	Total Required Stock2	$	2,402,052	$	2,305,335

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 ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021.~~2022.

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 ~~$82.7~~$52.2 million for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 compared to ~~$48.1~~$20.5 million for the same period in the prior year. The weighted average dividend rate for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 was ~~6.94~~8.12 percent, ~~and 5.90 percent, respectively,~~ which represented a dividend payout ratio of ~~54.4~~61.5 percent ~~and 49.3 percent, respectively,~~ compared to a weighted average dividend rate of ~~4.15 percent and 4.12~~4.88 percent and a payout ratio of ~~43.1 percent and 42.1~~40.6 percent for the three ~~and nine~~ months ended ~~September 30, 2021, respectively.~~March 31, 2022. 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 ~~September 2022~~March 2023 were based on income during the three months ended ~~August 31, 2022.~~February 28, 2023. (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~~2022 for other factors that contribute to the level of dividends paid.)

8071

Table of Contents

In accordance with our capital plan, we must pay holders of Class A Common Stock the ~~dividend parity threshold~~DPT rate before paying a higher rate to holders of Class B Common Stock. The ~~current dividend parity threshold is~~DPT effective for dividends paid during 2022 and the first quarter of 2023 was equal to the average overnight Federal funds effective rate minus 100 basis points. On March 24, 2023, the board of directors revised the DPT as the average effective overnight Federal funds rate for a dividend period minus ~~100~~200 basis ~~points and was~~points. This DPT will be effective for ~~all dividends paid in 2021~~the second quarter of 2023 and ~~2022. The~~continue to be effective until such time as it may be changed by the board of directors. When the overnight Federal funds effective rate is below 2.00 percent, the DPT is zero for that dividend ~~parity threshold~~period (DPT is floored at ~~zero percent when the current overnight Federal funds target rate is less than one percent.~~zero). Table 3729 presents the dividend rates per annum paid on capital stock under our capital plan for the quarterly periods listed below:

Table 3729


Applicable Rate per Annum	Applicable Rate per Annum	09/30/2022		06/30/2022		03/31/2022		12/31/2021		09/30/2021		Applicable Rate per Annum	03/31/2023		12/31/2022		09/30/2022		06/30/2022		03/31/2022
Class A Common Stock	Class A Common Stock	2.25	%	1.00	%	0.25	%	0.25	%	0.25	%	Class A Common Stock	3.75	%	3.00	%	2.25	%	1.00	%	0.25	%
Class B Common Stock1		7.75		6.50		5.75		6.75		5.25
Weighted Average2		6.94		5.63		4.88		5.62		4.15
Class B Common Stock												Class B Common Stock	8.75		8.50		7.75		6.50		5.75
Weighted Average1												Weighted Average1	8.12		7.79		6.94		5.63		4.88
Dividend Parity Threshold:	Dividend Parity Threshold:											Dividend Parity Threshold:
Average effective overnight Federal funds rate	Average effective overnight Federal funds rate	2.20	%	0.76	%	0.12	%	0.08	%	0.09	%	Average effective overnight Federal funds rate	4.52	%	3.65	%	2.20	%	0.76	%	0.12	%
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)	1.20	%	0.00	%	0.00	%	0.00	%	0.00	%	TOTAL (floored at zero percent)	3.52	%	2.65	%	1.20	%	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~~near current dividend rates throughout ~~2022. Dividend~~2023. Historically, dividend rates ~~typically move~~have moved directionally with short-term ~~market~~interest rates. Market conditions and movements in short-term interest rates can be unpredictable, and ~~we expect that trend to continue. Adverse~~adverse market conditions may result in lower dividend rates in future quarters. ~~While there is no assurance that our~~As mentioned previously, the board of directors ~~will not~~changed the DPT effective for the second quarter of 2023. If there is a change to the ~~dividend parity threshold~~DPT in the future, the capital plan requires that we provide members ~~with~~notice of that change 90 ~~days' notice~~days prior to ~~the end of~~ a dividend ~~period in which a different dividend parity threshold is utilized in the payment of a dividend.~~payment.

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, support our affordable housing mission, 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 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.

8172

Table of Contents

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 ~~September 30, 2022,~~March 31, 2023, our exposure to LIBOR was primarily in investments and in derivatives hedging assets (indexed to the one-month and three-month tenors). We are prohibited by our regulator from entering into new financial assets, liabilities, or derivatives that reference 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. During ~~the third quarter of~~ 2022, we sold $12.6 million of LIBOR-indexed securities classified as trading and $20.0 million of LIBOR-indexed securities classified as held-to-maturity. All held-to-maturity securities sold had paid down below 15 percent of the principal outstanding at acquisition and were therefore considered maturities under GAAP. 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. We have also ~~begun to transition~~transitioned certain LIBOR-indexed swaps to ~~SOFR with~~SOFR. We have elected to terminate some LIBOR-indexed swaps that were designated in a fair value hedging relationship and either economically hedge the ~~intent~~outstanding item or leave the item unhedged, which could cause some income statement volatility until those positions mature. The remaining LIBOR-indexed swaps will likely transition to ~~continue to do so over~~a new index rate via the ~~next several months.~~International Swaps and Derivatives Association, Inc. protocol at LIBOR cessation.

~~All variable rate advances indexed to LIBOR matured prior to December 31, 2021.~~ We had ~~$2.7~~$3.0 billion in advances indexed to SOFR outstanding as of ~~September 30, 2022.~~March 31, 2023. We have no variable rate advances indexed to LIBOR.

Table 3830 presents the par value of variable rate investment securities by the related interest rate index as of ~~September 30, 2022~~March 31, 2023 (dollar amounts in thousands):

Table 3830


09/30/2022
03/31/2023						03/31/2023
Index	Index	Amount		Percent		Index	Amount		Percent
Non-mortgage-backed securities:	Non-mortgage-backed securities:					Non-mortgage-backed securities:
LIBOR	LIBOR	$	73,940	2.6	%	LIBOR	$	70,505	2.1	%

Non-mortgage-backed securities	Non-mortgage-backed securities	73,940		2.6		Non-mortgage-backed securities	70,505		2.1
Mortgage-backed securities:	Mortgage-backed securities:					Mortgage-backed securities:
LIBOR	LIBOR	1,504,310		53.1		LIBOR	1,360,450		39.8
SOFR	SOFR	1,253,621		44.3		SOFR	1,987,021		58.1

Other	Other	18		—		Other	17		—
Mortgage-backed securities	Mortgage-backed securities	2,757,949		97.4		Mortgage-backed securities	3,347,488		97.9
TOTAL	TOTAL	$	2,831,889	100.0	%	TOTAL	$	3,417,993	100.0	%

8273

Table of Contents

Table 3931 presents the par value of investment securities indexed to LIBOR outstanding by year of contractual maturity as of ~~September 30, 2022~~March 31, 2023 (in thousands):

Table 3931

~~09/30/2022~~03/31/2023

Year of Contractual Maturity

Amount

Non-mortgage-backed securities:

After June 30, 2023

~~73,940~~70,505

Non-mortgage-backed securities

~~73,940~~70,505

Mortgage-backed securities:

~~2022~~

—

Through June 30, 2023

~~56,894~~31,696

Thereafter

~~1,447,416~~1,328,754

Mortgage-backed securities

~~1,504,310~~1,360,450

TOTAL

~~1,578,250~~1,430,955

Table 4032 presents the notional amount of interest rate swaps (excludes interest rate caps and mortgage delivery commitments) by related interest rate index as of ~~September 30, 2022~~March 31, 2023 (amounts in thousands):

Table 4032


09/30/2022
03/31/2023						03/31/2023
Index	Index	Pay Side		Receive Side		Index	Pay Side		Receive Side
Fixed rate	Fixed rate	$	14,168,001	$	27,541,037	Fixed rate	$	17,631,611	$	36,822,777
LIBOR	LIBOR	25,000		3,220,636		LIBOR	—		1,640,344
SOFR	SOFR	25,685,864		9,177,171		SOFR	35,417,777		14,285,678
OIS	OIS	1,830,173		1,770,194		OIS	1,405,000		1,705,589

TOTAL	TOTAL	$	41,709,038	$	41,709,038	TOTAL	$	54,454,388	$	54,454,388

Table 4133 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 ~~September 30, 2022~~March 31, 2023 (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 4133


09/30/2022
03/31/2023										03/31/2023
Year	Year	Pay Side				Receive Side				Year	Pay Side				Receive Side
		Cleared		Bilateral		Cleared		Bilateral			Cleared		Bilateral		Cleared		Bilateral

2022		$	—	$	—	$	11,330	$	16,500

Prior to June 30, 2023	Prior to June 30, 2023	—		—		195,482		—		Prior to June 30, 2023	—		—		15,000		32,506
Thereafter	Thereafter	—		25,000		576,764		2,420,560		Thereafter	—		—		—		1,592,838
TOTAL	TOTAL	$	—	$	25,000	$	783,576	$	2,437,060	TOTAL	$	—	$	—	$	15,000	$	1,625,344

As of ~~September 30, 2022,~~March 31, 2023, all ~~$16.7~~$22.4 billion of variable rate consolidated obligation bonds were indexed to SOFR. ~~As of December 31, 2021, all LIBOR-indexed consolidated obligation bonds had matured.~~

~~Table of Contents~~

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.

Legislative and Regulatory Developments

Significant regulatory actions and developments for the period covered by this report not previously disclosed are summarized below.

~~Amendments to FINRA~~

Table of Contents

Consumer Financial Protection Bureau (CFPB) Final Rule ~~4210: Margining of Covered Agency Transactions.~~on Small Business Lending Data. On ~~August 15, 2022,~~March 30, 2023, the ~~SEC published amendments~~CFPB issued a final rule requiring certain covered financial institutions to ~~Financial Industries Regulatory Authority (FINRA) Rule 4210 that delayed~~collect and report small business lending data. Small businesses are businesses with $5.0 million or less in gross annual revenue in the ~~effectiveness~~preceding fiscal year. We will be subject to data collection and reporting obligations if we have originated a minimum of ~~margining requirements~~100 “covered credit transactions” to small businesses in each of the two preceding calendar years. The final rule implements phased-in compliance dates, beginning on October 1, 2024, based on the number of originations the covered financial institution makes to small businesses within a specified timeframe. We are assessing whether the obligations will be triggered for ~~covered agency transactions from October 26, 2022 until at least April 24, 2023. Once~~ the ~~margining requirements~~FHLBank and what operational changes will be necessary for compliance. While we are ~~effective,~~still analyzing the impact of the final rule, 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. We do not ~~expect this rule to~~believe these changes will have a material effect on our financial condition or results of operations.

FHFA Proposed Rule on Fair Lending, Fair Housing, and Equitable Housing Finance Plans.On April 26, 2023, the FHFA published a proposed rule that specifies requirements related to FHLBank compliance with fair housing and fair lending laws and prohibitions on unfair or deceptive acts or practices. The fair housing and fair lending laws would be the Fair Housing Act, the Equal Credit Opportunity Act, and those acts’ implementing regulations. Further, the proposed rule would outline the FHFA’s enforcement authority. The proposal is open for public comment through June 26, 2023, and we are evaluating the potential impact of the proposed rule on FHLBank and our operations.

We continue to monitor these actions and guidance as they evolve and to evaluate their potential impact on us.

Item 3: Quantitative and Qualitative Disclosures About Market Risk

Market risk is the risk that changes in market value may adversely affect our financial condition and performance. Interest rate risk is a component of market risk and represents our most significant market risk exposure. Interest rate risk is the risk that the market value of our asset, liability, and derivative portfolios will be negatively impacted by interest rate volatility or that earnings will be affected significantly by interest rate changes. We ~~measure~~manage interest rate risk ~~exposure~~through the characteristics of our portfolio of assets and liabilities and by ~~various methods, including~~using derivative transactions to limit duration mismatches and reduce MVE sensitivity. Matching the ~~calculation of~~ duration of ~~equity (DOE)~~assets with the duration of liabilities funding those assets is accomplished through the use of different debt maturities and ~~MVE in different~~embedded option characteristics, as well as the use of derivatives, primarily interest rate ~~scenarios. We manage DOE~~swaps, interest rate caps, and ~~MVE within limits approved~~interest rate floors. Interest rate swaps increase the flexibility of our funding alternatives by ~~the board of directors~~providing cash flows or characteristics that might not be as ~~described under Part II, Item 7A - "Quantitative and Qualitative Disclosures About Market Risk"~~readily available or cost-effective if obtained in the ~~annual report on Form 10-K, incorporated by reference herein~~standard GSE debt market.

Duration of ~~Equity~~

Equity:DOE ~~measures~~aggregates the ~~price~~estimated sensitivity of market value for each of our financial assets and liabilities to changes in interest rates. A positive DOE results when the duration of assets and designated derivatives is greater than the duration of liabilities and designated derivatives, indicating a degree of interest rate risk exposure in a rising interest rate environment. A negative DOE results in the opposite scenario, indicating a degree of interest rate risk exposure in a declining interest rate environment. Higher DOE numbers, whether positive or negative, indicate greater volatility of ~~MVE~~market value in response to changing interest rates. A decline in market value does not necessarily translate directly into a decline in income, especially for entities that do not trade financial instruments. Changes in market value may indicate trends in income over longer periods, and knowing the sensitivity of our market value to changes in interest rates provides a measure of the interest rate risk we take.

~~While~~Under the RMP, our DOE is generally limited ~~by policy~~ to a range of ±5.0 ~~in the base case, we typically manage~~assuming current interest rates. In addition, our DOE ~~in the base scenario~~is generally limited to ~~remain in the~~a range of ~~±2.5,~~±7.0 assuming an instantaneous parallel increase or decrease in interest rates of 200 basis points. During periods of extremely low interest rates, the FHFA requires that the FHLBanks employ a constrained down shock analysis to limit the evolution of forward interest rates to positive non-zero values. Since our market ~~rates. All DOE measurements were~~risk model imposes a positive non-zero boundary on post-shock interest rates, no additional calculations are necessary in compliance with board of director established policy limits and operating ranges as of September 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,~~order to meet this FHFA requirement when applicable. 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;~~assets; and/or (3) the addition to the balance sheet of assets or liabilities having characteristics that ~~allow for~~are such that they counterbalance the ~~management of the~~excessive duration ~~profile. We regularly evaluate balance sheet composition along with strategic alternatives to manage the relative position of DOE.~~observed.

Table 42of Contents

Table 34 presents ~~the~~our DOE in the base ~~case~~ and the up and down 200 basis point interest rate shock ~~scenarios as of the periods noted:~~scenarios:

Table 4234


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
03/31/2023						03/31/2023	1.8	1.8	2.4
12/31/2022						12/31/2022	1.7	1.7	2.1
09/30/2022	09/30/2022	1.6	1.8		2.6	09/30/2022	1.6	1.8	2.6
06/30/2022	06/30/2022	1.6	2.2		3.3	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		0.6	-0.4		1.5
09/30/2021		0.4	-2.7		1.5

~~Table of Contents~~

The absolute value of the DOE of the portfolio as of September 30, 2022 decreased in the base and down 200 basis point interest rate shock scenarios and was unchanged in the up 200 basis point interest rate shock scenario from June 30, 2022. The primary factors contributing to ~~these~~the net changes in duration ~~during the period~~from December 31, 2022 to March 31, 2023 were: (1) the ~~significant increase~~decrease in interest rates and the relative level of mortgage ~~prices and~~ rates during the period; (2) the ~~relative~~ decrease in percent of total assets represented by the ~~weighted contribution of the~~fixed rate 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 new advance activity. The ~~increase~~decrease in interest rates during the period caused the mortgage loan portfolio contribution to duration to ~~lengthen~~shorten less than the associated liabilities, contributing to the ~~decreasing~~slight increase in the asset sensitive DOE profile in the base case. The mortgage loan portfolio generally has a longer duration profile in the interest rate shock scenarios contributing to 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,~~

The decrease in interest rates since December 31, 2022 generally shortened the duration profile for both the fixed rate mortgage loan portfolio and the associated unswapped callable consolidated obligation bonds funding these assets. With the slight increase in our mortgage loan portfolio balance, the net impact was a slight decrease as a percentage of total assets during this period, as discussed in Item 7A7 – ~~“Quantitative~~“Management’s Discussion and ~~Qualitative Disclosures About Market Risk”~~Analysis of Financial Condition and Results of Operations – Financial Condition – MPF Program” so the duration profile changed as expected since a general decrease in interest rates typically generates slower prepayments for both new production mortgage loans, as well as the outstanding fixed rate mortgage loan portfolio. Generally, lower interest rates indicate a relative increase in refinancing incentive for borrowers.

To effectively manage these changes in the ~~annual report on Form 10-K~~mortgage loan portfolio (including new production and prepaid loans) and related sensitivity to changes in market conditions, unswapped callable consolidated obligation bonds that either matured or were called were generally replaced with reissuance of unswapped callable consolidated obligation bonds with relatively long maturities and short lock-out periods (generally three months to one year). This liability extension corresponds with the expected longer duration profile of the new fixed rate mortgage loans, all else being equal, and positions the balance sheet for future changes in rates, including interest rate increases where the ~~year ended~~mortgage loan portfolio will likely lengthen in duration as expected prepayments slow. For further discussion of the call and reissuance of consolidated obligation bonds, see Item 7 – “Management's Discussion and Analysis of Financial Condition and Results of Operations – Financial Condition – Consolidated Obligations.” The combination of these factors contributed to the net DOE changes in all scenarios during the period.

Duration gap is the difference between the duration of our assets and the duration of our liabilities. Our base duration gap was 1.1 months for both March 31, 2023 and December 31, ~~2021.~~2022.

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 4335 presents MVE as a percent of TRCS. As of ~~September 30, 2022,~~March 31, 2023, 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.

Table of Contents

The MVE to TRCS ratios can be 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 ~~September 30, 2022~~March 31, 2023 (see Table 3628 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 ~~September 30, 2022.~~March 31, 2023. 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~~the change in interest rates contributed to ~~a negative~~the overall impact on base MVE during the quarter, ~~(mortgage loan portfolio market values declined more than~~ the ~~unswapped callable consolidated obligation bond portfolio),~~changes were limited with the ratio maintaining consistent levels in the base case and interest rate shock scenarios during the quarter. In general, the overall declining trend in the following ratios ~~in the third quarter of 2022 and over the past few quarters~~ is primarily the result of the increasing capital position as discussed and referenced above.

Table 4335


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
03/31/2023						03/31/2023	143	148	154
12/31/2022						12/31/2022	143	148	154
09/30/2022	09/30/2022	147	151		158	09/30/2022	147	151	158
06/30/2022	06/30/2022	154	159		168	06/30/2022	154	159	168
03/31/2022	03/31/2022	176	177		182	03/31/2022	176	177	182
12/31/2021		186	184		195
09/30/2021		209	201		206

8577

Table of Contents

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 4436 and 4537 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 4436

09/30/2022

03/31/2023

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

5,660,660

47,109

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

9,296,767

(11,817)

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

480,150

10,616

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

240,650

6,914

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

1,215

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

178,857

425

Firm commitment to issue a fixed rate advance

Forward settling interest rate swap

Protect against fair value risk

Fair Value Hedge

35,375

1,358

Firm commitment to issue a fixed rate advance

Forward settling interest rate swap

Protect against fair value risk

Fair Value Hedge

60,579

(397)

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

3,200,000

4,657

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

3,050,000

(6,579)

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

3,053,763

93,229

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

3,356,459

47,108

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

494

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

798,500

(46)

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

655,191

35,046

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

649,798

26,652

Adjustable rate MBS with embedded caps

Interest rate cap

Offset the interest rate cap embedded in a variable rate investment

Economic Hedge

329,000

2,200

Adjustable rate MBS with embedded caps

Interest rate cap

Offset the interest rate cap embedded in a variable rate investment

Economic Hedge

304,000

1,377

Mortgage Loans Held for Portfolio

Fixed rate mortgage purchase commitments

Mortgage purchase commitment

Protect against fair value risk

Economic Hedge

41,745

(637)

Fixed rate mortgage purchase commitments

Mortgage purchase commitment

Protect against fair value risk

Economic Hedge

46,347

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

5,620,662

(422)

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

8,475,097

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

10,245,683

1,390

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

10,330,065

4,660

Firm commitment to issue consolidated obligation discount note

Receive fixed, pay variable interest rate swap

Protect against fair value risk

Fair Value Hedge

47,692

Firm commitment to issue consolidated obligation discount note

Receive fixed, pay variable interest rate swap

Protect against fair value risk

Fair Value Hedge

286,515

279

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

432,000

(12,523)

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

5,015,500

(20,750)

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

8,773,000

(476,853)

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

11,158,600

(377,580)

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

100,000

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

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

2,152,000

(136,780)

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

1,507,000

(96,544)

Firm commitment to issue a consolidated obligation bond

Receive fixed, pay variable interest rate swap

Protect against fair value risk

Fair Value Hedge

170,000

(300)

TOTAL

42,079,783

(430,177)

TOTAL

54,804,734

(426,161)

8678

Table of Contents

Table 4537

12/31/2021

12/31/2022

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

4,808,953

(7,734)

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

8,219,720

39,770

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 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

309,650

9,795

Firm commitment to issue a fixed rate advance

Forward settling interest rate swap

Protect against fair value risk

Fair Value Hedge

176,464

234

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)

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

34,257

1,107

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 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

3,243,924

74,972

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 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

3,250,000

770

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 non-MBS trading investments

Pay fixed, receive variable interest rate swap

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

Economic Hedge

798,500

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)

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

652,700

32,883

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

Adjustable rate MBS with embedded caps

Interest rate cap

Offset the interest rate cap embedded in a variable rate investment

Economic Hedge

304,000

1,727

Mortgage Loans Held for Portfolio

Fixed rate mortgage purchase commitments

Mortgage purchase commitment

Protect against fair value risk

Economic Hedge

72,025

(13)

Fixed rate mortgage purchase commitments

Mortgage purchase commitment

Protect against fair value risk

Economic Hedge

33,882

(149)

Consolidated Obligation Discount Notes

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

Receive fixed, pay floating interest rate swap

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

Fair Value Hedge

7,508,162

1,003

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

Receive fixed, pay floating interest rate swap

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

Economic Hedge

12,564,086

(1,095)

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

2,304,500

(18,280)

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

8,053,000

(458,805)

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

1,902,000

(124,715)

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)

Variable rate non-callable 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

100,000

(8)

TOTAL

21,324,793

(164,260)

TOTAL

49,454,845

(440,748)

8779

Table of Contents

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

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 ~~September 30, 2022~~March 31, 2023 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,~~20, 2023, 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.

8880

Table of Contents

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 October 26, 2022, 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.

8981

Table of Contents

SIGNATURES

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


			Federal Home Loan Bank of Topeka


~~November 10, 2022~~May 12, 2023			By: /s/ Mark E. Yardley
Date			Mark E. Yardley
			President and Chief Executive Officer

~~November 10, 2022~~May 12, 2023			By: /s/ Jeffrey B. Kuzbel
Date			Jeffrey B. Kuzbel
			Executive Vice President and Chief Financial Officer

9082



	Nine Months Ended
	9/30/2021
	Interest Income/Expense
	Advances		Available-for-sale Securities		Consolidated Obligation Discount Notes		Consolidated Obligation Bonds
Total amounts presented in the Statements of Income	$	95,677	$	29,589	$	4,393	$	124,395
Gains (losses) on fair value hedging relationships:
Interest rate contracts:
Derivatives1	$	84,116	$	81,276	$	13	$	(11,167)
Hedged items2	(133,978)		(153,929)		(33)		33,424
NET GAINS (LOSSES) ON FAIR VALUE HEDGING RELATIONSHIPS	$	(49,862)	$	(72,653)	$	(20)	$	22,257


	Three Months Ended 09/30/2021
	Advances		Investments		Mortgage Loans		Consolidated Obligation Bonds		Total
Unrealized gains (losses) due to fair value changes	$	30	$	1,698	$	—	$	295	$	2,023
Net amortization/accretion of hedging activities	(830)		—		(221)		—		(1,051)
Net interest received (paid)	(16,438)		(24,133)		—		6,285		(34,286)
Price alignment amount	10		19		—		(1)		28
TOTAL	$	(17,228)	$	(22,416)	$	(221)	$	6,579	$	(33,286)



	Nine Months Ended 09/30/2022
	Advances		Investments		Mortgage Loans		Consolidated Obligation Discount Notes		Consolidated Obligation Bonds		Total
Unrealized gains (losses) due to fair value changes	$	3,687	$	12,193	$	—	$	3,630	$	5,511	$	25,021
Net amortization/accretion of hedging activities	(1,679)		—		553		—		—		(1,126)
Net interest received (paid)	(12,757)		(31,613)		—		4,214		7,811		(32,345)
Price alignment amount	(1,754)		(1,580)		—		131		27		(3,176)
TOTAL	$	(12,503)	$	(21,000)	$	553	$	7,975	$	13,349	$	(11,626)


Domicile of Counterparty	Overnight		Due 2 – 30 days		Due 31 – 90 days		Total
Domestic	$	779,541	$	750,000	$	—	$	1,529,541
U.S. subsidiaries of foreign commercial banks	—		—		249,927		249,927
Total domestic and U.S. subsidiaries of foreign commercial banks	779,541		750,000		249,927		1,779,468
U.S. Branches and agency offices of foreign commercial banks:
Canada	—		1,965,000		—		1,965,000
Australia	—		915,000		—		915,000
Netherlands	—		475,000		—		475,000
Germany	—		449,977		—		449,977
United Kingdom	—		400,000		—		400,000




Total U.S. Branches and agency offices of foreign commercial banks	—		4,204,977		—		4,204,977
TOTAL UNSECURED INVESTMENT CREDIT EXPOSURE1	$	779,541	$	4,954,977	$	249,927	$	5,984,445