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 ~~June~~September 30, 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
			~~July~~October 31, 2023
Class A Stock, par value $100 per share			~~2,971,771~~3,106,935
Class B Stock, par value $100 per share			~~23,162,325~~22,973,997

.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	12
	Statements of Cash Flows	13
	Notes to Financial Statements	15
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4748
	Executive Level Overview	4849
	Financial Market Trends	5051
	Critical Accounting Policies and Estimates	5152
	Results of Operations	5253
	Financial Condition	6465
	Liquidity and Capital Resources	7778
	Risk Management	8081
	Recently Issued Accounting Standards	8182
	Legislative and Regulatory Developments	8182
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	8182
Item 4.	Controls and Procedures	8687
Part II	OTHER INFORMATION	8687
Item 1.	Legal Proceedings	8687
Item 1A.	Risk Factors	8687
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	8687
Item 3.	Defaults Upon Senior Securities	8687
Item 4.	Mine Safety Disclosures	8687
Item 5.	Other Information	8687
Item 6.	Exhibits	8788

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;

•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;

•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, 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)
		06/30/2023		12/31/2022			09/30/2023		12/31/2022
ASSETS	ASSETS					ASSETS
Cash and due from banks	Cash and due from banks	$	25,190	$	25,964	Cash and due from banks	$	26,652	$	25,964
Interest-bearing deposits	Interest-bearing deposits	2,068,466		2,039,852		Interest-bearing deposits	1,698,340		2,039,852
Securities purchased under agreements to resell (Note 9)	Securities purchased under agreements to resell (Note 9)	2,000,000		2,350,000		Securities purchased under agreements to resell (Note 9)	1,825,000		2,350,000
Federal funds sold	Federal funds sold	4,400,000		3,750,000		Federal funds sold	4,400,000		3,750,000

Investment securities:	Investment securities:					Investment securities:
Trading securities (Note 3)	Trading securities (Note 3)	1,063,514		1,421,453		Trading securities (Note 3)	899,023		1,421,453
Available-for-sale securities, amortized cost of $10,451,380 and $9,438,859 (Note 3)		10,367,378		9,354,416
Held-to-maturity securities, fair value of $281,782 and $340,259 (Note 3)		285,313		345,430
Available-for-sale securities, amortized cost of $10,997,936 and $9,438,859 (Note 3)						Available-for-sale securities, amortized cost of $10,997,936 and $9,438,859 (Note 3)	10,868,344		9,354,416
Held-to-maturity securities, fair value of $271,634 and $340,259 (Note 3)						Held-to-maturity securities, fair value of $271,634 and $340,259 (Note 3)	276,457		345,430
Total investment securities	Total investment securities	11,716,205		11,121,299		Total investment securities	12,043,824		11,121,299

Advances (Note 4)	Advances (Note 4)	43,957,361		44,262,750		Advances (Note 4)	44,322,221		44,262,750

Mortgage loans held for portfolio, net of allowance for credit losses of $6,630 and $6,378 (Note 5)		8,064,228		7,905,135
Mortgage loans held for portfolio, net of allowance for credit losses of $6,212 and $6,378 (Note 5)						Mortgage loans held for portfolio, net of allowance for credit losses of $6,212 and $6,378 (Note 5)	8,207,138		7,905,135

Accrued interest receivable	Accrued interest receivable	186,904		186,594		Accrued interest receivable	201,430		186,594

Derivative assets, net (Notes 6, 9)	Derivative assets, net (Notes 6, 9)	359,298		272,076		Derivative assets, net (Notes 6, 9)	331,896		272,076
Other assets	Other assets	81,908		79,172		Other assets	79,791		79,172

TOTAL ASSETS	TOTAL ASSETS	$	72,859,560	$	71,992,842	TOTAL ASSETS	$	73,136,292	$	71,992,842

LIABILITIES	LIABILITIES					LIABILITIES
Deposits (Note 7)	Deposits (Note 7)	$	539,157	$	711,061	Deposits (Note 7)	$	751,952	$	711,061

Consolidated obligations, net:	Consolidated obligations, net:					Consolidated obligations, net:
Discount notes (Note 8)	Discount notes (Note 8)	20,892,865		24,775,405		Discount notes (Note 8)	17,892,734		24,775,405
Bonds (Note 8)	Bonds (Note 8)	47,051,669		42,505,839		Bonds (Note 8)	50,098,873		42,505,839
Total consolidated obligations, net	Total consolidated obligations, net	67,944,534		67,281,244		Total consolidated obligations, net	67,991,607		67,281,244

Mandatorily redeemable capital stock (Note 10)	Mandatorily redeemable capital stock (Note 10)	263		280		Mandatorily redeemable capital stock (Note 10)	253		280
Accrued interest payable	Accrued interest payable	344,903		197,175		Accrued interest payable	357,213		197,175
Affordable Housing Program payable	Affordable Housing Program payable	68,801		53,635		Affordable Housing Program payable	72,735		53,635
Derivative liabilities, net (Notes 6, 9)	Derivative liabilities, net (Notes 6, 9)	188		2,359		Derivative liabilities, net (Notes 6, 9)	803		2,359
Other liabilities	Other liabilities	65,228		70,544		Other liabilities	70,111		70,544

TOTAL LIABILITIES	TOTAL LIABILITIES	68,963,074		68,316,298		TOTAL LIABILITIES	69,244,674		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)
		06/30/2023		12/31/2022			09/30/2023		12/31/2022

CAPITAL	CAPITAL					CAPITAL
Capital stock outstanding - putable:	Capital stock outstanding - putable:					Capital stock outstanding - putable:
Class A ($100 par value; 3,522 and 2,388 shares issued and outstanding) (Note 10)		$	352,169	$	238,777
Class B ($100 par value; 22,920 and 22,689 shares issued and outstanding) (Note 10)		2,292,080		2,268,932
Class A ($100 par value; 3,580 and 2,388 shares issued and outstanding) (Note 10)						Class A ($100 par value; 3,580 and 2,388 shares issued and outstanding) (Note 10)	$	357,963	$	238,777
Class B ($100 par value; 22,915 and 22,689 shares issued and outstanding) (Note 10)						Class B ($100 par value; 22,915 and 22,689 shares issued and outstanding) (Note 10)	2,291,488		2,268,932
Total capital stock	Total capital stock	2,644,249		2,507,709		Total capital stock	2,649,451		2,507,709

Retained earnings:	Retained earnings:					Retained earnings:
Unrestricted	Unrestricted	959,468		914,716		Unrestricted	976,588		914,716
Restricted	Restricted	376,598		338,389		Restricted	394,998		338,389
Total retained earnings	Total retained earnings	1,336,066		1,253,105		Total retained earnings	1,371,586		1,253,105

Accumulated other comprehensive income (loss) (Note 11)	Accumulated other comprehensive income (loss) (Note 11)	(83,829)		(84,270)		Accumulated other comprehensive income (loss) (Note 11)	(129,419)		(84,270)

TOTAL CAPITAL	TOTAL CAPITAL	3,896,486		3,676,544		TOTAL CAPITAL	3,891,618		3,676,544

TOTAL LIABILITIES AND CAPITAL	TOTAL LIABILITIES AND CAPITAL	$	72,859,560	$	71,992,842	TOTAL LIABILITIES AND CAPITAL	$	73,136,292	$	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				Six Months Ended					Three Months Ended				Nine Months Ended
		06/30/2023		06/30/2022		06/30/2023		06/30/2022			09/30/2023		09/30/2022		09/30/2023		09/30/2022
INTEREST INCOME:	INTEREST INCOME:									INTEREST INCOME:
Interest-bearing deposits	Interest-bearing deposits	$	36,687	$	2,367	$	67,384	$	2,743	Interest-bearing deposits	$	37,569	$	7,538	$	104,953	$	10,281
Securities purchased under agreements to resell	Securities purchased under agreements to resell	32,356		5,251		62,638		5,787		Securities purchased under agreements to resell	27,969		14,870		90,607		20,657
Federal funds sold	Federal funds sold	52,930		6,360		100,286		7,154		Federal funds sold	49,772		22,017		150,058		29,171
Trading securities	Trading securities	9,620		16,348		19,980		30,231		Trading securities	7,497		15,651		27,477		45,882
Available-for-sale securities	Available-for-sale securities	144,744		25,960		261,580		40,744		Available-for-sale securities	159,499		59,920		421,079		100,664
Held-to-maturity securities	Held-to-maturity securities	4,168		1,450		8,274		2,503		Held-to-maturity securities	3,866		2,559		12,140		5,062
Advances	Advances	613,730		77,874		1,150,324		115,755		Advances	634,899		211,173		1,785,223		326,928

Mortgage loans held for portfolio	Mortgage loans held for portfolio	62,836		56,383		123,644		110,937		Mortgage loans held for portfolio	66,871		58,045		190,515		168,982
Other	Other	191		295		951		492		Other	286		217		1,237		709
Total interest income	Total interest income	957,262		192,288		1,795,061		316,346		Total interest income	988,228		391,990		2,783,289		708,336

INTEREST EXPENSE:	INTEREST EXPENSE:									INTEREST EXPENSE:
Deposits	Deposits	7,180		997		14,749		1,123		Deposits	8,720		3,353		23,469		4,476
Consolidated obligations:	Consolidated obligations:									Consolidated obligations:
Discount notes	Discount notes	288,183		27,998		551,704		30,034		Discount notes	284,947		117,644		836,651		147,678
Bonds	Bonds	539,939		79,776		1,001,821		116,332		Bonds	579,352		175,920		1,581,173		292,252
Mandatorily redeemable capital stock	Mandatorily redeemable capital stock	5		1		8		2		Mandatorily redeemable capital stock	3		3		11		5
Other	Other	288		290		709		554		Other	298		275		1,007		829
Total interest expense	Total interest expense	835,595		109,062		1,568,991		148,045		Total interest expense	873,320		297,195		2,442,311		445,240

NET INTEREST INCOME	NET INTEREST INCOME	121,667		83,226		226,070		168,301		NET INTEREST INCOME	114,908		94,795		340,978		263,096
Provision (reversal) for credit losses on mortgage loans	Provision (reversal) for credit losses on mortgage loans	746		(108)		344		(415)		Provision (reversal) for credit losses on mortgage loans	(33)		115		311		(300)
NET INTEREST INCOME AFTER LOAN LOSS PROVISION (REVERSAL)	NET INTEREST INCOME AFTER LOAN LOSS PROVISION (REVERSAL)	120,921		83,334		225,726		168,716		NET INTEREST INCOME AFTER LOAN LOSS PROVISION (REVERSAL)	114,941		94,680		340,667		263,396

OTHER INCOME (LOSS):	OTHER INCOME (LOSS):									OTHER INCOME (LOSS):
Net gains (losses) on trading securities	Net gains (losses) on trading securities	(4,601)		(23,339)		4,383		(82,827)		Net gains (losses) on trading securities	2,216		(30,249)		6,599		(113,076)

Net gains (losses) on sale of held-to-maturity securities										Net gains (losses) on sale of held-to-maturity securities	—		(89)		—		(89)
Net gains (losses) on derivatives	Net gains (losses) on derivatives	20,294		12,814		19,769		59,377		Net gains (losses) on derivatives	5,232		26,198		25,001		85,575

Standby bond purchase agreement commitment fees	Standby bond purchase agreement commitment fees	689		651		1,370		1,276		Standby bond purchase agreement commitment fees	715		682		2,085		1,958
Letters of credit fees	Letters of credit fees	2,034		1,551		3,944		3,121		Letters of credit fees	2,141		1,625		6,085		4,746
Other	Other	609		671		1,172		1,892		Other	623		659		1,795		2,551
Total other income (loss)	Total other income (loss)	19,025		(7,652)		30,638		(17,161)		Total other income (loss)	10,927		(1,174)		41,565		(18,335)

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				Six Months Ended					Three Months Ended				Nine Months Ended
		06/30/2023		06/30/2022		06/30/2023		06/30/2022			09/30/2023		09/30/2022		09/30/2023		09/30/2022
OTHER EXPENSES:	OTHER EXPENSES:									OTHER EXPENSES:
Compensation and benefits	Compensation and benefits	$	11,769	$	10,750	$	23,476	$	21,308	Compensation and benefits	$	11,892	$	9,743	$	35,368	$	31,051
Other operating	Other operating	5,594		4,861		11,273		9,864		Other operating	6,988		5,112		18,261		14,976
Federal Housing Finance Agency	Federal Housing Finance Agency	1,531		1,327		3,062		2,740		Federal Housing Finance Agency	1,531		1,328		4,593		4,068
Office of Finance	Office of Finance	963		919		2,059		2,143		Office of Finance	1,195		1,080		3,254		3,223

Mortgage loans transaction service fees	Mortgage loans transaction service fees	1,586		1,522		3,150		3,043		Mortgage loans transaction service fees	1,618		1,523		4,768		4,566
Other	Other	503		346		1,071		505		Other	425		363		1,496		868
Total other expenses	Total other expenses	21,946		19,725		44,091		39,603		Total other expenses	23,649		19,149		67,740		58,752

INCOME BEFORE ASSESSMENTS	INCOME BEFORE ASSESSMENTS	118,000		55,957		212,273		111,952		INCOME BEFORE ASSESSMENTS	102,219		74,357		314,492		186,309

Affordable Housing Program	Affordable Housing Program	11,800		5,596		21,228		11,196		Affordable Housing Program	10,222		7,436		31,450		18,632

NET INCOME	NET INCOME	$	106,200	$	50,361	$	191,045	$	100,756	NET INCOME	$	91,997	$	66,921	$	283,042	$	167,677

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				Six Months Ended					Three Months Ended				Nine Months Ended
		06/30/2023		06/30/2022		06/30/2023		06/30/2022			09/30/2023		09/30/2022		09/30/2023		09/30/2022
Net income	Net income	$	106,200	$	50,361	$	191,045	$	100,756	Net income	$	91,997	$	66,921	$	283,042	$	167,677

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	(1,446)		(54,565)		441		(95,792)		Net unrealized gains (losses) on available-for-sale securities	(45,590)		(29,088)		(45,149)		(124,880)

Defined benefit pension plan	Defined benefit pension plan	—		62		—		124		Defined benefit pension plan	—		63		—		187
Total other comprehensive income (loss)	Total other comprehensive income (loss)	(1,446)		(54,503)		441		(95,668)		Total other comprehensive income (loss)	(45,590)		(29,025)		(45,149)		(124,693)

TOTAL COMPREHENSIVE INCOME (LOSS)	TOTAL COMPREHENSIVE INCOME (LOSS)	$	104,754	$	(4,142)	$	191,486	$	5,088	TOTAL COMPREHENSIVE INCOME (LOSS)	$	46,407	$	37,896	$	237,893	$	42,984

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 March 31, 2022		2,202	$	220,222	13,539	$	1,353,935	15,741	$	1,574,157	$	872,252	$	300,321	$	1,172,573	$	31,150	$	2,777,880
Balance at June 30, 2022																					Balance at June 30, 2022	2,716	$	271,621	15,494	$	1,549,395	18,210	$	1,821,016	$	886,710	$	310,393	$	1,197,103	$	(23,353)	$	2,994,766

Comprehensive income	Comprehensive income										40,289		10,072		50,361		(54,503)		(4,142)		Comprehensive income										53,537		13,384		66,921		(29,025)		37,896
Proceeds from issuance of capital stock	Proceeds from issuance of capital stock	20	2,019		9,144	914,414		9,164	916,433										916,433		Proceeds from issuance of capital stock	—	—		9,963	996,320		9,963	996,320										996,320
Repurchase/redemption of capital stock	Repurchase/redemption of capital stock	(3,297)	(329,700)		(703)	(70,329)		(4,000)	(400,029)										(400,029)		Repurchase/redemption of capital stock	(5,198)	(519,803)		(689)	(68,922)		(5,887)	(588,725)										(588,725)
Net reclassification of shares to mandatorily redeemable capital stock	Net reclassification of shares to mandatorily redeemable capital stock	(2,024)	(202,423)		(928)	(92,893)		(2,952)	(295,316)										(295,316)		Net reclassification of shares to mandatorily redeemable capital stock	(168)	(16,805)		(1,279)	(127,875)		(1,447)	(144,680)										(144,680)
Net transfer of shares between Class A and Class B	Net transfer of shares between Class A and Class B	5,815	581,503		(5,815)	(581,503)		—	—										—		Net transfer of shares between Class A and Class B	5,403	540,283		(5,403)	(540,283)		—	—										—

Dividends on capital stock (Class A - 1.0%, Class B - 6.5%):
Dividends on capital stock (Class A - 2.3%, Class B - 7.7%):																					Dividends on capital stock (Class A - 2.3%, Class B - 7.7%):
Cash payment	Cash payment										(60)				(60)				(60)		Cash payment										(66)				(66)				(66)
Stock issued	Stock issued				257	25,771		257	25,771		(25,771)				(25,771)				—		Stock issued				364	36,342		364	36,342		(36,342)				(36,342)				—
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 September 30, 2022																					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

		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 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
Balance at June 30, 2023																					Balance at June 30, 2023	3,522	$	352,169	22,920	$	2,292,080	26,442	$	2,644,249	$	959,468	$	376,598	$	1,336,066	$	(83,829)	$	3,896,486

Comprehensive income	Comprehensive income										84,960		21,240		106,200		(1,446)		104,754		Comprehensive income										73,597		18,400		91,997		(45,590)		46,407
Proceeds from issuance of capital stock	Proceeds from issuance of capital stock	20	1,987		6,384	638,376		6,404	640,363										640,363		Proceeds from issuance of capital stock	15	1,504		8,459	845,924		8,474	847,428										847,428
Repurchase/redemption of capital stock	Repurchase/redemption of capital stock	(3,674)	(367,414)		(644)	(64,341)		(4,318)	(431,755)										(431,755)		Repurchase/redemption of capital stock	(7,035)	(703,482)		(419)	(41,972)		(7,454)	(745,454)										(745,454)
Net reclassification of shares to mandatorily redeemable capital stock	Net reclassification of shares to mandatorily redeemable capital stock	(2,246)	(224,688)		(577)	(57,572)		(2,823)	(282,260)										(282,260)		Net reclassification of shares to mandatorily redeemable capital stock	(544)	(54,428)		(987)	(98,751)		(1,531)	(153,179)										(153,179)
Net transfer of shares between Class A and Class B	Net transfer of shares between Class A and Class B	6,498	649,860		(6,498)	(649,860)		—	—										—		Net transfer of shares between Class A and Class B	7,622	762,200		(7,622)	(762,200)		—	—										—

Dividends on capital stock (Class A - 4.0%, Class B - 9.0%):
Dividends on capital stock (Class A - 4.5%, Class B - 9.2%):																					Dividends on capital stock (Class A - 4.5%, Class B - 9.2%):
Cash payment	Cash payment										(63)				(63)				(63)		Cash payment										(70)				(70)				(70)
Stock issued	Stock issued				558	55,812		558	55,812		(55,812)				(55,812)				—		Stock issued				564	56,407		564	56,407		(56,407)				(56,407)				—
Balance at June 30, 2023		3,522	$	352,169	22,920	$	2,292,080	26,442	$	2,644,249	$	959,468	$	376,598	$	1,336,066	$	(83,829)	$	3,896,486
Balance at September 30, 2023																					Balance at September 30, 2023	3,580	$	357,963	22,915	$	2,291,488	26,495	$	2,649,451	$	976,588	$	394,998	$	1,371,586	$	(129,419)	$	3,891,618

1 Putable

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

Table of Contents


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

Balance at December 31, 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	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										80,605		20,151		100,756		(95,668)		5,088		Comprehensive income										134,142		33,535		167,677		(124,693)		42,984
Proceeds from issuance of capital stock	Proceeds from issuance of capital stock	20	2,019		15,531	1,553,123		15,551	1,555,142										1,555,142		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	Repurchase/redemption of capital stock	(6,904)	(690,404)		(1,308)	(130,849)		(8,212)	(821,253)										(821,253)		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	Net reclassification of shares to mandatorily redeemable capital stock	(2,628)	(262,820)		(1,955)	(195,543)		(4,583)	(458,363)										(458,363)		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	Net transfer of shares between Class A and Class B	9,886	988,636		(9,886)	(988,636)		—	—										—		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 - 0.6%, Class B - 6.1%):
Dividends on capital stock (Class A - 1.2%, Class B - 6.7%):																					Dividends on capital stock (Class A - 1.2%, Class B - 6.7%):
Cash payment	Cash payment										(114)				(114)				(114)		Cash payment										(180)				(180)				(180)
Stock issued	Stock issued				461	46,189		461	46,189		(46,189)				(46,189)				—		Stock issued				825	82,531		825	82,531		(82,531)				(82,531)				—
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 September 30, 2022																					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

		Capital Stock1									Retained Earnings						Accumulated		Total Capital			Capital Stock1									Retained Earnings						Accumulated		Total Capital
																	Other																				Other
		Class A			Class B			Total									Comprehensive					Class A			Class B			Total									Comprehensive
		Shares	Par Value		Shares	Par Value		Shares	Par Value		Unrestricted		Restricted		Total		Income (Loss)					Shares	Par Value		Shares	Par Value		Shares	Par Value		Unrestricted		Restricted		Total		Income (Loss)
Balance at December 31, 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	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										152,836		38,209		191,045		441		191,486		Comprehensive income										226,433		56,609		283,042		(45,149)		237,893
Proceeds from issuance of capital stock	Proceeds from issuance of capital stock	20	1,987		16,614	1,661,386		16,634	1,663,373										1,663,373		Proceeds from issuance of capital stock	35	3,491		25,073	2,507,310		25,108	2,510,801										2,510,801
Repurchase/redemption of capital stock	Repurchase/redemption of capital stock	(10,122)	(1,012,265)		(1,291)	(129,024)		(11,413)	(1,141,289)										(1,141,289)		Repurchase/redemption of capital stock	(17,157)	(1,715,747)		(1,710)	(170,996)		(18,867)	(1,886,743)										(1,886,743)
Net reclassification of shares to mandatorily redeemable capital stock	Net reclassification of shares to mandatorily redeemable capital stock	(3,025)	(302,540)		(1,911)	(190,957)		(4,936)	(493,497)										(493,497)		Net reclassification of shares to mandatorily redeemable capital stock	(3,569)	(356,968)		(2,898)	(289,708)		(6,467)	(646,676)										(646,676)
Net transfer of shares between Class A and Class B	Net transfer of shares between Class A and Class B	14,261	1,426,210		(14,261)	(1,426,210)		—	—										—		Net transfer of shares between Class A and Class B	21,883	2,188,410		(21,883)	(2,188,410)		—	—										—

Dividends on capital stock (Class A - 3.9%, Class B - 8.9%):
Dividends on capital stock (Class A - 4.1%, Class B - 9.0%):																					Dividends on capital stock (Class A - 4.1%, Class B - 9.0%):
Cash payment	Cash payment										(131)				(131)				(131)		Cash payment										(201)				(201)				(201)
Stock issued	Stock issued				1,080	107,953		1,080	107,953		(107,953)				(107,953)				—		Stock issued				1,644	164,360		1,644	164,360		(164,360)				(164,360)				—
Balance at June 30, 2023		3,522	$	352,169	22,920	$	2,292,080	26,442	$	2,644,249	$	959,468	$	376,598	$	1,336,066	$	(83,829)	$	3,896,486
Balance at September 30, 2023																					Balance at September 30, 2023	3,580	$	357,963	22,915	$	2,291,488	26,495	$	2,649,451	$	976,588	$	394,998	$	1,371,586	$	(129,419)	$	3,891,618

1 Putable

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 CASH FLOWS - Unaudited	STATEMENTS OF CASH FLOWS - Unaudited					STATEMENTS OF CASH FLOWS - Unaudited
(In thousands)	(In thousands)					(In thousands)

		Six Months Ended					Nine Months Ended
		06/30/2023		06/30/2022			09/30/2023		09/30/2022
CASH FLOWS FROM OPERATING ACTIVITIES:	CASH FLOWS FROM OPERATING ACTIVITIES:					CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	Net income	$	191,045	$	100,756	Net income	$	283,042	$	167,677
Adjustments to reconcile net income to net cash provided by (used in) operating activities:	Adjustments to reconcile net income to net cash provided by (used in) operating activities:					Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization:	Depreciation and amortization:					Depreciation and amortization:
Premiums and discounts on consolidated obligations, net	Premiums and discounts on consolidated obligations, net	90,352		19,826		Premiums and discounts on consolidated obligations, net	59,694		79,424
Concessions on consolidated obligations	Concessions on consolidated obligations	2,982		2,120		Concessions on consolidated obligations	4,355		3,537
Premiums and discounts on investments, net	Premiums and discounts on investments, net	(11,299)		2,336		Premiums and discounts on investments, net	(18,821)		1,279
Premiums, discounts and commitment fees on advances, net	Premiums, discounts and commitment fees on advances, net	(1,515)		(2,043)		Premiums, discounts and commitment fees on advances, net	(2,191)		(2,876)
Premiums, discounts and deferred loan costs on mortgage loans, net	Premiums, discounts and deferred loan costs on mortgage loans, net	6,402		11,934		Premiums, discounts and deferred loan costs on mortgage loans, net	9,930		16,484
Fair value adjustments on hedged assets or liabilities	Fair value adjustments on hedged assets or liabilities	(878)		809		Fair value adjustments on hedged assets or liabilities	(2,294)		1,126
Premises, software and equipment	Premises, software and equipment	1,470		1,639		Premises, software and equipment	2,288		2,409
Other	Other	—		124		Other	—		187
Provision (reversal) for credit losses on mortgage loans	Provision (reversal) for credit losses on mortgage loans	344		(415)		Provision (reversal) for credit losses on mortgage loans	311		(300)
Non-cash interest on mandatorily redeemable capital stock	Non-cash interest on mandatorily redeemable capital stock	7		2		Non-cash interest on mandatorily redeemable capital stock	10		3

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

Net realized (gains) losses on disposal of premises, software and equipment	Net realized (gains) losses on disposal of premises, software and equipment	—		16		Net realized (gains) losses on disposal of premises, software and equipment	9		16

Other adjustments, net	Other adjustments, net	21		(192)		Other adjustments, net	(7)		(207)
Net (gains) losses on trading securities	Net (gains) losses on trading securities	(4,383)		82,827		Net (gains) losses on trading securities	(6,599)		113,076
Net change in derivatives and hedging activities	Net change in derivatives and hedging activities	86,051		493,441		Net change in derivatives and hedging activities	271,936		706,873
(Increase) decrease in accrued interest receivable	(Increase) decrease in accrued interest receivable	(668)		(18,375)		(Increase) decrease in accrued interest receivable	(14,838)		(46,922)
Change in net accrued interest included in derivative assets	Change in net accrued interest included in derivative assets	(50,118)		(33,149)		Change in net accrued interest included in derivative assets	(103,031)		(36,850)
(Increase) decrease in other assets	(Increase) decrease in other assets	(250)		(260)		(Increase) decrease in other assets	1,339		949
Increase (decrease) in accrued interest payable	Increase (decrease) in accrued interest payable	147,395		31,482		Increase (decrease) in accrued interest payable	159,549		75,642
Change in net accrued interest included in derivative liabilities	Change in net accrued interest included in derivative liabilities	(3,473)		5,764		Change in net accrued interest included in derivative liabilities	(7,336)		72
Increase (decrease) in Affordable Housing Program liability	Increase (decrease) in Affordable Housing Program liability	15,166		3,577		Increase (decrease) in Affordable Housing Program liability	19,100		5,640
Increase (decrease) in other liabilities	Increase (decrease) in other liabilities	(5,309)		(3,120)		Increase (decrease) in other liabilities	(409)		(1,204)
Total adjustments	Total adjustments	272,297		598,343		Total adjustments	372,995		918,447
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES	NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES	463,342		699,099		NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES	656,037		1,086,124

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 CASH FLOWS - Unaudited	STATEMENTS OF CASH FLOWS - Unaudited					STATEMENTS OF CASH FLOWS - Unaudited
(In thousands)	(In thousands)					(In thousands)

		Six Months Ended					Nine Months Ended
		06/30/2023		06/30/2022			09/30/2023		09/30/2022
CASH FLOWS FROM INVESTING ACTIVITIES:	CASH FLOWS FROM INVESTING ACTIVITIES:					CASH FLOWS FROM INVESTING ACTIVITIES:
Net (increase) decrease in interest-bearing deposits	Net (increase) decrease in interest-bearing deposits	$	(54,177)	$	(409,606)	Net (increase) decrease in interest-bearing deposits	$	401,452	$	(474,438)
Net (increase) decrease in securities purchased under resale agreements	Net (increase) decrease in securities purchased under resale agreements	350,000		(750,000)		Net (increase) decrease in securities purchased under resale agreements	525,000		(1,750,000)
Net (increase) decrease in Federal funds sold	Net (increase) decrease in Federal funds sold	(650,000)		(2,000,000)		Net (increase) decrease in Federal funds sold	(650,000)		(1,345,000)

Proceeds from sale of trading securities						Proceeds from sale of trading securities	—		12,448
Proceeds from maturities of and principal repayments on trading securities	Proceeds from maturities of and principal repayments on trading securities	362,322		1,686,892		Proceeds from maturities of and principal repayments on trading securities	529,029		2,830,436
Purchases of trading securities	Purchases of trading securities	—		(1,790,000)		Purchases of trading securities	—		(2,790,000)

Proceeds from maturities of and principal repayments on available-for-sale securities	Proceeds from maturities of and principal repayments on available-for-sale securities	987,677		715,524		Proceeds from maturities of and principal repayments on available-for-sale securities	1,400,514		1,145,236
Purchases of available-for-sale securities	Purchases of available-for-sale securities	(1,978,587)		(1,573,277)		Purchases of available-for-sale securities	(3,015,515)		(2,515,529)

Proceeds from sale of held-to-maturity securities						Proceeds from sale of held-to-maturity securities	—		19,930
Proceeds from maturities of and principal repayments on held-to-maturity securities	Proceeds from maturities of and principal repayments on held-to-maturity securities	60,106		46,903		Proceeds from maturities of and principal repayments on held-to-maturity securities	68,945		65,164

Advances repaid	Advances repaid	420,013,035		285,513,050		Advances repaid	661,546,972		439,317,000
Advances originated	Advances originated	(419,767,039)		(291,848,144)		Advances originated	(661,737,932)		(451,622,000)
Principal collected on mortgage loans	Principal collected on mortgage loans	356,663		700,359		Principal collected on mortgage loans	575,207		970,568
Purchases of mortgage loans	Purchases of mortgage loans	(523,336)		(602,813)		Purchases of mortgage loans	(888,729)		(858,581)
Net proceeds from sale of foreclosed assets	Net proceeds from sale of foreclosed assets	148		691		Net proceeds from sale of foreclosed assets	251		687

Other investing activities	Other investing activities	—		1,875		Other investing activities	—		1,876
Net (increase) decrease in loans to other FHLBanks		—		(200,000)

Purchases of premises, software and equipment	Purchases of premises, software and equipment	(2,933)		(1,186)		Purchases of premises, software and equipment	(3,774)		(1,349)
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES	NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES	(846,121)		(10,509,732)		NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES	(1,248,580)		(16,993,552)

CASH FLOWS FROM FINANCING ACTIVITIES:	CASH FLOWS FROM FINANCING ACTIVITIES:					CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits	Net increase (decrease) in deposits	(180,628)		(136,788)		Net increase (decrease) in deposits	32,021		(223,283)
Net proceeds from issuance of consolidated obligations:	Net proceeds from issuance of consolidated obligations:					Net proceeds from issuance of consolidated obligations:
Discount notes	Discount notes	207,990,326		123,799,659		Discount notes	316,686,971		245,269,000
Bonds	Bonds	29,982,709		18,972,994		Bonds	39,927,572		31,195,723
Payments for maturing, retired and transferred consolidated obligations:	Payments for maturing, retired and transferred consolidated obligations:					Payments for maturing, retired and transferred consolidated obligations:
Discount notes	Discount notes	(211,986,290)		(110,298,433)		Discount notes	(323,660,623)		(229,225,000)
Bonds	Bonds	(24,463,213)		(23,287,700)		Bonds	(31,386,663)		(31,636,400)
Bonds transferred to other FHLBanks	Bonds transferred to other FHLBanks	(999,987)		—		Bonds transferred to other FHLBanks	(999,987)		—
Net increase (decrease) in overnight loans from other FHLBanks		—		500,000

Net interest payments received (paid) for financing derivatives	Net interest payments received (paid) for financing derivatives	10,656		(8,955)		Net interest payments received (paid) for financing derivatives	16,796		(10,507)
Proceeds from issuance of capital stock	Proceeds from issuance of capital stock	1,663,373		1,555,142		Proceeds from issuance of capital stock	2,510,801		2,551,462
Payments for repurchase/redemption of capital stock	Payments for repurchase/redemption of capital stock	(1,141,289)		(821,253)		Payments for repurchase/redemption of capital stock	(1,886,743)		(1,409,978)
Payments for repurchase of mandatorily redeemable capital stock	Payments for repurchase of mandatorily redeemable capital stock	(493,521)		(458,410)		Payments for repurchase of mandatorily redeemable capital stock	(646,713)		(603,336)
Cash dividends paid	Cash dividends paid	(131)		(114)		Cash dividends paid	(201)		(180)

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES	NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES	382,005		9,816,142		NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES	593,231		15,907,501
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	(774)		5,509		NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	688		73
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	25,964		25,841		CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	25,964		25,841
CASH AND CASH EQUIVALENTS AT END OF PERIOD	CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	25,190	$	31,350	CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	26,652	$	25,914

Supplemental disclosures:	Supplemental disclosures:					Supplemental disclosures:
Interest paid	Interest paid	$	506,095	$	112,450	Interest paid	$	827,474	$	299,832
Affordable Housing Program payments	Affordable Housing Program payments	$	6,111	$	7,739	Affordable Housing Program payments	$	12,624	$	13,131
Net transfers of mortgage loans to other assets	Net transfers of mortgage loans to other assets	$	707	$	67	Net transfers of mortgage loans to other assets	$	786	$	213

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

~~June~~September 30, 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, 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 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

Disclosure Improvements (Accounting Standards Update (ASU) 2023-06). In October 2023, the Financial Accounting Standards Board (FASB) issued amendments to modify the disclosure or presentation requirements in response to the SEC Release No. 33-10532, Disclosure Update and Simplification, issued August 17, 2018. The amendments represent clarifications or technical corrections of the current requirements to incorporate several SEC disclosure requirements into US GAAP. The ASU adds interim and annual disclosure requirements to a variety of topics, including those focusing on accounting changes, earnings per share, debt and repurchase agreements. For all entities subject to the SEC existing disclosure requirements, each amendment shall become effective on the date that the SEC’s removal of the related guidance from Regulation S-X or Regulation S-K becomes effective. FHLBank will adopt the guidance as it becomes effective with all pending content expected to transition by June 30, 2027. The adoption of this guidance is not expected to have a material effect on FHLBank’s current disclosures.

Troubled Debt Restructurings and Vintage Disclosures ~~(Accounting Standards Update (ASU)~~(ASU 2022-02). In March 2022, the ~~Financial Accounting Standards Board (FASB)~~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. FHLBank adopted this guidance as of January 1, 2023. While this guidance is intended to enhance disclosures, the adoption of this guidance did not have a material effect on FHLBank’s financial condition, results of operations, cash flows, ~~and~~or 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. FHLBank adopted this guidance 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, or disclosures given current strategies.

Table of Contents

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. This guidance was effective upon issuance and through December 31, 2024, as amended, except for certain optional expedients elected for hedging relationships, which should be retained for the duration of the hedge term. As of June 30, 2023, FHLBank ~~has~~ transitioned all outstanding London Interbank Offered Rate (LIBOR) settings to convert to reference the secured overnight financing rate (SOFR), either to start or to fall back, beginning July 3, 2023 or at the beginning of the next reset period. As a result of finalizing transition, FHLBank adopted certain practical expedients in ASC 848 for qualifying contract modifications related to reference rate reform, including with respect to qualifying hedge relationships. Application of this guidance did not have a material impact on the FHLBank’s financial condition, results of operations, cash flows, or disclosures. For qualifying hedge relationships, FHLBank does not expect that the practical expedients elected for the duration of the hedge term will have a material impact on the financial statements. As all of FHLBank’s qualifying contracts ~~have~~ transitioned at June 30, 2023, FHLBank does not expect to further elect provisions or expedients of this guidance through its ending date of December 31, ~~2024.~~2024 because FHLBank has no outstanding LIBOR exposure.

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 ~~June~~September 30, 2023, approximately 2423 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 ~~June~~September 30, 2023 and December 31, 2022, all investments in interest-bearing deposits and Federal funds sold were repaid or expected to be repaid according to the contractual terms. No allowance for credit losses was recorded for these assets as of ~~June~~September 30, 2023 and December 31, 2022. Carrying values of interest-bearing deposits and Federal funds sold exclude accrued interest receivable of ~~$3,165,000~~$3,292,000 and ~~$622,000,~~$1,306,000, respectively, as of ~~June~~September 30, 2023, and $2,278,000 and $903,000, respectively, as of December 31, 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 ~~June~~September 30, 2023 and December 31, 2022. The carrying value of securities purchased under agreements to resell excludes accrued interest receivable of ~~$283,000~~$541,000 and $565,000 as of ~~June~~September 30, 2023 and December 31, 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.

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:

▪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).

~~Table of Contents~~

Trading Securities: Trading securities by major security type as of ~~June~~September 30, 2023 and December 31, 2022 are summarized in Table 3.1 (in thousands):

Table 3.1


		Fair Value					Fair Value
		06/30/2023		12/31/2022			09/30/2023		12/31/2022
Non-mortgage-backed securities:	Non-mortgage-backed securities:					Non-mortgage-backed securities:

U.S. Treasury obligations	U.S. Treasury obligations	149,406		396,233		U.S. Treasury obligations	$	—	$	396,233
GSE debentures	GSE debentures	284,623		388,955		GSE debentures	285,509		388,955
Non-mortgage-backed securities	Non-mortgage-backed securities	434,029		785,188		Non-mortgage-backed securities	285,509		785,188
Mortgage-backed securities:	Mortgage-backed securities:					Mortgage-backed securities:

GSE MBS	GSE MBS	629,485		636,265		GSE MBS	613,514		636,265
Mortgage-backed securities	Mortgage-backed securities	629,485		636,265		Mortgage-backed securities	613,514		636,265
TOTAL	TOTAL	$	1,063,514	$	1,421,453	TOTAL	$	899,023	$	1,421,453

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

Table 3.2

Three Months Ended Six Months Ended
06/30/2023 06/30/2022 06/30/2023 06/30/2022
Net gains (losses) on trading securities held as of June 30, 2023 $ (5,744) $ (16,667) $ 1,848 $ (61,074)
Net gains (losses) on trading securities sold or matured prior to June 30, 2023 1,143 (6,672) 2,535 (21,753)
NET GAINS (LOSSES) ON TRADING SECURITIES $ (4,601) $ (23,339) $ 4,383 $ (82,827)



	Three Months Ended				Nine Months Ended
	09/30/2023		09/30/2022		09/30/2023		09/30/2022
Net gains (losses) on trading securities held as of September 30, 2023	$	717	$	(25,177)	$	1,354	$	(79,681)
Net gains (losses) on trading securities sold or matured prior to September 30, 2023	1,499		(5,072)		5,245		(33,395)
NET GAINS (LOSSES) ON TRADING SECURITIES	$	2,216	$	(30,249)	$	6,599	$	(113,076)

Table of Contents

Available-for-sale Securities: Available-for-sale securities by major security type as of ~~June~~September 30, 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 ~~$28,352,000~~$36,238,000 as of ~~June~~September 30, 2023.

Table 3.3


		06/30/2023									09/30/2023
		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	$	2,951,555	$	332	$	(26,711)	$	2,925,176	U.S. Treasury obligations	$	2,925,749	$	46	$	(35,408)	$	2,890,387
Non-mortgage-backed securities	Non-mortgage-backed securities	2,951,555		332		(26,711)		2,925,176		Non-mortgage-backed securities	2,925,749		46		(35,408)		2,890,387
Mortgage-backed securities:	Mortgage-backed securities:									Mortgage-backed securities:
U.S. obligation MBS	U.S. obligation MBS	116,098		—		(1,352)		114,746		U.S. obligation MBS	113,689		—		(2,343)		111,346
GSE MBS	GSE MBS	7,383,727		27,268		(83,539)		7,327,456		GSE MBS	7,958,498		26,305		(118,192)		7,866,611
Mortgage-backed securities	Mortgage-backed securities	7,499,825		27,268		(84,891)		7,442,202		Mortgage-backed securities	8,072,187		26,305		(120,535)		7,977,957
TOTAL	TOTAL	$	10,451,380	$	27,600	$	(111,602)	$	10,367,378	TOTAL	$	10,997,936	$	26,351	$	(155,943)	$	10,868,344

~~Table of Contents~~

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

Table 3.4


	12/31/2022
	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Fair Value
Non-mortgage-backed securities:
U.S. Treasury obligations	$	3,332,244	$	1,493	$	(18,381)	$	3,315,356
Non-mortgage-backed securities	3,332,244		1,493		(18,381)		3,315,356
Mortgage-backed securities:
U.S. obligation MBS	40,881		—		(842)		40,039
GSE MBS	6,065,734		26,457		(93,170)		5,999,021
Mortgage-backed securities	6,106,615		26,457		(94,012)		6,039,060
TOTAL	$	9,438,859	$	27,950	$	(112,393)	$	9,354,416

Table of Contents

Table 3.5 summarizes the available-for-sale securities with gross unrealized losses as of ~~June~~September 30, 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


		06/30/2023													09/30/2023
		Less Than 12 Months				12 Months or More				Total					Less Than 12 Months				12 Months or More				Total
		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross 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	$	1,428,755	$	(10,020)	$	948,999	$	(16,691)	$	2,377,754	$	(26,711)	U.S. Treasury obligations	$	1,254,983	$	(9,465)	$	1,385,882	$	(25,943)	$	2,640,865	$	(35,408)
Non-mortgage-backed securities	Non-mortgage-backed securities	1,428,755		(10,020)		948,999		(16,691)		2,377,754		(26,711)		Non-mortgage-backed securities	1,254,983		(9,465)		1,385,882		(25,943)		2,640,865		(35,408)
Mortgage-backed securities:	Mortgage-backed securities:													Mortgage-backed securities:
U.S. obligation MBS	U.S. obligation MBS	76,816		(313)		37,930		(1,039)		114,746		(1,352)		U.S. obligation MBS	74,703		(1,137)		36,643		(1,206)		111,346		(2,343)
GSE MBS	GSE MBS	2,506,727		(10,078)		2,701,745		(73,461)		5,208,472		(83,539)		GSE MBS	2,831,073		(30,513)		3,149,749		(87,679)		5,980,822		(118,192)
Mortgage-backed securities	Mortgage-backed securities	2,583,543		(10,391)		2,739,675		(74,500)		5,323,218		(84,891)		Mortgage-backed securities	2,905,776		(31,650)		3,186,392		(88,885)		6,092,168		(120,535)
TOTAL	TOTAL	$	4,012,298	$	(20,411)	$	3,688,674	$	(91,191)	$	7,700,972	$	(111,602)	TOTAL	$	4,160,759	$	(41,115)	$	4,572,274	$	(114,828)	$	8,733,033	$	(155,943)

1819

Table of Contents

Table 3.6 summarizes the available-for-sale securities with gross unrealized losses as of December 31, 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


	12/31/2022
	Less Than 12 Months				12 Months or More				Total
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
Non-mortgage-backed securities:
U.S. Treasury obligations	$	1,540,880	$	(6,384)	$	532,968	$	(11,997)	$	2,073,848	$	(18,381)
Non-mortgage-backed securities	1,540,880		(6,384)		532,968		(11,997)		2,073,848		(18,381)
Mortgage-backed securities:
U.S. obligation MBS	35,008		(766)		5,032		(76)		40,040		(842)
GSE MBS	3,743,089		(56,545)		881,963		(36,625)		4,625,052		(93,170)
Mortgage-backed securities	3,778,097		(57,311)		886,995		(36,701)		4,665,092		(94,012)
TOTAL	$	5,318,977	$	(63,695)	$	1,419,963	$	(48,698)	$	6,738,940	$	(112,393)

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


		06/30/2023				12/31/2022					09/30/2023				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	$	547,090	$	547,421	$	1,240,015	$	1,241,508	Due in one year or less	$	249,477	$	249,522	$	1,240,015	$	1,241,508
Due after one year through five years	Due after one year through five years	2,187,783		2,161,393		1,876,301		1,858,697		Due after one year through five years	2,676,272		2,640,865		1,876,301		1,858,697
Due after five years through ten years	Due after five years through ten years	216,682		216,362		215,928		215,151		Due after five years through ten years	—		—		215,928		215,151
Due after ten years	Due after ten years	—		—		—		—		Due after ten years	—		—		—		—
Non-mortgage-backed securities	Non-mortgage-backed securities	2,951,555		2,925,176		3,332,244		3,315,356		Non-mortgage-backed securities	2,925,749		2,890,387		3,332,244		3,315,356
Mortgage-backed securities	Mortgage-backed securities	7,499,825		7,442,202		6,106,615		6,039,060		Mortgage-backed securities	8,072,187		7,977,957		6,106,615		6,039,060
TOTAL	TOTAL	$	10,451,380	$	10,367,378	$	9,438,859	$	9,354,416	TOTAL	$	10,997,936	$	10,868,344	$	9,438,859	$	9,354,416

1920

Table of Contents

Held-to-maturity Securities: Held-to-maturity securities by major security type as of ~~June~~September 30, 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 ~~$628,000~~$631,000 as of ~~June~~September 30, 2023.

Table 3.8


		06/30/2023									09/30/2023
		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	$	39,515	$	—	$	(757)	$	38,758	State or local housing agency obligations	$	39,515	$	—	$	(745)	$	38,770
Non-mortgage-backed securities	Non-mortgage-backed securities	39,515		—		(757)		38,758		Non-mortgage-backed securities	39,515		—		(745)		38,770
Mortgage-backed securities:	Mortgage-backed securities:									Mortgage-backed securities:

GSE MBS	GSE MBS	245,798		505		(3,279)		243,024		GSE MBS	236,942		119		(4,197)		232,864
Mortgage-backed securities	Mortgage-backed securities	245,798		505		(3,279)		243,024		Mortgage-backed securities	236,942		119		(4,197)		232,864
TOTAL	TOTAL	$	285,313	$	505	$	(4,036)	$	281,782	TOTAL	$	276,457	$	119	$	(4,942)	$	271,634

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

Table 3.9


	12/31/2022
	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Fair Value
Non-mortgage-backed securities:
State or local housing agency obligations	$	70,505	$	—	$	(1,737)	$	68,768
Non-mortgage-backed securities	70,505		—		(1,737)		68,768
Mortgage-backed securities:

GSE MBS	274,925		695		(4,129)		271,491
Mortgage-backed securities	274,925		695		(4,129)		271,491
TOTAL	$	345,430	$	695	$	(5,866)	$	340,259

2021

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


		06/30/2023		12/31/2022				09/30/2023				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	$	—	$	—	$	—		$	—	Due in one year or less	$	—	$	—	$	—	$	—
Due after one year through five years	Due after one year through five years	—		—		—			—		Due after one year through five years	—		—		—		—
Due after five years through ten years	Due after five years through ten years	39,515		38,758		40,505			40,036		Due after five years through ten years	39,515		38,770		40,505		40,036
Due after ten years	Due after ten years	—		—		30,000			28,732		Due after ten years	—		—		30,000		28,732
Non-mortgage-backed securities	Non-mortgage-backed securities	39,515		38,758		70,505			68,768		Non-mortgage-backed securities	39,515		38,770		70,505		68,768
Mortgage-backed securities	Mortgage-backed securities	245,798		243,024		274,925			271,491		Mortgage-backed securities	236,942		232,864		274,925		271,491
TOTAL	TOTAL	$	285,313	$	281,782	$	345,430		$	340,259	TOTAL	$	276,457	$	271,634	$	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 ~~June~~September 30, 2023 and 2022, 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 issuers’ obligation to pay principal and interest on those securities will be honored, taking into account their status as GSEs.

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NOTE 4 – ADVANCES

General Terms: FHLBank offers fixed and variable rate advance products with different maturities, interest rates, payment characteristics and optionality. As of both ~~June~~September 30, 2023 and December 31, 2022, FHLBank had advances outstanding at interest rates ranging from 0.40 percent to 7.20 percent and 0.29 percent to 7.20 ~~percent.~~percent, respectively. Table 4.1 presents advances summarized by redemption term as of ~~June~~September 30, 2023 and December 31, 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 ~~$108,200,000~~$113,328,000 and $108,891,000 as of ~~June~~September 30, 2023 and December 31, 2022, respectively.

Table 4.1


		06/30/2023				12/31/2022					09/30/2023				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	$	27,927,723	5.03	%	$	31,796,396	4.31	%	Due in one year or less	$	28,428,307	5.27	%	$	31,796,396	4.31	%
Due after one year through two years	Due after one year through two years	4,627,252		3.99		3,147,406		3.24		Due after one year through two years	4,565,464		4.21		3,147,406		3.24
Due after two years through three years	Due after two years through three years	3,296,787		3.69		2,784,200		3.30		Due after two years through three years	3,640,809		3.72		2,784,200		3.30
Due after three years through four years	Due after three years through four years	3,312,930		3.92		2,625,365		3.64		Due after three years through four years	3,100,931		4.06		2,625,365		3.64
Due after four years through five years	Due after four years through five years	3,192,497		4.02		1,894,308		3.52		Due after four years through five years	3,153,385		3.98		1,894,308		3.52
Thereafter	Thereafter	2,051,529		3.06		2,407,040		3.07		Thereafter	1,956,778		3.04		2,407,040		3.07
Total par value	Total par value	44,408,718		4.58	%	44,654,715		4.03	%	Total par value	44,845,674		4.77	%	44,654,715		4.03	%
Discounts	Discounts	(11,626)				(13,141)				Discounts	(10,950)				(13,141)
Hedging adjustments	Hedging adjustments	(439,731)				(378,824)				Hedging adjustments	(512,503)				(378,824)
TOTAL	TOTAL	$	43,957,361			$	44,262,750			TOTAL	$	44,322,221			$	44,262,750

FHLBank offers advances that may be prepaid without prepayment or termination fees on predetermined exercise dates (call dates) prior to the stated advance 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). FHLBank also offers fixed rate advances that include a put option held by FHLBank. On the date FHLBank exercises its put option, the borrower has the option to prepay the advance in full without a fee or roll into another advance product. FHLBank would generally exercise its put option when interest rates increase. 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, ~~$208,400,000~~$155,900,000 remain outstanding at ~~June~~September 30, 2023.

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Table 4.2 presents advances summarized by redemption term or next call date and by redemption term or next put or conversion date as of ~~June~~September 30, 2023 and December 31, 2022 (in thousands):

Table 4.2


		Redemption Term or Next Call Date				Redemption Term or Next Put or Conversion Date					Redemption Term or Next Call Date				Redemption Term or Next Put or Conversion Date
Redemption Term	Redemption Term	06/30/2023		12/31/2022		06/30/2023		12/31/2022		Redemption Term	09/30/2023		12/31/2022		09/30/2023		12/31/2022
Due in one year or less	Due in one year or less	$	29,226,248	$	33,289,458	$	29,269,223	$	31,992,646	Due in one year or less	$	29,643,598	$	33,289,458	$	29,874,107	$	31,992,646
Due after one year through two years	Due after one year through two years	4,087,768		2,709,465		4,798,152		3,240,306		Due after one year through two years	4,118,259		2,709,465		4,776,864		3,240,306
Due after two years through three years	Due after two years through three years	3,296,974		2,552,756		3,357,787		2,801,700		Due after two years through three years	3,524,932		2,552,756		3,730,809		2,801,700
Due after three years through four years	Due after three years through four years	3,000,421		2,403,502		3,012,930		2,625,365		Due after three years through four years	2,738,648		2,403,502		2,792,431		2,625,365
Due after four years through five years	Due after four years through five years	2,910,812		1,568,168		2,227,497		1,884,308		Due after four years through five years	2,993,229		1,568,168		2,063,885		1,884,308
Thereafter	Thereafter	1,886,495		2,131,366		1,743,129		2,110,390		Thereafter	1,827,008		2,131,366		1,607,578		2,110,390
TOTAL PAR VALUE	TOTAL PAR VALUE	$	44,408,718	$	44,654,715	$	44,408,718	$	44,654,715	TOTAL PAR VALUE	$	44,845,674	$	44,654,715	$	44,845,674	$	44,654,715

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

Table 4.3


Redemption Term	Redemption Term	06/30/2023		12/31/2022		Redemption Term	09/30/2023		12/31/2022
Fixed rate:	Fixed rate:					Fixed rate:
Due in one year or less	Due in one year or less	$	27,171,623	$	31,307,096	Due in one year or less	$	27,506,807	$	31,307,096
Due after one year through three years	Due after one year through three years	6,015,289		3,984,356		Due after one year through three years	6,221,523		3,984,356
Due after three years through five years	Due after three years through five years	5,121,817		3,050,314		Due after three years through five years	5,070,706		3,050,314
Due after five years through fifteen years	Due after five years through fifteen years	1,896,877		2,050,428		Due after five years through fifteen years	1,831,206		2,050,428
Due after fifteen years	Due after fifteen years	30,950		35,010		Due after fifteen years	32,770		35,010
Total fixed rate	Total fixed rate	40,236,556		40,427,204		Total fixed rate	40,663,012		40,427,204
Variable rate:	Variable rate:					Variable rate:
Due in one year or less	Due in one year or less	756,100		489,300		Due in one year or less	921,500		489,300
Due after one year through three years	Due after one year through three years	1,908,750		1,947,250		Due after one year through three years	1,984,750		1,947,250
Due after three years through five years	Due after three years through five years	1,383,610		1,469,360		Due after three years through five years	1,183,610		1,469,360
Due after five years through fifteen years	Due after five years through fifteen years	121,202		319,101		Due after five years through fifteen years	90,302		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	4,172,162		4,227,511		Total variable rate	4,182,662		4,227,511
TOTAL PAR VALUE	TOTAL PAR VALUE	$	44,408,718	$	44,654,715	TOTAL PAR VALUE	$	44,845,674	$	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 ~~June~~September 30, 2023 and December 31, 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 ~~June~~September 30, 2023 and December 31, 2022, no advances were past due, on nonaccrual status, or considered impaired.

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

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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.

Mortgage Loans Held for Portfolio: Table 5.1 presents information as of ~~June~~September 30, 2023 and December 31, 2022 on mortgage loans held for portfolio (in thousands). Carrying amounts exclude accrued interest receivable of ~~$40,281,000~~$42,992,000 and $38,358,000 as of ~~June~~September 30, 2023 and December 31, 2022, respectively.

Table 5.1


		06/30/2023		12/31/2022			09/30/2023		12/31/2022
Real estate:	Real estate:					Real estate:
Fixed rate, medium-term1, single-family mortgages	Fixed rate, medium-term1, single-family mortgages	$	1,113,402	$	1,189,428	Fixed rate, medium-term1, single-family mortgages	$	1,080,329	$	1,189,428
Fixed rate, long-term, single-family mortgages	Fixed rate, long-term, single-family mortgages	6,879,375		6,640,750		Fixed rate, long-term, single-family mortgages	7,058,115		6,640,750
Total unpaid principal balance	Total unpaid principal balance	7,992,777		7,830,178		Total unpaid principal balance	8,138,444		7,830,178
Premiums	Premiums	95,081		97,210		Premiums	94,040		97,210
Discounts	Discounts	(3,236)		(2,230)		Discounts	(4,981)		(2,230)
Deferred loan costs, net	Deferred loan costs, net	42		46		Deferred loan costs, net	41		46

Hedging adjustments	Hedging adjustments	(13,806)		(13,691)		Hedging adjustments	(14,194)		(13,691)
Total before allowance for credit losses on mortgage loans	Total before allowance for credit losses on mortgage loans	8,070,858		7,911,513		Total before allowance for credit losses on mortgage loans	8,213,350		7,911,513
Allowance for credit losses on mortgage loans	Allowance for credit losses on mortgage loans	(6,630)		(6,378)		Allowance for credit losses on mortgage loans	(6,212)		(6,378)
MORTGAGE LOANS HELD FOR PORTFOLIO, NET	MORTGAGE LOANS HELD FOR PORTFOLIO, NET	$	8,064,228	$	7,905,135	MORTGAGE LOANS HELD FOR PORTFOLIO, NET	$	8,207,138	$	7,905,135

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

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

Table 5.2


		06/30/2023		12/31/2022			09/30/2023		12/31/2022
Conventional loans	Conventional loans	$	7,653,958	$	7,486,591	Conventional loans	$	7,804,699	$	7,486,591
Government-guaranteed or -insured loans	Government-guaranteed or -insured loans	338,819		343,587		Government-guaranteed or -insured loans	333,745		343,587
TOTAL UNPAID PRINCIPAL BALANCE	TOTAL UNPAID PRINCIPAL BALANCE	$	7,992,777	$	7,830,178	TOTAL UNPAID PRINCIPAL BALANCE	$	8,138,444	$	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.

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

Table 5.3


		06/30/2023																						09/30/2023
		Conventional Loans															Government Loans			Total				Conventional Loans															Government Loans			Total
		Origination Year												Subtotal										Origination Year												Subtotal
		Prior to 2019		2019		2020		2021		2022		2023												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	$	17,357	$	7,170	$	3,258	$	5,142	$	3,087	$	415	$	36,429		$	10,980		$	47,409		Past due 30-59 days delinquent	$	18,870	$	7,262	$	3,715	$	7,197	$	3,702	$	2,035	$	42,781		$	8,996		$	51,777
Past due 60-89 days delinquent	Past due 60-89 days delinquent	6,609		2,201		1,075		1,912		1,720		—		13,517			2,369			15,886			Past due 60-89 days delinquent	4,476		1,979		1,115		280		2,391		—		10,241			2,717			12,958
Past due 90 days or more delinquent	Past due 90 days or more delinquent	6,708		3,357		974		143		738		—		11,920			2,148			14,068			Past due 90 days or more delinquent	7,899		4,485		1,214		816		203		—		14,617			3,157			17,774
Total past due	Total past due	30,674		12,728		5,307		7,197		5,545		415		61,866			15,497			77,363			Total past due	31,245		13,726		6,044		8,293		6,296		2,035		67,639			14,870			82,509
Total current loans	Total current loans	1,899,884		1,030,242		1,580,898		1,791,359		876,069		487,402		7,665,854			327,641			7,993,495			Total current loans	1,828,719		998,957		1,540,115		1,752,186		856,909		830,859		7,807,745			323,096			8,130,841
Total mortgage loans	Total mortgage loans	$	1,930,558	$	1,042,970	$	1,586,205	$	1,798,556	$	881,614	$	487,817	$	7,727,720		$	343,138		$	8,070,858		Total mortgage loans	$	1,859,964	$	1,012,683	$	1,546,159	$	1,760,479	$	863,205	$	832,894	$	7,875,384		$	337,966		$	8,213,350

Other delinquency statistics:	Other delinquency statistics:																						Other delinquency statistics:
In process of foreclosure2	In process of foreclosure2													$	5,481		$	893		$	6,374		In process of foreclosure2													$	4,598		$	637		$	5,235
Serious delinquency rate3	Serious delinquency rate3													0.2		%	0.6		%	0.2		%	Serious delinquency rate3													0.2		%	0.9		%	0.2		%
Past due 90 days or more and still accruing interest	Past due 90 days or more and still accruing interest													$	—		$	2,148		$	2,148		Past due 90 days or more and still accruing interest													$	—		$	3,157		$	3,157
Loans on nonaccrual status4	Loans on nonaccrual status4													$	18,391		$	—		$	18,391		Loans on nonaccrual status4													$	18,332		$	—		$	18,332

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 ~~$6,842,000~~$9,818,000 of conventional mortgage loans on nonaccrual status that did not have an associated allowance for credit losses because either these loans were previously charged off to the expected recoverable value or the fair value of the underlying collateral was greater than the amortized cost of the loans.

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

Table 5.4


	12/31/2022
	Conventional Loans															Government Loans			Total
	Origination Year												Subtotal
	Prior to 2018		2018		2019		2020		2021		2022
Amortized Cost:1
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	3,586		1,125		1,023		674		920		698		8,026			1,460			9,486
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	28,525		9,024		15,215		6,447		9,968		5,135		74,314			16,010			90,324
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	$	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:
In process of foreclosure2													$	8,431		$	920		$	9,351
Serious delinquency rate3													0.3		%	1.2		%	0.3		%
Past due 90 days or more and still accruing interest													$	—		$	4,169		$	4,169
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 $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 previously charged off to the expected recoverable value or the fair value of the underlying collateral was greater than the amortized cost of the loans.

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 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 third-party projected cash flow model to estimate expected credit losses over the life of the loans. This model relies on a number of inputs, such as both current and forecasted property values and interest rates as well as historical borrower 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.

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FHLBank established an allowance for credit losses on its conventional mortgage loans held for portfolio. Table 5.5 presents a roll-forward of the allowance for credit losses on mortgage loans for the three and ~~six~~nine months ended ~~June~~September 30, 2023 and 2022.

Table 5.5


		Three Months Ended				Six Months Ended					Three Months Ended				Nine Months Ended
Conventional Loans	Conventional Loans	06/30/2023		06/30/2022		06/30/2023		06/30/2022		Conventional Loans	09/30/2023		09/30/2022		09/30/2023		09/30/2022
Balance, beginning of the period	Balance, beginning of the period	$	5,836	$	5,038	$	6,378	$	5,317	Balance, beginning of the period	$	6,630	$	5,202	$	6,378	$	5,317

Net (charge-offs) recoveries	Net (charge-offs) recoveries	48		272		(92)		300		Net (charge-offs) recoveries	(385)		51		(477)		351
Provision (reversal) for credit losses	Provision (reversal) for credit losses	746		(108)		344		(415)		Provision (reversal) for credit losses	(33)		115		311		(300)
Balance, end of the period	Balance, end of the period	$	6,630	$	5,202	$	6,630	$	5,202	Balance, end of the period	$	6,212	$	5,368	$	6,212	$	5,368

Government-Guaranteed or -Insured Mortgage Loans: FHLBank invests in fixed rate mortgage loans that are insured or guaranteed by the Federal Housing Administration, the Department of Veterans Affairs, the Rural Housing Service of the Department of Agriculture, and/or the Department of Housing and Urban Development. The servicer provides and maintains insurance or a guarantee from the applicable government agency. The servicer is responsible for compliance with all government agency requirements and for obtaining the benefit of the applicable guarantee or insurance with respect to defaulted government-guaranteed or -insured mortgage loans. 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 ~~June~~September 30, 2023 and December 31, 2022. Furthermore, none of these mortgage loans 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 ~~June~~September 30, 2023 and December 31, 2022 (in thousands). Total derivative assets and liabilities include the effect of netting adjustments and cash collateral.

Table 6.1


		06/30/2023						12/31/2022							09/30/2023						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	$	47,599,895	$	152,476	$	576,766	$	34,967,420	$	134,299	$	609,555	Interest rate swaps	$	44,925,032	$	213,040	$	575,808	$	34,967,420	$	134,299	$	609,555
Total derivatives designated as hedging relationships	Total derivatives designated as hedging relationships	47,599,895		152,476		576,766		34,967,420		134,299		609,555		Total derivatives designated as hedging relationships	44,925,032		213,040		575,808		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	10,959,346		36,522		253		14,149,543		34,187		1,257		Interest rate swaps	4,871,030		32,866		593		14,149,543		34,187		1,257
Interest rate caps/floors	Interest rate caps/floors	304,000		1,869		—		304,000		1,727		—		Interest rate caps/floors	304,000		1,811		—		304,000		1,727		—
Mortgage delivery commitments	Mortgage delivery commitments	47,416		9		188		33,882		24		173		Mortgage delivery commitments	48,915		27		135		33,882		24		173

Total derivatives not designated as hedging instruments	Total derivatives not designated as hedging instruments	11,310,762		38,400		441		14,487,425		35,938		1,430		Total derivatives not designated as hedging instruments	5,223,945		34,704		728		14,487,425		35,938		1,430
TOTAL	TOTAL	$	58,910,657	190,876		577,207		$	49,454,845	170,237		610,985		TOTAL	$	50,148,977	247,744		576,536		$	49,454,845	170,237		610,985
Netting adjustments and cash collateral1	Netting adjustments and cash collateral1			168,422		(577,019)				101,839		(608,626)		Netting adjustments and cash collateral1			84,152		(575,733)				101,839		(608,626)
DERIVATIVE ASSETS AND LIABILITIES	DERIVATIVE ASSETS AND LIABILITIES			$	359,298	$	188			$	272,076	$	2,359	DERIVATIVE ASSETS AND LIABILITIES			$	331,896	$	803			$	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 ~~$787,974,000~~$702,290,000 and $761,704,000 as of ~~June~~September 30, 2023 and December 31, 2022, respectively. Cash collateral received was ~~$42,533,000~~$42,405,000 and $51,239,000 as of ~~June~~September 30, 2023 and December 31, 2022, respectively.

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

Gains (losses) on fair value hedges include unrealized changes in fair value as well as net interest settlements. For the three months ended ~~June~~September 30, 2023 and 2022, 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
		06/30/2023									09/30/2023
		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	$	613,730	$	144,744	$	288,183	$	539,939	Total amounts presented in the Statements of Income	$	634,899	$	159,499	$	284,947	$	579,352
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	$	241,132	$	155,006	$	(19,567)	$	(169,181)	Derivatives1	$	149,032	$	134,941	$	(2,660)	$	(66,086)
Hedged items2	Hedged items2	(179,348)		(100,723)		8,142		95,419		Hedged items2	(72,773)		(85,579)		(6,153)		(26,480)
NET GAINS (LOSSES) ON FAIR VALUE HEDGING RELATIONSHIPS	NET GAINS (LOSSES) ON FAIR VALUE HEDGING RELATIONSHIPS	$	61,784	$	54,283	$	(11,425)	$	(73,762)	NET GAINS (LOSSES) ON FAIR VALUE HEDGING RELATIONSHIPS	$	76,259	$	49,362	$	(8,813)	$	(92,566)


		Three Months Ended									Three Months Ended
		06/30/2022									09/30/2022
		Interest Income/Expense									Interest Income/Expense
		Advances		Available-for-sale Securities		Consolidated Obligation Discount Notes		Consolidated Obligation Bonds			Advances		Available-for-sale Securities		Consolidated Obligation Discount Notes		Consolidated Obligation Bonds
Total amounts presented in the Statements of Income	Total amounts presented in the Statements of Income	$	77,874	$	25,960	$	27,998	$	79,776	Total amounts presented in the Statements of Income	$	211,173	$	59,920	$	117,644	$	175,920
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	$	83,919	$	109,717	$	(12,112)	$	(97,791)	Derivatives1	$	184,879	$	215,644	$	(21,255)	$	(240,632)
Hedged items2	Hedged items2	(92,726)		(122,076)		19,597		109,196		Hedged items2	(174,839)		(204,404)		21,121		224,576
NET GAINS (LOSSES) ON FAIR VALUE HEDGING RELATIONSHIPS	NET GAINS (LOSSES) ON FAIR VALUE HEDGING RELATIONSHIPS	$	(8,807)	$	(12,359)	$	7,485	$	11,405	NET GAINS (LOSSES) ON FAIR VALUE HEDGING RELATIONSHIPS	$	10,040	$	11,240	$	(134)	$	(16,056)

1 Includes net interest settlements in interest income/expense.

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

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For the ~~six~~nine months ended ~~June~~September 30, 2023 and 2022, FHLBank recorded net gains (losses) on derivatives and the related hedged items in fair value hedging relationships and the impact of those derivatives on FHLBank’s net interest income as presented in Table 6.3 (in thousands):

Table 6.3


		Six Months Ended									Nine Months Ended
		06/30/2023									09/30/2023
		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	$	1,150,324	$	261,580	$	551,704	$	1,001,821	Total amounts presented in the Statements of Income	$	1,785,223	$	421,079	$	836,651	$	1,581,173
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	$	162,326	$	83,788	$	(2,909)	$	(114,280)	Derivatives1	$	311,358	$	218,729	$	(5,569)	$	(180,366)
Hedged items2	Hedged items2	(60,907)		10,777		(17,749)		(28,759)		Hedged items2	(133,680)		(74,802)		(23,902)		(55,142)
NET GAINS (LOSSES) ON FAIR VALUE HEDGING RELATIONSHIPS	NET GAINS (LOSSES) ON FAIR VALUE HEDGING RELATIONSHIPS	$	101,419	$	94,565	$	(20,658)	$	(143,039)	NET GAINS (LOSSES) ON FAIR VALUE HEDGING RELATIONSHIPS	$	177,678	$	143,927	$	(29,471)	$	(235,508)


		Six Months Ended									Nine Months Ended
		6/30/2022									09/30/2022
		Interest Income/Expense									Interest Income/Expense
		Advances		Available-for-sale Securities		Consolidated Obligation Discount Notes		Consolidated Obligation Bonds			Advances		Available-for-sale Securities		Consolidated Obligation Discount Notes		Consolidated Obligation Bonds
Total amounts presented in the Statements of Income	Total amounts presented in the Statements of Income	$	115,755	$	40,744	$	30,034	$	116,332	Total amounts presented in the Statements of Income	$	326,928	$	100,664	$	147,678	$	292,252
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	$	277,349	$	325,521	$	(12,718)	$	(353,354)	Derivatives1	$	462,228	$	541,165	$	(33,973)	$	(593,986)
Hedged items2	Hedged items2	(299,892)		(357,761)		20,827		382,759		Hedged items2	(474,731)		(562,165)		41,948		607,335
NET GAINS (LOSSES) ON FAIR VALUE HEDGING RELATIONSHIPS	NET GAINS (LOSSES) ON FAIR VALUE HEDGING RELATIONSHIPS	$	(22,543)	$	(32,240)	$	8,109	$	29,405	NET GAINS (LOSSES) ON FAIR VALUE HEDGING RELATIONSHIPS	$	(12,503)	$	(21,000)	$	7,975	$	13,349

1 Includes net interest settlements in interest income/expense.

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

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

Table 6.4


06/30/2023
09/30/2023										09/30/2023
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	$	12,420,556	$	(429,048)	$	(10,683)	$	(439,731)	Advances	$	12,633,547	$	(502,711)	$	(9,792)	$	(512,503)
Available-for-sale securities	Available-for-sale securities	5,986,167		(408,208)		—		(408,208)		Available-for-sale securities	6,052,223		(493,786)		—		(493,786)
Consolidated obligation discount notes	Consolidated obligation discount notes	(7,784,578)		13,115		—		13,115		Consolidated obligation discount notes	(4,135,294)		6,963		—		6,963
Consolidated obligation bonds	Consolidated obligation bonds	(20,175,734)		582,063		(6,130)		575,933		Consolidated obligation bonds	(20,709,096)		555,487		(6,034)		549,453

12/31/2022	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	$	8,161,351	$	(387,377)	$	8,553	$	(378,824)	Advances	$	8,161,351	$	(387,377)	$	8,553	$	(378,824)
Available-for-sale securities	Available-for-sale securities	5,959,781		(418,984)		—		(418,984)		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 discount notes	(7,562,117)		30,865		—		30,865
Consolidated obligation bonds	Consolidated obligation bonds	(11,657,093)		604,595		—		604,595		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 accumulated other comprehensive income (AOCI) is excluded).

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

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

Table 6.5


		Three Months Ended				Six Months Ended					Three Months Ended				Nine Months Ended
		06/30/2023		06/30/2022		06/30/2023		06/30/2022			09/30/2023		09/30/2022		09/30/2023		09/30/2022
Derivatives not designated as hedging instruments:	Derivatives not designated as hedging instruments:									Derivatives not designated as hedging instruments:
Economic hedges:	Economic hedges:									Economic hedges:
Interest rate swaps	Interest rate swaps	$	11,371	$	20,060	$	3,084	$	80,987	Interest rate swaps	$	(2,202)	$	28,284	$	882	$	109,271
Interest rate caps/floors	Interest rate caps/floors	475		144		125		1,085		Interest rate caps/floors	(93)		780		32		1,865
Net interest settlements	Net interest settlements	9,257		(5,470)		17,555		(15,844)		Net interest settlements	8,393		(1,201)		25,948		(17,045)
Price alignment interest	Price alignment interest	(182)		(1)		(391)		3		Price alignment interest	(216)		(36)		(607)		(33)
Mortgage delivery commitments	Mortgage delivery commitments	(627)		(1,919)		(604)		(6,854)		Mortgage delivery commitments	(650)		(1,629)		(1,254)		(8,483)

NET GAINS (LOSSES) ON DERIVATIVES	NET GAINS (LOSSES) ON DERIVATIVES	$	20,294	$	12,814	$	19,769	$	59,377	NET GAINS (LOSSES) ON DERIVATIVES	$	5,232	$	26,198��	$	25,001	$	85,575

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

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FHLBank utilizes two Derivative Clearing Organizations (Clearinghouse) for all cleared derivative transactions, LCH Limited and CME Clearing. At both Clearinghouses, initial margin is considered cash collateral. For cleared derivatives, the Clearinghouse determines initial margin requirements and generally, credit ratings are not factored into the initial margin. However, clearing agents may require additional initial margin to be posted based on credit considerations, including but not limited to credit rating downgrades. FHLBank was not required to post additional initial margin by its clearing agents as of ~~June~~September 30, 2023 and December 31, 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 ~~June~~September 30, 2023 and December 31, 2022 (in thousands):

Table 7.1


		06/30/2023		12/31/2022			09/30/2023		12/31/2022
Interest-bearing:	Interest-bearing:					Interest-bearing:
Demand	Demand	$	309,738	$	301,073	Demand	$	280,042	$	301,073
Overnight	Overnight	164,300		352,400		Overnight	413,600		352,400
Term	Term	5,750		12,000		Term	5,700		12,000

Total interest-bearing	Total interest-bearing	479,788		665,473		Total interest-bearing	699,342		665,473
Non-interest-bearing:	Non-interest-bearing:					Non-interest-bearing:
Other	Other	59,369		45,588		Other	52,610		45,588

Total non-interest-bearing	Total non-interest-bearing	59,369		45,588		Total non-interest-bearing	52,610		45,588
TOTAL DEPOSITS	TOTAL DEPOSITS	$	539,157	$	711,061	TOTAL DEPOSITS	$	751,952	$	711,061

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NOTE 8 – CONSOLIDATED OBLIGATIONS

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

Table 8.1


		06/30/2023				12/31/2022					09/30/2023				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	$	27,786,030	4.80	%	$	21,936,100	3.77	%	Due in one year or less	$	28,996,115	4.89	%	$	21,936,100	3.77	%
Due after one year through two years	Due after one year through two years	7,441,925		3.17		7,074,505		2.97		Due after one year through two years	9,631,390		3.97		7,074,505		2.97
Due after two years through three years	Due after two years through three years	2,862,720		2.22		3,508,370		1.95		Due after two years through three years	3,289,220		1.84		3,508,370		1.95
Due after three years through four years	Due after three years through four years	3,740,610		1.92		4,254,750		1.74		Due after three years through four years	2,960,110		2.10		4,254,750		1.74
Due after four years through five years	Due after four years through five years	1,508,350		2.52		1,694,660		1.79		Due after four years through five years	1,466,350		2.92		1,694,660		1.79
Thereafter	Thereafter	4,287,650		2.22		4,638,150		1.99		Thereafter	4,306,650		2.41		4,638,150		1.99
Total par value	Total par value	47,627,285		3.86	%	43,106,535		3.02	%	Total par value	50,649,835		4.09	%	43,106,535		3.02	%
Premiums	Premiums	15,762				18,950				Premiums	13,563				18,950
Discounts	Discounts	(4,474)				(3,789)				Discounts	(3,818)				(3,789)
Concession fees	Concession fees	(10,971)				(11,262)				Concession fees	(11,254)				(11,262)
Hedging adjustments	Hedging adjustments	(575,933)				(604,595)				Hedging adjustments	(549,453)				(604,595)
TOTAL	TOTAL	$	47,051,669			$	42,505,839			TOTAL	$	50,098,873			$	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 consolidated obligation bonds outstanding as of ~~June~~September 30, 2023 and December 31, 2022 includes callable bonds totaling ~~$22,324,000,000~~$22,663,000,000 and $16,008,000,000, respectively. Table 8.2 summarizes FHLBank’s consolidated obligation bonds outstanding by year of maturity, or by the next call date for callable bonds as of ~~June~~September 30, 2023 and December 31, 2022 (in thousands):

Table 8.2


Year of Maturity or Next Call Date	Year of Maturity or Next Call Date	06/30/2023		12/31/2022		Year of Maturity or Next Call Date	09/30/2023		12/31/2022
Due in one year or less	Due in one year or less	$	41,928,030	$	35,682,600	Due in one year or less	$	42,513,115	$	35,682,600
Due after one year through two years	Due after one year through two years	3,283,925		4,789,005		Due after one year through two years	5,843,390		4,789,005
Due after two years through three years	Due after two years through three years	840,720		940,370		Due after two years through three years	755,220		940,370
Due after three years through four years	Due after three years through four years	761,610		1,067,750		Due after three years through four years	679,110		1,067,750
Due after four years through five years	Due after four years through five years	510,850		256,660		Due after four years through five years	552,850		256,660
Thereafter	Thereafter	302,150		370,150		Thereafter	306,150		370,150
TOTAL PAR VALUE	TOTAL PAR VALUE	$	47,627,285	$	43,106,535	TOTAL PAR VALUE	$	50,649,835	$	43,106,535

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

Table 8.3


		06/30/2023		12/31/2022			09/30/2023		12/31/2022
Fixed rate	Fixed rate	$	28,002,785	$	19,194,535	Fixed rate	$	28,594,335	$	19,194,535
Simple variable rate	Simple variable rate	17,787,500		21,625,000		Simple variable rate	20,218,500		21,625,000
Step	Step	1,837,000		2,287,000		Step	1,837,000		2,287,000

TOTAL PAR VALUE	TOTAL PAR VALUE	$	47,627,285	$	43,106,535	TOTAL PAR VALUE	$	50,649,835	$	43,106,535

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

Table 8.4


		Carrying Value		Par Value		Weighted Average Interest Rate1			Carrying Value		Par Value		Weighted Average Interest Rate1
June 30, 2023		$	20,892,865	$	21,136,330	4.81	%
September 30, 2023								September 30, 2023	$	17,892,734	$	18,052,225	5.12	%

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

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

Table 9.1


06/30/2023
09/30/2023												09/30/2023
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	$	183,017	$	(167,315)	$	15,702	$	(9)	$	15,693	Uncleared derivatives	$	244,197	$	(241,265)	$	2,932	$	(27)	$	2,905
Cleared derivatives	Cleared derivatives	7,859		335,737		343,596		—		343,596		Cleared derivatives	3,547		325,417		328,964		—		328,964
Total derivative assets	Total derivative assets	190,876		168,422		359,298		(9)		359,289		Total derivative assets	247,744		84,152		331,896		(27)		331,869
Securities purchased under agreements to resell	Securities purchased under agreements to resell	2,000,000		—		2,000,000		(2,000,000)		—		Securities purchased under agreements to resell	1,825,000		—		1,825,000		(1,825,000)		—
TOTAL	TOTAL	$	2,190,876	$	168,422	$	2,359,298	$	(2,000,009)	$	359,289	TOTAL	$	2,072,744	$	84,152	$	2,156,896	$	(1,825,027)	$	331,869

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).

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Table 9.2


12/31/2022
Description	Gross Amounts of Recognized Assets		Gross Amounts Offset in the Statements of Condition		Net Amounts of Assets Presented in the Statements of Condition		Gross Amounts Not Offset in the Statement of Condition1		Net Amount
Derivative assets:
Uncleared derivatives	$	154,844	$	(153,125)	$	1,719	$	(24)	$	1,695
Cleared derivatives	15,393		254,964		270,357		—		270,357
Total derivative assets	170,237		101,839		272,076		(24)		272,052
Securities purchased under agreements to resell	2,350,000		—		2,350,000		(2,350,000)		—
TOTAL	$	2,520,237	$	101,839	$	2,622,076	$	(2,350,024)	$	272,052

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

Table 9.3


06/30/2023
09/30/2023												09/30/2023
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	$	569,169	$	(568,981)	$	188	$	(188)	$	—	Uncleared derivatives	$	560,769	$	(559,966)	$	803	$	(135)	$	668
Cleared derivatives	Cleared derivatives	8,038		(8,038)		—		—		—		Cleared derivatives	15,767		(15,767)		—		—		—
Total derivative liabilities	Total derivative liabilities	577,207		(577,019)		188		(188)		—		Total derivative liabilities	576,536		(575,733)		803		(135)		668

TOTAL	TOTAL	$	577,207	$	(577,019)	$	188	$	(188)	$	—	TOTAL	$	576,536	$	(575,733)	$	803	$	(135)	$	668

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Table 9.4


12/31/2022
Description	Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Statements of Condition		Net Amounts of Liabilities Presented in the Statements of Condition		Gross Amounts Not Offset in the Statement of Condition1		Net Amount
Derivative liabilities:
Uncleared derivatives	$	609,169	$	(606,810)	$	2,359	$	(173)	$	2,186
Cleared derivatives	1,816		(1,816)		—		—		—
Total derivative liabilities	610,985		(608,626)		2,359		(173)		2,186

TOTAL	$	610,985	$	(608,626)	$	2,359	$	(173)	$	2,186

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 ~~June~~September 30, 2023 and December 31, 2022 (dollar amounts in thousands):

Table 10.1


		06/30/2023						12/31/2022							09/30/2023						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	$	696,344		$	3,628,149		$	481,076		$	3,522,040		Risk-based capital	$	754,537		$	3,663,076		$	481,076		$	3,522,040
Total regulatory capital-to-asset ratio	Total regulatory capital-to-asset ratio	4.0		%	5.5		%	4.0		%	5.2		%	Total regulatory capital-to-asset ratio	4.0		%	5.5		%	4.0		%	5.2		%
Total regulatory capital	Total regulatory capital	$	2,914,382		$	3,980,578		$	2,879,714		$	3,761,094		Total regulatory capital	$	2,925,452		$	4,021,290		$	2,879,714		$	3,761,094
Leverage capital ratio	Leverage capital ratio	5.0		%	8.0		%	5.0		%	7.7		%	Leverage capital ratio	5.0		%	8.0		%	5.0		%	7.7		%
Leverage capital	Leverage capital	$	3,642,978		$	5,794,653		$	3,599,642		$	5,522,115		Leverage capital	$	3,656,815		$	5,852,828		$	3,599,642		$	5,522,115

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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.

Table 10.2 presents a roll-forward of mandatorily redeemable capital stock for the three and ~~six~~nine months ended ~~June~~September 30, 2023 and 2022 (in thousands):

Table 10.2


		Three Months Ended				Six Months Ended					Three Months Ended				Nine Months Ended
		06/30/2023		06/30/2022		06/30/2023		06/30/2022			09/30/2023		09/30/2022		09/30/2023		09/30/2022
Balance, beginning of period	Balance, beginning of period	$	269	$	559	$	280	$	582	Balance, beginning of period	$	263	$	537	$	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	282,260		295,316		493,497		458,363		Capital stock subject to mandatory redemption reclassified from equity during the period	153,179		144,680		646,676		603,043

Redemption or repurchase of mandatorily redeemable capital stock during the period	Redemption or repurchase of mandatorily redeemable capital stock during the period	(282,271)		(295,340)		(493,521)		(458,410)		Redemption or repurchase of mandatorily redeemable capital stock during the period	(153,192)		(144,926)		(646,713)		(603,336)
Stock dividend classified as mandatorily redeemable capital stock during the period	Stock dividend classified as mandatorily redeemable capital stock during the period	5		2		7		2		Stock dividend classified as mandatorily redeemable capital stock during the period	3		1		10		3
Balance, end of period	Balance, end of period	$	263	$	537	$	263	$	537	Balance, end of period	$	253	$	292	$	253	$	292

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 ~~June~~September 30, 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 became effective for the second quarter of 2023 and will 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).

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NOTE 11 – ACCUMULATED OTHER COMPREHENSIVE INCOME

Table 11.1 summarizes the changes in AOCI for the three months ended ~~June~~September 30, 2023 and 2022 (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 March 31, 2022		$	33,462	$	(2,312)	$	31,150
Balance at June 30, 2022									Balance at June 30, 2022	$	(21,103)	$	(2,250)	$	(23,353)
Other comprehensive income (loss) before reclassification:	Other comprehensive income (loss) before reclassification:								Other comprehensive income (loss) before reclassification:

Unrealized gains (losses)	Unrealized gains (losses)	(54,565)				(54,565)			Unrealized gains (losses)	(29,088)				(29,088)

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			62		62			Amortization of net losses - defined benefit pension plan1			63		63
Net current period other comprehensive income (loss)	Net current period other comprehensive income (loss)	(54,565)		62		(54,503)			Net current period other comprehensive income (loss)	(29,088)		63		(29,025)
Balance at June 30, 2022		$	(21,103)	$	(2,250)	$	(23,353)
Balance at September 30, 2022									Balance at September 30, 2022	$	(50,191)	$	(2,187)	$	(52,378)

Balance at March 31, 2023		$	(82,556)	$	173	$	(82,383)
Balance at June 30, 2023									Balance at June 30, 2023	$	(84,002)	$	173	$	(83,829)
Other comprehensive income (loss) before reclassification:	Other comprehensive income (loss) before reclassification:								Other comprehensive income (loss) before reclassification:
Unrealized gains (losses)	Unrealized gains (losses)	(1,446)				(1,446)			Unrealized gains (losses)	(45,590)				(45,590)

Net current period other comprehensive income (loss)	Net current period other comprehensive income (loss)	(1,446)		—		(1,446)			Net current period other comprehensive income (loss)	(45,590)		—		(45,590)
Balance at June 30, 2023		$	(84,002)	$	173	$	(83,829)
Balance at September 30, 2023									Balance at September 30, 2023	$	(129,592)	$	173	$	(129,419)

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

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Table 11.2 summarizes the changes in AOCI for the ~~six~~nine months ended ~~June~~September 30, 2023 and 2022 (in thousands):

Table 11.2


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

Balance at December 31, 2021	Balance at December 31, 2021	$	74,689	$	(2,374)	$	72,315		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)	(95,792)				(95,792)			Unrealized gains (losses)	(124,880)				(124,880)

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			124		124			Amortization of net losses - defined benefit pension plan1			187		187
Net current period other comprehensive income (loss)	Net current period other comprehensive income (loss)	(95,792)		124		(95,668)			Net current period other comprehensive income (loss)	(124,880)		187		(124,693)
Balance at June 30, 2022		$	(21,103)	$	(2,250)	$	(23,353)
Balance at September 30, 2022									Balance at September 30, 2022	$	(50,191)	$	(2,187)	$	(52,378)

Balance at December 31, 2022	Balance at December 31, 2022	$	(84,443)	$	173	$	(84,270)		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)	441				441			Unrealized gains (losses)	(45,149)				(45,149)

Net current period other comprehensive income (loss)	Net current period other comprehensive income (loss)	441		—		441			Net current period other comprehensive income (loss)	(45,149)		—		(45,149)
Balance at June 30, 2023		$	(84,002)	$	173	$	(83,829)
Balance at September 30, 2023									Balance at September 30, 2023	$	(129,592)	$	173	$	(129,419)

1 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 ~~June~~September 30, 2023 and December 31, 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 are subjective and require judgments regarding significant matters such as the amount and timing of future cash flows, prepayment speed assumptions, expected interest rate volatility, methods to determine possible distributions of future interest rates used to value options, and the selection of discount rates that appropriately reflect market and credit risks. 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.

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

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

•Level 2 Inputs – Inputs other than quoted prices within Level 1 that are observable inputs for the asset or liability, either directly or indirectly. If the asset or liability has a specified (contractual) term, a Level 2 input must be observable for substantially the full term of the asset or liability. Level 2 inputs include the following: (1) quoted prices for similar assets and liabilities in active markets; (2) quoted prices for similar assets and liabilities in markets that are not active; (3) inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates and yield curves that are observable at commonly quoted intervals and implied volatilities); and (4) inputs that are derived principally from or corroborated by observable market data by correlation or other means.

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

FHLBank reviews its fair value hierarchy classifications on a quarterly basis. Changes in the observability of the valuation inputs may result in a reclassification of certain assets or liabilities. There were no transfers of assets or liabilities between fair value levels during the three and ~~six~~nine months ended ~~June~~September 30, 2023 and 2022.

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

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

Table 12.1


		06/30/2023													09/30/2023
		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	$	25,190	$	25,190	$	25,190	$	—	$	—	$	—	Cash and due from banks	$	26,652	$	26,652	$	26,652	$	—	$	—	$	—
Interest-bearing deposits	Interest-bearing deposits	2,068,466		2,068,466		—		2,068,466		—		—		Interest-bearing deposits	1,698,340		1,698,340		—		1,698,340		—		—
Securities purchased under agreements to resell	Securities purchased under agreements to resell	2,000,000		2,000,000		—		2,000,000		—		—		Securities purchased under agreements to resell	1,825,000		1,825,000		—		1,825,000		—		—
Federal funds sold	Federal funds sold	4,400,000		4,400,000		—		4,400,000		—		—		Federal funds sold	4,400,000		4,400,000		—		4,400,000		—		—
Trading securities	Trading securities	1,063,514		1,063,514		—		1,063,514		—		—		Trading securities	899,023		899,023		—		899,023		—		—
Available-for-sale securities	Available-for-sale securities	10,367,378		10,367,378		—		10,367,378		—		—		Available-for-sale securities	10,868,344		10,868,344		—		10,868,344		—		—
Held-to-maturity securities	Held-to-maturity securities	285,313		281,782		—		243,024		38,758		—		Held-to-maturity securities	276,457		271,634		—		232,864		38,770		—
Advances	Advances	43,957,361		43,927,375		—		43,927,375		—		—		Advances	44,322,221		44,281,186		—		44,281,186		—		—
Mortgage loans held for portfolio, net of allowance	Mortgage loans held for portfolio, net of allowance	8,064,228		6,774,446		—		6,773,075		1,371		—		Mortgage loans held for portfolio, net of allowance	8,207,138		6,901,866		—		6,899,367		2,499		—

Accrued interest receivable	Accrued interest receivable	186,904		186,904		—		186,904		—		—		Accrued interest receivable	201,430		201,430		—		201,430		—		—
Derivative assets	Derivative assets	359,298		359,298		—		190,876		—		168,422		Derivative assets	331,896		331,896		—		247,744		—		84,152
Liabilities:	Liabilities:													Liabilities:
Deposits	Deposits	539,157		539,157		—		539,157		—		—		Deposits	751,952		751,953		—		751,953		—		—
Consolidated obligation discount notes	Consolidated obligation discount notes	20,892,865		20,668,442		—		20,668,442		—		—		Consolidated obligation discount notes	17,892,734		17,892,180		—		17,892,180		—		—
Consolidated obligation bonds	Consolidated obligation bonds	47,051,669		45,904,957		—		45,904,957		—		—		Consolidated obligation bonds	50,098,873		48,815,150		—		48,815,150		—		—

Mandatorily redeemable capital stock	Mandatorily redeemable capital stock	263		263		263		—		—		—		Mandatorily redeemable capital stock	253		253		253		—		—		—
Accrued interest payable	Accrued interest payable	344,903		344,903		—		344,903		—		—		Accrued interest payable	357,213		357,213		—		357,213		—		—
Derivative liabilities	Derivative liabilities	188		188		—		577,207		—		(577,019)		Derivative liabilities	803		803		—		576,536		—		(575,733)
Other Asset (Liability):	Other Asset (Liability):													Other Asset (Liability):
Industrial revenue bonds	Industrial revenue bonds	35,000		31,936		—		31,936		—		—		Industrial revenue bonds	35,000		31,643		—		31,643		—		—
Financing obligation payable	Financing obligation payable	(35,000)		(31,936)		—		(31,936)		—		—		Financing obligation payable	(35,000)		(31,643)		—		(31,643)		—		—

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

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Table 12.2


	12/31/2022
	Carrying Value		Total Fair Value		Level 1		Level 2		Level 3		Netting Adjustment and Cash Collateral1
Assets:
Cash and due from banks	$	25,964	$	25,964	$	25,964	$	—	$	—	$	—
Interest-bearing deposits	2,039,852		2,039,852		—		2,039,852		—		—
Securities purchased under agreements to resell	2,350,000		2,350,000		—		2,350,000		—		—
Federal funds sold	3,750,000		3,750,000		—		3,750,000		—		—
Trading securities	1,421,453		1,421,453		—		1,421,453		—		—
Available-for-sale securities	9,354,416		9,354,416		—		9,354,416		—		—
Held-to-maturity securities	345,430		340,259		—		271,491		68,768		—
Advances	44,262,750		44,173,791		—		44,173,791		—		—
Mortgage loans held for portfolio, net of allowance	7,905,135		6,639,257		—		6,638,132		1,125		—

Accrued interest receivable	186,594		186,594		—		186,594		—		—
Derivative assets	272,076		272,076		—		170,237		—		101,839
Liabilities:
Deposits	711,061		711,052		—		711,052		—		—
Consolidated obligation discount notes	24,775,405		24,630,686		—		24,630,686		—		—
Consolidated obligation bonds	42,505,839		41,258,883		—		41,258,883		—		—
Mandatorily redeemable capital stock	280		280		280		—		—		—
Accrued interest payable	197,175		197,175		—		197,175		—		—
Derivative liabilities	2,359		2,359		—		610,985		—		(608,626)
Other Asset (Liability):
Industrial revenue bonds	35,000		31,948		—		31,948		—		—
Financing obligation payable	(35,000)		(31,948)		—		(31,948)		—		—

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Fair Value Measurements: Tables 12.3 and 12.4 present, for each hierarchy level, FHLBank’s assets and liabilities that are measured at fair value on a recurring or nonrecurring basis on the Statements of Condition as of or for the periods ended ~~June~~September 30, 2023 and December 31, 2022 (in thousands).

Table 12.3


		06/30/2023											09/30/2023
		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:

U.S. Treasury obligations		$	149,406	$	—	$	149,406	$	—	$	—

GSE debentures	GSE debentures	284,623		—		284,623		—		—		GSE debentures	$	285,509	$	—	$	285,509	$	—	$	—

GSE MBS	GSE MBS	629,485		—		629,485		—		—		GSE MBS	613,514		—		613,514		—		—
Total trading securities	Total trading securities	1,063,514		—		1,063,514		—		—		Total trading securities	899,023		—		899,023		—		—
Available-for-sale securities:	Available-for-sale securities:											Available-for-sale securities:
U.S. Treasury obligations	U.S. Treasury obligations	2,925,176		—		2,925,176		—		—		U.S. Treasury obligations	2,890,387		—		2,890,387		—		—
U.S. obligation MBS	U.S. obligation MBS	114,746		—		114,746		—		—		U.S. obligation MBS	111,346		—		111,346		—		—
GSE MBS	GSE MBS	7,327,456		—		7,327,456		—		—		GSE MBS	7,866,611		—		7,866,611		—		—
Total available-for-sale securities	Total available-for-sale securities	10,367,378		—		10,367,378		—		—		Total available-for-sale securities	10,868,344		—		10,868,344		—		—
Derivative assets:	Derivative assets:											Derivative assets:
Interest-rate related	Interest-rate related	359,289		—		190,867		—		168,422		Interest-rate related	331,869		—		247,717		—		84,152
Mortgage delivery commitments	Mortgage delivery commitments	9		—		9		—		—		Mortgage delivery commitments	27		—		27		—		—
Total derivative assets	Total derivative assets	359,298		—		190,876		—		168,422		Total derivative assets	331,896		—		247,744		—		84,152
TOTAL RECURRING FAIR VALUE MEASUREMENTS - ASSETS	TOTAL RECURRING FAIR VALUE MEASUREMENTS - ASSETS	$	11,790,190	$	—	$	11,621,768	$	—	$	168,422	TOTAL RECURRING FAIR VALUE MEASUREMENTS - ASSETS	$	12,099,263	$	—	$	12,015,111	$	—	$	84,152

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	$	—	$	—	$	577,019	$	—	$	(577,019)	Interest-rate related	$	668	$	—	$	576,401	$	—	$	(575,733)
Mortgage delivery commitments	Mortgage delivery commitments	188		—		188		—		—		Mortgage delivery commitments	135		—		135		—		—
Total derivative liabilities	Total derivative liabilities	188		—		577,207		—		(577,019)		Total derivative liabilities	803		—		576,536		—		(575,733)
TOTAL RECURRING FAIR VALUE MEASUREMENTS - LIABILITIES	TOTAL RECURRING FAIR VALUE MEASUREMENTS - LIABILITIES	$	188	$	—	$	577,207	$	—	$	(577,019)	TOTAL RECURRING FAIR VALUE MEASUREMENTS - LIABILITIES	$	803	$	—	$	576,536	$	—	$	(575,733)

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

Impaired mortgage loans	Impaired mortgage loans	$	1,387	$	—	$	—	$	1,387	$	—	Impaired mortgage loans	$	2,537	$	—	$	—	$	2,537	$	—
Real estate owned	Real estate owned	43		—		—		43		—		Real estate owned	43		—		—		43		—
TOTAL NONRECURRING FAIR VALUE MEASUREMENTS - ASSETS	TOTAL NONRECURRING FAIR VALUE MEASUREMENTS - ASSETS	$	1,430	$	—	$	—	$	1,430	$	—	TOTAL NONRECURRING FAIR VALUE MEASUREMENTS - ASSETS	$	2,580	$	—	$	—	$	2,580	$	—

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 ~~six~~nine months ended ~~June~~September 30, 2023 and still outstanding as of ~~June~~September 30, 2023.

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Table 12.4


	12/31/2022
	Total		Level 1		Level 2		Level 3		Netting Adjustment and Cash Collateral1
Recurring fair value measurements - Assets:
Trading securities:


U.S. Treasury obligations	$	396,233	$	—	$	396,233	$	—	$	—
GSE debentures	388,955		—		388,955		—		—

GSE MBS	636,265		—		636,265		—		—
Total trading securities	1,421,453		—		1,421,453		—		—
Available-for-sale securities:
U.S. Treasury obligations	3,315,356		—		3,315,356		—		—
U.S. obligation MBS	40,039		—		40,039		—		—
GSE MBS	5,999,021		—		5,999,021		—		—
Total available-for-sale securities	9,354,416		—		9,354,416		—		—
Derivative assets:
Interest-rate related	272,052		—		170,213		—		101,839
Mortgage delivery commitments	24		—		24		—		—
Total derivative assets	272,076		—		170,237		—		101,839
TOTAL RECURRING FAIR VALUE MEASUREMENTS - ASSETS	$	11,047,945	$	—	$	10,946,106	$	—	$	101,839

Recurring fair value measurements - Liabilities:
Derivative liabilities:
Interest-rate related	$	2,186	$	—	$	610,812	$	—	$	(608,626)
Mortgage delivery commitments	173		—		173		—		—
Total derivative liabilities	2,359		—		610,985		—		(608,626)
TOTAL RECURRING FAIR VALUE MEASUREMENTS - LIABILITIES	$	2,359	$	—	$	610,985	$	—	$	(608,626)

Nonrecurring fair value measurements - Assets2:


Impaired mortgage loans	$	1,164	$	—	$	—	$	1,164	$	—

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

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

NOTE 13 – COMMITMENTS AND CONTINGENCIES

Joint and Several Liability: As provided in the Bank Act 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 ~~$1,271,401,978,000~~$1,161,172,587,000 and $1,113,638,974,000 as of ~~June~~September 30, 2023 and December 31, 2022, respectively.

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

Table 13.1


		06/30/2023						12/31/2022							09/30/2023						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	$	6,761,753	$	15,049	$	6,776,802	$	6,475,917	$	250	$	6,476,167	Standby letters of credit outstanding	$	6,692,755	$	9,516	$	6,702,271	$	6,475,917	$	250	$	6,476,167

Advance commitments outstanding	Advance commitments outstanding	76,380		3,615		79,995		173,959		2,505		176,464		Advance commitments outstanding	86,496		3,615		90,111		173,959		2,505		176,464
Principal commitments for standby bond purchase agreements	Principal commitments for standby bond purchase agreements	305,655		581,655		887,310		212,705		646,165		858,870		Principal commitments for standby bond purchase agreements	326,965		595,520		922,485		212,705		646,165		858,870
Commitments to fund or purchase mortgage loans	Commitments to fund or purchase mortgage loans	47,416		—		47,416		33,882		—		33,882		Commitments to fund or purchase mortgage loans	48,915		—		48,915		33,882		—		33,882
Commitments to issue consolidated bonds, at par	Commitments to issue consolidated bonds, at par	65,000		—		65,000		501,000		—		501,000		Commitments to issue consolidated bonds, at par	766,500		—		766,500		501,000		—		501,000
Commitments to issue consolidated discount notes, at par	Commitments to issue consolidated discount notes, at par	—		—		—		7,500		—		7,500		Commitments to issue consolidated discount notes, at par	—		—		—		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. 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 ~~$1,935,000~~$2,497,000 and $1,878,000 as of ~~June~~September 30, 2023 and December 31, 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.

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 2028, though some are renewable at the option of FHLBank. As of ~~June~~September 30, 2023 and December 31, 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 ~~six~~nine months ended ~~June~~September 30, 2023 and 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 ~~$(179,000)~~$(108,000) and $(149,000) as of ~~June~~September 30, 2023 and December 31, 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.

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

Table 14.1


06/30/2023
09/30/2023															09/30/2023
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	0.1	%	$	524,142	22.9	%	$	524,642	19.8	%	MidFirst Bank	OK	$	24,133	6.7	%	$	482,957	21.1	%	$	507,090	19.1	%

BOKF, N.A.															BOKF, N.A.	OK	80,493		22.5		278,945		12.2		359,438		13.6

TOTAL	TOTAL		$	500	0.1	%	$	524,142	22.9	%	$	524,642	19.8	%	TOTAL		$	104,626	29.2	%	$	761,902	33.3	%	$	866,528	32.7	%

Table 14.2


12/31/2022
Member Name	State	Total Class A Stock Par Value		Percent of Total Class A		Total Class B Stock Par Value		Percent of Total Class B		Total Capital Stock Par Value		Percent of Total Capital Stock
MidFirst Bank	OK	$	500	0.2	%	$	493,412	21.7	%	$	493,912	19.7	%


TOTAL		$	500	0.2	%	$	493,412	21.7	%	$	493,912	19.7	%

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

Table 14.3


		06/30/2023				12/31/2022				06/30/2023				12/31/2022					09/30/2023				12/31/2022				09/30/2023				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	$	11,370,000	25.6	%	$	10,740,000	24.1	%	$	1,076	0.2	%	$	530	0.1	%	MidFirst Bank	$	10,530,000	23.5	%	$	10,740,000	24.1	%	$	760	0.1	%	$	530	0.1	%

BOKF, N.A.																		BOKF, N.A.	6,175,000		13.8						21,391		2.8

TOTAL	TOTAL	$	11,370,000	25.6	%	$	10,740,000	24.1	%	$	1,076	0.2	%	$	530	0.1	%	TOTAL	$	16,705,000	37.3	%	$	10,740,000	24.1	%	$	22,151	2.9	%	$	530	0.1	%

BOKF, N.A. sold $5,905,000 and $15,989,000 mortgage loans into the MPF Program during the three and nine months ended September 30, 2023. MidFirst Bank did not sell any mortgage loans into the MPF Program during the ~~three and six months ended June 30, 2023 and 2022.~~

same periods.

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


		06/30/2023				12/31/2022					09/30/2023				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	$	231,729	0.5	%	$	185,535	0.4	%	Advances	$	250,516	0.6	%	$	185,535	0.4	%

Deposits	Deposits	$	7,377	1.4	%	$	7,322	1.0	%	Deposits	$	6,963	0.9	%	$	7,322	1.0	%

Class A Common Stock	Class A Common Stock	$	5,387	1.5	%	$	4,151	1.7	%	Class A Common Stock	$	4,335	1.2	%	$	4,151	1.7	%
Class B Common Stock	Class B Common Stock	13,018		0.6		11,793		0.5		Class B Common Stock	14,099		0.6		11,793		0.5
TOTAL CAPITAL STOCK	TOTAL CAPITAL STOCK	$	18,405	0.7	%	$	15,944	0.6	%	TOTAL CAPITAL STOCK	$	18,434	0.7	%	$	15,944	0.6	%

Table 14.5 presents mortgage loans acquired during the three and ~~six~~nine months ended ~~June~~September 30, 2023 and 2022 for members that had an officer or director serving on FHLBank’s board of directors in 2023 or 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 Six Months Ended
06/30/2023 06/30/2022 06/30/2023 06/30/2022
Amount Percent of Total Amount Percent of Total Amount Percent of Total Amount Percent of Total
Mortgage loans acquired $ 4,473 1.3 % $ 5,719 1.8 % $ 8,984 1.7 % $ 11,296 1.9 %



	Three Months Ended								Nine Months Ended
	09/30/2023				09/30/2022				09/30/2023				09/30/2022
	Amount		Percent of Total		Amount		Percent of Total		Amount		Percent of Total		Amount		Percent of Total
Mortgage loans acquired	$	5,476	1.5	%	$	4,736	1.9	%	$	14,461	1.6	%	$	16,032	1.9	%

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 first quarter of 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 ~~current quarter~~three months ended September, 30, 2023 or the three and ~~six~~nine months ended ~~June~~September 30, 2022.

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

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is intended to assist the reader in understanding our business and assessing our operations both historically and prospectively. This discussion should be read in conjunction with our interim financial statements and related notes presented under Part I, Item 1 of this quarterly report on Form 10-Q and the annual report on Form 10-K for the year ended December 31, 2022, which includes audited financial statements and related notes for the year ended December 31, 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.

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Executive Level Overview

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

Table 1


		06/30/2023			03/31/2023			12/31/2022			09/30/2022			06/30/2022				09/30/2023			06/30/2023			03/31/2023			12/31/2022			09/30/2022
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	$	72,859,560		$	74,838,195		$	71,992,842		$	63,500,273		$	57,499,300		Total assets	$	73,136,292		$	72,859,560		$	74,838,195		$	71,992,842		$	63,500,273
Investments1	Investments1	20,184,671			19,831,466			19,261,151			19,720,136			19,367,647			Investments1	19,967,164			20,184,671			19,831,466			19,261,151			19,720,136
Advances	Advances	43,957,361			46,456,748			44,262,750			35,318,980			29,522,840			Advances	44,322,221			43,957,361			46,456,748			44,262,750			35,318,980
Mortgage loans, net	Mortgage loans, net	8,064,228			7,925,256			7,905,135			7,998,911			8,018,930			Mortgage loans, net	8,207,138			8,064,228			7,925,256			7,905,135			7,998,911
Total liabilities	Total liabilities	68,963,074			70,972,748			68,316,298			60,204,762			54,504,534			Total liabilities	69,244,674			68,963,074			70,972,748			68,316,298			60,204,762
Deposits	Deposits	539,157			955,321			711,061			667,970			781,845			Deposits	751,952			539,157			955,321			711,061			667,970

Consolidated obligations, net2	Consolidated obligations, net2	67,944,534			69,487,247			67,281,244			59,236,614			53,004,477			Consolidated obligations, net2	67,991,607			67,944,534			69,487,247			67,281,244			59,236,614

Total capital	Total capital	3,896,486			3,865,447			3,676,544			3,295,511			2,994,766			Total capital	3,891,618			3,896,486			3,865,447			3,676,544			3,295,511
Capital stock	Capital stock	2,644,249			2,662,089			1,168,835			2,120,273			1,821,016			Capital stock	2,649,451			2,644,249			2,662,089			2,507,709			2,120,273
Retained earnings	Retained earnings	1,336,066			1,285,741			1,253,105			1,227,616			1,197,103			Retained earnings	1,371,586			1,336,066			1,285,741			1,253,105			1,227,616

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	121,667			104,403			99,895			94,795			83,226			Net interest income	114,908			121,667			104,403			99,895			94,795

Other income (loss)	Other income (loss)	19,025			11,613			4,393			(1,174)			(7,652)			Other income (loss)	10,927			19,025			11,613			4,393			(1,174)
Other expenses	Other expenses	21,946			22,145			22,102			19,149			19,725			Other expenses	23,649			21,946			22,145			22,102			19,149
Income before assessments	Income before assessments	118,000			94,273			81,176			74,357			55,957			Income before assessments	102,219			118,000			94,273			81,176			74,357
Affordable Housing Program (AHP) assessments	Affordable Housing Program (AHP) assessments	11,800			9,428			8,117			7,436			5,596			Affordable Housing Program (AHP) assessments	10,222			11,800			9,428			8,117			7,436
Net income	Net income	106,200			84,845			73,059			66,921			50,361			Net income	91,997			106,200			84,845			73,059			66,921
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	55,875			52,209			47,570			36,408			25,831			Dividends paid	56,477			55,875			52,209			47,570			36,408
Weighted average dividend rate3	Weighted average dividend rate3	8.31		%	8.12		%	7.79		%	6.94		%	5.63		%	Weighted average dividend rate3	8.62		%	8.31		%	8.12		%	7.79		%	6.94		%
Dividend payout ratio4	Dividend payout ratio4	52.61		%	61.53		%	65.11		%	54.40		%	51.29		%	Dividend payout ratio4	61.39		%	52.61		%	61.53		%	65.11		%	54.40		%
Return on average equity	Return on average equity	10.81		%	8.96		%	8.04		%	8.07		%	6.60		%	Return on average equity	9.39		%	10.81		%	8.96		%	8.04		%	8.07		%
Return on average assets	Return on average assets	0.55		%	0.46		%	0.41		%	0.42		%	0.35		%	Return on average assets	0.49		%	0.55		%	0.46		%	0.41		%	0.42		%
Average equity to average assets	Average equity to average assets	5.10		%	5.09		%	5.06		%	5.21		%	5.37		%	Average equity to average assets	5.18		%	5.10		%	5.09		%	5.06		%	5.21		%
Net interest margin5	Net interest margin5	0.63		%	0.56		%	0.56		%	0.60		%	0.59		%	Net interest margin5	0.61		%	0.63		%	0.56		%	0.56		%	0.60		%
Total capital ratio6	Total capital ratio6	5.35		%	5.17		%	5.11		%	5.19		%	5.21		%	Total capital ratio6	5.32		%	5.35		%	5.17		%	5.11		%	5.19		%
Regulatory capital ratio7	Regulatory capital ratio7	5.46		%	5.28		%	5.22		%	5.27		%	5.25		%	Regulatory capital ratio7	5.50		%	5.46		%	5.28		%	5.22		%	5.27		%

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 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. 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) as a percentage of total assets.

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 (CDFI).~~institutions.

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In March and April 2023, members increased their on-balance sheet liquidity due to market turmoil caused by the financial difficulties and failures of multiple U.S. banks. The concern over stress in the banking sector kept the demand for liquidity elevated. The purpose and mission of the 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 stress. As the stress caused by this specific event has eased, demand for advances as additional on-balance sheet liquidity has declined, along with the related funding. However, member banks have maintained elevated levels of advances due in part to deposit loss and the risk that the conditions that lead to the stress in March could return, as interest rates and inflation remain high.

~~Second~~Third Quarter 2023 Financial Highlights:

•Net interest income/margin: Net interest income increased ~~$38.5~~$20.1 million to ~~$121.7~~$114.9 million for the quarter ended ~~June~~September 30, 2023 compared to ~~$83.2~~$94.8 million for the quarter ended ~~June~~September 30, 2022. The increase in net interest income resulted from increased average balances on advances and investments at higher interest rates, combined with the impact of higher interest rates on fair value ~~hedges. Additionally, prepayments~~hedges and a continued ~~to slow~~decline in premium amortization on mortgage-related ~~assets, which also increased interest income due to less premium amortization between periods.~~assets. Net interest margin increased 4one basis ~~points~~point for the current quarter, from ~~0.59~~0.60 percent for the quarter ended ~~June~~September 30, 2022 to ~~0.63~~0.61 percent for the quarter ended ~~June~~September 30, 2023. The increase in net interest margin was attributed to the increase in rate and volume on advances and investments between periods, despite a decrease of 20 basis points in net interest spread between the yield on interest-earning assets and the cost of interest-bearing liabilities. The decline in spread is attributed to the increase in the cost of the rate-sensitive liabilities funding the fixed rate mortgage loan portfolio and a significant change in asset composition.The increase in short-term advances as a percentage of total assets has contributed to the contraction in net interest spread. Short-term advances are one of our lowest spread assets, so net interest margin and spread decline as short-term advance balances comprise a larger percentage of total assets.

•Total assets: Total assets increased from $72.0 billion as of December 31, 2022 to ~~$72.9~~$73.1 billion as of ~~June~~September 30, 2023, driven by the ~~$0.9~~$0.7 billion increase in short- and long-term investments between ~~periods.~~periods and a $0.3 billion increase in the mortgage loan portfolio. The average balance of interest-earning assets increased ~~$20.3~~$11.9 billion between the quarter ended ~~June~~September 30, 2023 and the same period in the prior year, driven by a ~~$17.3~~$10.3 billion increase in the average balance of ~~advances and a $2.7 billion increase in short-term investments.~~advances.

•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 ~~June~~September 30, 2023 and December 31, 2022, our Primary Mission Asset ratio was 81 percent and 80 percent, respectively.

•Advances: Advances ~~decreased from~~remained relatively flat between periods, at $44.3 billion atfor both December 31, 2022 ~~to $44.0 billion at June~~and September 30, 2023, representing ~~60.3~~60.6 percent of total assets as of ~~June~~September 30, 2023, compared to 61.5 percent as of December 31, 2022. The average balance of advances increased ~~$17.3~~$10.3 billion, or ~~56.9~~29.0 percent, for the three months ended ~~June~~September 30, 2023 when compared to the prior year period. The increase in the average balance of advances between periods was largely attributed to the funding needs of depository members as loan growth outpaced deposit growth through 2022 and into 2023. We continue to execute our liquidity mission by serving as a reliable source of liquidity and funding for members.

•Mortgage loans: Mortgage loans increased ~~$0.2~~$0.3 billion from $7.9 billion at December 31, 2022 to ~~$8.1~~$8.2 billion as of ~~June~~September 30, 2023, representing ~~11.1~~11.2 percent of total assets as of ~~June~~September 30, 2023, compared to 11.0 percent as of December 31, 2022. The average balance of mortgage loans ~~decreased~~increased $0.1 billion, or ~~0.6~~1.6 percent, for the three months ended ~~June~~September 30, 2023 when compared to the prior year ~~period, but the interest~~period. Interest income ~~impact of this decrease was offset~~continues to be positively impacted 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 ~~10.81~~9.39 percent for the quarter ended ~~June~~September 30, 2023 compared to ~~6.60~~8.07 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 ~~4.0~~4.5 percent per annum and the Class B Common Stock dividend rate of ~~9.0~~9.25 percent per annum combined for a weighted average dividend rate for the quarter ended ~~June~~September 30, 2023 of ~~8.31~~8.62 percent, which is ~~325~~329 basis points above the average daily interest rate on reserve balances for the quarter.

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Financial Market Trends

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

General discussion of the level of market interest rates:

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

Table 2


		06/30/2023		06/30/2022		06/30/2023		06/30/2022		06/30/2023		12/31/2022			09/30/2023		09/30/2022		09/30/2023		09/30/2022		09/30/2023		12/31/2022
Market Instrument	Market Instrument	Three-month				Six-month				Ending		Ending		Market Instrument	Three-month				Nine-month				Ending		Ending
		Average								Rate		Rate			Average								Rate		Rate
Secured Overnight Financing Rate1	Secured Overnight Financing Rate1	4.97	%	0.71	%	4.73	%	0.40	%	5.09	%	4.30	%	Secured Overnight Financing Rate1	5.24	%	2.15	%	4.90	%	0.99	%	5.31	%	4.30	%
Federal funds effective rate1	Federal funds effective rate1	4.99		0.76		4.76		0.44		5.08		4.33		Federal funds effective rate1	5.26		2.20		4.93		1.03		5.33		4.33
Federal Reserve interest rate on reserve balances1	Federal Reserve interest rate on reserve balances1	5.06		0.84		4.82		0.52		5.15		4.40		Federal Reserve interest rate on reserve balances1	5.33		2.26		4.99		1.11		5.40		4.40
3-month U.S. Treasury bill1	3-month U.S. Treasury bill1	5.17		1.07		4.94		0.68		5.30		4.37		3-month U.S. Treasury bill1	5.43		2.67		5.10		1.35		5.45		4.37
3-month LIBOR1		5.40		1.53		5.15		1.01		5.55		4.77
2-year U.S. Treasury note1	2-year U.S. Treasury note1	4.28		2.72		4.32		2.08		4.90		4.43		2-year U.S. Treasury note1	4.93		3.38		4.53		2.51		5.04		4.43
5-year U.S. Treasury note1	5-year U.S. Treasury note1	3.70		2.95		3.75		2.39		4.16		4.00		5-year U.S. Treasury note1	4.31		3.23		3.94		2.67		4.61		4.00
10-year U.S. Treasury note1	10-year U.S. Treasury note1	3.60		2.93		3.62		2.43		3.84		3.88		10-year U.S. Treasury note1	4.14		3.10		3.80		2.66		4.57		3.88
30-year residential mortgage note rate1,2	30-year residential mortgage note rate1,2	6.64		5.43		6.54		4.71		6.85		6.58		30-year residential mortgage note rate1,2	7.18		5.81		6.76		5.08		7.53		6.58

1 Source is Bloomberg.

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

The deposit outflows and financial difficulties experienced by multiple U.S. banks at the end of the first quarter of 2023 created stress for the banking industry and the financial markets ~~that persisted~~and kept demand for liquidity elevated into the ~~early part~~third quarter, as some of the ~~second quarter. However, conditions improved later in~~deposit loss members experienced during the ~~second quarter.~~first half of 2023 has persisted. 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. 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. ~~No material~~Members also have access to other wholesale funding sources, such as brokered deposits or Fed funds, which may impact ~~was identified~~the demand for advances. Alternative funding sources had a minimal impact on advances during the quarter ended ~~June~~September 30, 2023. We continue to monitor these and related developments and assess any effect on our business, results of operations, and financial condition.

~~Yields~~Treasury yields continued to increase across the curve, with the 10-year Treasury reaching its highest yield since 2007. While yields on U.S. ~~Treasuries~~Treasury obligations have increased, they remained inverted at the end of the ~~second~~third 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~~note, but 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~~has become less inverted than in ~~response to the March~~prior periods. The Federal Open Market Committee (FOMC) ~~policy decisions and outlook for the economy. The FOMC~~ announced rate hikes of 25 basis points at the February, March, May, and July meetings while holding rates steady at the September and November meetings. The FOMC’s November statement indicated ~~that, despite some improvements~~continued strength in economic indicators, ~~concerns about~~despite continued elevated inflation ~~persist so ongoing increases in the target range will likely be required~~and tighter financial and credit conditions for households and businesses. The FOMC remains attentive to ~~reduce~~inflation risks and remains committed to returning inflation to the ~~FOMC’s~~ two percent objective. Mortgage rates remained elevated compared to market conditions one year ago, resulting in declines in new mortgage origination activity and lower mortgage prepayments, which has reduced related premium amortization and increased yields on mortgage-related assets compared to the ~~second~~third quarter of 2022.

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We issue debt at a spread above U.S. Treasury securities; as a result, the level of interest rates impacts the cost of issuing FHLBank consolidated obligations and the cost of advances to our members and housing associates. The cost of 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 concerns over the federal debt ceiling~~ has kept this spread relatively ~~narrow during the first half of 2023.~~narrow. Congress passed legislation for a short-term funding bill to ~~raise the debt ceiling on June 2, 2023, just prior to the deadline when~~fund the U.S. ~~would default~~government through November 17, 2023; however, the U.S. continues to face a possible government shutdown. Historically, this event has not had a significant impact on its debt. In August 2023, Fitch Ratings downgraded the long-term credit rating of the United States and in turn certain GSEs, including the only two FHLBanks that are rated by Fitch Ratings, from AAA to AA+. However, Fitch Ratings does not provide ratings for the consolidated obligations of the FHLBanks or FHLBank Topeka specifically. Ourour ability to issue ~~debt remains robust, but volatility~~debt. Volatility in the capital markets can also impact the demand for and cost of debt issued by the FHLBanks. Recent efforts of 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, including concerns about a possible recession. ~~Labor market constraints~~Robust consumer spending and low levels of unemployment are expected to keep inflation elevated 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.~~in 2024. For further discussion, see this Item 2 – “Financial Condition – Consolidated Obligations.”

The publication of LIBOR on a representative basis ceased for one-week and two-month LIBOR effective January 1, 2022, and the remaining LIBOR tenors ceased immediately after June 30, 2023. ~~As noted throughout this quarterly report, some of our~~Any remaining variable rate investments, derivative assets, derivative liabilities, and related collateral that were indexed to ~~one-month~~LIBOR followed the contractual or ~~three-month tenors of LIBOR, most of which have maturity dates that extend beyond June 30, 2023.~~statutory fallback provisions in subsequent rate resets. In accordance with the recommendations of our regulator and the Alternative Reference Rates Committee (AARC) and industry developments, we have selected SOFR as our preferred primary replacement rate for LIBOR-indexed financial instruments. As of June 30, 2023, we have transitioned many of our outstanding instruments referencing LIBOR to reference the SOFR index. For instruments that were not proactively transitioned, rate resets after June 30, 2023 will follow the industry standard fallback provisions. For additional information on LIBOR transition, 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 ~~June~~September 30, 2023.

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Results of Operations

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

Table 3


		Increase (Decrease) in Earnings Components									Increase (Decrease) in Earnings Components

		Three Months Ended				Six Months Ended					Three Months Ended				Nine Months Ended
		06/30/2023 vs. 06/30/2022				06/30/2023 vs. 06/30/2022					09/30/2023 vs. 09/30/2022				09/30/2023 vs. 09/30/2022
		Dollar Change		Percentage Change		Dollar Change		Percentage Change			Dollar Change		Percentage Change		Dollar Change		Percentage Change
Total interest income	Total interest income	$	764,974	397.8	%	$	1,478,715	467.4	%	Total interest income	$	596,238	152.1	%	$	2,074,953	292.9	%
Total interest expense	Total interest expense	726,533		666.2		1,420,946		959.8		Total interest expense	576,125		193.9		1,997,071		448.5
Net interest income	Net interest income	38,441		46.2		57,769		34.3		Net interest income	20,113		21.2		77,882		29.6
Provision (reversal) for credit losses on mortgage loans	Provision (reversal) for credit losses on mortgage loans	854		790.7		759		182.9		Provision (reversal) for credit losses on mortgage loans	(148)		(128.7)		611		203.7
Net interest income after mortgage loan loss provision	Net interest income after mortgage loan loss provision	37,587		45.1		57,010		33.8		Net interest income after mortgage loan loss provision	20,261		21.4		77,271		29.3
Net gains (losses) on trading securities	Net gains (losses) on trading securities	18,738		80.3		87,210		105.3		Net gains (losses) on trading securities	32,465		107.3		119,675		105.8
Net gains (losses) on derivatives	Net gains (losses) on derivatives	7,480		58.4		(39,608)		(66.7)		Net gains (losses) on derivatives	(20,966)		(80.0)		(60,574)		(70.8)
Other non-interest income	Other non-interest income	459		16.0		197		3.1		Other non-interest income	602		20.9		799		8.7
Total other income (loss)	Total other income (loss)	26,677		348.6		47,799		278.5		Total other income (loss)	12,101		1,030.7		59,900		326.7
Operating expenses	Operating expenses	1,752		11.2		3,577		11.5		Operating expenses	4,025		27.1		7,602		16.5
Other non-interest expenses	Other non-interest expenses	469		11.4		911		10.8		Other non-interest expenses	475		11.1		1,386		10.9
Total other expenses	Total other expenses	2,221		11.3		4,488		11.3		Total other expenses	4,500		23.5		8,988		15.3
AHP assessments	AHP assessments	6,204		110.9		10,032		89.6		AHP assessments	2,786		37.5		12,818		68.8
NET INCOME	NET INCOME	$	55,839	110.9	%	$	90,289	89.6	%	NET INCOME	$	25,076	37.5	%	$	115,365	68.8	%

Net income increased ~~$55.8~~$25.1 million, or ~~110.9~~37.5 percent, to ~~$106.2~~$92.0 million for the three months ended ~~June~~September 30, 2023 compared to ~~$50.4~~$66.9 million for the three months ended ~~June~~September 30, 2022. For the ~~six~~nine months ended ~~June~~September 30, 2023, net income increased ~~$90.3~~$115.4 million, or ~~89.6~~68.8 percent, to ~~$191.0~~$283.0 million compared to ~~$100.8~~$167.7 million for the same period in the prior year. The increase in net income is substantially attributed to increases in net interest income and to a lesser extent fluctuations in fair value of derivatives and trading securities, partially offset by increases in operating expenses driven by compensation and benefits and an 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 ~~$38.4~~$20.1 million for the quarter, or ~~46.2~~21.2 percent, from ~~$83.2~~$94.8 million for the three months ended ~~June~~September 30, 2022 to ~~$121.7~~$114.9 million for the three months ended ~~June~~September 30, 2023. Net interest income increased ~~$57.8~~$77.9 million, or 29.6 percent, for the current year-to-date period, from ~~$168.3~~$263.1 million for the ~~six~~nine months ended ~~June~~September 30, 2022 to ~~$226.1~~$341.0 million for the ~~six~~nine months ended ~~June~~September 30, 2023. The increase for both the three- and ~~six-month~~nine-month periods was due to increased average balances on advances and investments at higher interest rates, combined with the impact of higher interest rates and spreads on fair value hedges. Additionally, prepayments continued to slow on mortgage-related assets, which also increased interest income due to less premium amortization between periods. Slower prepayments generally extend the weighted average life of lower-rate mortgages, which can contribute to interest rate spread compression.

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Net interest margin increased 4one basis ~~points~~point for the current quarter, from ~~0.59~~0.60 percent for the quarter ended ~~June~~September 30, 2022 to ~~0.63~~0.61 percent for the quarter ended ~~June~~September 30, 2023 (see Table 8). Net interest margin declined ~~two~~one basis ~~points,~~point, from ~~0.62~~0.61 percent to 0.60 percent for the ~~six~~nine months ended ~~June~~September 30, 2023 compared to the prior year period (see Table 10). ~~The increase in net~~Net interest margin held relatively steady for the current quarter ~~was attributed primarily to~~and year-to-date period, despite the ~~increase in interest rates and higher average balances on advances and investments between periods combined with maturing higher-cost debt, despite a decrease of 20 basis points~~decreases in net interest spread between the yield on interest-earning assets and the cost of interest-bearing ~~liabilities. This decline in net interest margin~~liabilities for both the quarter and year-to-date ~~period was caused by compression in net interest spread.~~periods. This compression of net interest spread for both the three- and ~~six-month~~nine-month periods was due to changes in balance sheet composition, notably an increase in advances as a percentage of total assets from September 30, 2022 to September 30, 2023, and the increase in the cost of rate-sensitive liabilities, primarily as it relates to the mortgage loan ~~portfolio.~~portfolio, over the same period. Advances are typically one of our lowest spread assets, so net interest ~~margin~~spread declines as short-term advance balances comprise a larger percentage of total assets. 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, reduced the net interest spread on the mortgage loan portfolio. The increase in funding costs was due to 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. 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.

Net interest income and net interest margin are also impacted by derivative and hedging activities, as net interest settlements on derivatives and the changes in fair values of hedged assets and liabilities and the corresponding derivative instruments designated in fair value hedging relationships are recorded in net interest income. For the current quarter, net interest income increased ~~$27.3~~$40.5 million due to net interest settlements received on fair value hedges compared to net interest paid for the same period in the prior year due to increases in interest rates between periods. Tables 4 through 7 present the impact of derivatives and hedging activities recorded in net interest income (in thousands):

Table 4


		Three Months Ended 06/30/2023												Three Months Ended 09/30/2023
		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	$	684	$	12,811	$	—	$	(1,252)	$	2,391	$	14,634		Unrealized gains (losses) due to fair value changes	$	2,751	$	4,115	$	—	$	(2,758)	$	(5,444)	$	(1,336)
Net amortization/accretion of hedging activities	Net amortization/accretion of hedging activities	955		—		266		—		—		1,221			Net amortization/accretion of hedging activities	890		—		333		—		96		1,319
Net interest received (paid)	Net interest received (paid)	63,707		45,084		—		(10,345)		(76,196)		22,250			Net interest received (paid)	78,437		50,579		—		(6,197)		(87,413)		35,406
Price alignment amount	Price alignment amount	(3,562)		(3,612)		—		172		43		(6,959)			Price alignment amount	(5,819)		(5,332)		—		142		195		(10,814)
TOTAL	TOTAL	$	61,784	$	54,283	$	266	$	(11,425)	$	(73,762)	$	31,146		TOTAL	$	76,259	$	49,362	$	333	$	(8,813)	$	(92,566)	$	24,575

Table 5


		Three Months Ended 06/30/2022												Three Months Ended 09/30/2022
		Advances		Investments		Mortgage Loans		Consolidated Obligation Discount Notes		Consolidated Obligation Bonds		Total				Advances		Investments		Mortgage Loans		Consolidated Obligation Discount Notes		Consolidated Obligation Bonds		Total
Unrealized gains (losses) due to fair value changes	Unrealized gains (losses) due to fair value changes	$	77	$	3,120	$	—	$	1,224	$	(377)	$	4,044		Unrealized gains (losses) due to fair value changes	$	1,481	$	6,606	$	—	$	2,174	$	3,821	$	14,082
Net amortization/accretion of hedging activities	Net amortization/accretion of hedging activities	(559)		—		138		—		—		(421)			Net amortization/accretion of hedging activities	(560)		—		243		—		—		(317)
Net interest received (paid)	Net interest received (paid)	(7,947)		(15,149)		—		6,251		11,777		(5,068)			Net interest received (paid)	10,478		5,877		—		(2,429)		(19,899)		(5,973)
Price alignment amount	Price alignment amount	(378)		(330)		—		10		5		(693)			Price alignment amount	(1,359)		(1,243)		—		121		22		(2,459)
TOTAL	TOTAL	$	(8,807)	$	(12,359)	$	138	$	7,485	$	11,405	$	(2,138)		TOTAL	$	10,040	$	11,240	$	243	$	(134)	$	(16,056)	$	5,333

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Table 6


		Six Months Ended 06/30/2023												Nine Months Ended 09/30/2023
		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	$	(4,485)	$	18,885	$	—	$	3,111	$	1,361	$	18,872		Unrealized gains (losses) due to fair value changes	$	(1,735)	$	23,000	$	—	$	353	$	(4,082)	$	17,536
Net amortization/accretion of hedging activities	Net amortization/accretion of hedging activities	418		—		459		—		—		877			Net amortization/accretion of hedging activities	1,309		—		793		—		193		2,295
Net interest received (paid)	Net interest received (paid)	112,726		82,973		—		(24,238)		(144,484)		26,977			Net interest received (paid)	191,163		133,552		—		(30,435)		(231,897)		62,383
Price alignment amount	Price alignment amount	(7,240)		(7,293)		—		469		84		(13,980)			Price alignment amount	(13,059)		(12,625)		—		611		278		(24,795)
TOTAL	TOTAL	$	101,419	$	94,565	$	459	$	(20,658)	$	(143,039)	$	32,746		TOTAL	$	177,678	$	143,927	$	793	$	(29,471)	$	(235,508)	$	57,419

Table 7


		Six Months Ended 06/30/2022												Nine Months Ended 09/30/2022
		Advances		Investments		Mortgage Loans		Consolidated Obligation Discount Notes		Consolidated Obligation Bonds		Total				Advances		Investments		Mortgage Loans		Consolidated Obligation Discount Notes		Consolidated Obligation Bonds		Total
Unrealized gains (losses) due to fair value changes	Unrealized gains (losses) due to fair value changes	$	2,206	$	5,587	$	—	$	1,456	$	1,690	$	10,939		Unrealized gains (losses) due to fair value changes	$	3,687	$	12,193	$	—	$	3,630	$	5,511	$	25,021
Net amortization/accretion of hedging activities	Net amortization/accretion of hedging activities	(1,119)		—		310		—		—		(809)			Net amortization/accretion of hedging activities	(1,679)		—		553		—		—		(1,126)
Net interest received (paid)	Net interest received (paid)	(23,235)		(37,490)		—		6,643		27,710		(26,372)			Net interest received (paid)	(12,757)		(31,613)		—		4,214		7,811		(32,345)
Price alignment amount	Price alignment amount	(395)		(337)		—		10		5		(717)			Price alignment amount	(1,754)		(1,580)		—		131		27		(3,176)
TOTAL	TOTAL	$	(22,543)	$	(32,240)	$	310	$	8,109	$	29,405	$	(16,959)		TOTAL	$	(12,503)	$	(21,000)	$	553	$	7,975	$	13,349	$	(11,626)

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Average Balances and Yields: Table 8 presents average balances and annualized yields of major earning asset categories and the sources funding those earning assets (dollar amounts in thousands):

Table 8


		Three Months Ended													Three Months Ended
		06/30/2023						06/30/2022							09/30/2023						09/30/2022
		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	$	2,916,614	$	36,687	5.05	%	$	1,289,312	$	2,367	0.74	%	Interest-bearing deposits	$	2,803,908	$	37,569	5.32	%	$	1,383,035	$	7,538	2.16	%
Securities purchased under agreements to resell	Securities purchased under agreements to resell	2,573,077		32,356		5.04		2,531,978		5,251		0.83		Securities purchased under agreements to resell	2,078,370		27,969		5.34		2,666,315		14,870		2.21
Federal funds sold	Federal funds sold	4,190,220		52,930		5.07		3,069,626		6,360		0.83		Federal funds sold	3,697,174		49,772		5.34		3,939,293		22,017		2.22
Investment securities1,2	Investment securities1,2	11,660,984		158,532		5.45		11,391,789		43,758		1.54		Investment securities1,2	12,132,738		170,862		5.59		11,307,414		78,130		2.74
Advances1,2	Advances1,2	47,703,045		613,730		5.16		30,410,190		77,874		1.03		Advances1,2	45,862,896		634,899		5.49		35,552,050		211,173		2.36
Mortgage loans3,4	Mortgage loans3,4	7,985,358		62,836		3.16		8,035,822		56,383		2.81		Mortgage loans3,4	8,150,358		66,871		3.26		8,021,512		58,045		2.87
Other interest-earning assets	Other interest-earning assets	36,264		191		2.11		73,781		295		1.60		Other interest-earning assets	43,152		286		2.63		41,522		217		2.07
Total earning assets	Total earning assets	77,065,562		957,262		4.98		56,802,498		192,288		1.36		Total earning assets	74,768,596		988,228		5.24		62,911,141		391,990		2.47
Other non-interest-earning assets	Other non-interest-earning assets	228,830						211,092						Other non-interest-earning assets	182,623						221,691
Total assets	Total assets	$	77,294,392					$	57,013,590					Total assets	$	74,951,219					$	63,132,832

Interest-bearing liabilities:	Interest-bearing liabilities:													Interest-bearing liabilities:
Deposits	Deposits	$	610,795	$	7,180	4.71	%	$	795,061	$	997	0.50	%	Deposits	$	685,182	$	8,720	5.05	%	$	694,256	$	3,353	1.92	%
Consolidated obligations1:	Consolidated obligations1:													Consolidated obligations1:
Discount Notes	Discount Notes	23,340,502		288,183		4.95		16,321,410		27,998		0.69		Discount Notes	21,345,764		284,947		5.30		23,390,351		117,644		2.00
Bonds	Bonds	48,175,525		539,939		4.50		36,083,770		79,776		0.89		Bonds	47,908,824		579,352		4.80		34,967,317		175,920		2.00
Other borrowings	Other borrowings	43,313		293		2.72		48,889		291		2.39		Other borrowings	43,469		301		2.74		43,539		278		2.52
Total interest-bearing liabilities	Total interest-bearing liabilities	72,170,135		835,595		4.64		53,249,130		109,062		0.82		Total interest-bearing liabilities	69,983,239		873,320		4.95		59,095,463		297,195		1.99
Capital and other non-interest-bearing funds	Capital and other non-interest-bearing funds	5,124,257						3,764,460						Capital and other non-interest-bearing funds	4,967,980						4,037,369
Total funding	Total funding	$	77,294,392					$	57,013,590					Total funding	$	74,951,219					$	63,132,832

Net interest income and net interest spread5	Net interest income and net interest spread5			$	121,667	0.34	%			$	83,226	0.54	%	Net interest income and net interest spread5			$	114,908	0.29	%			$	94,795	0.48	%

Net interest margin6	Net interest margin6					0.63	%					0.59	%	Net interest margin6					0.61	%					0.60	%

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 income payments made to PFIs are netted against interest earnings on the mortgage loans. The expense related to these payments was $1.7 million and $1.6 million for ~~both of~~ the three months ended ~~June~~September 30, 2023 and ~~2022.~~2022, 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.

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Changes in the volume of interest-earning assets and the level of interest rates influence changes in net interest income, net interest spread and net interest margin. Table 9 summarizes changes in interest income and interest expense (in thousands):

Table 9


		Three Months Ended							Three Months Ended
		06/30/2023 vs. 06/30/2022							09/30/2023 vs. 09/30/2022
		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	$	6,090	$	28,230	$	34,320	Interest-bearing deposits	$	12,411	$	17,620	$	30,031
Securities purchased under agreements to resell	Securities purchased under agreements to resell	86		27,019		27,105		Securities purchased under agreements to resell	(3,904)		17,003		13,099
Federal funds sold	Federal funds sold	3,114		43,456		46,570		Federal funds sold	(1,434)		29,189		27,755
Investment securities	Investment securities	1,058		113,716		114,774		Investment securities	6,092		86,640		92,732
Advances	Advances	66,347		469,509		535,856		Advances	75,828		347,898		423,726
Mortgage loans	Mortgage loans	(356)		6,809		6,453		Mortgage loans	945		7,881		8,826
Other assets	Other assets	(179)		75		(104)		Other assets	9		60		69
Total interest-earning assets	Total interest-earning assets	76,160		688,814		764,974		Total interest-earning assets	89,947		506,291		596,238
Interest Expense3:	Interest Expense3:							Interest Expense3:
Deposits	Deposits	(283)		6,466		6,183		Deposits	(44)		5,411		5,367
Consolidated obligations:	Consolidated obligations:							Consolidated obligations:
Discount notes	Discount notes	16,883		243,302		260,185		Discount notes	(11,137)		178,440		167,303
Bonds	Bonds	35,008		425,155		460,163		Bonds	84,178		319,254		403,432
Other borrowings	Other borrowings	(35)		37		2		Other borrowings	—		23		23
Total interest-bearing liabilities	Total interest-bearing liabilities	51,573		674,960		726,533		Total interest-bearing liabilities	72,997		503,128		576,125
Change in net interest income	Change in net interest income	$	24,587	$	13,854	$	38,441	Change in net interest income	$	16,950	$	3,163	$	20,113

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

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

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

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

Table 10


		Six Months Ended														Nine Months Ended
		06/30/2023						06/30/2022						09/30/2023				09/30/2022
		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	$	2,820,352	$	67,384	4.82	%	$	1,204,481	$	2,743	0.46	%		Interest-bearing deposits	$	2,814,811	$	104,953	4.99	%	$	1,264,653	$	10,281	1.10	%
Securities purchased under agreements to resell	Securities purchased under agreements to resell	2,625,967		62,638		4.81		2,092,619		5,787		0.56			Securities purchased under agreements to resell	2,441,429		90,607		4.96		2,285,952		20,657		1.20
Federal funds sold	Federal funds sold	4,187,790		100,286		4.83		2,772,011		7,154		0.52			Federal funds sold	4,022,454		150,058		4.99		3,165,381		29,171		1.20
Investment securities1,2	Investment securities1,2	11,332,922		289,834		5.16		11,098,669		73,478		1.34			Investment securities1,2	11,602,457		460,697		5.31		11,169,015		151,608		1.80
Advances1,2	Advances1,2	47,124,490		1,150,324		4.92		29,223,064		115,755		0.80			Advances1,2	46,699,337		1,785,223		5.11		31,355,909		326,928		1.40
Mortgage loans3,4	Mortgage loans3,4	7,944,645		123,644		3.14		8,057,081		110,937		2.78			Mortgage loans3,4	8,013,970		190,515		3.18		8,045,095		168,982		2.80
Other interest-earning assets	Other interest-earning assets	61,050		951		3.14		56,674		492		1.75			Other interest-earning assets	55,018		1,237		3.01		51,568		709		1.80
Total earning assets	Total earning assets	76,097,216		1,795,061		4.76		54,504,599		316,346		1.17			Total earning assets	75,649,476		2,783,290		4.92		57,337,573		708,336		1.70
Other non-interest-earning assets	Other non-interest-earning assets	291,515						216,463							Other non-interest-earning assets	254,818						218,225
Total assets	Total assets	$	76,388,731					$	54,721,062						Total assets	$	75,904,294					$	57,555,798

Interest-bearing liabilities:	Interest-bearing liabilities:														Interest-bearing liabilities:
Deposits	Deposits	$	660,938	14,749		4.50		$	883,623	1,123		0.26			Deposits	$	669,108	23,469		4.69		$	819,807	4,476		0.70
Consolidated obligations1:	Consolidated obligations1:														Consolidated obligations1:
Discount Notes	Discount Notes	23,745,681		551,704		4.69		12,187,791		30,034		0.50			Discount Notes	22,936,918		836,651		4.88		15,963,013		147,678		1.20
Bonds	Bonds	46,966,842		1,001,821		4.30		37,991,783		116,332		0.62			Bonds	47,284,287		1,581,173		4.47		36,972,549		292,252		1.10
Other borrowings	Other borrowings	49,122		717		2.95		49,996		556		2.24			Other borrowings	47,217		1,019		2.88		47,819		834		2.30
Total interest-bearing liabilities	Total interest-bearing liabilities	71,422,583		1,568,991		4.43		51,113,193		148,045		0.58			Total interest-bearing liabilities	70,937,530		2,442,312		4.60		53,803,188		445,240		1.09
Capital and other non-interest-bearing funds	Capital and other non-interest-bearing funds	4,966,148						3,607,869							Capital and other non-interest-bearing funds	4,966,764						3,752,610
Total funding	Total funding	$	76,388,731					$	54,721,062						Total funding	$	75,904,294					$	57,555,798

Net interest income and net interest spread5	Net interest income and net interest spread5			$	226,070	0.33	%			$	168,301	0.59	%		Net interest income and net interest spread5			$	340,978	0.32	%			$	263,096	0.61	%

Net interest margin6	Net interest margin6					0.60	%					0.62	%		Net interest margin6					0.60	%					0.61	%

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 income payments made to PFIs are netted against interest earnings on the mortgage loans. The expense related to these payments was ~~$3.2~~$4.9 million and $4.8 million for the ~~six~~nine months ended ~~June~~September 30, 2023 and ~~2022.~~2022, 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.

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

Table 11


		Six Months Ended						Nine Months Ended
		06/30/2023 vs. 06/30/2022						09/30/2023 vs. 09/30/2022
		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	$	8,007	$	56,634	$	64,641		Interest-bearing deposits	$	24,115	$	70,557	$	94,672
Securities purchased under agreements to resell	Securities purchased under agreements to resell	1,839		55,012		56,851			Securities purchased under agreements to resell	1,499		68,451		69,950
Federal funds sold	Federal funds sold	5,412		87,720		93,132			Federal funds sold	9,862		111,025		120,887
Investment securities	Investment securities	1,583		214,773		216,356			Investment securities	6,108		302,981		309,089
Advances	Advances	109,739		924,830		1,034,569			Advances	226,120		1,232,175		1,458,295
Mortgage loans	Mortgage loans	(1,568)		14,275		12,707			Mortgage loans	(656)		22,189		21,533
Other assets	Other assets	40		419		459			Other assets	50		478		528
Total earning assets	Total earning assets	125,052		1,353,663		1,478,715			Total earning assets	267,098		1,807,856		2,074,954
Interest Expense3:	Interest Expense3:								Interest Expense3:
Deposits	Deposits	(353)		13,979		13,626			Deposits	(968)		19,961		18,993
Consolidated obligations:	Consolidated obligations:								Consolidated obligations:
Discount notes	Discount notes	52,760		468,910		521,670			Discount notes	89,060		599,913		688,973
Bonds	Bonds	33,726		851,763		885,489			Bonds	102,436		1,186,485		1,288,921
Other borrowings	Other borrowings	(10)		171		161			Other borrowings	(10)		195		185
Total interest-bearing liabilities	Total interest-bearing liabilities	86,123		1,334,823		1,420,946			Total interest-bearing liabilities	190,518		1,806,554		1,997,072
Change in net interest income	Change in net interest income	$	38,929	$	18,840	$	57,769		Change in net interest income	$	76,580	$	1,302	$	77,882

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

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

Table 12


		Three Months Ended 06/30/2023													Three Months Ended 09/30/2023
		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	$	4,295	$	7,302	$	—	$	171	$	78	$	11,846	Economic hedges – unrealized gains (losses) due to fair value changes	$	2,414	$	(4,855)	$	—	$	(95)	$	241	$	(2,295)
Mortgage delivery commitments	Mortgage delivery commitments	—		—		(627)		—		—		(627)		Mortgage delivery commitments	—		—		(650)		—		—		(650)

Economic hedges – net interest received (paid)	Economic hedges – net interest received (paid)	981		9,195		—		(696)		(223)		9,257		Economic hedges – net interest received (paid)	1,148		8,291		—		(785)		(261)		8,393
Price alignment amount	Price alignment amount	(33)		(163)		—		5		9		(182)		Price alignment amount	(88)		(140)		—		5		7		(216)
Net gains (losses) on derivatives	Net gains (losses) on derivatives	5,243		16,334		(627)		(520)		(136)		20,294		Net gains (losses) on derivatives	3,474		3,296		(650)		(875)		(13)		5,232
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	—		(4,586)		—		—		—		(4,586)		Net gains (losses) on trading securities hedged on an economic basis with derivatives	—		2,254		—		—		—		2,254
TOTAL	TOTAL	$	5,243	$	11,748	$	(627)	$	(520)	$	(136)	$	15,708	TOTAL	$	3,474	$	5,550	$	(650)	$	(875)	$	(13)	$	7,486

Table 13


		Three Months Ended 06/30/2022												Three Months Ended 09/30/2022
		Advances		Investments		Mortgage Loans		Consolidated Obligation Discount Notes		Consolidated Obligation Bonds		Total				Advances		Investments		Mortgage Loans		Consolidated Obligation Discount Notes		Consolidated Obligation Bonds		Total
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	$	1,241	$	21,831	$	—	$	(3,081)	$	213	$	20,204		Economic hedges – unrealized gains (losses) due to fair value changes	$	1,556	$	30,014	$	—	$	(1,584)	$	(922)	$	29,064
Mortgage delivery commitments	Mortgage delivery commitments	—		—		(1,919)		—		—		(1,919)			Mortgage delivery commitments	—		—		(1,629)		—		—		(1,629)

Economic hedges – net interest received (paid)	Economic hedges – net interest received (paid)	(122)		(6,544)		—		1,175		21		(5,470)			Economic hedges – net interest received (paid)	2		(297)		—		(1,069)		163		(1,201)
Price alignment amount	Price alignment amount	(1)		(2)		—		2		—		(1)			Price alignment amount	(3)		(50)		—		16		1		(36)
Net gains (losses) on derivatives	Net gains (losses) on derivatives	1,118		15,285		(1,919)		(1,904)		234		12,814			Net gains (losses) on derivatives	1,555		29,667		(1,629)		(2,637)		(758)		26,198
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	—		(22,814)		—		—		—		(22,814)			Net gains (losses) on trading securities hedged on an economic basis with derivatives	—		(30,195)		—		—		—		(30,195)
TOTAL	TOTAL	$	1,118	$	(7,529)	$	(1,919)	$	(1,904)	$	234	$	(10,000)		TOTAL	$	1,555	$	(528)	$	(1,629)	$	(2,637)	$	(758)	$	(3,997)

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Table 14


		Six Months Ended 06/30/2023												Nine Months Ended 09/30/2023
		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	$	4,126	$	(4,121)	$	—	$	2,809	$	395	$	3,209		Economic hedges – unrealized gains (losses) due to fair value changes	$	6,539	$	(8,975)	$	—	$	2,713	$	637	$	914
Mortgage delivery commitments	Mortgage delivery commitments	—		—		(604)		—		—		(604)			Mortgage delivery commitments	—		—		(1,254)		—		—		(1,254)

Economic hedges – net interest received (paid)	Economic hedges – net interest received (paid)	1,280		17,209		—		(443)		(491)		17,555			Economic hedges – net interest received (paid)	2,428		25,499		—		(1,227)		(752)		25,948
Price alignment amount	Price alignment amount	(48)		(349)		—		(11)		17		(391)			Price alignment amount	(136)		(489)		—		(6)		24		(607)
Net gains (losses) on derivatives	Net gains (losses) on derivatives	5,358		12,739		(604)		2,355		(79)		19,769			Net gains (losses) on derivatives	8,831		16,035		(1,254)		1,480		(91)		25,001
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	—		4,367		—		—		—		4,367			Net gains (losses) on trading securities hedged on an economic basis with derivatives	—		6,622		—		—		—		6,622
TOTAL	TOTAL	$	5,358	$	17,106	$	(604)	$	2,355	$	(79)	$	24,136		TOTAL	$	8,831	$	22,657	$	(1,254)	$	1,480	$	(91)	$	31,623

Table 15


		Six Months Ended 06/30/2022												Nine Months Ended 09/30/2022
		Advances		Investments		Mortgage Loans		Consolidated Obligation Discount Notes		Consolidated Obligation Bonds		Total				Advances		Investments		Mortgage Loans		Consolidated Obligation Discount Notes		Consolidated Obligation Bonds		Total
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	$	3,360	$	81,580	$	—	$	(3,081)	$	213	$	82,072		Economic hedges – unrealized gains (losses) due to fair value changes	$	4,916	$	111,594	$	—	$	(4,665)	$	(709)	$	111,136
Mortgage delivery commitments	Mortgage delivery commitments	—		—		(6,854)		—		—		(6,854)			Mortgage delivery commitments	—		—		(8,483)		—		—		(8,483)

Economic hedges – net interest received (paid)	Economic hedges – net interest received (paid)	(305)		(16,737)		—		1,177		21		(15,844)			Economic hedges – net interest received (paid)	(303)		(17,034)		—		108		184		(17,045)
Price alignment amount	Price alignment amount	(1)		2		—		2		—		3			Price alignment amount	(4)		(48)		—		18		1		(33)
Net gains (losses) on derivatives	Net gains (losses) on derivatives	3,054		64,845		(6,854)		(1,902)		234		59,377			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	Net gains (losses) on trading securities hedged on an economic basis with derivatives	—		(82,397)		—		—		—		(82,397)			Net gains (losses) on trading securities hedged on an economic basis with derivatives	—		(112,592)		—		—		—		(112,592)
TOTAL	TOTAL	$	3,054	$	(17,552)	$	(6,854)	$	(1,902)	$	234	$	(23,020)		TOTAL	$	4,609	$	(18,080)	$	(8,483)	$	(4,539)	$	(524)	$	(27,017)

For the three months ended ~~June~~September 30, 2023, net gains and losses on derivatives resulted in an increase in net income of ~~$20.3~~$5.2 million compared to an increase of ~~$12.8~~$26.2 million for the prior year period. For the ~~six~~nine months ended ~~June~~September 30, 2023 and 2022, net gains and losses on derivatives resulted in increases in net income of ~~$19.8~~$25.0 million compared to ~~$59.4~~$85.6 million for the prior year period. The change between periods was attributed to fair value fluctuations resulting from an increase in the level of swap index rates. The increase in swap index rates between ~~June~~September 30, 2022 and ~~June~~September 30, 2023 positively impacted the net interest settlements on economic hedges, as they were in a pay position of ~~$5.5~~$1.2 million and ~~$15.8~~$17.0 million for the prior year quarter and year-to-date period, respectively, and a receive position of ~~$9.3~~$8.4 million and ~~$17.6~~$25.9 million for the current quarter and year-to-date period, respectively. As part of our LIBOR transition, we elected to terminate some LIBOR-indexed swaps that were designated in fair value hedging relationships and either economically hedge the outstanding items or leave the items unhedged, which could cause some income statement volatility until those positions mature.

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

Table 16


		Three Months Ended													Three Months Ended
		06/30/2023						06/30/2022							09/30/2023						09/30/2022
		Gains (Losses) on Derivatives		Gains (Losses) on Trading Securities		Net		Gains (Losses) on Derivatives		Gains (Losses) on Trading Securities		Net			Gains (Losses) on Derivatives		Gains (Losses) on Trading Securities		Net		Gains (Losses) on Derivatives		Gains (Losses) on Trading Securities		Net
U.S. Treasury obligations	U.S. Treasury obligations	$	(1,816)	$	1,399	$	(417)	$	6,150	$	(5,931)	$	219	U.S. Treasury obligations	$	(638)	$	593	$	(45)	$	2,705	$	(3,518)	$	(813)
GSE debentures	GSE debentures	639		(855)		(216)		4,308		(5,428)		(1,120)		GSE debentures	(1,643)		885		(758)		6,798		(7,243)		(445)
GSE MBS	GSE MBS	8,005		(5,130)		2,875		11,228		(11,455)		(227)		GSE MBS	(2,481)		776		(1,705)		19,731		(19,434)		297
TOTAL	TOTAL	$	6,828	$	(4,586)	$	2,242	$	21,686	$	(22,814)	$	(1,128)	TOTAL	$	(4,762)	$	2,254	$	(2,508)	$	29,234	$	(30,195)	$	(961)

Table 17


		Six Months Ended													Nine Months Ended
		06/30/2023						06/30/2022							09/30/2023						09/30/2022
		Gains (Losses) on Derivatives		Gains (Losses) on Trading Securities		Net		Gains (Losses) on Derivatives		Gains (Losses) on Trading Securities		Net			Gains (Losses) on Derivatives		Gains (Losses) on Trading Securities		Net		Gains (Losses) on Derivatives		Gains (Losses) on Trading Securities		Net
U.S. Treasury obligations	U.S. Treasury obligations	$	(3,747)	$	3,174	$	(573)	$	17,731	$	(18,365)	$	(634)	U.S. Treasury obligations	$	(4,384)	$	3,767	$	(617)	$	20,436	$	(21,883)	$	(1,447)
GSE debentures	GSE debentures	(2,231)		1,168		(1,063)		18,375		(19,431)		(1,056)		GSE debentures	(3,874)		2,053		(1,821)		25,173		(26,674)		(1,501)
GSE MBS	GSE MBS	1,731		26		1,757		44,389		(44,601)		(212)		GSE MBS	(749)		802		53		64,120		(64,035)		85
TOTAL	TOTAL	$	(4,247)	$	4,368	$	121	$	80,495	$	(82,397)	$	(1,902)	TOTAL	$	(9,007)	$	6,622	$	(2,385)	$	109,729	$	(112,592)	$	(2,863)

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 40 and 41 under Item 3 – “Quantitative and Qualitative Disclosures About Market Risk” for additional detail regarding notional and fair value amounts of derivative instruments.

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 SOFR. The fair values of the fixed rate multifamily GSE MBS are affected by changes in mortgage rates and credit spreads are swapped on an economic basis to 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 SOFR.

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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. 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 18 presents the major components of the net gains (losses) on trading securities (in thousands):

Table 18


		Three Months Ended				Six Months Ended					Three Months Ended				Nine Months Ended
		06/30/2023		06/30/2022		06/30/2023		06/30/2022			09/30/2023		09/30/2022		09/30/2023		09/30/2022
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	$	(15)	$	(101)	$	16	$	(194)	U.S. obligation MBS and GSE MBS	$	(39)	$	(171)	$	(23)	$	(365)
Short-term securities	Short-term securities	—		(424)		—		(236)		Short-term securities	—		117		—		(119)
Total trading securities not hedged	Total trading securities not hedged	(15)		(525)		16		(430)		Total trading securities not hedged	(39)		(54)		(23)		(484)
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	1,399		(5,931)		3,173		(18,365)		U.S. Treasury obligations	594		(3,518)		3,767		(21,883)
GSE debentures	GSE debentures	(855)		(5,428)		1,168		(19,431)		GSE debentures	885		(7,243)		2,053		(26,674)
GSE MBS	GSE MBS	(5,130)		(11,455)		26		(44,601)		GSE MBS	776		(19,434)		802		(64,035)
Total trading securities hedged on an economic basis with derivatives	Total trading securities hedged on an economic basis with derivatives	(4,586)		(22,814)		4,367		(82,397)		Total trading securities hedged on an economic basis with derivatives	2,255		(30,195)		6,622		(112,592)
TOTAL	TOTAL	$	(4,601)	$	(23,339)	$	4,383	$	(82,827)	TOTAL	$	2,216	$	(30,249)	$	6,599	$	(113,076)

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, especially relative to the losses recognized in the prior year periods. The increase in Treasury and mortgage rates was more substantial for the prior year 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).

Other Expenses: Other expenses, which includes compensation and benefits and other operating expenses, increased ~~$2.2~~$4.5 million and ~~$4.5~~$9.0 million ~~for the three and six months ended June 30, 2023, respectively,~~ compared to the prior year periods ~~primarily due~~for the three and nine months ended September 30, 2023, respectively. The change between periods was attributed to an increase in compensation and benefits ~~expense~~ and other operating ~~expense.~~expenses. Compensation and benefits expense increased due to hiring for new and open positions and higher incentive accruals based on incentive plan goal attainment. ~~We expect modest increases in compensation and benefits expense for 2023 in anticipation of continued hiring for new and open positions. We also expect an increase in other~~Other operating ~~expense for the next few years~~expenses have increased due to ~~planned~~a multi-year software implementation. For 2023, we have also committed ~~a minimum of $1.0~~$3.0 million to a voluntary grant program for Native American Tribes and Tribally Designated Housing ~~Entities. We have also~~Entities and 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.

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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~~interest paid or received on variation ~~margin),~~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 19 presents a reconciliation of GAAP net income to adjusted income (a non-GAAP measure) (in thousands):

Table 19


		Three Months Ended				Six Months Ended					Three Months Ended				Nine Months Ended
		06/30/2023		06/30/2022		06/30/2023		06/30/2022			09/30/2023		09/30/2022		09/30/2023		09/30/2022
Net income, as reported under GAAP	Net income, as reported under GAAP	$	106,200	$	50,361	$	191,045	$	100,756	Net income, as reported under GAAP	$	91,997	$	66,921	$	283,042	$	167,677
AHP assessments	AHP assessments	11,800		5,596		21,228		11,196		AHP assessments	10,222		7,436		31,450		18,632
Income before AHP assessments	Income before AHP assessments	118,000		55,957		212,273		111,952		Income before AHP assessments	102,219		74,357		314,492		186,309
Derivative (gains) losses1	Derivative (gains) losses1	(25,851)		(22,329)		(21,477)		(86,157)		Derivative (gains) losses1	4,281		(41,518)		(17,196)		(127,675)
Trading (gains) losses	Trading (gains) losses	4,601		23,339		(4,383)		82,827		Trading (gains) losses	(2,216)		30,249		(6,599)		113,076
Prepayment/yield maintenance fees2	Prepayment/yield maintenance fees2	(30)		(2,425)		(37)		(6,149)		Prepayment/yield maintenance fees2	(6)		(942)		(43)		(7,091)

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

Total excluded items	Total excluded items	(21,280)		(1,415)		(25,897)		(9,479)		Total excluded items	2,059		(12,122)		(23,838)		(21,601)
Adjusted income (a non-GAAP measure)	Adjusted income (a non-GAAP measure)	$	96,720	$	54,542	$	186,376	$	102,473	Adjusted income (a non-GAAP measure)	$	104,278	$	62,235	$	290,654	$	164,708

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 20 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 20


		Three Months Ended						Six Months Ended							Three Months Ended						Nine Months Ended
		06/30/2023			06/30/2022			06/30/2023			06/30/2022				09/30/2023			09/30/2022			09/30/2023			09/30/2022
Net interest income, as reported under GAAP	Net interest income, as reported under GAAP	$	121,667		$	83,226		$	226,070		$	168,301		Net interest income, as reported under GAAP	$	114,908		$	94,795		$	340,978		$	263,096
(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	(14,634)			(4,044)			(18,872)			(10,939)			(Gains) losses on derivatives qualifying for hedge accounting recorded in net interest income	1,336			(14,083)			(17,536)			(25,022)
Net interest received (paid) on derivatives not qualifying for hedge accounting	Net interest received (paid) on derivatives not qualifying for hedge accounting	9,257			(5,470)			17,555			(15,844)			Net interest received (paid) on derivatives not qualifying for hedge accounting	8,393			(1,201)			25,948			(17,045)
Prepayment/yield maintenance fees1	Prepayment/yield maintenance fees1	(30)			(2,425)			(37)			(6,149)			Prepayment/yield maintenance fees1	(6)			(942)			(43)			(7,091)
Adjusted net interest income (a non-GAAP measure)	Adjusted net interest income (a non-GAAP measure)	$	116,260		$	71,287		$	224,716		$	135,369		Adjusted net interest income (a non-GAAP measure)	$	124,631		$	78,569		$	349,347		$	213,938

Net interest margin, as calculated under GAAP	Net interest margin, as calculated under GAAP	0.63		%	0.59		%	0.60		%	0.62		%	Net interest margin, as calculated under GAAP	0.61		%	0.60		%	0.60		%	0.61		%
Adjusted net interest margin (a non-GAAP measure)	Adjusted net interest margin (a non-GAAP measure)	0.61		%	0.50		%	0.60		%	0.50		%	Adjusted net interest margin (a non-GAAP measure)	0.66		%	0.50		%	0.62		%	0.50		%

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

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

Table 21


		Three Months Ended						Six Months Ended							Three Months Ended						Nine Months Ended
		06/30/2023			06/30/2022			06/30/2023			06/30/2022				09/30/2023			09/30/2022			09/30/2023			09/30/2022
Average GAAP total capital	Average GAAP total capital	$	3,941,891		$	3,060,294		$	3,890,702		$	2,994,161		Average GAAP total capital	$	3,884,942		$	3,289,015		$	3,888,761		$	3,093,526
ROE, based upon GAAP net income	ROE, based upon GAAP net income	10.81		%	6.60		%	9.90		%	6.79		%	ROE, based upon GAAP net income	9.39		%	8.07		%	9.73		%	7.25		%
Adjusted ROE, based upon adjusted income (a non-GAAP measure)	Adjusted ROE, based upon adjusted income (a non-GAAP measure)	9.84		%	7.15		%	9.66		%	6.90		%	Adjusted ROE, based upon adjusted income (a non-GAAP measure)	10.65		%	7.51		%	9.99		%	7.12		%
Average overnight Federal funds effective rate	Average overnight Federal funds effective rate	4.99		%	0.76		%	4.76		%	0.44		%	Average overnight Federal funds effective rate	5.26		%	2.20		%	4.93		%	1.03		%
GAAP ROE as a spread to average overnight Federal funds effective rate	GAAP ROE as a spread to average overnight Federal funds effective rate	5.82		%	5.84		%	5.14		%	6.35		%	GAAP ROE as a spread to average overnight Federal funds effective rate	4.13		%	5.87		%	4.80		%	6.22		%
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)	4.85		%	6.39		%	4.90		%	6.46		%	Adjusted ROE as a spread to average overnight Federal funds effective rate (a non-GAAP measure)	5.39		%	5.31		%	5.06		%	6.09		%

Financial Condition

Overall: Table 22 presents the percentage concentration of the major components of our Statements of Condition:

Table 22


		Component Concentration					Component Concentration
		06/30/2023		12/31/2022			09/30/2023		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	%	0.1	%
Interest-bearing deposits, securities purchased under agreements to resell and Federal funds sold	Interest-bearing deposits, securities purchased under agreements to resell and Federal funds sold	11.6		11.3		Interest-bearing deposits, securities purchased under agreements to resell and Federal funds sold	10.8		11.3
Investment securities	Investment securities	16.1		15.4		Investment securities	16.5		15.4
Advances	Advances	60.3		61.5		Advances	60.6		61.5
Mortgage loans, net	Mortgage loans, net	11.1		11.0		Mortgage loans, net	11.2		11.0

Other assets	Other assets	0.9		0.7		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	0.7	%	1.0	%	Deposits	1.0	%	1.0	%
Consolidated obligation discount notes, net	Consolidated obligation discount notes, net	28.7		34.4		Consolidated obligation discount notes, net	24.5		34.4
Consolidated obligation bonds, net	Consolidated obligation bonds, net	64.6		59.0		Consolidated obligation bonds, net	68.5		59.0

Other liabilities	Other liabilities	0.7		0.5		Other liabilities	0.7		0.5
Total liabilities	Total liabilities	94.7		94.9		Total liabilities	94.7		94.9

Capital:	Capital:					Capital:
Capital stock outstanding	Capital stock outstanding	3.6		3.5		Capital stock outstanding	3.6		3.5
Retained earnings	Retained earnings	1.8		1.7		Retained earnings	1.9		1.7
Accumulated other comprehensive income (loss)	Accumulated other comprehensive income (loss)	(0.1)		(0.1)		Accumulated other comprehensive income (loss)	(0.2)		(0.1)
Total capital	Total capital	5.3		5.1		Total capital	5.3		5.1
Total liabilities and capital	Total liabilities and capital	100.0	%	100.0	%	Total liabilities and capital	100.0	%	100.0	%

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Table 23 presents changes in the major components of our Statements of Condition (dollar amounts in thousands):

Table 23


		Increase (Decrease) in Components					Increase (Decrease) in Components
		06/30/2023 vs. 12/31/2022					09/30/2023 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	$	(774)	(3.0)	%	Cash and due from banks	$	688	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	328,614		4.0		Interest-bearing deposits, securities purchased under agreements to resell and Federal funds sold	(216,512)		(2.7)
Investment securities	Investment securities	594,906		5.3		Investment securities	922,525		8.3
Advances	Advances	(305,389)		(0.7)		Advances	59,471		0.1
Mortgage loans, net	Mortgage loans, net	159,093		2.0		Mortgage loans, net	302,003		3.8

Other assets	Other assets	90,268		16.8		Other assets	75,275		14.0
Total assets	Total assets	$	866,718	1.2	%	Total assets	$	1,143,450	1.6	%

Liabilities:	Liabilities:					Liabilities:
Deposits	Deposits	$	(171,904)	(24.2)	%	Deposits	$	40,891	5.8	%
Consolidated obligation discount notes, net	Consolidated obligation discount notes, net	(3,882,540)		(15.7)		Consolidated obligation discount notes, net	(6,882,671)		(27.8)
Consolidated obligation bonds, net	Consolidated obligation bonds, net	4,545,830		10.7		Consolidated obligation bonds, net	7,593,034		17.9

Other liabilities	Other liabilities	155,390		48.0		Other liabilities	177,122		54.7
Total liabilities	Total liabilities	646,776		0.9		Total liabilities	928,376		1.4

Capital:	Capital:					Capital:
Capital stock outstanding	Capital stock outstanding	136,540		5.4		Capital stock outstanding	141,742		5.7
Retained earnings	Retained earnings	82,961		6.6		Retained earnings	118,481		9.5
Accumulated other comprehensive income (loss)	Accumulated other comprehensive income (loss)	441		0.5		Accumulated other comprehensive income (loss)	(45,149)		(53.6)
Total capital	Total capital	219,942		6.0		Total capital	215,074		5.8
Total liabilities and capital	Total liabilities and capital	$	866,718	1.2	%	Total liabilities and capital	$	1,143,450	1.6	%

Total assets increased between periods, from $72.0 billion at December 31, 2022 to ~~$72.9~~$73.1 billion at ~~June~~September 30, 2023, driven by the increase in ~~short- and~~ long-term investments between those periods. Asset composition remained relatively consistent from December 31, 2022 to ~~June~~September 30, 2023, with a slight increase in long-term investments to ~~16.1~~16.5 percent of total assets compared to 15.4 percent as of December 31, 2022. Mortgage loans increased by ~~$159.1~~$302.0 million from December 31, 2022 to ~~June~~September 30, 2023, and increased slightly as a percent of total assets, from 11.0 percent as of December 31, 2022 to ~~11.1~~11.2 percent of total assets as of ~~June~~September 30, 2023. Advances declined slightly as a percent of total assets compared to December 31, 2022 as some members experienced deposit growth or shifted their use of wholesale funding from advances to alternative funding sources. Total liabilities increased ~~$646.8~~$928.4 million from December 31, 2022 to ~~June~~September 30, 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 ~~69.3~~73.7 percent and ~~30.7~~26.3 percent at ~~June~~September 30, 2023. This composition shift is mostly due to an increase in swapped callable and swapped bullet consolidated obligation bonds and a decrease in discount notes. Total capital increased ~~$219.9~~$215.1 million, or ~~6.0~~5.8 percent, from December 31, 2022 to ~~June~~September 30, 2023 due to an increase in excess capital stock and net income in excess of dividends paid.

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Advances: Advances are one of the primary ways we fulfill our mission of providing liquidity to our members and constituted the largest asset on our balance sheet at ~~June~~September 30, 2023 and December 31, 2022. Advance par value ~~decreased~~increased by ~~0.6~~0.4 percent, from $44.7 billion at December 31, 2022 to ~~$44.4~~$44.8 billion at ~~June~~September 30, 2023 (see Table 24). In 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. This stress has largely ~~subsided, which resulted in members holding less excess liquidity at June 30, 2023 than in March and April 2023, but~~subsided; however, members continue to hold elevated levels of advances. Members are also shifting from overnight advances to term advances. We began offering a new putable advance product in April of 2023 to further expand fixed rate advance offerings. Despite the ~~$3.6~~$3.8 billion growth in standard fixed rate advances with maturities longer than 93 days in the past ~~six~~nine months, the composition of the advance portfolio remains concentrated in advances that either reprice or mature on a relatively short-term basis.

As of ~~June~~September 30, 2023 and December 31, 2022, ~~64.7~~65.0 percent and 64.4 percent, respectively, of our members carried outstanding advance balances. Additional volatility in advance balances may occur during the remainder of 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~~including 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 advances, we elect to swap a significant portion of 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 ~~94.7~~95.2 percent and 92.9 percent of our total advance portfolio as of ~~June~~September 30, 2023 and December 31, 2022, respectively. We anticipate continuing the practice of swapping advances with longer maturities to short-term indices. As part of our LIBOR transition, we began offering adjustable rate advances indexed to SOFR in late 2020 and had $3.0 billion of SOFR-indexed advances outstanding as of ~~June~~September 30, 2023. For additional information on LIBOR transition, see “Risk Management – Interest Rate Risk Management” under this Item 2.

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Table 24 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 24


		06/30/2023				12/31/2022					09/30/2023				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	$	9,758,649	22.0	%	$	15,682,310	35.1	%	Overnight line of credit1	$	8,641,938	19.3	%	$	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	2,634,750		5.9		2,504,950		5.6		Regular adjustable rate advances	2,680,750		6.0		2,504,950		5.6
Adjustable rate callable advances	Adjustable rate callable advances	1,515,150		3.4		1,700,299		3.8		Adjustable rate callable advances	1,479,650		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	22,262		0.1		22,262		0.1		Adjustable rate callable advances	22,262		0.1		22,262		0.1
Total adjustable rate term advances	Total adjustable rate term advances	4,172,162		9.4		4,227,511		9.5		Total adjustable rate term advances	4,182,662		9.4		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	15,335,951		34.5		12,988,848		29.1		Short-term fixed rate advances2	16,774,571		37.4		12,988,848		29.1
Regular fixed rate advances	Regular fixed rate advances	12,067,517		27.2		10,290,760		23.1		Regular fixed rate advances	12,060,272		26.9		10,290,760		23.1
Fixed rate callable advances	Fixed rate callable advances	66,811		0.2		64,071		0.1		Fixed rate callable advances	68,402		0.2		64,071		0.1
Fixed rate putable advances	Fixed rate putable advances	1,775,000		4.0		—		—		Fixed rate putable advances	1,979,800		4.4		—		—
Fixed rate convertible advances	Fixed rate convertible advances	208,400		0.5		309,650		0.7		Fixed rate convertible advances	155,900		0.4		309,650		0.7
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	332,965		0.8		356,035		0.8		Regular fixed rate advances	315,724		0.7		356,035		0.8
Fixed rate callable advances	Fixed rate callable advances	458		—		458		—		Fixed rate callable advances	458		—		458		—
Total fixed rate term advances	Total fixed rate term advances	29,787,102		67.2		24,009,822		53.8		Total fixed rate term advances	31,355,127		70.0		24,009,822		53.8
Amortizing:	Amortizing:									Amortizing:
Standard advance products:	Standard advance products:									Standard advance products:
Fixed rate amortizing advances	Fixed rate amortizing advances	445,606		1.0		465,181		1.0		Fixed rate amortizing advances	428,112		1.0		465,181		1.0
Fixed rate callable amortizing advances	Fixed rate callable amortizing advances	19,202		—		19,370		—		Fixed rate callable amortizing advances	18,828		—		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	214,559		0.4		238,773		0.6		Fixed rate amortizing advances	207,601		0.3		238,773		0.6
Fixed rate callable amortizing advances	Fixed rate callable amortizing advances	11,438		—		11,748		—		Fixed rate callable amortizing advances	11,406		—		11,748		—
Total amortizing advances	Total amortizing advances	690,805		1.4		735,072		1.6		Total amortizing advances	665,947		1.3		735,072		1.6
TOTAL PAR VALUE	TOTAL PAR VALUE	$	44,408,718	100.0	%	$	44,654,715	100.0	%	TOTAL PAR VALUE	$	44,845,674	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.

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Table 25 presents information on our five largest borrowers (dollar amounts in thousands). We do not expect to incur any credit losses on these advances based on our rights to collateral with an estimated fair value in excess of the book value of these advances. We have not experienced a credit loss on an advance since the inception of FHLBank.

Table 25


		06/30/2023				12/31/2022					09/30/2023				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	$	11,370,000	25.6	%	$	10,740,000	24.1	%	MidFirst Bank	$	10,530,000	23.5	%	$	10,740,000	24.1	%
BOKF, N.A.	BOKF, N.A.	3,750,000		8.4		4,700,000		10.5		BOKF, N.A.	6,175,000		13.8		4,700,000		10.5
Capitol Federal Savings Bank	Capitol Federal Savings Bank	2,490,246		5.6		2,650,082		5.9		Capitol Federal Savings Bank	2,382,828		5.3		2,650,082		5.9
United of Omaha Life Insurance Co.	United of Omaha Life Insurance Co.	2,118,800		4.8		1,946,896		4.4		United of Omaha Life Insurance Co.	2,296,958		5.1		1,946,896		4.4
First United Bank & Trust Co.										First United Bank & Trust Co.	1,734,387		3.9
Security Life of Denver Insurance Co.	Security Life of Denver Insurance Co.	1,750,000		3.9		1,650,000		3.7		Security Life of Denver Insurance Co.					1,650,000		3.7

TOTAL	TOTAL	$	21,479,046	48.3	%	$	21,686,978	48.6	%	TOTAL	$	23,119,173	51.6	%	$	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									Three Months Ended
		06/30/2023				06/30/2022					09/30/2023				09/30/2022
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	$	162,117	29.3	%	$	17,737	20.7	%	MidFirst Bank	$	148,537	26.5	%	$	50,449	25.2	%
BOKF, N.A.	BOKF, N.A.	66,915		12.1						BOKF, N.A.	95,813		17.1		8,728		4.3
Capitol Federal Savings Bank	Capitol Federal Savings Bank	29,444		5.3		9,567		11.1		Capitol Federal Savings Bank	23,984		4.3		23,763		11.9
United of Omaha Life Insurance Co.										United of Omaha Life Insurance Co.	21,426		3.8
Security Life of Denver Insurance Co.	Security Life of Denver Insurance Co.	19,598		3.5						Security Life of Denver Insurance Co.	20,636		3.8		8,017		4.0
United of Omaha Life Insurance Co.		19,292		3.5		3,949		4.6
Pacific Life Insurance Co.	Pacific Life Insurance Co.					4,354		5.1		Pacific Life Insurance Co.					11,568		5.8
First United Bank & Trust Co.						3,526		4.1

TOTAL	TOTAL	$	297,366	53.7	%	$	39,133	45.6	%	TOTAL	$	310,396	55.5	%	$	102,525	51.2	%

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.

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

Table 27


		Six Months Ended									Nine Months Ended
		06/30/2023				06/30/2022					09/30/2023				09/30/2022
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	$	298,697	28.5	%	$	24,631	18.2	%	MidFirst Bank	$	447,233	27.8	%	$	75,080	22.4	%
BOKF, N.A.	BOKF, N.A.	119,190		11.4						BOKF, N.A.	215,003		13.4
Capitol Federal Savings Bank	Capitol Federal Savings Bank	62,310		5.9		15,683		11.6		Capitol Federal Savings Bank	86,294		5.4		39,446		11.8
United of Omaha Life Insurance Co.										United of Omaha Life Insurance Co.	57,646		3.6		12,650		3.7
Security Life of Denver Insurance Co.	Security Life of Denver Insurance Co.	36,476		3.5						Security Life of Denver Insurance Co.	57,114		3.5		13,126		3.9
United of Omaha Life Insurance Co.		36,221		3.5		6,044		4.5
American Fidelity Assurance Co.						5,556		4.1
First United Bank & Trust Co.						5,114		3.8
Pacific Life Insurance Co.										Pacific Life Insurance Co.					16,433		4.9

TOTAL	TOTAL	$	552,894	52.8	%	$	57,028	42.2	%	TOTAL	$	863,290	53.7	%	$	156,735	46.7	%

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 increased ~~$0.2~~$0.3 billion between periods, from $7.9 billion at December 31, 2022 to ~~$8.1~~$8.2 billion at ~~June~~September 30, 2023. Mortgage rates continued to trend upward in response to market conditions, which has reduced origination volume and refinancing incentive for borrowers and slowed prepayments in recent periods, although purchase volume has exceeded principal repayments during ~~the first six months of~~ 2023. Net mortgage loans as a percentage of total assets increased, from 11.0 percent as of December 31, 2022 to ~~11.1~~11.2 percent as of ~~June~~September 30, 2023. Mortgage loans are generally 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 ~~six~~nine months ended ~~June~~September 30, 2023 was ~~$0.5~~$0.9 billion.

Future growth in the MPF portfolio is a function of asset size and composition, most notably the balance of advances, and 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 level of interest rates and the shape of the yield curve; (2) the mortgage loan origination volume of current PFIs; (3) refinancing activity; (4) the relative competitiveness of MPF pricing to the prices offered by other buyers of residential mortgage loans; (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; and (6) the number of new and delivering PFIs.

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Table 28 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 28


		06/30/2023				12/31/2022					09/30/2023				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	$	347,451	4.3	%	$	325,530	4.2	%	Fidelity Bank	$	362,137	4.4	%	$	325,530	4.2	%
Farmers Bank & Trust										Farmers Bank & Trust	326,362		4.0
Tulsa Teachers Credit Union	Tulsa Teachers Credit Union	314,228		3.9		326,491		4.2		Tulsa Teachers Credit Union	307,182		3.8		326,491		4.2
Farmers Bank & Trust		269,396		3.4
West Gate Bank	West Gate Bank	244,623		3.1		227,649		2.9		West Gate Bank	259,188		3.2		227,649		2.9
Community National Bank & Trust	Community National Bank & Trust	229,188		2.9		233,975		3.0		Community National Bank & Trust	227,269		2.8		233,975		3.0
Mid-America Bank	Mid-America Bank					176,792		2.3		Mid-America Bank					176,792		2.3

TOTAL	TOTAL	$	1,404,886	17.6	%	$	1,290,437	16.6	%	TOTAL	$	1,482,138	18.2	%	$	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 ~~June~~September 30, 2023 was ~~749~~750 and ~~74.2~~74.4 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 ~~increased $0.3~~decreased $0.2 million from December 31, 2022 to ~~June~~September 30, 2023. Delinquencies of conventional loans remained at low levels relative to the portfolio, at ~~0.8~~0.9 percent of the amortized cost of total conventional loans at ~~June~~September 30, 2023 and 1.0 percent at December 31, 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 ~~$0.9~~$0.7 billion from December 31, 2022 to ~~June~~September 30, 2023 primarily due to an increase in ~~liquidity investments and~~ MBS, partially offset by a decline in U.S. ~~Treasuries.~~Treasury obligations.

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.

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.

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

Table 29


		06/30/2023		12/31/2022			09/30/2023		12/31/2022
Interest-bearing deposits	Interest-bearing deposits	$	2,068,039	$	2,039,333	Interest-bearing deposits	$	1,698,118	$	2,039,333
Federal funds sold	Federal funds sold	4,400,000		3,750,000		Federal funds sold	4,400,000		3,750,000

TOTAL UNSECURED INVESTMENT CREDIT EXPOSURE1	TOTAL UNSECURED INVESTMENT CREDIT EXPOSURE1	$	6,468,039	$	5,789,333	TOTAL UNSECURED INVESTMENT CREDIT EXPOSURE1	$	6,098,118	$	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.

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

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

Table 30

Domicile of Counterparty

Overnight

Domestic

~~2,068,039~~2,048,118

U.S. Branches and agency offices of foreign commercial banks:

~~Finland~~

~~1,100,000~~

Australia

~~1,000,000~~1,075,000

Canada

~~700,000~~1,075,000

~~Netherlands~~Germany

700,000

United Kingdom

700,000

~~Germany~~Netherlands

~~200,000~~500,000

Total U.S. Branches and agency offices of foreign commercial banks

~~4,400,000~~4,050,000

TOTAL UNSECURED INVESTMENT CREDIT EXPOSURE1

~~6,468,039~~6,098,118

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.

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Long-term investments – Our long-term investment portfolio consists primarily of GSE MBS and U.S. Treasury obligations. Our Risk Management Policy (RMP) restricts the acquisition of investments to highly rated long-term securities. Generally, fixed rate U.S. Treasury obligations are either classified as trading securities and economically swapped to variable rates or classified as available-for-sale securities and swapped to variable rates in qualifying fair value hedging relationships. In addition to serving as excellent collateral, U.S. Treasury obligations also help satisfy regulatory liquidity requirements. We also purchase fixed rate securities for duration and interest rate risk management. A significant portion of our variable rate investment securities were indexed to LIBOR for the first half of 2023; however, LIBOR ceased publication on June 30, 2023. As such, all LIBOR-indexed investments converted to reference SOFR, either to start or fall back, beginning July 3, 2023 or at the beginning of the next reset period. For additional information on LIBOR transition, 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 ~~June~~September 30, 2023, the aggregate value of our MBS portfolio represented ~~218~~231 percent of our regulatory capital. We are below our regulatory threshold primarily due to an increase in regulatory capital despite increased MBS purchases ~~of $1.7 billion~~ in ~~MBS since the beginning of~~ 2023. We expect to be below our regulatory limit in the near-term but continue to remain opportunistic about future MBS 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 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~~may be sold when the duration exposure is within risk tolerances, are classified as trading or available-for-sale securities. Changes in the fair values of investments classified as trading are recorded through other income and the original premiums/discounts on these investments are not amortized.

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See Note 3 of the Notes to Financial Statements under Part I, Item 1 of this quarterly report for additional information on our different investment classifications including the types of securities held under each classification. The carrying values by contractual maturities of our investments as of ~~June~~September 30, 2023 are summarized by security type in Table 31 (dollar amounts in thousands) with certain weighted average yield metrics along with carrying values as of December 31, 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 31


		06/30/2023														12/31/2022			09/30/2023														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:

U.S. Treasury obligations	U.S. Treasury obligations	$	149,406		$	—		$	—		$	—		$	149,406	$	396,233	U.S. Treasury obligations	$	—		$	—		$	—		$	—		$	—	$	396,233
GSE debentures	GSE debentures	48,711			235,912			—						284,623		388,955		GSE debentures	268,178			17,331			—						285,509		388,955

GSE MBS	GSE MBS	14,007			603,285			3,231			8,962			629,485		636,265		GSE MBS	13,960			588,016			6,823			4,715			613,514		636,265
Total trading securities	Total trading securities	212,124			839,197			3,231			8,962			1,063,514		1,421,453		Total trading securities	282,138			605,347			6,823			4,715			899,023		1,421,453

Available-for-sale securities:	Available-for-sale securities:																	Available-for-sale securities:
U.S. Treasury obligations	U.S. Treasury obligations	547,421			2,161,393			216,362			—			2,925,176		3,315,356		U.S. Treasury obligations	249,522			2,640,865			—						2,890,387		3,315,356
U.S. obligation MBS	U.S. obligation MBS	—									114,746			114,746		40,039		U.S. obligation MBS	—									111,346			111,346		40,039
GSE MBS	GSE MBS	—			1,519,250			3,917,900			1,890,306			7,327,456		5,999,021		GSE MBS	40,871			1,595,338			3,844,553			2,385,849			7,866,611		5,999,021
Total available-for-sale securities	Total available-for-sale securities	547,421			3,680,643			4,134,262			2,005,052			10,367,378		9,354,416		Total available-for-sale securities	290,393			4,236,203			3,844,553			2,497,195			10,868,344		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	—						39,515			—			39,515		70,505		State or local housing agency obligations	—						39,515			—			39,515		70,505

GSE MBS	GSE MBS	—			17,461			33,219			195,118			245,798		274,925		GSE MBS	—			46,491			1,998			188,453			236,942		274,925
Total held-to-maturity securities	Total held-to-maturity securities	—			17,461			72,734			195,118			285,313		345,430		Total held-to-maturity securities	—			46,491			41,513			188,453			276,457		345,430

Total securities	Total securities	759,545			4,537,301			4,210,227			2,209,132			11,716,205		11,121,299		Total securities	572,531			4,888,041			3,892,889			2,690,363			12,043,824		11,121,299

Interest-bearing deposits	Interest-bearing deposits	2,068,466			—									2,068,466		2,039,852		Interest-bearing deposits	1,698,340			—									1,698,340		2,039,852

Federal funds sold	Federal funds sold	4,400,000			—									4,400,000		3,750,000		Federal funds sold	4,400,000			—									4,400,000		3,750,000

Securities purchased under agreements to resell	Securities purchased under agreements to resell	2,000,000			—									2,000,000		2,350,000		Securities purchased under agreements to resell	1,825,000			—									1,825,000		2,350,000
TOTAL INVESTMENTS	TOTAL INVESTMENTS	$	9,228,011		$	4,537,301		$	4,210,227		$	2,209,132		$	20,184,671	$	19,261,151	TOTAL INVESTMENTS	$	8,495,871		$	4,888,041		$	3,892,889		$	2,690,363		$	19,967,164	$	19,261,151

Weighted average yields1:	Weighted average yields1:																	Weighted average yields1:
Available-for-sale securities	Available-for-sale securities	2.43		%	2.63		%	3.16		%	4.19		%					Available-for-sale securities	2.41		%	2.64		%	3.56		%	4.45		%
Held-to-maturity securities	Held-to-maturity securities	—		%	1.22		%	2.69		%	1.68		%					Held-to-maturity securities	—		%	2.74		%	2.51		%	1.70		%

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

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Securities Ratings – Tables 32 and 33 present the carrying value of our investments by rating as of ~~June~~September 30, 2023 and December 31, 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 32


		06/30/2023									09/30/2023
		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	$	16	$	427	$	2,068,023		$	—		$	2,068,466		Interest-bearing deposits2	$	—	$	222	$	1,698,118			$	—	$	1,698,340

Federal funds sold2	Federal funds sold2	—		1,100,000		3,300,000			—			4,400,000			Federal funds sold2	—		—		4,400,000				—		4,400,000

Securities purchased under agreements to resell3	Securities purchased under agreements to resell3	—		—		—			2,000,000			2,000,000			Securities purchased under agreements to resell3	—		—		—				1,825,000		1,825,000

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

U.S. Treasury obligations	U.S. Treasury obligations	—		3,074,582		—			—			3,074,582			U.S. Treasury obligations	—		2,890,387		—				—		2,890,387
GSE debentures	GSE debentures	—		284,623		—			—			284,623			GSE debentures	—		285,509		—				—		285,509
State or local housing agency obligations	State or local housing agency obligations	39,515		—		—			—			39,515			State or local housing agency obligations	39,515		—		—				—		39,515
Total non-mortgage-backed securities	Total non-mortgage-backed securities	39,515		3,359,205		—			—			3,398,720			Total non-mortgage-backed securities	39,515		3,175,896		—				—		3,215,411
Mortgage-backed securities:	Mortgage-backed securities:														Mortgage-backed securities:
U.S. obligation MBS	U.S. obligation MBS	—		114,746		—			—			114,746			U.S. obligation MBS	—		111,346		—				—		111,346
GSE MBS	GSE MBS	—		8,202,739		—			—			8,202,739			GSE MBS	—		8,717,067		—				—		8,717,067
Total mortgage-backed securities	Total mortgage-backed securities	—		8,317,485		—			—			8,317,485			Total mortgage-backed securities	—		8,828,413		—				—		8,828,413

TOTAL INVESTMENTS	TOTAL INVESTMENTS	$	39,531	$	12,777,117	$	5,368,023		$	2,000,000		$	20,184,671		TOTAL INVESTMENTS	$	39,515	$	12,004,531	$	6,098,118			$	1,825,000	$	19,967,164

1 Investment amounts represent the carrying value and do not include related accrued interest receivable of ~~$38.0~~$44.5 million at ~~June~~September 30, 2023.

2 Amounts include unsecured credit exposure with overnight maturities.

3 Amounts represent collateralized overnight borrowings.

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Table 33


	12/31/2022
	Carrying Value1
	Investment Grade						Unrated	Total
	Triple-A		Double-A		Single-A
Interest-bearing deposits2	$	—	$	519	$	2,039,333		$	—	$	2,039,852

Federal funds sold2	—		250,000		3,500,000			—		3,750,000

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

Investment securities:
Non-mortgage-backed securities:


U.S. Treasury obligations	—		3,711,589		—			—		3,711,589
GSE debentures	—		388,955		—			—		388,955
State or local housing agency obligations	40,505		30,000		—			—		70,505
Total non-mortgage-backed securities	40,505		4,130,544		—			—		4,171,049
Mortgage-backed securities:
U.S. obligation MBS	—		40,039		—			—		40,039
GSE MBS	—		6,910,211		—			—		6,910,211
Total mortgage-backed securities	—		6,950,250		—			—		6,950,250

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 $39.3 million at December 31, 2022.

2 Amounts include unsecured credit exposure with overnight maturities.

3 Amounts represent collateralized overnight borrowings.

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Table 34 details interest rate payment terms for the carrying value of our investment securities as of ~~June~~September 30, 2023 and December 31, 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 40 and 41 under Part I, Item 3 – “Quantitative and Qualitative Disclosures About Market Risk).”

Table 34


		06/30/2023		12/31/2022			09/30/2023		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	$	434,029	$	785,188	Fixed rate	$	285,509	$	785,188

Non-mortgage-backed securities	Non-mortgage-backed securities	434,029		785,188		Non-mortgage-backed securities	285,509		785,188
Mortgage-backed securities:	Mortgage-backed securities:					Mortgage-backed securities:
Fixed rate	Fixed rate	617,293		622,984		Fixed rate	601,976		622,984
Variable rate	Variable rate	12,192		13,281		Variable rate	11,538		13,281
Mortgage-backed securities	Mortgage-backed securities	629,485		636,265		Mortgage-backed securities	613,514		636,265
Total trading securities	Total trading securities	1,063,514		1,421,453		Total trading securities	899,023		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	2,925,176		3,315,356		Fixed rate	2,890,387		3,315,356
Non-mortgage-backed securities	Non-mortgage-backed securities	2,925,176		3,315,356		Non-mortgage-backed securities	2,890,387		3,315,356
Mortgage-backed securities:	Mortgage-backed securities:					Mortgage-backed securities:
Fixed rate	Fixed rate	3,391,720		3,193,215		Fixed rate	3,467,561		3,193,215
Variable rate	Variable rate	4,050,482		2,845,845		Variable rate	4,510,396		2,845,845
Mortgage-backed securities	Mortgage-backed securities	7,442,202		6,039,060		Mortgage-backed securities	7,977,957		6,039,060
Total available-for-sale securities	Total available-for-sale securities	10,367,378		9,354,416		Total available-for-sale securities	10,868,344		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	39,515		70,505		Variable rate	39,515		70,505
Non-mortgage-backed securities	Non-mortgage-backed securities	39,515		70,505		Non-mortgage-backed securities	39,515		70,505
Mortgage-backed securities:	Mortgage-backed securities:					Mortgage-backed securities:
Fixed rate	Fixed rate	28,606		33,741		Fixed rate	25,849		33,741
Variable rate	Variable rate	217,192		241,184		Variable rate	211,093		241,184
Mortgage-backed securities	Mortgage-backed securities	245,798		274,925		Mortgage-backed securities	236,942		274,925
Total held-to-maturity securities	Total held-to-maturity securities	285,313		345,430		Total held-to-maturity securities	276,457		345,430
TOTAL	TOTAL	$	11,716,205	$	11,121,299	TOTAL	$	12,043,824	$	11,121,299

Deposits: Deposits are generally an insignificant source of funding. Total deposits ~~decreased $171.9~~increased $40.9 million from December 31, 2022 to ~~June~~September 30, 2023 primarily due to ~~a decrease~~an increase in overnight 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 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.

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

Table 35


		06/30/2023		12/31/2022			09/30/2023		12/31/2022
Bonds:	Bonds:					Bonds:
Par value	Par value	$	47,627,285	$	43,106,535	Par value	$	50,649,835	$	43,106,535
Premiums	Premiums	15,762		18,950		Premiums	13,563		18,950
Discounts	Discounts	(4,474)		(3,789)		Discounts	(3,818)		(3,789)
Concession fees	Concession fees	(10,971)		(11,262)		Concession fees	(11,254)		(11,262)
Hedging adjustments	Hedging adjustments	(575,933)		(604,595)		Hedging adjustments	(549,453)		(604,595)
Total bonds	Total bonds	47,051,669		42,505,839		Total bonds	50,098,873		42,505,839
Discount Notes:	Discount Notes:					Discount Notes:
Par value	Par value	21,136,330		24,997,018		Par value	18,052,225		24,997,018
Discounts	Discounts	(229,718)		(190,034)		Discounts	(152,109)		(190,034)
Concession fees	Concession fees	(631)		(714)		Concession fees	(419)		(714)
Hedging adjustments	Hedging adjustments	(13,116)		(30,865)		Hedging adjustments	(6,963)		(30,865)
Total discount notes	Total discount notes	20,892,865		24,775,405		Total discount notes	17,892,734		24,775,405
TOTAL	TOTAL	$	67,944,534	$	67,281,244	TOTAL	$	67,991,607	$	67,281,244

Total consolidated obligations increased $0.7 billion, or ~~1.0~~1.1 percent, from December 31, 2022 to ~~June~~September 30, 2023 aligning with growth in total assets. The distribution between consolidated obligation bonds and discount notes shifted between periods, from 63.2 percent and 36.8 percent, respectively, at December 31, 2022 to ~~69.3~~73.7 percent and ~~30.7~~26.3 percent at ~~June~~September 30, 2023, respectively, mostly due to an increase in swapped callable bonds and swapped bullet bonds and a decrease in discount notes. The decline in discount notes was primarily due to a decline in swapped discount notes that was partially offset by an increase in unswapped discount notes. Management increased issuance of swapped fixed rate debt due to ~~more closely match the repricing characteristics of our assets.~~advantageous funding opportunities relative to other SOFR debt. Issuance of swapped callable bonds increased during ~~the first half of~~ 2023 due to favorable funding ~~spreads. Callable bonds provide us with options to replace the bonds at lower costs if interest rates decline.~~spreads and increased demand from investors driven by market volatility.. 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, we call the hedged bond. Unswapped callable bonds provide us with options to replace the bonds at lower costs if interest rates decline. 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 since 2021 have been indexed to SOFR as we transitioned away from LIBOR and maintain an allocation of floating rate bonds funding ~~short-term~~ advances and ~~short-term~~ investments. For additional information on market trends impacting the cost of issuing debt, including discussion of the transition from LIBOR to SOFR, 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.

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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 repaying called and maturing consolidated obligations for which we are the primary 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 ~~six~~nine months ended ~~June~~September 30, 2023, proceeds (net of premiums and discounts) from the issuance of bonds and discount notes were ~~$30.0~~$39.9 billion and ~~$208.0~~$316.7 billion, respectively, compared to ~~$19.0~~$31.2 billion and ~~$123.8~~$245.3 billion for the ~~six~~nine months ended ~~June~~September 30, 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~~U.S. Treasury obligations 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 decreased ~~slightly~~ between periods, from $10.0 billion as of December 31, 2022 to ~~$9.3~~$8.5 billion as of ~~June~~September 30, 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.

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 ~~six~~nine months ended ~~June~~September 30, 2023, advance disbursements totaled ~~$419.8~~$661.7 billion compared to ~~$291.8~~$451.6 billion for the prior year period which reflects increased member utilization of advances, especially short-term advances. During the ~~six~~nine months ended ~~June~~September 30, 2023, investment purchases (excluding overnight investments) totaled ~~$2.0~~$3.0 billion compared to ~~$3.4~~$5.4 billion for the same period in the prior year. During the ~~six~~nine months ended ~~June~~September 30, 2023, payments on maturing and retired consolidated obligation bonds and discount notes were ~~$24.5~~$31.4 billion and ~~$212.0~~$323.7 billion, respectively, compared to ~~$23.3~~$31.6 billion and ~~$110.3~~$229.2 billion for the prior year period.

Capital: Total capital increased ~~$219.9~~$215.1 million, or ~~6.0~~5.8 percent, from December 31, 2022 to ~~June~~September 30, 2023 due to an increase in capital stock (see Table 36) and retained earnings. 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.

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Table 36 provides a summary of member capital requirements under our current capital plan as of ~~June~~September 30, 2023 and December 31, 2022 (in thousands):

Table 36


Requirement	Requirement	06/30/2023		12/31/2022		Requirement	09/30/2023		12/31/2022
Asset-based (Class A Common Stock only)	Asset-based (Class A Common Stock only)	$	182,940	$	179,450	Asset-based (Class A Common Stock only)	$	184,329	$	179,450
Activity-based (additional Class B Common Stock)1	Activity-based (additional Class B Common Stock)1	2,113,364		2,125,885		Activity-based (additional Class B Common Stock)1	2,141,059		2,125,885
Total Required Stock2	Total Required Stock2	2,296,304		2,305,335		Total Required Stock2	2,325,388		2,305,335
Excess Stock (Class A and B Common Stock)	Excess Stock (Class A and B Common Stock)	348,208		202,654		Excess Stock (Class A and B Common Stock)	324,316		202,654
Total Regulatory Capital Stock2	Total Regulatory Capital Stock2	$	2,644,512	$	2,507,989	Total Regulatory Capital Stock2	$	2,649,704	$	2,507,989

Activity-based Requirements:	Activity-based Requirements:					Activity-based Requirements:
Advances3	Advances3	$	1,991,584	$	2,005,795	Advances3	$	2,013,503	$	2,005,795
Letters of credit	Letters of credit	16,942		16,190		Letters of credit	16,756		16,190
AMA assets (mortgage loans)4	AMA assets (mortgage loans)4	238,516		233,793		AMA assets (mortgage loans)4	243,009		233,793
Total Activity-based Requirement	Total Activity-based Requirement	2,247,042		2,255,778		Total Activity-based Requirement	2,273,268		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	49,262		49,557		Asset-based Requirement (Class A Common Stock) not supporting member activity1	52,120		49,557
Total Required Stock2	Total Required Stock2	$	2,296,304	$	2,305,335	Total Required Stock2	$	2,325,388	$	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, 2022 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 ~~June~~September 30, 2023 and December 31, 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 ~~$108.1~~$164.6 million for the ~~six~~nine months ended ~~June~~September 30, 2023 compared to ~~$46.3~~$82.7 million for the same period in the prior year. The weighted average dividend rate was ~~8.31~~8.62 percent and ~~8.22~~8.35 percent for the three and ~~six~~nine months ~~June~~September 30, 2023, respectively, which represented a dividend payout ratio of ~~52.6~~61.4 percent and ~~56.6~~58.1 percent, respectively. For the three and ~~six~~nine months ended ~~June~~September 30, 2022, the weighted average dividend rate was ~~5.63~~6.94 percent and ~~5.27~~5.90 percent, respectively, which represented a dividend payout ratio of ~~51.3~~54.4 percent and ~~46.0~~49.3 percent, respectively. The dividend payout ratio represents dividends declared and paid during a period as a percentage of net income for the period, although FHFA regulation requires dividends be paid out of known income prior to the declaration date. For example, dividends declared and paid in ~~June~~September 2023 were based on income during the three months ended ~~May~~August 31, 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, 2022 for other factors that contribute to the level of dividends paid.)

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In accordance with our capital plan, we must pay holders of Class A Common Stock the DPT rate before paying a higher rate to holders of Class B Common Stock. 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 was effective for the second quarter of 2023 and will 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). Table 37 presents the dividend rates per annum paid on capital stock under our capital plan for the quarterly periods listed below:

Table 37


Applicable Rate per Annum	Applicable Rate per Annum	06/30/2023		03/31/2023		12/31/2022		09/30/2022		06/30/2022		Applicable Rate per Annum	09/30/2023		06/30/2023		03/31/2023		12/31/2022		09/30/2022
Class A Common Stock	Class A Common Stock	4.00	%	3.75	%	3.00	%	2.25	%	1.00	%	Class A Common Stock	4.50	%	4.00	%	3.75	%	3.00	%	2.25	%
Class B Common Stock	Class B Common Stock	9.00		8.75		8.50		7.75		6.50		Class B Common Stock	9.25		9.00		8.75		8.50		7.75
Weighted Average1	Weighted Average1	8.31		8.12		7.79		6.94		5.63		Weighted Average1	8.62		8.31		8.12		7.79		6.94
Dividend Parity Threshold:	Dividend Parity Threshold:											Dividend Parity Threshold:
Average effective overnight Federal funds rate	Average effective overnight Federal funds rate	4.99	%	4.52	%	3.65	%	2.20	%	0.76	%	Average effective overnight Federal funds rate	5.26	%	4.99	%	4.52	%	3.65	%	2.20	%
Spread to index	Spread to index	(2.00)		(1.00)		(1.00)		(1.00)		(1.00)		Spread to index	(2.00)		(2.00)		(1.00)		(1.00)		(1.00)
TOTAL (floored at zero percent)	TOTAL (floored at zero percent)	2.99	%	3.52	%	2.65	%	1.20	%	0.00	%	TOTAL (floored at zero percent)	3.26	%	2.99	%	3.52	%	2.65	%	1.20	%

1 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 stock dividends on Class A Common Stock and Class B Common Stock will remain at or near current dividend rates ~~throughout~~for the remainder of 2023. Historically, dividend rates have moved directionally with short-term interest rates. Based on current market expectations of short-term interest rates, we anticipate paying dividend rates in ranges between 4.50 to 4.75 percent for Class A Common Stock and 9.00 to 9.50 percent for Class B Common Stock for the fourth quarter of 2023. Market conditions and movements in short-term interest rates can be unpredictable, and adverse market conditions may result in lower dividend rates in future quarters. ~~As mentioned previously, the board of directors changed the DPT effective for the second quarter of 2023.~~ If there is a change to the DPT in the future, the capital plan requires that we provide members notice of that change 90 days prior to 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. FHFA regulation prohibits any FHLBank from paying a stock dividend if excess stock outstanding will exceed one percent of its total assets after payment of the stock 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.

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Transition from LIBOR to an Alternative Reference Rate – Historically, many of our adjustable rate investments, derivatives, and collateral pledged were indexed to LIBOR with exposure extending past June 30, 2023. We assessed our LIBOR exposure, which included evaluating the fallback language of derivative and investment contracts indexed to LIBOR, and executed a transition plan for the replacement of LIBOR that included strategies to manage and reduce exposure, operating under the assumption that SOFR will become the dominant replacement in the capital markets. 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 ceased immediately after June 30, 2023. During the first half of 2023, we had LIBOR exposure related to investment securities and derivatives with interest rates indexed to LIBOR. ~~As of June 30, 2023, we have~~We transitioned all outstanding instruments referencing LIBOR to reference SOFR or these instruments ~~will~~ reference SOFR as the fallback ~~index beginning July 3, 2023 or at the beginning of the next reset period.~~index. As such, we have no further variable LIBOR ~~exposure at June 30, 2023.~~exposure.

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.

FHFA’s Review and Analysis of the FHLBank System. In the fall of 2022, and over a period of several months, the FHFA undertook a review and analysis of the FHLBank System, in part through a series of public listening sessions, regional roundtable discussions, and receipt of comments from stakeholders. This review covered such areas as the FHLBanks’ mission and purpose in a changing marketplace; their organization, operational efficiency, and effectiveness; their role in promoting affordable, sustainable, equitable, and resilient housing and community investment; their role in addressing the unique needs of rural and financially vulnerable communities; member products, services, collateral requirements; and membership eligibility and requirements. ~~The~~

On November 7, 2023, the FHFA ~~has stated that~~issued its written report presenting its review and analysis ~~will culminate~~of the FHLBank System and the actions and recommendations that it plans to pursue in ~~a written~~service of its vision for the future of the FHLBank System. FHFA stated that it can implement some of the recommendations from the report ~~issued no later than September 30, 2023.~~through supervision, as well as through rulemaking or other forms of guidance, and some other recommendations can only be fully implemented through Congressional action. The report is ~~expected to~~focused on four broad themes: (1) ~~summarize~~mission of the ~~feedback received;~~FHLBank System; (2) ~~identify actions~~stable and reliable source of liquidity; (3) housing and community development; and (4) FHLBank System operational efficiency, structure and governance. Among other things, the FHFA has indicated that it plans to:

•Update and clarify its regulatory statement of the FHLBanks’ mission to explicitly incorporate its view of the core objectives of the FHLBanks’ mission, which are (1) providing stable and reliable liquidity to members, and (2) supporting housing and community development;

•Clarify the FHLBanks’ liquidity role and take steps that FHFA believes will better position the FHLBanks to perform their liquidity function;

•Expand the FHLBanks’ housing and community development focus by requiring the establishment of mission-oriented collateral programs, re-evaluating the definition of long-term advances, exploring revisions to the Community Support Requirements, and reviewing the Affordable Housing Program, Community Investment Programs, and Community Investment Cash Advance Programs to encourage greater use in a safe and sound manner. FHFA will also recommend that Congress consider amending the FHLBank Act to at least double the statutory minimum required annual AHP contributions by the FHLBanks.

•Review the FHLBanks’ operational efficiencies through encouraging collaboration among the FHLBanks, evaluating the size and structure of FHLBank boards, considering the structure of FHLBank districts and composition of their membership, and studying whether realignment or consolidation are necessary for the efficiency of the System. The FHFA also plans to ~~take; and (3) outline any recommendations~~require certain members have at least 10 percent of their assets in residential mortgage loans or equivalent mission assets to remain eligible for ~~consideration by Congress.~~FHLBank financing.

~~We continue to monitor these actions and guidance as they evolve and~~FHLBank is continuing to evaluate ~~their potential~~the report and is not able to predict what actions will ultimately result from the FHFA’s recommendations in the report or the ultimate impact on ~~us.~~FHLBank in the future. For a further discussion of related risks, see “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022.

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 manage interest rate risk through the characteristics of our portfolio of assets and liabilities and by using derivative transactions to limit duration mismatches and reduce MVE sensitivity. Matching the duration of assets with the duration of liabilities funding those assets is accomplished through the use of different debt maturities and embedded option

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characteristics, as well as the use of derivatives, primarily interest rate swaps, interest rate caps, and interest rate floors. Interest rate swaps increase the flexibility of our funding alternatives by providing cash flows or characteristics that might not be as readily available or cost-effective if obtained in the standard GSE debt market.

Duration of Equity: DOE aggregates the 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 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.

~~Table of Contents~~

Under the RMP, our DOE is generally limited to a range of ±5.0 assuming current interest rates. In addition, our DOE is generally limited to a range of ±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 risk model imposes a positive non-zero boundary on post-shock interest rates, no additional calculations are necessary in order to meet this FHFA requirement when applicable. When DOE exceeds the limits established by the RMP, corrective actions taken may include: (1) the purchase of interest rate caps, interest rate floors, or other derivatives; (2) the sale of assets; and/or (3) the addition to the balance sheet of assets or liabilities having characteristics that are such that they counterbalance the excessive duration observed.

Table 38 presents our DOE in the base and the up and down 200 basis point interest rate shock scenarios:

Table 38


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
09/30/2023						09/30/2023	3.2	2.2	1.9
06/30/2023	06/30/2023	2.3	1.6		2.0	06/30/2023	2.3	1.6	2.0
03/31/2023	03/31/2023	1.8	1.8		2.4	03/31/2023	1.8	1.8	2.4
12/31/2022	12/31/2022	1.7	1.7		2.1	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		1.6	2.2		3.3

The primary factors contributing to the net changes in duration from ~~March 31,~~June 30, 2023 to ~~June~~September 30, 2023 were: (1) the significant increase in longer-term interest rates and the relative level of mortgage rates during the ~~period;~~period along with variable rate collateralized mortgage obligation (CMO) investments and their effective cap levels; (2) the increase in percent of total assets represented by the fixed rate mortgage loan portfolio 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 advance activity. The significant increase in interest rates during the period caused the mortgage loan portfolio contribution to duration to ~~shorten~~lengthen more than the associated liabilities, contributing to the ~~slight decrease~~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.~~scenarios, including the increasing asset-sensitive DOE in the up 200 basis point scenario. 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. In addition, the significant increase in short-term and long-term interest rates impacts implied forward rates and the valuation of our variable rate CMO investments with lower effective interest rate caps. This results in a longer duration profile on the base and +200 rate shock scenarios.

The increase in interest rates since ~~March 31,~~June 30, 2023 generally ~~shortened~~lengthened 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 increase as a percentage of total assets during this period, as discussed in Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Financial Condition – MPF Program” so the duration profile changed as expected since a general increase in interest rates typically generates slower prepayments for both new production mortgage loans, as well as the outstanding fixed rate mortgage loan portfolio. Generally, higher interest rates indicate a relative decrease in refinancing incentive for borrowers.

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To effectively manage these changes in the 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 further interest rate increases where the 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 ~~1.0~~1.4 month and 1.1 months for ~~June~~September 30, 2023 and December 31, 2022, respectively.

~~Table of Contents~~

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 39 presents MVE as a percent of TRCS. As of ~~June~~September 30, 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.

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 ~~June~~September 30, 2023 (see Table 36 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 ~~June~~September 30, 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 the change in interest rates contributed to the overall impact on base MVE during the quarter, the 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 is primarily the result of the increasing capital position as discussed and referenced above.~~

Table 39


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
09/30/2023						09/30/2023	136	144	150
06/30/2023	06/30/2023	143	148		154	06/30/2023	143	148	154
03/31/2023	03/31/2023	143	148		154	03/31/2023	143	148	154
12/31/2022	12/31/2022	143	148		154	12/31/2022	143	148	154
09/30/2022	09/30/2022	147	151		158	09/30/2022	147	151	158
06/30/2022		154	159		168

8384

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

Various types of derivative instruments are utilized to mitigate the interest rate risks described in the preceding sections as well as to better match the terms of assets and liabilities. Tables 40 and 41 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 40

06/30/2023

09/30/2023

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

10,607,639

(1,010)

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

10,741,067

(4,538)

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

208,400

7,631

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

155,900

6,259

Fixed rate putable 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

1,775,000

19,781

Fixed rate putable 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

1,979,800

24,894

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

211,253

1,028

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

211,253

1,227

Firm commitment to issue a fixed rate advance

Forward settling interest rate swap

Protect against fair value risk

Fair Value Hedge

79,995

229

Firm commitment to issue a fixed rate advance

Forward settling interest rate swap

Protect against fair value risk

Fair Value Hedge

90,111

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

3,050,000

(3,216)

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

(5,957)

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

3,471,978

70,928

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

3,646,230

71,687

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

443,000

(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

293,000

(29)

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

646,984

34,730

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

630,891

31,384

Adjustable rate MBS with embedded caps

Interest rate cap

Offset the interest rate cap embedded in a variable rate investment

Economic Hedge

304,000

1,869

Adjustable rate MBS with embedded caps

Interest rate cap

Offset the interest rate cap embedded in a variable rate investment

Economic Hedge

304,000

1,811

Mortgage Loans Held for Portfolio

Fixed rate mortgage purchase commitments

Mortgage purchase commitment

Protect against fair value risk

Economic Hedge

47,416

(179)

Fixed rate mortgage purchase commitments

Mortgage purchase commitment

Protect against fair value risk

Economic Hedge

48,915

(108)

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

9,608,109

609

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

Receive fixed, pay variable interest rate swap

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

Economic Hedge

3,685,886

(310)

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

7,636,383

4,858

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

4,014,924

2,214

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

4,734,500

(25,624)

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

4,988,000

(31,099)

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

14,534,000

(389,063)

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

14,812,000

(310,914)

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

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

1,457,000

(108,778)

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

1,432,000

(115,295)

Firm commitment to issue a consolidated obligation bond

Receive fixed, pay variable interest rate swap

Protect against fair value risk

Fair Value Hedge

45,000

(26)

Firm commitment to issue a consolidated obligation bond

Receive fixed, pay variable interest rate swap

Protect against fair value risk

Fair Value Hedge

15,000

(23)

TOTAL

58,910,657

(386,331)

TOTAL

50,148,977

(328,792)

8485

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Table 41

12/31/2022

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

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

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

34,257

1,107

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

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

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

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

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

304,000

1,727

Mortgage Loans Held for Portfolio

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)

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

49,454,845

(440,748)

8586

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Item 4: Controls and Procedures

Disclosure Controls and Procedures

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

Management, with the participation of the President and Chief Executive Officer (CEO), our principal executive officer, and the Chief Financial Officer (CFO), our principal financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of ~~June~~September 30, 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 ~~June~~September 30, 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 ~~June~~September 30, 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 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.

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Item 6: Exhibits


Exhibit No.			Description
3.1			Exhibit 3.1 to the FHLBank’s registration statement on Form 10, filed May 15, 2006, and made effective on July 14, 2006 (File No. 000-52004), Federal Home Loan Bank of Topeka Articles and Organization Certificate, is incorporated herein by reference as Exhibit 3.1.
3.2			Exhibit 3.1 to the Current Report on Form 8-K, filed 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.

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SIGNATURES

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


			Federal Home Loan Bank of Topeka


~~August 10,~~November 9, 2023			By: /s/ Mark E. Yardley
Date			Mark E. Yardley
			President and Chief Executive Officer

~~August 10,~~November 9, 2023			By: /s/ Jeffrey B. Kuzbel
Date			Jeffrey B. Kuzbel
			Executive Vice President and Chief Financial Officer

8889