UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q



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

For the quarterly period ended March 31, ~~2019~~2020



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

For the transition period from __________ to __________.

Commission File No. 000-51399

FEDERAL HOME LOAN BANK OF CINCINNATI

(Exact name of registrant as specified in its charter)



Federally chartered corporation		31-6000228
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
600 Atrium Two, P.O. Box 598,
Cincinnati, ~~Ohio~~	OH	45201-0598
(Address of principal executive offices)		(Zip Code)

~~(513)~~ (513) 852-7500

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

x☒ Yes o☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

x☒ Yes o☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



~~Large accelerated filer~~ o	~~Accelerated filer~~ o
~~Non-accelerated filer~~ xLarge accelerated Filer ☐		Accelerated Filer ☐
Non-accelerated Filer	☒	Smaller reporting companyo	☐
		Emerging growth companyo	☐

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

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

o☐ Yes x ☒ No

~~Securities registered pursuant to Section 12(b) of the Act: None~~

The capital stock of the registrant is not listed on any securities exchange or quoted on any automated quotation system, only may be owned by members and former members and is transferable only at its par value of $100 per share. As of April 30, ~~2019,~~2020, the registrant had ~~42,157,918~~47,608,735 shares of capital stock outstanding, which included stock classified as mandatorily redeemable.



Page 1 of	7475

Table of Contents



	PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited):

	Statements of Condition - March 31, ~~2019~~2020 and December 31, ~~2018~~2019	3

	Statements of Income - Three months ended March 31, ~~2019~~2020 and ~~2018~~2019	4

	Statements of Comprehensive Income - Three months ended March 31, ~~2019~~2020 and ~~2018~~2019	5

	Statements of Capital - Three months ended March 31, ~~2019~~2020 and ~~2018~~2019	6

	Statements of Cash Flows - Three months ended March 31, ~~2019~~2020 and ~~2018~~2019	7

	Notes to Unaudited Financial Statements	9

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	4042

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	7072

Item 4.	Controls and Procedures	7072

	PART II - OTHER INFORMATION

Item 1A.	Risk Factors	72

~~Item 5.~~	~~Other Information~~	7273

Item 6.	Exhibits	7374

Signatures		7375

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

FEDERAL HOME LOAN BANK OF CINCINNATI

STATEMENTS OF CONDITION

(Unaudited)

(In thousands, except par value)


	March 31, 2019			December 31, 2018			March 31, 2020			December 31, 2019
ASSETS
Cash and due from banks	$	20,685		$	10,037		$	3,923,890		$	20,608
Interest-bearing deposits	390,174			122			780,081			550,160
Securities purchased under agreements to resell	2,828,796			4,402,208			183,504			2,348,584
Federal funds sold	11,820,000			10,793,000			—			4,833,000
Investment securities:
Trading securities	5,582,966			223,980			11,988,073			11,615,693
Available-for-sale securities	1,070,297			2,402,897			142,074			1,542,185
Held-to-maturity securities (includes $0 and $0 pledged as collateral at March 31, 2019 and December 31, 2018, respectively, that may be repledged) ^(a)	15,857,805			15,791,222
Held-to-maturity securities (includes $0 and $0 pledged as collateral at March 31, 2020 and December 31 2019, respectively, that may be repledged) ^(a)							12,570,626			13,499,319
Total investment securities	22,511,068			18,418,099			24,700,773			26,657,197
Advances (includes $10,108 and $10,008 at fair value under fair value option at March 31, 2019 and December 31, 2018, respectively)	54,879,643			54,822,252
Mortgage loans held for portfolio, net of allowance for credit losses of $779 and $840 at March 31, 2019 and December 31, 2018, respectively	10,519,218			10,500,917
Advances (includes $5,385 and $5,238 at fair value under fair value option at March 31, 2020 and December 31 2019, respectively)							80,424,950			47,369,573
Mortgage loans held for portfolio, net of allowance for credit losses of $297 and $711 at March 31, 2020 and December 31 2019, respectively							11,923,078			11,235,353
Accrued interest receivable	231,846			169,982			197,718			182,252
Derivative assets	154,989			65,765			352,410			267,165
Other assets	21,348			20,191			23,440			27,667
TOTAL ASSETS	$	103,377,767		$	99,202,573		$	122,509,844		$	93,491,559
LIABILITIES
Deposits	$	776,151		$	669,016		$	1,185,476		$	951,296
Consolidated Obligations:
Discount Notes	44,211,775			46,943,632
Bonds (includes $5,471,536 and $3,906,610 at fair value under fair value option at March 31, 2019 and December 31, 2018, respectively)	52,124,054			45,659,138
Discount Notes (includes $9,319,663 and $12,386,974 at fair value under fair value option at March 31, 2020 and December 31 2019, respectively)							79,659,562			49,084,219
Bonds (includes $4,359,486 and $4,757,177 at fair value under fair value option at March 31, 2020 and December 31 2019, respectively)							34,668,308			38,439,724
Total Consolidated Obligations	96,335,829			92,602,770			114,327,870			87,523,943
Mandatorily redeemable capital stock	23,470			23,184			571,546			21,669
Accrued interest payable	162,752			147,337			98,157			126,091
Affordable Housing Program payable	122,249			117,336			118,120			115,295
Derivative liabilities	2,343			4,586			22,691			1,310
Other liabilities	877,863			308,128			310,713			307,499
Total liabilities	98,300,657			93,872,357			116,634,573			89,047,103
Commitments and contingencies
CAPITAL
Capital stock Class B putable ($100 par value); issued and outstanding shares: 40,590 shares at March 31, 2019 and 43,205 shares at December 31, 2018	4,058,981			4,320,459
Capital stock Class B putable ($100 par value); issued and outstanding shares: 47,394 shares at March 31, 2020 and 33,664 shares at December 31, 2019							4,739,413			3,366,428
Retained earnings:
Unrestricted	625,103			631,971			690,615			648,374
Restricted	405,481			390,829			461,979			446,048
Total retained earnings	1,030,584			1,022,800			1,152,594			1,094,422
Accumulated other comprehensive loss	(12,455		)	(13,043		)	(16,736		)	(16,394		)
Total capital	5,077,110			5,330,216			5,875,271			4,444,456
TOTAL LIABILITIES AND CAPITAL	$	103,377,767		$	99,202,573		$	122,509,844		$	93,491,559


(a)	Fair values: ~~$15,724,778~~$12,685,449 and $~~15,575,368~~13,501,207 at March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively.

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

FEDERAL HOME LOAN BANK OF CINCINNATI

STATEMENTS OF INCOME

(Unaudited)


(In thousands)	Three Months Ended March 31,						Three Months Ended March 31,
	2019			2018			2020			2019
INTEREST INCOME:
Advances	$	402,777		$	318,421		$	172,167		$	402,777
Prepayment fees on Advances, net	15			40			4,274			15
Interest-bearing deposits	1,544			103			3,350			1,544
Securities purchased under agreements to resell	18,825			6,957			10,154			18,825
Federal funds sold	63,829			34,738			28,526			63,829
Investment securities:
Trading securities	5,171			5			67,904			5,171
Available-for-sale securities	13,559			3,279			3,396			13,559
Held-to-maturity securities	106,473			82,920			68,304			106,473
Total investment securities	125,203			86,204			139,604			125,203
Mortgage loans held for portfolio	88,665			77,746			89,257			88,665
Loans to other FHLBanks	20			20			60			20
Total interest income	700,878			524,229			447,392			700,878
INTEREST EXPENSE:
Consolidated Obligations:
Discount Notes	311,710			181,371			176,124			311,710
Bonds	262,863			222,468			185,987			262,863
Total Consolidated Obligations	574,573			403,839			362,111			574,573
Deposits	3,698			1,885			2,976			3,698
Mandatorily redeemable capital stock	349			445			190			349
Total interest expense	578,620			406,169			365,277			578,620
NET INTEREST INCOME	122,258			118,060			82,115			122,258
NON-INTEREST INCOME (LOSS):
Net gains (losses) on investment securities	22,126			(2		)	372,406			22,126
Net (losses) gains on financial instruments held under fair value option	(17,181		)	19,725
Net losses on derivatives and hedging activities	(25,959		)	(26,373		)
Net gains (losses) on financial instruments held under fair value option							(50,830		)	(17,181		)
Net gains (losses) on derivatives and hedging activities							(293,966		)	(25,959		)
Other, net	2,615			2,793			3,079			2,615
Total non-interest income (loss)	(18,399		)	(3,857		)	30,689			(18,399		)
NON-INTEREST EXPENSE:
Compensation and benefits	12,659			12,693			13,340			12,659
Other operating expenses	5,477			5,128			6,103			5,477
Finance Agency	1,696			1,564			1,628			1,696
Office of Finance	1,366			1,337			1,258			1,366
Other	1,225			1,402			1,951			1,225
Total non-interest expense	22,423			22,124			24,280			22,423
INCOME BEFORE ASSESSMENTS	81,436			92,079			88,524			81,436
Affordable Housing Program assessments	8,179			9,252			8,871			8,179
NET INCOME	$	73,257		$	82,827		$	79,653		$	73,257

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

FEDERAL HOME LOAN BANK OF CINCINNATI

STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


(In thousands)	Three Months Ended March 31,				Three Months Ended March 31,
	2019		2018		2020			2019
Net income	$	73,257	$	82,827	$	79,653		$	73,257
Other comprehensive income adjustments:
Net unrealized gains on available-for-sale securities	187		143
Net unrealized gains (losses) on available-for-sale securities					(905		)	187
Pension and postretirement benefits	401		486		563			401
Total other comprehensive income adjustments	588		629
Total other comprehensive income (loss) adjustments					(342		)	588
Comprehensive income	$	73,845	$	83,456	$	79,311		$	73,845

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

FEDERAL HOME LOAN BANK OF CINCINNATI

STATEMENTS OF CAPITAL

(Unaudited)



(In thousands)	Capital Stock Class B - Putable					Retained Earnings								Accumulated Other Comprehensive			Total
	Shares		Par Value			Unrestricted			Restricted		Total			Loss			Capital
BALANCE, DECEMBER 31, 2018	43,205		$	4,320,459		$	631,971		$	390,829	$	1,022,800		$	(13,043	)	$	5,330,216
Comprehensive income (loss)						58,605			14,652		73,257			588			73,845
Proceeds from sale of capital stock	2,281		228,106														228,106
Repurchase of capital stock	(4,886	)	(488,544		)												(488,544		)
Net shares reclassified to mandatorily redeemable capital stock	(10	)	(1,040		)												(1,040		)
Dividends on capital stock:
Cash dividends on capital stock						(65,473		)			(65,473		)				(65,473		)
BALANCE, MARCH 31, 2019	40,590		$	4,058,981		$	625,103		$	405,481	$	1,030,584		$	(12,455	)	$	5,077,110


BALANCE, DECEMBER 31, 2019	33,664		$	3,366,428		$	648,374		$	446,048	$	1,094,422		$	(16,394	)	$	4,444,456
Adjustment for cumulative effect of accounting change						366			—		366						366
Comprehensive income (loss)						63,722			15,931		79,653			(342		)	79,311
Proceeds from sale of capital stock	20,729		2,072,862														2,072,862
Repurchase of capital stock	(1,500	)	(150,000		)												(150,000		)
Net shares reclassified to mandatorily redeemable capital stock	(5,499	)	(549,877		)												(549,877		)
Dividends on capital stock:
Cash dividends on capital stock						(21,847		)			(21,847		)				(21,847		)
BALANCE, MARCH 31, 2020	47,394		$	4,739,413		$	690,615		$	461,979	$	1,152,594		$	(16,736	)	$	5,875,271

(In thousands)
Capital Stock
Class B - Putable
Retained Earnings Accumulated Other Comprehensive Total
Shares Par Value Unrestricted Restricted Total Loss Capital
BALANCE, DECEMBER 31, 2017 42,411
$ 4,241,140
$ 617,034
$ 322,999
$ 940,033
$ (16,660 ) $ 5,164,513
Comprehensive income 66,262
16,565
82,827
629
83,456
Proceeds from sale of capital stock 2,824
282,415
282,415
Net shares reclassified to mandatorily
redeemable capital stock
—
(65 ) (65 )
Cash dividends on capital stock (61,372 ) (61,372 ) (61,372 )
BALANCE, MARCH 31, 2018 45,235
$ 4,523,490
$ 621,924
$ 339,564
$ 961,488
$ (16,031 ) $ 5,468,947

BALANCE, DECEMBER 31, 2018 43,205
$ 4,320,459
$ 631,971
$ 390,829
$ 1,022,800
$ (13,043 ) $ 5,330,216
Comprehensive income

58,605
14,652
73,257
588
73,845
Proceeds from sale of capital stock 2,281
228,106
228,106
Repurchase of capital stock (4,886 ) (488,544 ) (488,544 )
Net shares reclassified to mandatorily
redeemable capital stock
(10 ) (1,040 ) (1,040 )
Cash dividends on capital stock (65,473 ) (65,473 ) (65,473 )
BALANCE, MARCH 31, 2019 40,590
$ 4,058,981
$ 625,103
$ 405,481
$ 1,030,584
$ (12,455 ) $ 5,077,110

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

FEDERAL HOME LOAN BANK OF CINCINNATI

STATEMENTS OF CASH FLOWS

(Unaudited)


(In thousands)	Three Months Ended March 31,						Three Months Ended March 31,
	2019			2018			2020			2019
OPERATING ACTIVITIES:
Net income	$	73,257		$	82,827		$	79,653		$	73,257
Adjustments to reconcile net income to net cash provided by operating activities:
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization	37,144			21,327			29,025			37,144
Net change in derivative and hedging activities	(58,808		)	36,698			(204,187		)	(58,808		)
Net change in fair value adjustments on trading securities	(22,126		)	2			(372,406		)	(22,126		)
Net change in fair value adjustments on financial instruments held under fair value option	17,181			(19,725		)	50,830			17,181
Other adjustments	177			—			177			177
Net change in:
Accrued interest receivable	(61,925		)	(20,247		)	(15,359		)	(61,925		)
Other assets	4,977			3,847			3,741			4,977
Accrued interest payable	13,051			1,077			(28,574		)	13,051
Other liabilities	(2,705		)	(543		)	6,632			(2,705		)
Total adjustments	(73,034		)	22,436			(530,121		)	(73,034		)
Net cash provided by operating activities	223			105,263
Net cash provided by (used in) operating activities							(450,468		)	223

INVESTING ACTIVITIES:
Net change in:
Interest-bearing deposits	(473,043		)	2,574			(496,833		)	(473,043		)
Securities purchased under agreements to resell	1,573,412			6,065,851			2,165,080			1,573,412
Federal funds sold	(1,027,000		)	(14,125,000		)	4,833,000			(1,027,000		)
Premises, software, and equipment	(455		)	(888		)	(263		)	(455		)
Trading securities:
Proceeds from maturities of long-term	31			55
Purchases of long-term	(4,738,086		)	—
Proceeds from maturities							27			31
Purchases							—			(4,738,086		)
Available-for-sale securities:
Net decrease in short-term	1,400,000			400,000
Purchases of long-term	(76,000		)	—
Proceeds from maturities							1,810,000			2,350,000
Purchases							(400,000		)	(1,026,000		)
Held-to-maturity securities:
Net decrease in short-term	1,122			992
Proceeds from maturities of long-term	503,158			556,816
Purchases of long-term	(588,085		)	(1,857,422		)
Proceeds from maturities							958,486			538,649
Purchases							(34,234		)	(622,454		)
Advances:
Repaid	410,450,110			1,062,801,343			256,213,831			410,450,110
Originated	(410,455,274		)	(1,056,807,749		)	(288,877,977		)	(410,455,274		)
Mortgage loans held for portfolio:
Principal collected	226,964			255,683			539,328			226,964
Purchases	(249,754		)	(317,562		)	(1,231,879		)	(249,754		)
Net cash used in investing activities	(3,452,900		)	(3,025,307		)
Net cash provided by (used in) investing activities							(24,521,434		)	(3,452,900		)



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


(continued from previous page)
FEDERAL HOME LOAN BANK OF CINCINNATI													STATEMENTS OF CASH FLOWS	(Unaudited)
(In thousands)	Three Months Ended March 31,						Three Months Ended March 31,
	2019			2018			2020			2019
FINANCING ACTIVITIES:
Net change in deposits and pass-through reserves	$	102,205		$	38,218		$	233,060		$	102,205
Net payments on derivative contracts with financing elements	(92		)	(409		)
Net proceeds (payments) on derivative contracts with financing elements							(303		)	(92		)
Net proceeds from issuance of Consolidated Obligations:
Discount Notes	125,632,457			116,799,928			150,972,042			125,632,457
Bonds	11,340,789			6,310,660			9,381,318			11,340,789
Payments for maturing and retiring Consolidated Obligations:
Discount Notes	(128,399,569		)	(109,940,338		)	(120,420,948		)	(128,399,569		)
Bonds	(4,885,800		)	(8,680,425		)	(13,191,000		)	(4,885,800		)
Proceeds from issuance of capital stock	228,106			282,415			2,072,862			228,106
Payments for repurchase of capital stock	(488,544		)	—			(150,000		)	(488,544		)
Payments for repurchase/redemption of mandatorily redeemable capital stock	(754		)	(1,998		)	—			(754		)
Cash dividends paid	(65,473		)	(61,372		)	(21,847		)	(65,473		)
Net cash provided by financing activities	3,463,325			4,746,679
Net increase in cash and due from banks	10,648			1,826,635
Net cash provided by (used in) financing activities							28,875,184			3,463,325
Net increase (decrease) in cash and due from banks							3,903,282			10,648
Cash and due from banks at beginning of the period	10,037			26,550			20,608			10,037
Cash and due from banks at end of the period	$	20,685		$	1,853,185		$	3,923,890		$	20,685
Supplemental Disclosures:
Interest paid	$	535,427		$	392,372		$	388,791		$	535,427
Affordable Housing Program payments, net	$	3,266		$	4,565		$	6,046		$	3,266

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

FEDERAL HOME LOAN BANK OF CINCINNATI

NOTES TO UNAUDITED FINANCIAL STATEMENTS

Background Information

The Federal Home Loan Bank of Cincinnati (the FHLB), a federally chartered corporation, is one of 11 District Federal Home Loan Banks (FHLBanks). The FHLBanks are government-sponsored enterprises (GSEs) that serve the public by enhancing the availability of credit for residential mortgages and targeted community development. The FHLB is regulated by the Federal Housing Finance Agency (Finance Agency).

Note 1 - Summary of Significant Accounting Policies

Basis of Presentation

The accompanying interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). The preparation of financial statements in accordance with GAAP requires management to make assumptions and estimates. These assumptions and estimates affect the reported amount of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported amounts of income and expenses. Actual results could differ from these estimates. The interim financial statements presented are unaudited, but they include all adjustments (consisting of only normal recurring adjustments) which are, in the opinion of management, necessary for a fair statement of the financial condition, results of operations, and cash flows for such periods. These financial statements do not include all disclosures associated with annual financial statements and accordingly should be read in conjunction with the audited financial statements and notes included in the FHLB's Annual Report on Form 10-K for the year ended December 31, ~~2018~~2019 filed with the Securities and Exchange Commission (SEC). Results for the three months ended March 31, ~~2019~~2020 are not necessarily indicative of operating results for the full year.

The FHLB presents certain financial instruments, including derivative instruments and securities purchased under agreements to resell, on a net basis when it has a legal right of offset and all other requirements for netting are met (collectively referred to as the netting requirements). For these instruments, the FHLB has elected to offset its asset and liability positions, as well as cash collateral received or pledged, when it has met the netting requirements. The FHLB did not have any offsetting liabilities related to its securities purchased under agreements to resell for the periods presented.

The net exposure for these financial instruments can change on a daily basis; therefore, there may be a delay between the time this exposure change is identified and additional collateral is requested, and the time this collateral is received or pledged. Likewise, there may be a delay for excess collateral to be returned. For derivative instruments that meet the requirements for netting, any excess cash collateral received or pledged is recognized as a derivative liability or derivative asset. Additional information regarding these agreements is provided in Note ~~10.~~6. Based on the fair value of the related collateral held, the securities purchased under agreements to resell were fully collateralized for the periods presented. For more information about the FHLB's investments in securities purchased under agreements to resell, see “Item 8. Financial Statements and Supplementary Data - Note 1 - Summary of Significant Accounting Policies” in the FHLB's ~~2018~~2019 Annual Report on Form 10-K.

The FHLB did not hold any equity securities as of March 31, ~~2019~~2020 and December 31, ~~2018.~~2019.

Reclassifications

Certain amounts in the 2019 financial statements have been reclassified to conform to the presentation as of March 31, 2020. Specifically, certain cash flow amounts in the prior period Statement of Cash Flows have been reclassified to reflect short-term investment securities purchases and proceeds on a gross, rather than net, basis.

Subsequent ~~Events.~~Events

The FHLB has evaluated subsequent events for potential recognition or disclosure through the issuance of these financial statements and believes there have been no material subsequent events requiring additional disclosure or recognition in these financial statements.

Significant Accounting Policies

Beginning January 1, 2020, the FHLB adopted new accounting guidance related to the measurement of credit losses on financial instruments, which requires a financial asset or group of financial assets measured at amortized cost to be presented at the net amount expected to be collected. The new guidance also requires credit losses relating to these financial instruments and available-for-sale securities to be recorded through the allowance for credit losses. Key changes from prior accounting guidance are detailed below. Consistent with the modified retrospective method of adoption, the prior period has not been revised to conform to the new basis of accounting. See “Item 8. Financial Statements and Supplementary Data - Note 1 - Summary of Significant Accounting Policies” in the FHLB's 2019 Annual Report on Form 10-K for information on the prior accounting treatment.

Interest-Bearing Deposits, Securities Purchased under Agreements to Resell, and Federal Funds Sold.These investments provide short-term liquidity and are carried at amortized cost. Accrued interest receivable is recorded separately on the Statements of Condition.

These investments are evaluated quarterly for expected credit losses. If applicable, an allowance for credit losses is recorded with a corresponding adjustment to the provision (reversal) for credit losses. The FHLB applies the collateral maintenance provision practical expedient when evaluating securities purchased under agreements to resell for credit losses. Consequently, a credit loss would be recognized if there is a collateral shortfall which the FHLB does not believe the counterparty will replenish in accordance with its contractual terms. The credit loss would be limited to the difference between the fair value of the collateral and the investment’s amortized cost.

See Note 3 - Investments for details on the allowance methodologies relating to these investments.

Investment Securities.

Available for Sale. For securities classified as available-for-sale, the FHLB evaluates an individual security for impairment on a quarterly basis by comparing the security’s fair value to its amortized cost. Accrued interest receivable is recorded separately on the Statements of Condition. Impairment exists when the fair value of the investment is less than its amortized cost (i.e., in an unrealized loss position). In assessing whether a credit loss exists on an impaired security, the FHLB considers whether there would be a shortfall in receiving all cash flows contractually due. When a shortfall is considered possible, the FHLB compares the present value of cash flows to be collected from the security with the amortized cost basis of the security. If the present value of cash flows is less than amortized cost, an allowance for credit losses is recorded with a corresponding adjustment to the provision (reversal) for credit losses. The allowance is limited by the amount of the unrealized loss. The allowance for credit losses excludes uncollectible accrued interest receivable, which is measured separately.

If management intends to sell an impaired security classified as available-for-sale, or more likely than not will be required to sell the security before expected recovery of its amortized cost basis, any allowance for credit losses is written off and the amortized cost basis is written down to the security’s fair value at the reporting date with any incremental impairment reported in earnings as net gains (losses) on investment securities. If management does not intend to sell an impaired security classified as available-for-sale and it is not more likely than not that management will be required to sell the debt security, then the credit portion of the difference is recognized as an allowance for credit losses and any remaining difference between the security’s fair value and amortized cost is recorded to net unrealized gains (losses) on available-for-sale securities within other comprehensive income (loss).

Prior to January 1, 2020, credit losses were recorded as a direct write-down of the available-for-sale security carrying value. As of December 31, 2019, the FHLB had not recorded any direct write-downs to the carrying value of its available-for-sale securities.

Held-to-Maturity. Securities that the FHLB has both the ability and intent to hold to maturity are classified as held-to-maturity and are carried at amortized cost, which is original cost net of periodic principal repayments and amortization of premiums and accretion of discounts. Accrued interest receivable is recorded separately on the Statements of Condition.

Held-to-maturity securities are evaluated quarterly for expected credit losses on a pool basis unless an individual assessment is deemed necessary because the securities do not possess similar risk characteristics. An allowance for credit losses is recorded with a corresponding adjustment to the provision (reversal) for credit losses. The allowance for credit losses excludes uncollectible accrued interest receivable, which is measured separately. Prior to January 1, 2020, credit losses were recorded as a direct write-down of the held-to-maturity security carrying value. As of December 31, 2019, the FHLB had not recorded any direct write-downs to the carrying value of its held-to-maturity securities.

See Note 3 - Investments for details on the allowance methodologies relating to available-for-sale and held-to-maturity securities.

Advances. Advances (loans to members, former members, or housing associates) are carried at amortized cost, or at fair value, when the fair value option has been elected. Advances recorded at amortized cost are carried at original cost net of periodic principal repayments and amortization of premiums and accretion of discounts (including discounts related to the Affordable Housing Program), unearned commitment fees, and fair value hedge adjustments. Accrued interest receivable is recorded separately on the Statements of Condition. The Advances carried at amortized cost are evaluated quarterly for expected credit losses. If deemed necessary, an allowance for credit losses is recorded with a corresponding adjustment to the provision (reversal) for credit losses. See Note 4 - Advances for details on the allowance methodology relating to Advances.

Mortgage Loans Held for Portfolio. Mortgage loans held for portfolio are recorded at amortized cost, which is original cost, net of periodic principal repayments and amortization of premiums and accretion of discounts, hedging basis adjustments on loans initially classified as mortgage loan commitments, and direct write-downs. The FHLB has the intent and ability to hold these mortgage loans to maturity. Accrued interest receivable is recorded separately on the Statements of Condition. The FHLB performs a quarterly assessment of its mortgage loans held for portfolio to estimate expected credit losses. An allowance for credit losses is recorded with a corresponding adjustment to the provision (reversal) for credit losses

The FHLB measures expected credit losses on mortgage loans on a collective basis, pooling loans with similar risk characteristics. If a mortgage loan no longer shares risk characteristics with other loans, it is removed from the pool and evaluated for expected credit losses on an individual basis.

When developing the allowance for credit losses, the FHLB measures the expected loss over the estimated remaining life of a mortgage loan, which also considers how the FHLB’s credit enhancements mitigate credit losses. If a loan is purchased at a discount, the discount does not offset the allowance for credit losses. The FHLB’s measurement of expected credit losses takes into consideration any accrued interest that may be lost as a result of a default.

The FHLB does not purchase mortgage loans with credit deterioration present at the time of purchase. The FHLB includes estimates of expected recoveries within the allowance for credit losses. See Note 5 - Mortgage Loans for details on the allowance methodologies relating to mortgage loans.

Off-Balance Sheet Credit Exposures. The FHLB evaluates its off-balance sheet credit exposures on a quarterly basis for expected credit losses. If deemed necessary, an allowance for expected credit losses on these off-balance sheet exposures is recorded in other liabilities with a corresponding adjustment to the provision (reversal) for credit losses.

Note 2 - Recently Issued Accounting Standards and Interpretations

~~Inclusion~~Facilitation of the ~~Secured Overnight Financing~~Effects of Reference Rate ~~(SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes.~~Reform on Financial Reporting. On ~~October 25, 2018,~~March 12, 2020, the Financial Accounting Standards Board (FASB) issued temporary, optional guidance ~~that permits~~to ease the ~~OIS~~potential burden in accounting for reference rate ~~based on SOFR~~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 ~~an eligible U.S. benchmark interest rate for hedge accounting purposes, to facilitate the LIBOR to SOFR transition.~~held-to-maturity. This guidance ~~became~~is effective immediately for the FHLB, ~~for~~and the ~~interim~~amendments may be applied prospectively through December 31, 2022. The FHLB is in the process of evaluating the guidance, and annual periods beginning on January 1, 2019 (concurrent with the adoption of the hedging standard mentioned below). This guidance was adopted prospectively for qualifying new or re-designated hedging relationships entered into on or after January 1, 2019. Upon adoption, this guidance did not have an impactits effect on the ~~FHLB’s~~FHLB's financial condition, results of operations orand cash ~~flows.~~flows has not yet been determined.

Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. On August 29, 2018, the FASB issued amended guidance that aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). This guidance ~~becomes~~became effective for the FHLB for the interim and annual periods beginning on January 1, 2020. ~~Early adoption is permitted.~~ The ~~FHLB does~~guidance did not ~~intend to adopt this guidance early. The FHLB is in the process of evaluating this guidance, but its effect~~have a material impact on the FHLB’s financial condition, results of operations, orand cash ~~flows is not expected to be material.~~flows.

Changes to the Disclosure Requirements for Defined Benefit Plans. On August 28, 2018, the FASB issued amended guidance that modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans to improve disclosure effectiveness. This guidance becomes effective for annual periods ending after December 15, 2020 (December 31, 2020 for the FHLB) and will be applied retrospectively for all comparative periods presented. Early adoption is

permitted. The FHLB ~~does not intend to~~will adopt this guidance ~~early.~~for the year ended December 31, 2020. The adoption of this guidance will affect the FHLB's disclosures, but will not have any effect on the FHLB's financial condition, results of operations, or cash flows.

Changes to the Disclosure Requirements for Fair Value Measurement. On August 28, 2018, the FASB issued amended guidance that modifies the disclosure requirements for fair value measurements to improve disclosure effectiveness. This guidance ~~becomes~~became effective for the FHLB for the interim and annual periods beginning on January 1, 2020. ~~Early adoption is permitted. The FHLB does not intend to adopt this guidance early.~~ The adoption of this guidance ~~will affect~~affected the FHLB's disclosures, but ~~will~~did not have any effect on the FHLB's financial condition, results of operations, or cash flows.

~~Targeted Improvements to Accounting for Hedging Activities.~~ On August 28, 2017, the FASB issued amended guidance to improve the financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial statements. This guidance requires that, for fair value hedges, the entire change in the fair value of the hedging instrument included in the assessment of hedge effectiveness be presented in the same income statement line that is used to present the earnings effect of the hedged item. In addition, the amendments include certain targeted improvements to the assessment of hedge effectiveness. This guidance became effective for the FHLB for the interim and annual periods beginning on January 1, 2019 and was applied to all existing hedging relationships as of that date. On January 1, 2019, the FHLB modified the presentation of fair value hedge results on its Statements of Income, as well as relevant disclosures, prospectively. However, the adoption of this guidance did not have a material effect on the FHLB's ~~financial condition, results of operations, or cash flows.~~

~~Premium Amortization on Purchased Callable Debt Securities.~~ On March 30, 2017, the FASB issued amended guidance to shorten the amortization period for certain purchased callable debt securities held at a premium. Specifically, the amendments require the premium to be amortized to the earliest call date. The amendments do not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity. This guidance was adopted on January 1, 2019, and is applied using a modified retrospective method through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. The guidance did not have an impact on the FHLB’s financial condition, results of operations, or cash flows.

Measurement of Credit Losses on Financial Instruments. On June 16, 2016, the FASB issued amended guidance for the accounting of credit losses on financial instruments. The amendments require entities to immediately record the full amount of expected credit losses in their loan portfolios. The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. The guidance also requires, among other things, credit losses relating to available-for-sale debt securities to be recorded through an allowance for credit losses and expanded disclosure requirements. The guidance ~~becomes~~became effective for the FHLB for the interim and annual periods beginning on January 1, 2020. ~~Early adoption is permitted.~~ The guidance ~~should be~~was applied using a modified-retrospective approach, through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance iswas effective. ~~In addition, entities are required to use a prospective transition approach for debt securities for which an other-than-temporary impairment had been recognized before the effective date.~~ The ~~FHLB does~~adoption of this guidance did not ~~intend to adopt the new guidance early. Based on its preliminary assessments, the FHLB does not expect the guidance to~~ result in an allowance for credit losses for certain financial instruments including Advances, U.S. obligation/GSE investments, securities purchased under agreement to resell and other short-term investments given the specific terms, issuer guarantees, and/or collateralized/secured nature of the instruments. For mortgage loans held for portfolio, the ~~FHLB does~~adoption of this guidance did not ~~expect the guidance to~~ have a material ~~impact. However,~~impact on the FHLB's expectation of the guidance's ultimate impact on its financial condition, results of operations, and cash flows may change depending upon the composition of the FHLB’s financial assets at the adoption date and the economic conditions and forecasts at that time.

~~Leases.~~ On February 25, 2016, the FASB issued guidance that requires recognition of lease assets and lease liabilities on the Statement of Condition and disclosure of key information about leasing arrangements. In particular, this guidance requires a lessee, of operating or finance leases, to recognize on the Statement of Condition a liability to make lease payments and a right-of-use asset representing its right to use the underlying asset for the lease term. This guidance became effective for the FHLB for the interim and annual periods beginning on January 1, 2019. The FHLB elected to adopt this guidance using the modified retrospective method, and therefore, did not restate prior periods. On January 1, 2019, the FHLB recognized a right-of-use asset of $5,473,000 in other assets and a lease liability of $6,141,000 in other liabilities on its Statement of Condition for its operating leases. As permitted, the FHLB elected to not recognize a right-of-use asset or lease liability for its leases with terms of 12 months or less. The FHLB has determined that its leasing activities are not material to its financial condition, results of operations, or cash flows.

Note 3 - Investments

The FHLB makes short-term investments in interest-bearing deposits, securities purchased under agreements to resell, and Federal funds sold and may make other investments in debt securities, which are classified as either trading, available-for-sale, or held-to-maturity.

Interest-Bearing Deposits, Securities Purchased under Agreements to Resell, and Federal Funds Sold

The FHLB invests in interest-bearing deposits, securities purchased under agreements to resell, and Federal funds sold to provide short-term liquidity. These investments are transacted with counterparties that have received a credit rating of single-A or greater by a nationally recognized statistical rating organization (NRSRO). The FHLB’s internal ratings of these counterparties may differ from those issued by an NRSRO.

Federal funds sold are unsecured loans that are generally transacted on an overnight term. FHFA regulations include a limit on the amount of unsecured credit the FHLB may extend to a counterparty. At March 31, 2020 and December 31, 2019, all investments in interest-bearing deposits and Federal funds sold were repaid or expected to be repaid according to the contractual terms. NaN allowance for credit losses was recorded for these assets at March 31, 2020 and December 31, 2019. Carrying values of interest-bearing deposits and Federal funds sold exclude accrued interest receivable of (in thousands) $599 and $0 as of March 31, 2020, and $1,162 and $210 as of December 31, 2019.

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). If so, the counterparty must place an equivalent amount of additional securities as collateral or remit an equivalent amount of cash, generally by the next business day. Based upon the collateral held as security and collateral maintenance provisions with counterparties, the FHLB determined that 0 allowance for credit losses was needed for its securities purchased under agreements to resell at March 31, 2020 and December 31, 2019. The carrying value of securities purchased under agreements to resell excludes accrued interest receivable of (in thousands) $474 and $3,503 as of March 31, 2020 and December 31, 2019.

Debt Securities

The FHLB invests in debt securities, which are classified as either trading, available-for-sale, or held-to-maturity. The FHLB is prohibited by Finance Agency regulations from purchasing certain higher-risk securities, such as equity securities and debt instruments that are not investment quality, other than certain investments targeted at low-income persons or communities and instruments that experienced credit deterioration after their purchase by the FHLB.

Trading Securities

Table 3.1 - Trading Securities by Major Security Types (in thousands)


Fair Value	March 31, 2019		December 31, 2018		March 31, 2020		December 31, 2019
Non-mortgage-backed securities (non-MBS):
U.S. Treasury obligations	$	4,968,386	$	—	$	9,860,650	$	9,626,964
GSE obligations	613,999		223,368		2,126,978		1,988,259
Total non-MBS	5,582,385		223,368		11,987,628		11,615,223
Mortgage-backed securities (MBS):
U.S. obligation single-family MBS	581		612		445		470
Total	$	5,582,966	$	223,980	$	11,988,073	$	11,615,693

Table 3.2 - Net Gains (Losses) on Trading Securities (in thousands)



	Three Months Ended March 31,
	2020		2019
Net gains (losses) on trading securities held at period end	$	372,406	$	22,126
Net gains (losses) on trading securities	$	372,406	$	22,126

Three Months Ended March 31,
2019 2018
Net gains (losses) on trading securities held at period end $ 22,126
$ (2 )
Net gains (losses) on trading securities $ 22,126
$ (2 )

~~Note 4 -~~ Available-for-Sale Securities

Table ~~4.1~~3.3 - Available-for-Sale Securities by Major Security Types (in thousands)


	March 31, 2019									March 31, 2020
	Amortized Cost ⁽¹⁾		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Amortized Cost ⁽¹⁾		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Certificates of deposit	$	950,000	$	120	$	—		$	950,120
GSE obligations	120,220		123		(166		)	120,177		$	142,609	$	409	$	(944	)	$	142,074
Total	$	1,070,220	$	243	$	(166	)	$	1,070,297	$	142,609	$	409	$	(944	)	$	142,074

	December 31, 2018									December 31, 2019
	Amortized Cost ⁽¹⁾		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Amortized Cost ⁽¹⁾		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Certificates of deposit	$	2,350,000	$	71	$	(69	)	$	2,350,002	$	1,410,000	$	111	$	—		$	1,410,111
GSE obligations	53,007		16		(128		)	52,895		131,815		601		(342		)	132,074
Total	$	2,403,007	$	87	$	(197	)	$	2,402,897	$	1,541,815	$	712	$	(342	)	$	1,542,185


(1)	Amortized cost of available-for-sale securities includes adjustments made to the cost basis of an investment for accretion, amortization, and/or fair value hedge accounting ~~adjustments.~~adjustments, and excludes accrued interest receivable of (in thousands) $493 and $5,149 at March 31, 2020 and December 31, 2019.

~~All securities outstanding with gross unrealized losses at March 31, 2019 and December 31, 2018 were in a continuous unrealized loss position for less than 12 months.~~

Table ~~4.2 - Available-for-Sale Securities by Contractual Maturity (in thousands)~~

March 31, 2019 December 31, 2018
Year of Maturity
Amortized
Cost

Fair
Value

Amortized
Cost

Fair
Value
Due in 1 year or less $ 950,000
$ 950,120
$ 2,350,000
$ 2,350,002
Due after 1 year through 5 years —
—
—
—
Due after 5 years through 10 years 111,070
110,990
48,999
48,904
Due after 10 years 9,150
9,187
4,008
3,991
Total $ 1,070,220
$ 1,070,297
$ 2,403,007
$ 2,402,897

~~Table 4.3 - Interest Rate Payment Terms of Available-for-Sale Securities (in thousands)~~

March 31, 2019 December 31, 2018
Amortized cost of available-for-sale securities:
Fixed-rate $ 1,070,220
$ 2,403,007

~~Realized Gains and Losses.~~ ~~The FHLB had~~ no ~~sales of securities out of its available-for-sale portfolio for the three months ended~~ ~~March 31, 2019~~ or ~~2018~~.

~~Note 5 - Held-to-Maturity Securities~~

~~Table 5.1 - Held-to-Maturity Securities by Major Security Types (in thousands)~~

March 31, 2019

Amortized Cost ⁽¹⁾

Gross Unrecognized Holding
Gains
Gross Unrecognized Holding Losses Fair Value
Non-MBS:
U.S. Treasury obligations $ 34,545
$ 8
$ —
$ 34,553
Total non-MBS 34,545
8
—
34,553
MBS:
U.S. obligation single-family MBS 1,963,465
581
(23,637 ) 1,940,409
GSE single-family MBS 5,342,366
20,869
(106,736 ) 5,256,499
GSE multi-family MBS 8,517,429
510
(24,622 ) 8,493,317
Total MBS 15,823,260
21,960
(154,995 ) 15,690,225
Total $ 15,857,805
$ 21,968
$ (154,995 ) $ 15,724,778

December 31, 2018

Amortized Cost ⁽¹⁾

Gross Unrecognized Holding
Gains
Gross Unrecognized Holding Losses Fair Value
Non-MBS:
U.S. Treasury obligations $ 35,667
$ —
$ (6 ) $ 35,661
Total non-MBS 35,667
—
(6 ) 35,661
MBS:
U.S. obligation single-family MBS 2,040,642
540
(47,463 ) 1,993,719
GSE single-family MBS 5,543,524
9,891
(162,097 ) 5,391,318
GSE multi-family MBS 8,171,389
1,739
(18,458 ) 8,154,670
Total MBS 15,755,555
12,170
(228,018 ) 15,539,707
Total $ 15,791,222
$ 12,170
$ (228,024 ) $ 15,575,368


~~(1)~~	~~Carrying value equals amortized cost.~~

~~Table 5.2 - Net Purchased Premiums Included in the Amortized Cost of MBS Classified as Held-to-Maturity (in thousands)~~

March 31, 2019 December 31, 2018
Premiums $ 40,279
$ 42,299
Discounts (18,158 ) (19,730 )
Net purchased premiums $ 22,121
$ 22,569

~~Table 5.3~~3.4 summarizes the ~~held-to-maturity~~available-for-sale securities with unrealized losses, which are aggregated by major security type and length of time that individual securities have been in a continuous unrealized loss position.

Table ~~5.3~~3.4 - ~~Held-to-Maturity~~Available-for-Sale Securities in a Continuous Unrealized Loss Position (in thousands)



	March 31, 2020
	Less than 12 Months					12 Months or more					Total
	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
GSE obligations	$	55,707	$	(604	)	$	16,358	$	(340	)	$	72,065	$	(944	)
Total	$	55,707	$	(604	)	$	16,358	$	(340	)	$	72,065	$	(944	)

	December 31, 2019
	Less than 12 Months					12 Months or more					Total
	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
GSE obligations	$	17,071	$	(126	)	$	21,574	$	(216	)	$	38,645	$	(342	)
Total	$	17,071	$	(126	)	$	21,574	$	(216	)	$	38,645	$	(342	)

Table 3.5 - Available-for-Sale Securities by Contractual Maturity (in thousands)



	March 31, 2020				December 31, 2019
Year of Maturity	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in 1 year or less	$	—	$	—	$	1,410,000	$	1,410,111
Due after 1 year through 5 years	—		—		—		—
Due after 5 years through 10 years	128,773		128,074		119,771		119,870
Due after 10 years	13,836		14,000		12,044		12,204
Total	$	142,609	$	142,074	$	1,541,815	$	1,542,185

Table 3.6 - Interest Rate Payment Terms of Available-for-Sale Securities (in thousands)



	March 31, 2020		December 31, 2019
Amortized cost of available-for-sale securities:
Fixed-rate	$	142,609	$	1,541,815

The FHLB had 0 sales of securities out of its available-for-sale portfolio for the three months ended March 31, 2020 or 2019.

Held-to-Maturity Securities

Table 3.7 - Held-to-Maturity Securities by Major Security Types (in thousands)


	March 31, 2019
	Less than 12 Months					12 Months or more					Total
	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
MBS:
U.S. obligation single-family MBS	$	49,342	$	(22	)	$	1,591,030	$	(23,615	)	$	1,640,372	$	(23,637	)
GSE single-family MBS	26,932		(50		)	3,779,713		(106,686		)	3,806,645		(106,736		)
GSE multi-family MBS	5,839,555		(23,223		)	1,104,643		(1,399		)	6,944,198		(24,622		)
Total	$	5,915,829	$	(23,295	)	$	6,475,386	$	(131,700	)	$	12,391,215	$	(154,995	)

	December 31, 2018
	Less than 12 Months					12 Months or more					Total					March 31, 2020
	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Amortized Cost ⁽¹⁾		Gross Unrecognized Holding Gains		Gross Unrecognized Holding Losses			Fair Value
Non-MBS:
U.S. Treasury obligations	$	35,661	$	(6	)	$	—	$	—		$	35,661	$	(6	)	$	34,345	$	144	$	—		$	34,489
Total non-MBS	35,661		(6		)	—		—			35,661		(6		)	34,345		144		—			34,489
MBS:
U.S. obligation single-family MBS	175,663		(1,571		)	1,526,835		(45,892		)	1,702,498		(47,463		)	1,493,694		57,446		(373		)	1,550,767
GSE single-family MBS	401,509		(1,581		)	3,859,608		(160,516		)	4,261,117		(162,097		)	4,232,995		116,453		(2,558		)	4,346,890
GSE multi-family MBS	5,976,323		(18,185		)	229,739		(273		)	6,206,062		(18,458		)	6,809,592		28		(56,317		)	6,753,303
Total MBS	6,553,495		(21,337		)	5,616,182		(206,681		)	12,169,677		(228,018		)	12,536,281		173,927		(59,248		)	12,650,960
Total	$	6,589,156	$	(21,343	)	$	5,616,182	$	(206,681	)	$	12,205,338	$	(228,024	)	$	12,570,626	$	174,071	$	(59,248	)	$	12,685,449

																December 31, 2019
																Amortized Cost ⁽¹⁾		Gross Unrecognized Holding Gains		Gross Unrecognized Holding Losses			Fair Value
Non-MBS:
U.S. Treasury obligations																$	35,171	$	5	$	—		$	35,176
Total non-MBS																35,171		5		—			35,176
MBS:
U.S. obligation single-family MBS																1,670,783		13,499		(239		)	1,684,043
GSE single-family MBS																4,500,471		40,386		(24,072		)	4,516,785
GSE multi-family MBS																7,292,894		54		(27,745		)	7,265,203
Total MBS																13,464,148		53,939		(52,056		)	13,466,031
Total																$	13,499,319	$	53,944	$	(52,056	)	$	13,501,207


(1)	Carrying value equals amortized cost. Amortized cost of held-to-maturity securities includes adjustments made to the cost basis of an investment for accretion and amortization and excludes accrued interest receivable of (in thousands) $18,169 and $20,365 as of March 31, 2020 and December 31, 2019.

Table 3.8 - Net Purchased Premiums Included in the Amortized Cost of MBS Classified as Held-to-Maturity (in thousands)



	March 31, 2020			December 31, 2019
Premiums	$	24,532		$	32,071
Discounts	(10,898		)	(13,996		)
Net purchased premiums	$	13,634		$	18,075

Table ~~5.4~~3.9 - Held-to-Maturity Securities by Contractual Maturity (in thousands)


	March 31, 2019				December 31, 2018				March 31, 2020				December 31, 2019
Year of Maturity	Amortized Cost ⁽¹⁾		Fair Value		Amortized Cost ⁽¹⁾		Fair Value		Amortized Cost ⁽¹⁾		Fair Value		Amortized Cost ⁽¹⁾		Fair Value
Non-MBS:
Due in 1 year or less	$	34,545	$	34,553	$	35,667	$	35,661	$	34,345	$	34,489	$	35,171	$	35,176
Due after 1 year through 5 years	—		—		—		—		—		—		—		—
Due after 5 years through 10 years	—		—		—		—		—		—		—		—
Due after 10 years	—		—		—		—		—		—		—		—
Total non-MBS	34,545		34,553		35,667		35,661		34,345		34,489		35,171		35,176
MBS ⁽²⁾	15,823,260		15,690,225		15,755,555		15,539,707		12,536,281		12,650,960		13,464,148		13,466,031
Total	$	15,857,805	$	15,724,778	$	15,791,222	$	15,575,368	$	12,570,626	$	12,685,449	$	13,499,319	$	13,501,207


(1)	Carrying value equals amortized cost.


(2)	MBS are not presented by contractual maturity because their expected maturities will likely differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment fees.

Table ~~5.5~~3.10 - Interest Rate Payment Terms of Held-to-Maturity Securities (in thousands)



	March 31, 2020		December 31, 2019
Amortized cost of non-MBS:
Fixed-rate	$	34,345	$	35,171
Total amortized cost of non-MBS	34,345		35,171
Amortized cost of MBS:
Fixed-rate	5,135,315		5,438,532
Variable-rate	7,400,966		8,025,616
Total amortized cost of MBS	12,536,281		13,464,148
Total	$	12,570,626	$	13,499,319

March 31, 2019 December 31, 2018
Amortized cost of non-MBS:
Fixed-rate $ 34,545
$ 35,667
Total amortized cost of non-MBS 34,545
35,667
Amortized cost of MBS:
Fixed-rate 6,415,731
6,652,055
Variable-rate 9,407,529
9,103,500
Total amortized cost of MBS 15,823,260
15,755,555
Total $ 15,857,805
$ 15,791,222

~~Realized Gains and Losses.~~From time to time the FHLB may sell securities out of its held-to-maturity portfolio. These securities, generally, have less than 15 percent of the acquired principal outstanding at the time of the sale. These sales are considered maturities for the purposes of security classification. For the three months ended March 31, ~~2019~~2020 and ~~2018,~~2019, the FHLB did ~~not~~0t sell any held-to-maturity securities.

Allowance for Credit Losses on Available-for-Sale and Held-to-Maturity Securities

~~Note 6 - Other-Than-Temporary Impairment Analysis~~

The FHLB evaluates ~~any of its individual~~ available-for-sale and held-to-maturity investment securities ~~holdings~~for credit losses on a quarterly basis. The FHLB adopted new accounting guidance for the measurement of credit losses on financial instruments on January 1, 2020. See Note 1 - Summary of Significant Accounting Policies for additional information. See Note 1 - Summary of Significant Accounting Policies in the FHLB’s 2019 Annual Report on Form 10-K for information on the prior methodology for evaluating credit losses. As of December 31, 2019, the FHLB did not record any credit losses for its available-for-sale or held-to-maturity securities.

The FHLB’s available-for-sale and held-to-maturity securities are certificates of deposit, U.S. Treasury obligations, GSE obligations, and MBS issued by Fannie Mae, Freddie Mac, Ginnie Mae and the National Credit Union Administration (NCUA) that are backed by single-family or multi-family mortgage loans. The FHLB only purchases securities considered investment quality. At March 31, 2020, all available-for-sale and held-to-maturity securities were rated single-A, or above, by an NRSRO, based on the lowest long-term credit rating for each security used by the FHLB. The FHLB’s internal ratings of these securities may differ from those obtained from an NRSRO.

The FHLB evaluates individual available-for-sale securities for impairment by comparing the security’s fair value to its amortized cost. Impairment may exist when the fair value of the investment is less than its amortized cost (i.e., in an unrealized loss ~~position for other-than-temporary impairment on a quarterly basis.~~

~~U.S. Obligations and GSE Investments~~

For its U.S. obligations and GSE investments (MBS and non-MBS), the FHLB has determined that the strength of the issuers' guarantees through direct obligations or support from the U.S. government is sufficient to protect the FHLB from losses based on current expectations. As a result, the FHLB determined that, as of position). At March 31, ~~2019, all of the gross~~2020, certain available-for-sale securities were in an unrealized loss position. These losses ~~on these investments were~~are considered temporary as the ~~declines in market value of~~FHLB expects to recover the entire amortized cost basis on these available-for-sale investment securities ~~were not attributable to credit quality. Furthermore, the FHLB~~and does not intend to sell ~~the investments, and~~these securities nor considers it ~~is not~~ more likely than not that ~~the FHLB~~it will be required to sell ~~the investments~~these

securities before its anticipated recovery of ~~their~~each security's remaining amortized cost ~~bases.~~basis. Further, the FHLB has not experienced any payment defaults on the instruments. In addition, (in thousands) $142,074 of these securities carry a government guarantee. As a result, 0 allowance for credit losses was recorded on these available-for-sale securities at March 31, 2020.

The FHLB evaluates its held-to-maturity securities for impairment on a collective, or pooled basis, unless an individual assessment is deemed necessary because the securities do not possess similar risk characteristics. As of March 31, 2020, the FHLB had 0t established an allowance for credit loss on any held-to-maturity securities because the securities: (1) were all highly-rated and/or had short remaining terms to maturity, (2) had not experienced, nor did ~~not consider~~the FHLB expect, any payment default on the instruments, and (3) in the case of ~~these investments~~U.S., GSE, or other agency obligations, carry an implicit or explicit government guarantee such that the FHLB considered the risk of nonpayment to be ~~other-than-temporarily impaired at~~ ~~March 31, 2019~~.zero.

~~The FHLB did not consider any of its investments to be other-than-temporarily impaired at~~ ~~December 31, 2018~~.

Note 74 - Advances

The FHLB offers a wide range of fixed- and variable-rate Advance products with different maturities, interest rates, payment characteristics and optionality. The following table presents Advance redemptions by contractual maturity, including index-amortizing Advances, which are presented according to their predetermined amortization schedules.

Table ~~7.1~~4.1 - Advances by Redemption Term (dollars in thousands)



	March 31, 2020					December 31, 2019
Redemption Term	Amount			Weighted Average Interest Rate		Amount			Weighted Average Interest Rate
Due in 1 year or less	$	43,900,826		0.79	%	$	32,342,198		1.78	%
Due after 1 year through 2 years	20,964,575			1.48		4,477,497			2.19
Due after 2 years through 3 years	4,293,578			1.76		1,996,647			2.30
Due after 3 years through 4 years	2,258,670			2.38		1,408,948			2.50
Due after 4 years through 5 years	1,445,267			1.77		1,765,323			2.08
Thereafter	7,065,586			1.86		5,273,531			2.35
Total principal amount	79,928,502			1.18		47,264,144			1.94
Commitment fees	(230		)			(281		)
Discount on Affordable Housing Program (AHP) Advances	(2,875		)			(3,148		)
Premiums	1,147					1,221
Discounts	(2,539		)			(2,530		)
Hedging adjustments	500,560					109,929
Fair value option valuation adjustments and accrued interest	385					238
Total ⁽¹⁾	$	80,424,950				$	47,369,573


(1)	Carrying values exclude accrued interest receivable of (in thousands) $66,712 and $60,682 as of March 31, 2020 and December 31, 2019.

March 31, 2019 December 31, 2018
Redemption Term Amount
Weighted Average Interest
Rate
Amount
Weighted Average Interest
Rate
Overdrawn demand deposit accounts $ 4
2.57 % $ —
— %
Due in 1 year or less 39,326,315
2.56
38,592,494
2.56
Due after 1 year through 2 years 5,058,763
2.43
6,461,276
2.39
Due after 2 years through 3 years 2,744,395
2.34
3,146,830
2.30
Due after 3 years through 4 years 1,088,007
2.55
1,145,118
2.56
Due after 4 years through 5 years 1,634,781
2.70
935,439
2.76
Thereafter 5,025,125
2.92
4,591,015
2.98
Total principal amount 54,877,390
2.58
54,872,172
2.56
Commitment fees (433 ) (456 )
Discount on Affordable Housing Program (AHP) Advances (4,079 ) (4,386 )
Premiums 1,438
1,510

Discounts (2,895 ) (3,090 )
Hedging adjustments 8,114
(43,506 )
Fair value option valuation adjustments and accrued interest 108
8

Total $ 54,879,643
$ 54,822,252

The FHLB offers certain fixed and variable-rate Advances to members that may be prepaid on specified dates (call dates) without incurring prepayment or termination fees (callable Advances). If the call option is exercised, replacement funding may be available to members. Other Advances may only be prepaid subject to a prepayment fee paid to the FHLB that makes the FHLB financially indifferent to the prepayment of the Advance.

Table ~~7.2~~4.2 - Advances by Redemption Term or Next Call Date (in thousands)



Redemption Term or Next Call Date	March 31, 2020		December 31, 2019
Due in 1 year or less	$	67,120,907	$	35,366,608
Due after 1 year through 2 years	3,576,815		4,982,222
Due after 2 years through 3 years	1,501,086		1,724,647
Due after 3 years through 4 years	2,231,336		1,381,718
Due after 4 years through 5 years	1,432,772		1,535,418
Thereafter	4,065,586		2,273,531
Total principal amount	$	79,928,502	$	47,264,144

Redemption Term or Next Call Date March 31, 2019 December 31, 2018
Overdrawn demand deposit accounts $ 4
$ —
Due in 1 year or less 44,731,169
43,793,555
Due after 1 year through 2 years 4,156,013
4,338,117
Due after 2 years through 3 years 1,881,485
3,490,580
Due after 3 years through 4 years 696,565
753,716
Due after 4 years through 5 years 1,387,029
905,189
Thereafter 2,025,125
1,591,015
Total principal amount $ 54,877,390
$ 54,872,172

The FHLB also offers putable Advances. With a putable Advance, the FHLB effectively purchases put options from the member that allows the FHLB to terminate the Advance at predetermined dates. The FHLB normally would exercise its put option when interest rates increase relative to contractual rates.

Table ~~7.3~~4.3 - Advances by Redemption Term or Next Put Date for Putable Advances (in thousands)



Redemption Term or Next Put Date	March 31, 2020		December 31, 2019
Due in 1 year or less	$	46,537,576	$	33,451,448
Due after 1 year through 2 years	21,272,075		4,777,497
Due after 2 years through 3 years	4,411,578		2,129,647
Due after 3 years through 4 years	1,888,670		1,238,948
Due after 4 years through 5 years	1,476,017		1,611,073
Thereafter	4,342,586		4,055,531
Total principal amount	$	79,928,502	$	47,264,144

Redemption Term or Next Put Date March 31, 2019 December 31, 2018
Overdrawn demand deposit accounts $ 4
$ —
Due in 1 year or less 39,848,815
38,827,494
Due after 1 year through 2 years 5,383,763
6,611,276
Due after 2 years through 3 years 2,981,895
3,221,830
Due after 3 years through 4 years 1,088,007
1,145,118
Due after 4 years through 5 years 1,334,781
835,439
Thereafter 4,240,125
4,231,015
Total principal amount $ 54,877,390
$ 54,872,172

Table ~~7.4~~4.4 - Advances by Interest Rate Payment Terms (in thousands)


	March 31, 2019		December 31, 2018		March 31, 2020		December 31, 2019
Total fixed-rate ⁽¹⁾	$	32,621,574	$	23,988,298	$	48,793,003	$	36,113,108
Total variable-rate ⁽¹⁾	22,255,816		30,883,874		31,135,499		11,151,036
Total principal amount	$	54,877,390	$	54,872,172	$	79,928,502	$	47,264,144


(1)	Payment terms based on current interest rate terms, which reflect any option exercises or rate conversions that have occurred subsequent to the related Advance issuance.

~~Table 7.5 - Borrowers Holding Five Percent or more of Total Advances, Including Any Known Affiliates that are Members of the FHLB (dollars in millions)~~Credit Risk Exposure and Security Terms

March 31, 2019 December 31, 2018
Principal % of Total Principal Amount of Advances Principal % of Total Principal Amount of Advances
JPMorgan Chase Bank, N.A. $ 24,900
45 % JPMorgan Chase Bank, N.A. $ 23,400
43 %
Third Federal Savings and Loan Association 3,583
7
U.S. Bank, N.A. 4,574
8
U.S. Bank, N.A. 3,574
7
Third Federal Savings and Loan Association 3,727
7
Total $ 32,057
59 % Total $ 31,701
58 %

~~Note 8 - Mortgage Loans Held for Portfolio~~

~~Table 8.1 - Mortgage Loans Held for Portfolio (in thousands)~~

March 31, 2019 December 31, 2018
Unpaid principal balance:
Fixed rate medium-term single-family mortgage loans ⁽¹⁾
$ 894,039
$ 933,340
Fixed rate long-term single-family mortgage loans 9,395,962
9,338,814
Total unpaid principal balance 10,290,001
10,272,154
Premiums 225,092
227,161
Discounts (2,525 ) (2,603 )
Hedging basis adjustments ⁽²⁾
7,429
5,045
Total mortgage loans held for portfolio $ 10,519,997
$ 10,501,757


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


~~(2)~~	Represents the unamortized balance of the mortgage purchase commitments' market values at the time of settlement. The market value of the commitment is included in the basis of the mortgage loan and amortized accordingly.

~~Table 8.2 - Mortgage Loans Held for Portfolio by Collateral/Guarantee Type (in thousands)~~

March 31, 2019 December 31, 2018
Unpaid principal balance:
Conventional mortgage loans $ 10,026,673
$ 9,999,307
Federal Housing Administration (FHA) mortgage loans 263,328
272,847
Total unpaid principal balance $ 10,290,001
$ 10,272,154

~~Table 8.3 - Members, Including Any Known Affiliates that are Members of the FHLB, and Former Members Selling Five Percent or more of Total Unpaid Principal (dollars in millions)~~

March 31, 2019 December 31, 2018
Principal % of Total Principal % of Total
Union Savings Bank $ 3,447
34 % Union Savings Bank $ 3,449
34 %
Guardian Savings Bank FSB 967
9
Guardian Savings Bank FSB 987
10

~~Note 9 - Allowance for Credit Losses~~

The ~~FHLB has established an allowance methodology for each of the~~ FHLB's ~~portfolio segments: credit products (Advances, Letters of Credit and other extensions of credit~~Advances are made to ~~members); FHA mortgage loans held for portfolio; and conventional mortgage loans held for portfolio.~~

~~Credit Products~~

member financial institutions. The FHLB manages its credit exposure to ~~credit products~~Advances through an integrated approach that includes establishing a credit limit for each borrower and ongoing review of each borrower's financial condition, coupled with collateral and lending policies to limit risk of loss while balancing borrowers' needs for a reliable source of funding.

In addition, the FHLB lends to eligible borrowers in accordance with federal law and Finance Agency regulations, which require the FHLB to obtain sufficient collateral to fully secure credit products. Collateral eligible to secure new or renewed Advances includes:


▪	one-to-four family and multi-family mortgage loans (delinquent for no more than 90 days) and securities representing such mortgages;


▪	loans and securities issued, insured, or guaranteed by the U.S. government or any U.S. government agency (for example, mortgage-backed securities issued or guaranteed by Fannie Mae, Freddie Mac, or Ginnie Mae);


▪	cash or deposits in the FHLB;


▪	certain other collateral that is real estate-related, provided that the collateral has a readily ascertainable value and that the FHLB can perfect a security interest in it; and


▪	certain qualifying securities representing undivided equity interests in eligible Advance collateral.

Residential mortgage loans are the principal form of collateral for Advances. The estimated value of the collateral required to secure each member's credit products is calculated by applying collateral discounts, or haircuts, to the value of the collateral. ~~The FHLB accepts certain investment securities, residential mortgage loans, deposits and other real estate related assets as collateral.~~ In addition, community financial institutions are eligible to utilize expanded statutory collateral provisions for small business ~~agriculture loans~~ and ~~community development~~agribusiness loans. The FHLB's capital stock owned by its member borrowers is also pledged as collateral. Collateral arrangements and a member’s borrowing capacity vary based on the financial condition and performance of the institution, the types of collateral pledged and the overall quality of those assets. The FHLB can also require additional or substitute collateral to protect its security interest. The FHLB also has policies and procedures for validating the reasonableness of its collateral valuations and makes changes to its collateral guidelines, as necessary, based on current market conditions. In addition, collateral verifications and on-site reviews are performed by the FHLB based on the risk profile of the borrower. Management of the FHLB believes that these policies effectively manage the FHLB's credit risk from ~~credit products.~~Advances.

Members experiencing financial difficulties are subject to FHLB-performed “stress tests” of the impact of poorly performing assets on the member’s capital and loss reserve positions. Depending on the results of these tests and the level of over-collateralization, a member may be allowed to maintain pledged loan assets in its custody, may be required to deliver those loans into the custody of the FHLB or its agent, or may be required to provide details on ~~these~~those loans to facilitate an estimate of their fair value. The FHLB perfects its security interest in all pledged collateral. The FHLBank Act affords any security interest granted to the FHLB by a member priority over the claims or rights of any other party except for claims or rights of a third party that would otherwise be entitled to priority under ~~otherwise~~ applicable law and that are held by a bona fide purchaser for value or by a secured party holding a prior perfected security interest.

Using a risk-based approach, the FHLB considers the payment status, collateralization levels, and borrower's financial condition to be indicators of credit quality for its credit products. At March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, the FHLB did 0t have any Advances that were past due, in non-accrual status or considered impaired. In addition, there were 0 troubled debt restructurings related to Advances of the FHLB during the three months ended March 31, 2020 or 2019. At March 31, 2020 and December 31, 2019, the FHLB had rights to collateral on a member-by-member basis with an estimated value in excess of its outstanding extensions of credit.

~~The FHLB evaluates and makes changes to its collateral guidelines, as necessary, based on current market conditions. At~~ ~~March 31, 2019~~ and December 31, 2018, the FHLB did not have any Advances that were past due, in non-accrual status or impaired. In addition, there were no troubled debt restructurings related to credit products of the FHLB during the three months ended March 31, 2019 or ~~2018~~.

~~The FHLB has not experienced any credit losses on Advances since it was founded in 1932.~~ Based upon the collateral held as security, its credit extension and collateral policies and the repayment history on ~~credit products,~~Advances, the FHLB did not ~~record~~expect any credit losses on ~~credit products~~Advances as of March 31, ~~2019~~ ~~or December 31, 2018. Accordingly,~~2020 and therefore, 0 allowance for credit losses on Advances was recorded. For the same reasons, the FHLB did ~~not~~0t record any allowance for credit losses on ~~Advances.~~Advances at December 31, 2019.

Table 4.5 - Borrowers Holding Five Percent or more of Total Advances, Including Any Known Affiliates that are Members of the FHLB (dollars in millions)



March 31, 2020					December 31, 2019
	Principal		% of Total Principal Amount of Advances			Principal		% of Total Principal Amount of Advances
U.S. Bank, N.A.	$	24,374	30	%	U.S. Bank, N.A.	$	13,874	29	%
JPMorgan Chase Bank, N.A.	15,000		19		JPMorgan Chase Bank, N.A.	4,500		10
Third Federal Savings and Loan Association	4,077		5		Third Federal Savings and Loan Association	3,883		8
Total	$	43,451	54	%	Total	$	22,257	47	%

Note 5 - Mortgage Loans

Total mortgage loans held for portfolio represent residential mortgage loans under the Mortgage Purchase Program (MPP) that the FHLB's members originate, credit enhance, and then sell to the FHLB. The FHLB does not service any of these loans. The FHLB plans to retain its existing portfolio of mortgage loans.

At Table 5.1 - Mortgage Loans Held for Portfolio (in thousands)



	March 31, 2020			December 31, 2019
Fixed rate medium-term single-family mortgage loans ⁽¹⁾	$	743,427		$	773,575
Fixed rate long-term single-family mortgage loans	10,900,312			10,207,367
Total unpaid principal balance	11,643,739			10,980,942
Premiums	257,731			241,356
Discounts	(2,062		)	(2,166		)
Hedging basis adjustments ⁽²⁾	23,967			15,932
Total mortgage loans held for portfolio ⁽³⁾	11,923,375			11,236,064
Allowance for credit losses on mortgage loans	(297		)	(711		)
Mortgage loans held for portfolio, net	$	11,923,078		$	11,235,353


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


(2)	Represents the unamortized balance of the mortgage purchase commitments' market values at the time of settlement. The market value of the commitment is included in the basis of the mortgage loan and amortized accordingly.


(3)	Excludes accrued interest receivable of (in thousands) $38,473 and $36,739 at March 31, 2020 and December 31, 2019.

Table 5.2 - Mortgage Loans Held for Portfolio by Collateral/Guarantee Type (in thousands)



	March 31, 2020		December 31, 2019
Conventional mortgage loans	$	11,423,290	$	10,750,526
FHA mortgage loans	220,449		230,416
Total unpaid principal balance	$	11,643,739	$	10,980,942

Table 5.3 - Members, Including Any Known Affiliates that are Members of the FHLB, and Former Members Selling Five Percent or more of Total Unpaid Principal (dollars in millions)



	March 31, 2020					December 31, 2019
	Principal		% of Total			Principal		% of Total
Union Savings Bank	$	3,911	34	%	Union Savings Bank	$	3,574	33	%
Guardian Savings Bank FSB	1,068		9		Guardian Savings Bank FSB	1,004		9
FirstBank	804		7		FirstBank	714		7
The Huntington National Bank	624		5

Credit Risk Exposure

The FHLB manages credit risk exposure for conventional mortgage loans primarily though conservative underwriting and purchasing loans with characteristics consistent with favorable expected credit performance and by applying various credit enhancements.

Credit Enhancements. The conventional mortgage loans under the MPP are supported by some combination of credit enhancements (primary mortgage insurance (PMI), supplemental mortgage insurance (SMI) and the Lender Risk Account (LRA), including pooled LRA for those members participating in an aggregated MPP pool). These credit enhancements apply after a homeowner’s equity is exhausted. Beginning in February 2011, the FHLB discontinued the use of SMI for all new loan purchases and replaced it with expanded use of the LRA. The LRA is funded by the FHLB upfront as a portion of the purchase proceeds. The LRA is recorded in other liabilities in the Statement of Condition. Excess funds from the LRA are released to the member in accordance with the terms of the Master Commitment Contract, which is typically after five years, subject to performance of the related loan pool. The LRA established for a pool of loans is limited to only covering losses of that specific pool of loans. Because the FHA makes an explicit guarantee on FHA mortgage loans, the FHLB does not require any credit enhancements on these loans beyond primary mortgage insurance.

Table 5.4 - Changes in the LRA (in thousands)



	Three Months Ended
	March 31, 2020
LRA at beginning of year	$	233,476
Additions	13,776
Claims	(41		)
Scheduled distributions	(4,377		)
LRA at end of period	$	242,834

Payment Status of Mortgage Loans. The key credit quality indicator for conventional mortgage loans is payment status, which allows the FHLB to monitor the migration of past due loans. Past due loans are those where the borrower has failed to make timely payments of principal and/or interest in accordance with the terms of the loan. Other delinquency statistics include loans in process of foreclosure, serious delinquency rates, loans past due 90 days or more and still accruing interest, and non-accrual loans. Tables 5.5 and 5.6 present the payment status of conventional mortgage loans and other delinquency statistics.

Table 5.5 - Credit Quality Indicator of Conventional Mortgage Loans (dollars in thousands)



	March 31, 2020
	Origination Year
Payment status, at amortized cost ⁽¹⁾:	Prior to 2016		2016 to March 31, 2020		Total
Past due 30-59 days	$	20,153	$	13,860	$	34,013
Past due 60-89 days	4,154		470		4,624
Past due 90 days or more	9,802		1,630		11,432
Total past due mortgage loans	34,109		15,960		50,069
Current mortgage loans	3,592,598		8,058,309		11,650,907
Total conventional mortgage loans	$	3,626,707	$	8,074,269	$	11,700,976



	December 31, 2019
Payment status, at recorded investment ⁽¹⁾:	Conventional Loans
Past due 30-59 days	$	35,416
Past due 60-89 days	5,572
Past due 90 days or more	12,421
Total past due mortgage loans	53,409
Current mortgage loans	10,985,818
Total conventional mortgage loans	$	11,039,227


(1)	The recorded investment at December 31, 2019 includes accrued interest receivable whereas the amortized cost at March 31, 2020 excludes accrued interest receivable.

Table 5.6 - Other Delinquency Statistics (dollars in thousands)



	March 31, 2020
Amortized Cost:	Conventional MPP Loans			FHA Loans			Total
In process of foreclosure ⁽¹⁾	$	7,156		$	2,768		$	9,924
Serious delinquency rate ⁽²⁾	0.10		%	2.18		%	0.14		%
Past due 90 days or more still accruing interest ⁽³⁾	$	10,657		$	4,743		$	15,400
Loans on non-accrual status	$	2,168		$	—		$	2,168

	December 31, 2019
Recorded Investment:	Conventional MPP Loans			FHA Loans			Total
In process of foreclosure ⁽¹⁾	$	8,311		$	2,515		$	10,826
Serious delinquency rate ⁽²⁾	0.11		%	2.49		%	0.16		%
Past due 90 days or more still accruing interest ⁽³⁾	$	11,935		$	5,805		$	17,740
Loans on non-accrual status	$	1,902		$	—		$	1,902


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


(2)	Loans that are 90 days or more past due or in the process of foreclosure (including past due or current loans in the process of foreclosure) expressed as a percentage of the total loan portfolio class.


(3)	Each conventional loan past due 90 days or more still accruing interest is on a schedule/scheduled monthly settlement basis and contains one or more credit enhancements. Loans that are well secured and in the process of collection as a result of remaining credit enhancements and schedule/scheduled settlement are not placed on non-accrual status.

The FHLB did 0t have any real estate owned at March 31, ~~2019~~ ~~and~~2020 or December 31, ~~2018,~~2019.

Evaluation of Current Expected Credit Losses

See Note 10 - Allowance for Credit Losses in the ~~FHLB did not record any liability to reflect an allowance~~FHLB's 2019 Annual Report on Form 10-K, for ~~credit losses for off-balance sheet credit exposures. See~~ ~~Note 19~~ ~~for additional~~ information on the ~~FHLB's off-balance sheet~~prior methodology for evaluating credit ~~exposure.~~losses.

MortgageLoans ~~Held for Portfolio~~- ~~FHA~~

FHA. The FHLB invests in fixed-rate mortgage loans secured by one-to-four family residential properties insured by the FHA. The FHLB expects to recover any losses from such loans from the FHA. Any losses from these loans that are not recovered from the FHA would be due to a claim rejection by the FHA and, as such, would be recoverable from the selling participating financial institutions. Therefore, the FHLB only has credit risk for these loans if the seller or servicer fails to pay for losses not covered by the FHA insurance. As a result, the FHLB did not ~~establish~~record an allowance for credit losses on its FHA insured mortgage loans. Furthermore, due to the insurance, none of these mortgage loans have been placed on non-accrual status.

Mortgage Loans ~~Held for Portfolio~~ - Conventional ~~Mortgage Purchase Program (MPP)~~

~~The~~MPP. Conventional loans are evaluated collectively when similar risk characteristics exist. Conventional loans that do not share risk characteristics with other pools are removed from the collective evaluation and evaluated for expected credit losses on an individual basis. For loans with similar risk characteristics, the FHLB determines the allowance for ~~conventional loans~~credit losses through analyses that include consideration of various ~~data observations~~loan portfolio and collateral-related characteristics, such as past performance, current ~~performance, loan portfolio characteristics, collateral-related characteristics, industry data,~~conditions, and ~~prevailing~~reasonable and supportable forecasts of expected economic conditions. The ~~measurement~~FHLB uses a model that employs a variety of methods, such as projected cash flows to estimate expected credit losses over the life of the ~~allowance for~~loans. This model relies on a number of inputs, such as both current and forecasted property values and interest rates as well as historical borrower behavior experience. The FHLB’s calculation of expected credit losses ~~consists of: (1) collectively evaluating homogeneous pools~~includes a forecast of ~~residential mortgage loans; (2) reviewing specifically identified loans for impairment; and (3) considering other relevant qualitative factors.~~

~~Collectively Evaluated Mortgage Loans.~~ ~~The credit risk analysis~~home prices over the entire contractual terms of its conventional loans ~~evaluated collectively for impairment considers~~rather than a reversion to historical ~~delinquency migration, applies estimated loss severities, and~~home price trends after an initial forecast period. The FHLB also incorporates ~~the~~ associated credit enhancements ~~in order~~ to determine ~~the FHLB's best estimate of probable incurred losses at the reporting date. Migration analysis~~estimated expected credit losses.

If a loan is ~~a methodology for determining, through the FHLB's experience over a historical period, the rate of default~~required to be evaluated on loans. The FHLB applies migration analysis to loans based on payment status categories such as current, 30, 60, and 90 days past due. The FHLB then estimates how many loans in these categories may migrate to a loss realization event and applies a current loss severity to estimate losses. The estimated losses are then reduced by the probable cash flows resulting from available credit enhancements. To properly determine the credit enhancements available to recover estimated losses,an individual basis, the FHLB performs the credit risk analysis of all conventional mortgage loans at the individual Master Commitment Contract level. The Master Commitment Contract is an agreement with a member in which the member agrees to make a best efforts attempt to sell a specific dollar amount of loans to the FHLB generally over a one-year period. Any credit enhancement cash flows that are projected and assessed as not probable of receipt do not reduce estimated losses.

~~Individually Evaluated Mortgage Loans.~~ Conventional mortgage loans that are considered troubled debt restructurings are specifically identified for purposes of calculating the allowance for credit losses. The FHLB measures impairment of these specifically identified loans by either estimatingestimates the present value of expected cash flows, ~~estimating~~ the loan's observable market price, or ~~estimating~~ the fair value of the collateral if the loan is collateral dependent.

Certain conventional loans may be evaluated for credit losses by using the practical expedient for collateral dependent assets. A mortgage loan is considered collateral dependent if repayment is expected to be provided by the sale of the underlying property,

that is, if it is considered likely that the borrower will default. The FHLB ~~removes specifically identified loans evaluated for impairment from~~may estimate the ~~collectively evaluated~~fair value of this collateral by either applying an appropriate loss severity rate, using third-party estimates, or using a property valuation model. The expected credit loss of a collateral dependent mortgage loan ~~population.~~is equal to the difference between the amortized cost of the loan and the estimated fair value of the collateral, less estimated selling costs. The FHLB will either reserve for these estimated losses or record a direct charge-off of the loan balance, if certain triggering criteria are met. Expected recoveries of prior charge-offs, if any, are included in the allowance for credit losses.

~~Qualitative Factors.~~The FHLB also assesses other qualitative factors in its estimation of loan losses for the collectively evaluated population. This amount represents a subjective management judgment, based on facts and circumstances that exist as of the reporting date, which is intended to cover other ~~incurred~~expected losses that may not otherwise be captured in the methodology described above.

Allowance for Credit Losses on Conventional Mortgage Loans. The FHLB established an allowance for credit losses on its conventional mortgage loans held for portfolio.The following ~~tables present~~table presents a rollforward of the allowance for credit losses on conventional mortgage loans as well as the recorded investment in mortgage loans by impairment methodology. The recorded investment in a loan is the unpaid principal balance of the loan adjusted for accrued interest, unamortized premiums or discounts, hedging basis adjustments and direct write-downs. The recorded investment is not net of any allowance.loans.

Table ~~9.1~~5.7 - ~~Rollforward of~~ Allowance for Credit Losses on Conventional Mortgage Loans (in thousands)



	Three Months Ended March 31,
	2020			2019
Balance, beginning of period	$	711		$	840
Adjustment for cumulative effect of accounting changes	(366		)	—
Net charge offs	(48		)	(61		)
Balance, end of period	$	297		$	779

Three Months Ended March 31,
2019 2018
Balance, beginning of period $ 840
$ 1,190
Net charge offs (61 ) (122 )
Balance, end of period $ 779
$ 1,068

~~Table 9.2 - Allowance for Credit Losses and Recorded Investment on Conventional Mortgage Loans by Impairment Methodology (in thousands)~~

March 31, 2019 December 31, 2018
Allowance for credit losses:
Collectively evaluated for impairment $ 779
$ 840
Individually evaluated for impairment —
—
Total allowance for credit losses $ 779
$ 840
Recorded investment:
Collectively evaluated for impairment $ 10,277,146
$ 10,249,169
Individually evaluated for impairment 10,886
10,554
Total recorded investment $ 10,288,032
$ 10,259,723

~~Credit Enhancements.~~ The conventional mortgage loans under the MPP are supported by some combination of credit enhancements (primary mortgage insurance (PMI), supplemental mortgage insurance (SMI) and the Lender Risk Account (LRA), including pooled LRA for those members participating in an aggregated MPP pool). The amount of credit enhancements needed to protect the FHLB against credit losses is determined through use of a third-party default model. These credit enhancements apply after a homeowner's equity is exhausted. Beginning in February 2011, the FHLB discontinued the use of SMI for all new loan purchases and replaced it with expanded use of the LRA. The LRA is funded by the FHLB as a portion of the purchase proceeds to cover expected losses. The LRA is recorded in other liabilities in the Statements of Condition. Excess funds over required balances are returned to the member in accordance with a step-down schedule that is established upon execution of a Master Commitment Contract, subject to performance of the related loan pool. The LRA established for a pool of loans is limited to only covering losses of that specific pool of loans.

~~Table 9.3 - Changes in the LRA (in thousands)~~

Three Months Ended
March 31, 2019
LRA at beginning of year $ 213,260
Additions 3,114
Claims (8 )
Scheduled distributions (2,306 )
LRA at end of period $ 214,060

~~Credit Quality Indicators.~~ Key credit quality indicators for mortgage loans include the migration of past due loans, loans in process of foreclosure, and non-accrual loans. The table below summarizes the FHLB's key credit quality indicators for mortgage loans.

~~Table 9.4 - Recorded Investment in Delinquent Mortgage Loans (dollars in thousands)~~

March 31, 2019
Conventional MPP Loans FHA Loans Total
Past due 30-59 days delinquent $ 35,814
$ 15,013
$ 50,827
Past due 60-89 days delinquent 7,635
3,510
11,145
Past due 90 days or more delinquent 11,743
6,046
17,789
Total past due 55,192
24,569
79,761
Total current mortgage loans 10,232,840
242,359
10,475,199
Total mortgage loans $ 10,288,032
$ 266,928
$ 10,554,960
Other delinquency statistics:
In process of foreclosure, included above ⁽¹⁾
$ 8,043
$ 3,631
$ 11,674
Serious delinquency rate ⁽²⁾
0.11 % 2.38 % 0.17 %
Past due 90 days or more still accruing interest ⁽³⁾
$ 11,121
$ 6,046
$ 17,167
Loans on non-accrual status, included above $ 2,109
$ —
$ 2,109

December 31, 2018
Conventional MPP Loans FHA Loans Total
Past due 30-59 days delinquent $ 29,596
$ 14,845
$ 44,441
Past due 60-89 days delinquent 7,175
4,238
11,413
Past due 90 days or more delinquent 12,807
7,210
20,017
Total past due 49,578
26,293
75,871
Total current mortgage loans 10,210,145
250,308
10,460,453
Total mortgage loans $ 10,259,723
$ 276,601
$ 10,536,324
Other delinquency statistics:
In process of foreclosure, included above ⁽¹⁾
$ 7,557
$ 4,635
$ 12,192
Serious delinquency rate ⁽²⁾
0.13 % 2.65 % 0.19 %
Past due 90 days or more still accruing interest ⁽³⁾
$ 11,773
$ 7,210
$ 18,983
Loans on non-accrual status, included above $ 2,535
$ —
$ 2,535


~~(1)~~	Includes loans where the decision of foreclosure or a 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.


~~(2)~~	Loans that are 90 days or more past due or in the process of foreclosure (including past due or current loans in the process of foreclosure) expressed as a percentage of the total loan portfolio class recorded investment amount.


~~(3)~~	Each conventional loan past due 90 days or more still accruing interest is on a schedule/scheduled monthly settlement basis and contains one or more credit enhancements. Loans that are well secured and in the process of collection as a result of remaining credit enhancements and schedule/scheduled settlement are not placed on non-accrual status.

~~The FHLB did not have any real estate owned at~~ ~~March 31, 2019~~ ~~or December 31, 2018.~~

~~Troubled Debt Restructurings~~. A troubled debt restructuring is considered to have occurred when a concession is granted to a borrower for economic or legal reasons related to the borrower's financial difficulties and that concession would not have been considered otherwise. The FHLB's troubled debt restructurings primarily involve loans where an agreement permits the recapitalization of past due amounts up to the original loan amount and certain loans discharged in Chapter 7 bankruptcy. A loan considered a troubled debt restructuring is individually evaluated for impairment when determining its related allowance for credit losses. Credit loss is measured by estimating expected cash shortfalls incurred as of the reporting date.

~~The FHLB's recorded investment in modified loans considered troubled debt restructurings was (in thousands) $10,886 and $10,554 at~~ ~~March 31, 2019~~ ~~and December 31, 2018, respectively. The amount of troubled debt restructurings is not considered material to the FHLB's financial condition, results of operations, or cash flows.~~

Note 106 - Derivatives and Hedging Activities

Nature of Business Activity

The FHLB is exposed to interest rate risk primarily from the effect of interest rate changes on its interest-earning assets and on the interest-bearing liabilities that finance these assets. The goal of the FHLB's interest-rate risk management strategy is not to eliminate interest-rate risk, but to manage it within appropriate limits. To mitigate the risk of loss, the FHLB has established policies and procedures, which include guidelines on the amount of exposure to interest rate changes it is willing to accept. In addition, the FHLB monitors the risk to its interest income, net interest margin and average maturity of interest-earning assets and interest-bearing liabilities. The FHLB uses derivatives when they are considered to be the most cost-effective alternative to achieve the FHLB's financial and risk management objectives. See Note 11 - Derivatives and Hedging Activities in the FHLB's ~~2018~~2019 Annual Report on Form 10-K for additional information on the FHLB's derivative transactions.

The FHLB transacts its derivatives with large banks and major broker-dealers. Some of these banks and broker-dealers or their affiliates buy, sell, and distribute Consolidated Obligations. Derivative transactions may be executed either ~~executed~~ with a counterparty (uncleared derivatives) or cleared through a Futures Commission Merchant (i.e., clearing agent) with a Derivative Clearing Organization (cleared derivatives). Once a derivative transaction has been accepted for clearing by a Derivative Clearing Organization (Clearinghouse), the executing counterparty is replaced with the Clearinghouse. The FHLB is not a derivative dealer and does not trade derivatives for short-term profit.

Financial Statement Effect and Additional Financial Information

The notional amount of derivatives serves as a factor in determining periodic interest payments or cash flows received and paid. The notional amount reflects the FHLB's involvement in the various classes of financial instruments and represents neither the actual amounts exchanged nor the overall exposure of the FHLB to credit and market risk; the overall risk is much smaller. The risks of derivatives only can be measured meaningfully on a portfolio basis that takes into account the counterparties, the types of derivatives, the items being hedged and any offsets between the derivatives and the items being hedged.

Table ~~10.1~~6.1 summarizes the notional amount and fair value of derivative instruments and total derivative assets and liabilities. Total derivative assets and liabilities include the effect of netting adjustments and cash collateral. For purposes of this disclosure, the derivative values include the fair value of derivatives and the related accrued interest.

Table ~~10.1~~6.1 - Fair Value of Derivative Instruments (in thousands)


	March 31, 2019							March 31, 2020
	Notional Amount of Derivatives		Derivative Assets		Derivative Liabilities			Notional Amount of Derivatives		Derivative Assets		Derivative Liabilities
Derivatives designated as fair value hedging instruments:
Interest rate swaps	$	7,567,598	$	9,535	$	21,248		$	11,947,085	$	5,467	$	231,639
Derivatives not designated as hedging instruments:
Interest rate swaps	11,223,432		8,905		2,488			24,987,214		8,062		10,291
Interest rate swaptions	3,500,000		10,257		—			2,901,000		5,945		—
Forward rate agreements	389,000		26		1,817			1,392,000		1,558		15,964
Mortgage delivery commitments	341,104		2,346		78			764,574		10,972		823
Total derivatives not designated as hedging instruments	15,453,536		21,534		4,383			30,044,788		26,537		27,078
Total derivatives before adjustments	$	23,021,134	31,069		25,631			$	41,991,873	32,004		258,717
Netting adjustments and cash collateral ⁽¹⁾			123,920		(23,288		)			320,406		(236,026		)
Total derivative assets and total derivative liabilities			$	154,989	$	2,343				$	352,410	$	22,691

	December 31, 2018							December 31, 2019
	Notional Amount of Derivatives		Derivative Assets		Derivative Liabilities			Notional Amount of Derivatives		Derivative Assets		Derivative Liabilities
Derivatives designated as fair value hedging instruments:
Interest rate swaps	$	6,207,278	$	2,393	$	16,810		$	9,310,089	$	7,227	$	53,641
Derivatives not designated as hedging instruments:
Interest rate swaps	4,322,480		3,311		1,904			28,501,469		9,685		363
Interest rate swaptions	3,000,000		15,911		—			6,000,000		12,464		—
Forward rate agreements	131,000		—		2,664			849,000		21		782
Mortgage delivery commitments	146,009		1,726		1			936,269		2,798		64
Total derivatives not designated as hedging instruments	7,599,489		20,948		4,569			36,286,738		24,968		1,209
Total derivatives before adjustments	$	13,806,767	23,341		21,379			$	45,596,827	32,195		54,850
Netting adjustments and cash collateral ⁽¹⁾			42,424		(16,793		)			234,970		(53,540		)
Total derivative assets and total derivative liabilities			$	65,765	$	4,586				$	267,165	$	1,310

(1)

Amounts represent the application of the netting requirements that allow the FHLB to settle positive and negative positions, and also cash collateral and related accrued interest held or placed by the FHLB with the same clearing agent and/or counterparty. Cash collateral posted and related accrued interest was (in thousands) ~~$154,298~~$559,952 and ~~$71,246~~$293,148 at March 31, ~~2019~~2020 and December 31, ~~2018.~~2019. Cash collateral received and related accrued interest was (in thousands) ~~$7,090~~$3,520 and ~~$12,029~~$4,638 at March 31, ~~2019~~2020 and December 31, ~~2018.~~2019.

In connection with the adoption of new accounting guidance, 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 beginning on January 1, 2019. Prior to January 1, 2019, for designated fair value hedges, any hedge ineffectiveness (which represented the amount by which the change in the fair value of the derivative differed from the change in the fair value of the hedge item) was recorded in non-interest income as net gains (losses) on derivatives and hedging activities. See ~~Note 2~~ ~~for additional information on the adoption of~~ ~~Targeted Improvements to Accounting for Hedging Activities~~.

Table ~~10.2~~6.2 presents the impact of qualifying fair value hedging relationships on ~~the Statements of Income~~net interest income as well as the total interest income (expense) by product.

Table ~~10.2~~6.2 - Impact of Fair Value Hedging Relationships on ~~the Statements of~~Net Interest Income (in thousands)


	Three Months Ended March 31, 2019									Three Months Ended March 31, 2020
	Advances			Available-for-sale Securities			Consolidated Bonds			Advances			Available-for-sale Securities			Consolidated Bonds
Total interest income (expense) recorded in the Statements of Income	$	402,777		$	13,559		$	(262,863	)	$	172,167		$	3,396		$	(185,987	)
Impact of Fair Value Hedging Relationships on the Statements of Income ⁽¹⁾
Interest income/expense:
Net interest settlements	$	13,676		$	(15	)	$	195		$	(1,714	)	$	(274	)	$	384
Gain (loss) on derivatives	(52,594		)	(2,228		)	1,042			(404,311		)	(11,183		)	2,523
Gain (loss) on hedged items	51,621			2,212			(1,161		)	390,464			10,795			(2,546		)
Effect on net interest income	$	12,703		$	(31	)	$	76		$	(15,561	)	$	(662	)	$	361


	Three Months Ended March 31, 2018 ⁽²⁾						Three Months Ended March 31, 2019
	Advances			Consolidated Bonds			Advances			Available-for-sale securities			Consolidated Bonds
Total interest income (expense) recorded in the Statements of Income							$	402,777		$	13,559		$	(262,863	)
Impact of Fair Value Hedging Relationships on the Statements of Income ⁽¹⁾
Interest income/expense:
Net interest settlements ⁽³⁾	$	893		$	(1,243	)
Effect on net interest income	$	893		$	(1,243	)
Non-interest income (loss):
Net interest settlements							$	13,676		$	(15	)	$	195
Gain (loss) on derivatives	$	43,053		$	(411	)	(52,594		)	(2,228		)	1,042
Gain (loss) on hedged items	(42,163		)	513			51,621			2,212			(1,161		)
Effect on non-interest income (loss)	$	890		$	102
Effect on net interest income							$	12,703		$	(31	)	$	76


(1)	Includes interest rate swaps.



~~(2)~~	~~Prior period amounts were not conformed to new hedge accounting guidance adopted January 1, 2019.~~


~~(3)~~	~~Excludes (amortization)/accretion on closed fair value hedge relationships of (in thousands) $(171) for the three months ended March 31, 2018.~~

Table ~~10.3~~6.3 presents the cumulative basis adjustments on hedged items designated as fair value hedges and the related amortized cost of the hedged items.

Table ~~10.3~~6.3 - Cumulative Basis Adjustments for Fair Value Hedges (in thousands)


	March 31, 2019											March 31, 2020
Hedged Item	Amortized Cost of Hedged Asset/ (Liability) ⁽¹⁾			Basis Adjustment for Active Hedging Relationships Included in Amortized Cost			Basis Adjustments for Discontinued Hedging Relationships Included in Amortized Cost		Cumulative Amount of Fair Value Hedging Basis Adjustments			Amortized Cost of Hedged Asset/ Liability ⁽¹⁾		Basis Adjustment for Active Hedging Relationships Included in Amortized Cost		Basis Adjustments for Discontinued Hedging Relationships Included in Amortized Cost		Cumulative Amount of Fair Value Hedging Basis Adjustments
Advances	$	7,117,181		$	6,971		$	1,143	$	8,114		$	12,277,322	$	499,638	$	922	$	500,560
Available-for-sale securities	120,220			3,220			—		3,220			142,609		18,110		—		18,110
Consolidated Bonds	(419,949		)	(965		)	—		(965		)	122,021		3,254		—		3,254

												December 31, 2019
Hedged Item												Amortized Cost of Hedged Asset/ Liability⁽¹⁾		Basis Adjustment for Active Hedging Relationships Included in Amortized Cost		Basis Adjustments for Discontinued Hedging Relationships Included in Amortized Cost		Cumulative Amount of Fair Value Hedging Basis Adjustments
Advances												$	9,160,841	$	109,078	$	851	$	109,929
Available-for-sale securities												131,814		7,314		—		7,314
Consolidated Bonds												210,696		708		—		708


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

Table ~~10.4~~6.4 presents net gains (losses) ~~related to derivatives and hedging activities~~ recorded in non-interest income (loss)~~. For fair value~~ on derivatives not designated as hedging ~~relationships, the portion of net gains (losses) representing hedge ineffectiveness were recorded in non-interest income for periods prior to January 1, 2019.~~instruments.

Table ~~10.4~~6.4 - Net Gains (Losses) ~~on Derivatives and Hedging Activities~~ Recorded in Non-interest Income (Loss) on Derivatives Not Designated as Hedging Instruments (in thousands)


	Three Months Ended March 31,						Three Months Ended March 31,
	2019			2018			2020			2019
Derivatives designated as fair value hedging relationships:
Interest rate swaps	N/A			$	992
Derivatives not designated as hedging instruments:
Economic hedges:
Interest rate swaps	$	(6,530	)	(24,477		)	$	(367,001	)	$	(6,530	)
Interest rate swaptions	(12,476		)	4,658			92,077			(12,476		)
Forward rate agreements	(2,167		)	4,029			(25,884		)	(2,167		)
Net interest settlements	(8,167		)	(7,324		)	(11,282		)	(8,167		)
Mortgage delivery commitments	3,356			(4,249		)	17,094			3,356
Total net losses related to derivatives not designated as hedging instruments	(25,984		)	(27,363		)
Total net gains (losses) related to derivatives not designated as hedging instruments							(294,996		)	(25,984		)
Price alignment amount ⁽¹⁾	25			(2		)	1,030			25
Net losses on derivatives and hedging activities	$	(25,959	)	$	(26,373	)
Net gains (losses) on derivatives and hedging activities							$	(293,966	)	$	(25,959	)


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

Credit Risk on Derivatives

The FHLB is subject to credit risk due to the risk of non-performance by counterparties to its derivative transactions, and manages credit risk through credit analysis, collateral requirements and adherence to the requirements set forth in its policies, U.S. Commodity Futures Trading Commission regulations, and Finance Agency regulations.

For uncleared derivatives, the degree of credit risk depends on the extent to which master netting arrangements are included in these contracts to mitigate the risk. The FHLB requires collateral agreements on its uncleared derivatives ~~where~~with the collateral delivery threshold is set to zero.

For cleared derivatives, the Clearinghouse is the FHLB's counterparty. The Clearinghouse notifies the clearing agent of the required initial and variation margin and the clearing agent in turn notifies the FHLB. The FHLB utilizes two Clearinghouses for all cleared derivative transactions, LCH Ltd. and CME Clearing. At both Clearinghouses, variation margin is characterized as daily settlement payments, while initial margin is considered to be collateral. The requirement that the FHLB post initial and variation margin through the clearing agent, to the Clearinghouse, exposes the FHLB to credit risk if the clearing agent or the Clearinghouse fails to meet its obligations. The use of cleared derivatives is intended to mitigate credit risk exposure because a central counterparty is substituted for individual counterparties and collateral/payments for changes in the value of cleared derivatives is posted daily through a clearing agent.

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. At March 31, ~~2019,~~2020, the FHLB was not required to post additional initial margin by its clearing agents based on credit considerations.

Offsetting of Derivative Assets and Derivative Liabilities

The FHLB presents derivative instruments, related cash collateral received or pledged, and associated accrued interest, on a net basis by clearing agent and/or by counterparty when it has met the netting requirements.

The FHLB has analyzed the enforceability of offsetting rights incorporated in its cleared derivative transactions, and ~~determined~~it expects that the exercise of those offsetting rights by a non-defaulting party under these transactions ~~should~~would be upheld under applicable law upon an event of default including bankruptcy, insolvency, or similar proceeding involving the Clearinghouse or the FHLB's clearing agent, or both. Based on this analysis, the FHLB presents a net derivative receivable or payable for all of its transactions through a particular clearing agent with a particular Clearinghouse.

Table ~~10.5~~6.5 presents separately the fair value of derivative instruments meeting or not meeting netting requirements, including the related ~~collateral received from or pledged to counterparties.~~collateral. At March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, the FHLB did not receive or pledge any non-cash collateral. Any over-collateralization under an individual clearing agent and/or counterparty level is not included in the determination of the net unsecured amount.

Table ~~10.5~~6.5 - Offsetting of Derivative Assets and Derivative Liabilities (in thousands)


	March 31, 2019									March 31, 2020
	Derivative Instruments Meeting Netting Requirements									Derivative Instruments Meeting Netting Requirements
	Amount Recognized		Gross Amount of Netting Adjustments and Cash Collateral			Derivative Instruments Not Meeting Netting Requirements ⁽¹⁾		Total Derivative Assets and Total Derivative Liabilities		Gross Recognized Amount		Gross Amount of Netting Adjustments and Cash Collateral			Derivative Instruments Not Meeting Netting Requirements ⁽¹⁾		Total Derivative Assets and Total Derivative Liabilities
Derivative Assets:
Uncleared	$	15,856	$	(13,175	)	$	2,372	$	5,053	$	7,148	$	(7,100	)	$	12,530	$	12,578
Cleared	12,841		137,095			—		149,936		12,326		327,506			—		339,832
Total								$	154,989								$	352,410
Derivative Liabilities:
Uncleared	$	21,499	$	(21,051	)	$	1,895	$	2,343	$	235,907	$	(230,003	)	$	16,787	$	22,691
Cleared	2,237		(2,237		)	—		—		6,023		(6,023		)	—		—
Total								$	2,343								$	22,691

	December 31, 2018									December 31, 2019
	Derivative Instruments Meeting Netting Requirements									Derivative Instruments Meeting Netting Requirements
	Amount Recognized		Gross Amount of Netting Adjustments and Cash Collateral			Derivative Instruments Not Meeting Netting Requirements ⁽¹⁾		Total Derivative Assets and Total Derivative Liabilities		Gross Recognized Amount		Gross Amount of Netting Adjustments and Cash Collateral			Derivative Instruments Not Meeting Netting Requirements ⁽¹⁾		Total Derivative Assets and Total Derivative Liabilities
Derivative Assets:
Uncleared	$	20,284	$	(20,250	)	$	1,726	$	1,760	$	16,637	$	(13,903	)	$	2,819	$	5,553
Cleared	1,331		62,674			—		64,005		12,739		248,873			—		261,612
Total								$	65,765								$	267,165
Derivative Liabilities:
Uncleared	$	13,745	$	(11,824	)	$	2,665	$	4,586	$	53,533	$	(53,069	)	$	846	$	1,310
Cleared	4,969		(4,969		)	—		—		471		(471		)	—		—
Total								$	4,586								$	1,310


(1)	Represents mortgage delivery commitments and forward rate agreements that are not subject to an enforceable netting agreement.

Note 117 - Deposits

Table ~~11.1~~7.1 - Deposits (in thousands)



	March 31, 2020		December 31, 2019
Interest-bearing:
Demand and overnight	$	1,126,033	$	906,028
Term	49,800		27,850
Other	9,643		7,179
Total interest-bearing	1,185,476		941,057
Non-interest bearing:
Other	—		10,239
Total non-interest bearing	—		10,239
Total deposits	$	1,185,476	$	951,296

March 31, 2019 December 31, 2018
Interest bearing:
Demand and overnight $ 704,091
$ 605,979
Term 57,800
51,600
Other 4,513
4,959
Total interest bearing 766,404
662,538
Non-interest bearing:
Other 9,747
6,478
Total non-interest bearing 9,747
6,478
Total deposits $ 776,151
$ 669,016

Note 128 - Consolidated Obligations

Table ~~12.1~~8.1 - Consolidated Discount Notes Outstanding (dollars in thousands)

Book Value Principal Amount
Weighted Average Interest Rate ⁽¹⁾
March 31, 2019 $ 44,211,775
$ 44,335,826
2.41 %
December 31, 2018 $ 46,943,632
$ 47,071,113
2.35 %



	Book Value		Principal Amount		Weighted Average Interest Rate ⁽¹⁾
March 31, 2020	$	79,659,562	$	79,747,788	0.74	%
December 31, 2019	$	49,084,219	$	49,176,985	1.56	%


(1)	Represents an implied rate without consideration of concessions.

Table ~~12.2~~8.2 - Consolidated Bonds Outstanding by Original Contractual Maturity (dollars in thousands)



	March 31, 2020					December 31, 2019
Year of Original Contractual Maturity	Amount			Weighted Average Interest Rate		Amount				Weighted Average Interest Rate
Due in 1 year or less	$	20,409,565		0.85	%	$	18,259,565			1.77	%
Due after 1 year through 2 years	3,833,595			2.36		8,293,595				1.96
Due after 2 years through 3 years	2,743,830			2.43		3,024,885				2.41
Due after 3 years through 4 years	1,981,175			2.99		3,123,120				2.62
Due after 4 years through 5 years	1,248,405			2.74		1,540,405				2.73
Thereafter	4,359,000			2.83		4,139,000				2.97
Total principal amount	34,575,570			1.58		38,380,570			��	2.10
Premiums	58,791					64,604
Discounts	(23,793		)			(24,335		)
Hedging adjustments	3,254					708
Fair value option valuation adjustment and accrued interest	54,486					18,177
Total	$	34,668,308				$	38,439,724

March 31, 2019 December 31, 2018
Year of Contractual Maturity Amount Weighted Average Interest Rate Amount Weighted Average Interest Rate
Due in 1 year or less $ 27,407,000
2.42 % $ 21,085,800
2.20 %
Due after 1 year through 2 years 8,812,565
2.07
6,998,565
2.13
Due after 2 years through 3 years 5,195,595
2.31
6,829,595
2.05
Due after 3 years through 4 years 3,003,830
2.43
2,958,620
2.39
Due after 4 years through 5 years 3,091,175
2.72
3,248,975
2.63
Thereafter 4,590,405
2.96
4,525,635
2.94
Total principal amount 52,100,570
2.42
45,647,190
2.29
Premiums 70,972
75,809

Discounts (28,989 ) (29,275 )
Hedging adjustments 965
(196 )
Fair value option valuation adjustment and
accrued interest
(19,464 ) (34,390 )
Total $ 52,124,054
$ 45,659,138

Table ~~12.3~~8.3 - Consolidated Bonds Outstanding by Call Features (in thousands)



	March 31, 2020		December 31, 2019
Principal Amount of Consolidated Bonds:
Non-callable	$	31,297,570	$	32,953,570
Callable	3,278,000		5,427,000
Total principal amount	$	34,575,570	$	38,380,570

March 31, 2019 December 31, 2018
Principal Amount of Consolidated Bonds:
Non-callable $ 44,862,570
$ 38,539,190
Callable 7,238,000
7,108,000
Total principal amount $ 52,100,570
$ 45,647,190

Table ~~12.4~~8.4 - Consolidated Bonds Outstanding by Original Contractual Maturity or Next Call Date (in thousands)



Year of Original Contractual Maturity or Next Call Date	March 31, 2020		December 31, 2019
Due in 1 year or less	$	22,390,565	$	22,631,565
Due after 1 year through 2 years	4,055,595		7,130,595
Due after 2 years through 3 years	2,713,830		2,662,885
Due after 3 years through 4 years	1,962,175		2,343,120
Due after 4 years through 5 years	1,160,405		1,253,405
Thereafter	2,293,000		2,359,000
Total principal amount	$	34,575,570	$	38,380,570

Year of Contractual Maturity or Next Call Date March 31, 2019 December 31, 2018
Due in 1 year or less $ 33,850,000
$ 27,173,800
Due after 1 year through 2 years 7,677,565
5,773,565
Due after 2 years through 3 years 3,282,595
5,060,595
Due after 3 years through 4 years 2,549,830
2,470,620
Due after 4 years through 5 years 1,919,175
2,231,975
Thereafter 2,821,405
2,936,635
Total principal amount $ 52,100,570
$ 45,647,190

Table ~~12.5~~8.5 - Consolidated Bonds by Interest-rate Payment Type (in thousands)



	March 31, 2020		December 31, 2019
Principal Amount of Consolidated Bonds:
Fixed-rate	$	22,752,570	$	27,368,570
Variable-rate	11,823,000		11,012,000
Total principal amount	$	34,575,570	$	38,380,570

March 31, 2019 December 31, 2018
Principal Amount of Consolidated Bonds:
Fixed-rate $ 31,432,570
$ 29,837,190
Variable-rate 20,643,000
15,470,000
Step-up 25,000
340,000
Total principal amount $ 52,100,570
$ 45,647,190

Note 139 - Affordable Housing Program (AHP)

The FHLBank Act requires each FHLBank to establish an AHP. Each FHLBank provides subsidies in the form of direct grants and below-market interest rate AHP Advances to members who use the funds to assist in the purchase, construction, or rehabilitation of housing for very low-, low-, and moderate-income households. Each FHLBank is required to contribute to its AHP the greater of 10 percent of its previous year's income subject to assessment, or the prorated sum required to ensure the aggregate contribution by the FHLBanks is no less than $100 million for each year. For purposes of the AHP calculation, income subject to assessment is defined as net income before assessments, plus interest expense related to mandatorily redeemable capital stock. The FHLB accrues AHP expense monthly based on its income subject to assessment. The FHLB reduces the AHP liability as members use subsidies.

Table ~~13.1~~9.1 - Analysis of AHP Liability (in thousands)



Balance at December 31, 2019	$	115,295
Assessments (current year additions)	8,871
Subsidy uses, net	(6,046		)
Balance at March 31, 2020	$	118,120

Balance at December 31, 2018 $ 117,336
Assessments (current year additions) 8,179
Subsidy uses, net (3,266 )
Balance at March 31, 2019 $ 122,249

Note 1410 - Capital

Table ~~14.1~~10.1 - Capital Requirements (dollars in thousands)



	March 31, 2020						December 31, 2019
	Minimum Requirement			Actual			Minimum Requirement			Actual
Risk-based capital	$	570,582		$	6,463,553		$	820,635		$	4,482,519
Capital-to-assets ratio (regulatory)	4.00		%	5.28		%	4.00		%	4.79		%
Regulatory capital	$	4,900,394		$	6,463,553		$	3,739,662		$	4,482,519
Leverage capital-to-assets ratio (regulatory)	5.00		%	7.91		%	5.00		%	7.19		%
Leverage capital	$	6,125,492		$	9,695,330		$	4,674,578		$	6,723,779

March 31, 2019 December 31, 2018
Minimum Requirement Actual Minimum Requirement Actual
Risk-based capital $ 901,116
$ 5,113,035
$ 837,666
$ 5,366,443
Capital-to-assets ratio (regulatory) 4.00 % 4.95 % 4.00 % 5.41 %
Regulatory capital $ 4,135,111
$ 5,113,035
$ 3,968,103
$ 5,366,443
Leverage capital-to-assets ratio (regulatory) 5.00 % 7.42 % 5.00 % 8.11 %
Leverage capital $ 5,168,888
$ 7,669,553
$ 4,960,129
$ 8,049,665

Restricted Retained Earnings. At March 31, ~~2019~~2020 and December 31, ~~2018~~2019 the FHLB had (in thousands) $~~405,481~~461,979 and $~~390,829~~446,048 in restricted retained earnings. These restricted retained earnings are not available to pay dividends but are available to absorb unexpected losses, if any, that ~~the FHLB~~an FHLBank may experience.

Table ~~14.2~~10.2 - Mandatorily Redeemable Capital Stock Rollforward (in thousands)



Balance, December 31, 2019	$	21,669
Capital stock subject to mandatory redemption reclassified from equity	550,000
Capital stock previously subject to mandatory redemption reclassified to capital	(123		)
Balance, March 31, 2020	$	571,546

Balance, December 31, 2018 $ 23,184
Capital stock subject to mandatory redemption reclassified from equity 1,040
Repurchase/redemption of mandatorily redeemable capital stock (754 )
Balance, March 31, 2019 $ 23,470

Table ~~14.3~~10.3 - Mandatorily Redeemable Capital Stock by Contractual Year of Redemption (in thousands)


Contractual Year of Redemption	March 31, 2019		December 31, 2018		March 31, 2020		December 31, 2019
Year 1	$	147	$	1,633	$	224	$	371
Year 2	224		371		337		298
Year 3	390		357		1,142		1,129
Year 4	1,142		1,209		2,903		2,955
Year 5	4,433		3,553		551,808		1,931
Thereafter ⁽¹⁾	624		624		650		650
Past contractual redemption date due to remaining activity ⁽²⁾	16,510		15,437		14,482		14,335
Total	$	23,470	$	23,184	$	571,546	$	21,669

(1)

Represents mandatorily redeemable capital stock resulting from a Finance Agency rule effective February 19, 2016, that made captive insurance companies ineligible for FHLB membership. Captive insurance companies that were admitted as FHLB members prior to September 12, 2014, will have their membership terminated no later than February 19, 2021. ~~Captive insurance companies that were admitted as FHLB members on or after September 12, 2014, had their membership terminated no later than February 19, 2017.~~ The related mandatorily redeemable capital stock is not required to be redeemed until five years after the member's termination.


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

Note 1511 - Accumulated Other Comprehensive Income (Loss)

The following tables summarize the changes in accumulated other comprehensive income (loss) for the three months ended March 31, ~~2019~~2020 and ~~2018~~.2019.

Table ~~15.1~~11.1 - Accumulated Other Comprehensive Income (Loss) (in thousands)

Net unrealized (losses) gains on available-for-sale securities Pension and postretirement benefits Total accumulated other comprehensive (loss) income
BALANCE, DECEMBER 31, 2017 $ (124 ) $ (16,536 ) $ (16,660 )
Other comprehensive income before reclassification:
Net unrealized gains 143
—
143
Reclassifications from other comprehensive income to net income:
Amortization - pension and postretirement benefits —
486
486
Net current period other comprehensive income 143
486
629
BALANCE, MARCH 31, 2018 $ 19
$ (16,050 ) $ (16,031 )

BALANCE, DECEMBER 31, 2018 $ (110 ) $ (12,933 ) $ (13,043 )
Other comprehensive income before reclassification:
Net unrealized gains 187
—
187
Reclassifications from other comprehensive income to net income:
Amortization - pension and postretirement benefits —
401
401
Net current period other comprehensive income 187
401
588
BALANCE, MARCH 31, 2019 $ 77
$ (12,532 ) $ (12,455 )



	Net unrealized gains (losses) on available-for-sale securities			Pension and postretirement benefits			Total accumulated other comprehensive income (loss)
BALANCE, DECEMBER 31, 2018	$	(110	)	$	(12,933	)	$	(13,043	)
Other comprehensive income before reclassification:
Net unrealized gains (losses)	187			—			187
Reclassifications from other comprehensive income (loss) to net income:
Amortization - pension and postretirement benefits	—			401			401
Net current period other comprehensive income (loss)	187			401			588
BALANCE, MARCH 31, 2019	$	77		$	(12,532	)	$	(12,455	)


BALANCE, DECEMBER 31, 2019	$	370		$	(16,764	)	$	(16,394	)
Other comprehensive income before reclassification:
Net unrealized gains (losses)	(905		)	—			(905		)
Reclassifications from other comprehensive income (loss) to net income:
Amortization - pension and postretirement benefits	—			563			563
Net current period other comprehensive income (loss)	(905		)	563			(342		)
BALANCE, MARCH 31, 2020	$	(535	)	$	(16,201	)	$	(16,736	)

Note 1612 - Pension and Postretirement Benefit Plans

Qualified Defined Benefit Multi-employer Plan. The FHLB participates in the Pentegra Defined Benefit Plan for Financial Institutions (Pentegra Defined Benefit Plan), a tax-qualified defined benefit pension plan. Under the Pentegra Defined Benefit Plan, contributions made by one participating employer may be used to provide benefits to employees of other participating employers because assets contributed by an employer are not segregated in a separate account or restricted to provide benefits only to employees of that employer. Also, in the event a participating employer is unable to meet its contribution requirements, the required contributions for the other participating employers could increase proportionately. The Pentegra Defined Benefit Plan covers all officers and employees of the FHLB who meet certain eligibility requirements. Contributions to the Pentegra Defined Benefit Plan charged to compensation and benefit expense were ~~$1,968,000~~$1,518,000 and ~~$2,526,000~~$1,968,000 in the three months ended March 31, 2020 and 2019, ~~and 2018,~~ respectively.

Qualified Defined Contribution Plan. The FHLB also participates in the Pentegra Defined Contribution Plan for Financial Institutions, a tax-qualified, defined contribution plan. The FHLB contributes a percentage of the participants' compensation by making a matching contribution equal to a percentage of voluntary employee contributions, subject to certain IRS limitations. The FHLB contributed ~~$497,000~~$538,000 and ~~$477,000~~$497,000 in the three months ended March 31, 2020 and 2019, ~~and 2018,~~ respectively.

Nonqualified Supplemental Defined Benefit Retirement Plan (Defined Benefit Retirement Plan). The FHLB maintains a nonqualified, unfunded defined benefit plan. The plan ensures that participants receive the full amount of benefits to which they would have been entitled under the qualified defined benefit plan in the absence of limits on benefit levels imposed by the IRS. There are no funded plan assets. The FHLB has established a grantor trust, which is included in held-to-maturity securities on the Statements of Condition, to meet future benefit obligations and current payments to beneficiaries.

Postretirement Benefits Plan. The FHLB also sponsors a Postretirement Benefits Plan that includes health care and life insurance benefits for eligible retirees. Future retirees are eligible for the postretirement benefits plan if they were hired prior to

August 1, 1990, are age 55 or older, and their age plus years of continuous service at retirement are greater than or equal to 80. Spouses are covered subject to required contributions. There are no funded plan assets that have been designated to provide postretirement benefits.

Table ~~16.1~~12.1 - Net Periodic Benefit Cost (in thousands)



	Three Months Ended March 31,
	Defined Benefit Retirement Plan				Postretirement Benefits Plan
	2020		2019		2020		2019
Net Periodic Benefit Cost
Service cost	$	275	$	217	$	2	$	4
Interest cost	331		383		36		45
Amortization of net loss	563		401		—		—
Net periodic benefit cost	$	1,169	$	1,001	$	38	$	49

Three Months Ended March 31,

Defined Benefit
Retirement Plan
Postretirement Benefits Plan
2019 2018 2019 2018
Net Periodic Benefit Cost
Service cost $ 217
$ 276
$ 4
$ 5
Interest cost 383
332
45
41
Amortization of net loss 401
486
—
—
Net periodic benefit cost $ 1,001
$ 1,094
$ 49
$ 46

For the Defined Benefit Retirement Plan and the Postretirement Benefits Plan, the related service cost is recorded as part of Non-Interest Expense - Compensation and Benefits on the Statements of Income. The non-service related components of interest cost and amortization of net loss are recorded as Non-Interest Expense - Other in the Statements of Income.

Note 1713 - Segment Information

The FHLB has identified ~~two~~2 primary operating segments based on its method of internal reporting: Traditional Member Finance and the MPP. These segments reflect the FHLB's two primary Mission Asset Activities and the manner in which they are managed from the perspective of development, resource allocation, product delivery, pricing, credit risk and operational administration. The segments identify the principal ways the FHLB provides services to member stockholders.

Table ~~17.1~~13.1 - Financial Performance by Operating Segment (in thousands)

Three Months Ended March 31,

Traditional Member
Finance
MPP Total
2019
Net interest income $ 90,395
$ 31,863
$ 122,258
Non-interest income (loss) (11,955 ) (6,444 ) (18,399 )
Non-interest expense 19,390
3,033
22,423
Income before assessments 59,050
22,386
81,436
Affordable Housing Program assessments 5,940
2,239
8,179
Net income $ 53,110
$ 20,147
$ 73,257
2018
Net interest income $ 93,084
$ 24,976
$ 118,060
Non-interest income (loss) (6,190 ) 2,333
(3,857 )
Non-interest expense 18,864
3,260
22,124
Income before assessments 68,030
24,049
92,079
Affordable Housing Program assessments 6,847
2,405
9,252
Net income $ 61,183
$ 21,644
$ 82,827



	Three Months Ended March 31,
	Traditional Member Finance			MPP			Total
2020
Net interest income	$	64,649		$	17,466		$	82,115
Non-interest income (loss)	(23,580		)	54,269			30,689
Non-interest expense	21,107			3,173			24,280
Income before assessments	19,962			68,562			88,524
Affordable Housing Program assessments	2,015			6,856			8,871
Net income	$	17,947		$	61,706		$	79,653
2019
Net interest income	$	90,395		$	31,863		$	122,258
Non-interest income (loss)	(11,955		)	(6,444		)	(18,399		)
Non-interest expense	19,390			3,033			22,423
Income before assessments	59,050			22,386			81,436
Affordable Housing Program assessments	5,940			2,239			8,179
Net income	$	53,110		$	20,147		$	73,257

Table ~~17.2~~13.2 - Asset Balances by Operating Segment (in thousands)



	Assets
	Traditional Member Finance		MPP		Total
March 31, 2020	$	110,547,932	$	11,961,912	$	122,509,844
December 31, 2019	81,064,206		12,427,353		93,491,559

Assets
Traditional Member
Finance MPP Total
March 31, 2019 $ 89,904,919
$ 13,472,848
$ 103,377,767
December 31, 2018 86,042,150
13,160,423
99,202,573

Note 1814 - Fair Value Disclosures

The fair value amounts recorded on the Statements of Condition and presented in the related note disclosures have been determined by the FHLB using available market information and the FHLB'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). The fair values reflect the FHLB's judgment of how a market participant would estimate the fair values.

Fair Value Hierarchy. GAAP establishes a fair value hierarchy and requires an entity 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 measurement is determined. This overall level is an indication of how market observable the fair value measurement is. An entity must disclose the level within the fair value hierarchy in which the measurements are classified.

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

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

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

Level 3 Inputs - Unobservable inputs for the asset or liability.

The FHLB reviews the fair value hierarchy classifications on a quarterly basis. Changes in the observability of the valuation inputs may result in a reclassification of certain financial assets or liabilities. ~~Such reclassifications would be reported as transfers in/out at fair value as of the beginning of the quarter in which the changes occur.~~ The FHLB did not have any transfers of assets or liabilities ~~between~~into or out of Level 3 of the fair value ~~levels~~hierarchy during the three months ended March 31, ~~2019~~2020 or ~~2018~~2019.

Table ~~18.1~~14.1 presents the carrying value, fair value, and fair value hierarchy of financial assets and liabilities of the FHLB. The FHLB records trading securities, available-for-sale securities, derivative assets, derivative liabilities, certain Advances and certain Consolidated ~~Obligation Bonds~~Obligations at fair value on a recurring ~~basis, and on occasion, certain mortgage loans held for portfolio on a nonrecurring~~ basis. The FHLB records all other financial assets and liabilities at amortized cost. Refer to Table ~~18.2~~14.2 for further details about the financial assets and liabilities held at fair value on ~~either~~ a recurring ~~or nonrecurring~~ basis.

Table ~~18.1~~14.1 - Fair Value Summary (in thousands)


	March 31, 2019													March 31, 2020
			Fair Value													Fair Value
Financial Instruments	Carrying Value		Total		Level 1		Level 2		Level 3		Netting Adjustments and Cash Collateral ⁽¹⁾			Carrying Value		Total		Level 1		Level 2		Level 3		Netting Adjustments and Cash Collateral ⁽¹⁾
Assets:
Cash and due from banks	$	20,685	$	20,685	$	20,685	$	—	$	—	$	—		$	3,923,890	$	3,923,890	$	3,923,890	$	—	$	—	$	—
Interest-bearing deposits	390,174		390,174		—		390,174		—		—			780,081		780,081		—		780,081		—		—
Securities purchased under agreements to resell	2,828,796		2,828,841		—		2,828,841		—		—			183,504		183,506		—		183,506		—		—
Federal funds sold	11,820,000		11,820,000		—		11,820,000		—		—
Trading securities	5,582,966		5,582,966		—		5,582,966		—		—			11,988,073		11,988,073		—		11,988,073		—		—
Available-for-sale securities	1,070,297		1,070,297		—		1,070,297		—		—			142,074		142,074		—		142,074		—		—
Held-to-maturity securities	15,857,805		15,724,778		—		15,724,778		—		—			12,570,626		12,685,449		—		12,685,449		—		—
Advances ⁽²⁾	54,879,643		54,886,395		—		54,886,395		—		—			80,424,950		80,413,947		—		80,413,947		—		—
Mortgage loans held for portfolio, net	10,519,218		10,540,194		—		10,528,516		11,678		—			11,923,078		12,369,024		—		12,357,555		11,469		—
Accrued interest receivable	231,846		231,846		—		231,846		—		—			197,718		197,718		—		197,718		—		—
Derivative assets	154,989		154,989		—		31,069		—		123,920			352,410		352,410		—		32,004		—		320,406
Liabilities:
Deposits	776,151		776,153		—		776,153		—		—			1,185,476		1,185,669		—		1,185,669		—		—
Consolidated Obligations:
Discount Notes	44,211,775		44,215,842		—		44,215,842		—		—
Bonds ⁽³⁾	52,124,054		52,119,032		—		52,119,032		—		—
Discount Notes ⁽³⁾														79,659,562		79,719,001		—		79,719,001		—		—
Bonds ⁽⁴⁾														34,668,308		35,497,338		—		35,497,338		—		—
Mandatorily redeemable capital stock	23,470		23,470		23,470		—		—		—			571,546		571,546		571,546		—		—		—
Accrued interest payable	162,752		162,752		—		162,752		—		—			98,157		98,157		—		98,157		—		—
Derivative liabilities	2,343		2,343		—		25,631		—		(23,288		)	22,691		22,691		—		258,717		—		(236,026		)
Other:
Commitments to extend credit for Advances	—		3		—		3		—		—
Standby bond purchase agreements	—		594		—		594		—		—


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


(2)	Includes (in thousands) ~~$10,108~~$5,385 of Advances recorded under the fair value option at March 31, ~~2019~~2020.


(3)	Includes (in thousands) $9,319,663 of Consolidated Obligation Discount Notes recorded under the fair value option at March 31, 2020.


(4)	Includes (in thousands) $~~5,471,536~~4,359,486 of Consolidated Obligation Bonds recorded under the fair value option at March 31, ~~2019~~2020.


	December 31, 2018													December 31, 2019
			Fair Value													Fair Value
Financial Instruments	Carrying Value		Total		Level 1		Level 2		Level 3		Netting Adjustments and Cash Collateral ⁽¹⁾			Carrying Value		Total		Level 1		Level 2		Level 3		Netting Adjustments and Cash Collateral ⁽¹⁾
Assets:
Cash and due from banks	$	10,037	$	10,037	$	10,037	$	—	$	—	$	—		$	20,608	$	20,608	$	20,608	$	—	$	—	$	—
Interest-bearing deposits	122		122		—		122		—		—			550,160		550,160		—		550,160		—		—
Securities purchased under agreements to resell	4,402,208		4,402,237		—		4,402,237		—		—			2,348,584		2,348,607		—		2,348,607		—		—
Federal funds sold	10,793,000		10,793,000		—		10,793,000		—		—			4,833,000		4,833,000		—		4,833,000		—		—
Trading securities	223,980		223,980		—		223,980		—		—			11,615,693		11,615,693		—		11,615,693		—		—
Available-for-sale securities	2,402,897		2,402,897		—		2,402,897		—		—			1,542,185		1,542,185		—		1,542,185		—		—
Held-to-maturity securities	15,791,222		15,575,368		—		15,575,368		—		—			13,499,319		13,501,207		—		13,501,207		—		—
Advances⁽²⁾	54,822,252		54,736,645		—		54,736,645		—		—			47,369,573		47,458,028		—		47,458,028		—		—
Mortgage loans held for portfolio, net	10,500,917		10,329,982		—		10,317,010		12,972		—			11,235,353		11,437,180		—		11,424,857		12,323		—
Accrued interest receivable	169,982		169,982		—		169,982		—		—			182,252		182,252		—		182,252		—		—
Derivative assets	65,765		65,765		—		23,341		—		42,424			267,165		267,165		—		32,195		—		234,970
Liabilities:
Deposits	669,016		668,947		—		668,947		—		—			951,296		951,343		—		951,343		—		—
Consolidated Obligations:
Discount Notes(3)	46,943,632		46,944,523		—		46,944,523		—		—			49,084,219		49,086,723		—		49,086,723		—		—
Bonds ⁽³⁾⁽⁴⁾	45,659,138		45,385,615		—		45,385,615		—		—			38,439,724		38,832,230		—		38,832,230		—		—
Mandatorily redeemable capital stock	23,184		23,184		23,184		—		—		—			21,669		21,669		21,669		—		—		—
Accrued interest payable	147,337		147,337		—		147,337		—		—			126,091		126,091		—		126,091		—		—
Derivative liabilities	4,586		4,586		—		21,379		—		(16,793		)	1,310		1,310		—		54,850		—		(53,540		)
Other:
Standby bond purchase agreements	—		443		—		443		—		—


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


(2)	Includes (in thousands) $~~10,008~~5,238 of Advances recorded under the fair value option at December 31, ~~2018~~2019.


(3)	Includes (in thousands) $12,386,974 of Consolidated Obligation Discount Notes recorded under the fair value option at December 31, 2019.


(4)	Includes (in thousands) $~~3,906,610~~4,757,177 of Consolidated Obligation Bonds recorded under the fair value option at December 31, ~~2018~~2019.

Summary of Valuation Methodologies and Primary Inputs.

The valuation methodologies and primary inputs used to develop the measurement of fair value for assets and liabilities that are measured at fair value on a recurring or nonrecurring basis in the Statement of Condition are disclosed in Note 19 - Fair Value

Disclosures in the FHLB's ~~2018~~2019 Annual Report on Form 10-K. There have been no significant changes in the valuation

methodologies during ~~2019.~~2020.

Fair Value Measurements.

Table ~~18.2~~14.2 presents the fair value of financial assets and liabilities that are recorded on a recurring ~~or nonrecurring~~ basis at March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, by level within the fair value hierarchy. ~~The FHLB records nonrecurring fair value adjustments to reflect partial write-downs on certain mortgage loans.~~

Table ~~18.2~~14.2 - Fair Value Measurements (in thousands)


	Fair Value Measurements at March 31, 2019											Fair Value Measurements at March 31, 2020
	Total		Level 1		Level 2		Level 3		Netting Adjustments and Cash Collateral ⁽¹⁾			Total		Level 1		Level 2		Level 3		Netting Adjustments and Cash Collateral ⁽¹⁾
Recurring fair value measurements - Assets
Trading securities:
U.S. Treasury obligations	$	4,968,386	$	—	$	4,968,386	$	—	$	—		$	9,860,650	$	—	$	9,860,650	$	—	$	—
GSE obligations	613,999		—		613,999		—		—			2,126,978		—		2,126,978		—		—
U.S. obligation single-family MBS	581		—		581		—		—			445		—		445		—		—
Total trading securities	5,582,966		—		5,582,966		—		—			11,988,073		—		11,988,073		—		—
Available-for-sale securities:
Certificates of deposit	950,120		—		950,120		—		—
GSE obligations	120,177		—		120,177		—		—			142,074		—		142,074		—		—
Total available-for-sale securities	1,070,297		—		1,070,297		—		—			142,074		—		142,074		—		—
Advances	10,108		—		10,108		—		—			5,385		—		5,385		—		—
Derivative assets:
Interest rate related	152,617		—		28,697		—		123,920			339,880		—		19,474		—		320,406
Forward rate agreements	26		—		26		—		—			1,558		—		1,558		—		—
Mortgage delivery commitments	2,346		—		2,346		—		—			10,972		—		10,972		—		—
Total derivative assets	154,989		—		31,069		—		123,920			352,410		—		32,004		—		320,406
Total assets at fair value	$	6,818,360	$	—	$	6,694,440	$	—	$	123,920		$	12,487,942	$	—	$	12,167,536	$	—	$	320,406

Recurring fair value measurements - Liabilities
Consolidated Obligation Bonds	$	5,471,536	$	—	$	5,471,536	$	—	$	—
Consolidated Obligations:
Discount Notes												$	9,319,663	$	—	$	9,319,663	$	—	$	—
Bonds												4,359,486		—		4,359,486		—		—
Total Consolidated Obligations												13,679,149		—		13,679,149		—		—
Derivative liabilities:
Interest rate related	448		—		23,736		—		(23,288		)	5,904		—		241,930		—		(236,026		)
Forward rate agreements	1,817		—		1,817		—		—			15,964		—		15,964		—		—
Mortgage delivery commitments	78		—		78		—		—			823		—		823		—		—
Total derivative liabilities	2,343		—		25,631		—		(23,288		)	22,691		—		258,717		—		(236,026		)
Total liabilities at fair value	$	5,473,879	$	—	$	5,497,167	$	—	$	(23,288	)	$	13,701,840	$	—	$	13,937,866	$	—	$	(236,026	)

Nonrecurring fair value measurements - Assets ⁽²⁾
Mortgage loans held for portfolio	$	66	$	—	$	—	$	66


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


~~(2)~~	~~The fair value information presented is as of the date the fair value adjustment was recorded during the three months ended March 31, 2019.~~


	Fair Value Measurements at December 31, 2018											Fair Value Measurements at December 31, 2019
	Total		Level 1		Level 2		Level 3		Netting Adjustments and Cash Collateral ⁽¹⁾			Total		Level 1		Level 2		Level 3		Netting Adjustments and Cash Collateral ⁽¹⁾
Recurring fair value measurements - Assets
Trading securities:
U.S. Treasury obligations												$	9,626,964	$	—	$	9,626,964	$	—	$	—
GSE obligations	$	223,368	$	—	$	223,368	$	—	$	—		1,988,259		—		1,988,259		—		—
U.S. obligation single-family MBS	612		—		612		—		—			470		—		470		—		—
Total trading securities	223,980		—		223,980		—		—			11,615,693		—		11,615,693		—		—
Available-for-sale securities:
Certificates of deposit	2,350,002		—		2,350,002		—		—			1,410,111		—		1,410,111		—		—
GSE obligations	52,895		—		52,895		—		—			132,074		—		132,074		—		—
Total available-for-sale securities	2,402,897		—		2,402,897		—		—			1,542,185		—		1,542,185		—		—
Advances	10,008		—		10,008		—		—			5,238		—		5,238		—		—
Derivative assets:
Interest rate related	64,039		—		21,615		—		42,424			264,346		—		29,376		—		234,970
Forward rate agreements												21		—		21		—		—
Mortgage delivery commitments	1,726		—		1,726		—		—			2,798		—		2,798		—		—
Total derivative assets	65,765		—		23,341		—		42,424			267,165		—		32,195		—		234,970
Total assets at fair value	$	2,702,650	$	—	$	2,660,226	$	—	$	42,424		$	13,430,281	$	—	$	13,195,311	$	—	$	234,970

Recurring fair value measurements - Liabilities
Consolidated Obligation Bonds	$	3,906,610	$	—	$	3,906,610	$	—	$	—
Consolidated Obligations:
Discount Notes												$	12,386,974	$	—	$	12,386,974	$	—	$	—
Bonds												4,757,177		—		4,757,177		—		—
Total Consolidated Obligations												17,144,151		—		17,144,151		—		—
Derivative liabilities:
Interest rate related	1,921		—		18,714		—		(16,793		)	464		—		54,004		—		(53,540		)
Forward rate agreements	2,664		—		2,664		—		—			782		—		782		—		—
Mortgage delivery commitments	1		—		1		—		—			64		—		64		—		—
Total derivative liabilities	4,586		—		21,379		—		(16,793		)	1,310		—		54,850		—		(53,540		)
Total liabilities at fair value	$	3,911,196	$	—	$	3,927,989	$	—	$	(16,793	)	$	17,145,461	$	—	$	17,199,001	$	—	$	(53,540	)

Nonrecurring fair value measurements - Assets ⁽²⁾
Mortgage loans held for portfolio	$	311	$	—	$	—	$	311


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


~~(2)~~	~~The fair value information presented is as of the date the fair value adjustment was recorded during the year ended December 31, 2018.~~

Fair Value Option. The fair value option provides an irrevocable option to elect fair value as an alternative measurement for selected financial assets, financial liabilities, unrecognized firm commitments, and written loan commitments not previously carried at fair value. It requires a company to display the fair value of those assets and liabilities for which it has chosen to use fair value on the face of the Statements of Condition. Fair value is used for both the initial and subsequent measurement of the designated assets, liabilities and commitments, with the changes in fair value recognized in net income. If elected, interest income and interest expense on Advances and Consolidated ~~Bonds~~Obligations carried at fair value are recognized based solely on the contractual amount of interest due or unpaid. Any transaction fees or costs are immediately recognized into other non-interest income or other non-interest expense.

The FHLB has elected the fair value option for certain financial instruments that either do not qualify for hedge accounting or may be at risk for not meeting hedge effectiveness requirements. These fair value elections were made primarily in an effort to

mitigate the potential income statement volatility that can arise from economic hedging relationships in which the carrying value of the hedged item is not adjusted for changes in fair value.

Table ~~18.3~~14.3 presents net gains (losses) ~~gains~~ recognized in earnings related to financial assets and liabilities in which the fair value option was elected during the three months ended March 31, ~~2019~~2020 and ~~2018.~~2019.

Table ~~18.3~~14.3 – Fair Value Option - Financial Assets and Liabilities (in thousands)



	Three Months Ended March 31,
Net Gains (Losses) from Changes in Fair Value Recognized in Earnings	2020			2019
Advances	$	147		$	100
Consolidated Discount Notes	(14,026		)	—
Consolidated Bonds	(36,951		)	(17,281		)
Total net gains (losses)	$	(50,830	)	$	(17,181	)

Three Months Ended March 31,
Net (Losses) Gains from Changes in Fair Value Recognized in Earnings 2019 2018
Advances $ 100
$ (28 )
Consolidated Bonds (17,281 ) 19,753
Total net (losses) gains $ (17,181 ) $ 19,725

For instruments recorded under the fair value option, the related contractual interest income and contractual interest expense are recorded as part of net interest income on the Statements of Income. The remaining changes in fair value for instruments in which the fair value option has been elected are recorded as “Net gains (losses) ~~gains~~ on financial instruments held under fair value option” in the Statements of Income, except for changes in fair value related to instrument specific credit risk, which are recorded in accumulated other comprehensive income in the Statement of Condition. The FHLB has determined that none of the remaining changes in fair value were related to instrument-specific credit risk for the three months ended March 31, ~~2019~~2020 or ~~2018.~~2019. In determining that there has been no0 change in instrument-specific credit risk period to period, the FHLB primarily considered the following factors:


▪	The FHLB is a federally chartered GSE, and as a result of this status, the FHLB’s Consolidated Obligations have historically received the same credit ratings as the government bond credit rating of the United States, even though they are not ~~Obligations~~obligations of the United States and are not guaranteed by the United States.


▪	The FHLB is jointly and severally liable with the other 10 FHLBanks for the payment of principal and interest on all Consolidated Obligations of each of the other FHLBanks.

The following table reflects the difference between the aggregate unpaid principal balance outstanding and the aggregate fair value for Advances and Consolidated ~~Bonds~~Obligations for which the fair value option has been elected.

Table ~~18.4~~14.4 – Aggregate Unpaid Balance and Aggregate Fair Value (in thousands)


	March 31, 2019							December 31, 2018							March 31, 2020							December 31, 2019
	Aggregate Unpaid Principal Balance		Aggregate Fair Value		Aggregate Fair Value Over/(Under) Aggregate Unpaid Principal Balance			Aggregate Unpaid Principal Balance		Aggregate Fair Value		Aggregate Fair Value Over/(Under) Aggregate Unpaid Principal Balance			Aggregate Unpaid Principal Balance		Aggregate Fair Value		Aggregate Fair Value Over/(Under) Aggregate Unpaid Principal Balance			Aggregate Unpaid Principal Balance		Aggregate Fair Value		Aggregate Fair Value Over/(Under) Aggregate Unpaid Principal Balance
Advances ⁽¹⁾	$	10,000	$	10,108	$	108		$	10,000	$	10,008	$	8		$	5,000	$	5,385	$	385		$	5,000	$	5,238	$	238
Consolidated Discount Notes															9,320,610		9,319,663		(947		)	12,400,865		12,386,974		(13,891		)
Consolidated Bonds	5,491,000		5,471,536		(19,464		)	3,941,000		3,906,610		(34,390		)	4,305,000		4,359,486		54,486			4,739,000		4,757,177		18,177


(1)	At March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, none of the Advances were 90 days or more past due or had been placed on non-accrual status.

Note ~~19-~~15 - Commitments and Contingencies

Table ~~19.1~~15.1 - Off-Balance Sheet Commitments (in thousands)



	March 31, 2020						December 31, 2019
Notional Amount	Expire within one year		Expire after one year		Total		Expire within one year		Expire after one year		Total
Standby Letters of Credit ⁽¹⁾	$	14,690,822	$	1,094,601	$	15,785,423	$	15,143,075	$	1,062,105	$	16,205,180
Commitments for standby bond purchases ⁽¹⁾	26,285		47,900		74,185		20,360		55,150		75,510
Commitments to purchase mortgage loans	764,574		—		764,574		936,269		—		936,269
Unsettled Consolidated Bonds, principal amount ⁽²⁾	548,000		—		548,000		—		—		—
Unsettled Consolidated Discount Notes, principal amount ⁽²⁾	200,000		—		200,000		—		—		—

March 31, 2019 December 31, 2018
Notional Amount Expire within one year Expire after one year Total Expire within one year Expire after one year Total
Standby Letters of Credit $ 13,504,149
$ 308,517
$ 13,812,666
$ 14,578,925
$ 268,395
$ 14,847,320
Commitments for standby bond purchases 20,605
56,005
76,610
23,215
54,820
78,035
Commitments to fund additional Advances 1,001,885
—
1,001,885
—
—
—
Commitments to purchase mortgage loans 341,104
—
341,104
146,009
—
146,009
Unsettled Consolidated Bonds, principal amount ⁽¹⁾
147,000
—
147,000
92,000
—
92,000
Unsettled Consolidated Discount Notes, principal amount ⁽¹⁾
—
—
—
525,000
—
525,000


(1)	The FHLB has deemed it unnecessary to record any liability for credit losses on these agreements.


(2)	Expiration is based on settlement period rather than underlying contractual maturity of Consolidated Obligations.

Legal Proceedings. From time to time, the FHLB is subject to legal proceedings arising in the normal course of business. The FHLB would record an accrual for a loss contingency when it is probable that a loss has been incurred and the amount could be reasonably estimated. After consultation with legal counsel, management does not anticipate that ultimate liability, if any, arising out of any matters will have a material effect on the FHLB's financial condition or results of operations.

Note 2016 - Transactions with Other FHLBanks

The FHLB notes all transactions with other FHLBanks on the face of its financial statements. Occasionally, the FHLB loans short-term funds to and borrows short-term funds from other FHLBanks. These loans and borrowings are transacted at then current market rates when traded. There were no such loans or borrowings outstanding at March 31, ~~2019~~2020 or December 31, ~~2018.~~2019. The following table details the average daily balance of lending and borrowing between the FHLB and other FHLBanks for the three months ended March 31, ~~2019~~2020 and ~~2018.~~2019.

Table ~~20.1~~16.1 - Lending and Borrowing Between the FHLB and Other FHLBanks (in thousands)



	Average Daily Balances for the Three Months Ended March 31,
	2020		2019
Loans to other FHLBanks	$	19,780	$	3,333

Average Daily Balances for the Three Months Ended March 31,
2019 2018
Loans to other FHLBanks $ 3,333
$ 5,556

In addition, the FHLB may, from time to time, assume the outstanding primary liability for Consolidated Obligations of another FHLBank (at then current market rates on the day when the transfer is traded) rather than issuing new debt for which the FHLB is the primary obligor. The FHLB then becomes the primary obligor on the transferred debt. There were no0 Consolidated Obligations transferred to the FHLB during the three months ended March 31, ~~2019~~2020, or ~~2018.~~2019. The FHLB had no0 Consolidated Obligations transferred to other FHLBanks during these periods.

Note 2117 - Transactions with Stockholders

As a cooperative, the FHLB's capital stock is owned by its members, by former members that retain the stock as provided in the FHLB's Capital Plan and by nonmember institutions that have acquired members and must retain the stock to support Advances or other activities with the FHLB. All Advances are issued to members and all mortgage loans held for portfolio are purchased from members. The FHLB also maintains demand deposit accounts for members, primarily to facilitate settlement activities that are directly related to Advances and mortgage loan purchases. Additionally, the FHLB may enter into interest rate swaps with its stockholders. The FHLB may not invest in any equity securities issued by its stockholders and it has not purchased any MBS securitized by, or other direct long-term investments in, its stockholders.

For financial statement purposes, the FHLB defines related parties as those members with more than 10 percent of the voting interests of the FHLB capital stock outstanding. Federal statute prescribes the voting rights of members in the election of both Member and Independent directors. For Member directorships, the Finance Agency designates the number of Member directorships in a given year and an eligible voting member may vote only for candidates seeking election in its respective state. For Independent directors, the FHLB's Board of Directors nominates candidates to be placed on the ballot in an at-large election. For both Member and Independent director elections, a member is entitled to vote one share of required capital stock, subject to a statutory limitation, for each applicable directorship. Under this limitation, the total number of votes that a member may cast is limited to the average number of shares of the FHLB's capital stock that were required to be held by all members in that state as of the record date for voting. Nonmember stockholders are not eligible to vote in director elections. Due to these statutory limitations, no member owned more than 10 percent of the voting interests of the FHLB at March 31, ~~2019~~2020 or December 31, ~~2018.~~2019.

All transactions with stockholders are entered into in the ordinary course of business. Finance Agency regulations require the FHLB to offer the same pricing for Advances and other services to all members regardless of asset or transaction size, charter type, or geographic location. However, the FHLB may, in pricing its Advances, distinguish among members based upon its assessment of the credit and other risks to the FHLB of lending to any particular member or upon other reasonable criteria that may be applied equally to all members. The FHLB's policies and procedures require that such standards and criteria be applied consistently and without discrimination to all members applying for Advances.

Transactions with Directors' Financial Institutions. In the ordinary course of its business, the FHLB ~~may provide~~provides products and services to members whose officers or directors serve as directors of the FHLB (Directors' Financial Institutions). Finance Agency regulations require that transactions with Directors' Financial Institutions be made on the same terms as those with any other member. The following table reflects balances with Directors' Financial Institutions for the items indicated below. The FHLB had no MBS or derivatives transactions with Directors' Financial Institutions at March 31, ~~2019~~2020 or December 31, ~~2018.~~2019.

Table ~~21.1~~17.1 - Transactions with Directors' Financial Institutions (dollars in millions)


	March 31, 2019				December 31, 2018				March 31, 2020				December 31, 2019
	Balance		% of Total⁽¹⁾		Balance		% of Total ⁽¹⁾		Balance		% of Total⁽¹⁾		Balance		% of Total ⁽¹⁾
Advances	$	3,426	6.2	%	$	3,424	6.2	%	$	27,833	34.8	%	$	3,428	7.3	%
MPP	600		5.8		585		5.7		126		1.1		122		1.1
Regulatory capital stock	334		8.2		419		9.6		1,188		22.4		176		5.2


(1)	Percentage of total principal (Advances), unpaid principal balance (MPP), and regulatory capital stock.

Concentrations. The following table shows regulatory capital stock balances, outstanding Advance principal balances, and unpaid principal balances of mortgage loans held for portfolio of stockholders holding five percent or more of regulatory capital stock and includes any known affiliates that are members of the FHLB.

Table ~~21.2~~17.2 - Stockholders Holding Five Percent or more of Regulatory Capital Stock (dollars in millions)



	Regulatory Capital Stock				Advance		MPP Unpaid
March 31, 2020	Balance		% of Total		Principal		Principal Balance
JPMorgan Chase Bank, N.A.	$	1,183	22	%	$	15,000	$	—
U.S. Bank, N.A.	1,015		19		24,374		16
First Horizon Bank	562		11		3,900		—

Regulatory Capital Stock Advance MPP Unpaid
March 31, 2019 Balance % of Total Principal Principal Balance
JPMorgan Chase Bank, N.A. $ 1,252
31 % $ 24,900
$ —
U.S. Bank, N.A. 564
14
3,574
19



	Regulatory Capital Stock				Advance		MPP Unpaid
December 31, 2019	Balance		% of Total		Principal		Principal Balance
JPMorgan Chase Bank, N.A.	$	675	20	%	$	4,500	$	—
U.S. Bank, N.A.	485		14		13,874		17

Regulatory Capital Stock Advance MPP Unpaid
December 31, 2018 Balance % of Total Principal Principal Balance
JPMorgan Chase Bank, N.A. $ 1,085
25 % $ 23,400
$ —
U.S. Bank, N.A. 796
18
4,574
19
The Huntington National Bank 248
6
6
486

Nonmember Affiliates. The FHLB has relationships with ~~three~~3 nonmember affiliates, the Kentucky Housing Corporation, the Ohio Housing Finance Agency and the Tennessee Housing Development Agency. The FHLB had no investments in or borrowings to any of these nonmember affiliates at March 31, ~~2019~~2020 or December 31, ~~2018.~~2019. The FHLB has executed standby bond purchase agreements with ~~one state housing authority~~the Ohio Housing Finance Agency whereby the FHLB, for a fee, agrees as a liquidity provider if required, to purchase and hold the authority's 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. During the first three months of ~~2019~~2020 and ~~2018,~~2019, the FHLB was not required to purchase any bonds under these agreements.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

This document contains forward-looking statements that describe the objectives, expectations, estimates, and assessments of the Federal Home Loan Bank of Cincinnati (the FHLB). These statements use words such as “anticipates,” “expects,” “believes,” “could,” “estimates,” “may,” and “should.” By their nature, forward-looking statements relate to matters involving risks or uncertainties, some of which we may not be able to know, control, or completely manage. Actual future results could differ materially from those expressed or implied in forward-looking statements or could affect the extent to which we are able to realize an objective, expectation, estimate, or assessment. Some of the risks and uncertainties that could affect our forward-looking statements include the following:

▪

the effects of economic, financial, credit, market, and member conditions on our financial condition and results of operations, including changes in economic growth, general liquidity conditions, inflation and deflation, interest rates, interest rate spreads, interest rate volatility, mortgage originations, prepayment activity, housing prices, asset delinquencies, and members' mergers and consolidations, deposit flows, liquidity needs, and loan demand;

▪

political, national, or world events, including acts of war, terrorism, natural disasters, pandemics, including the current COVID-19 pandemic, or other catastrophic events, and legislative, regulatory, ~~federal~~ government, judicial or other developments that could affect us, our members, our counterparties, other Federal Home Loan Banks (FHLBanks) and ~~other government-sponsored enterprises (GSEs), and/or investors in the Federal Home Loan Bank System's (FHLBank System) debt securities, which are called Consolidated Obligations or Obligations;~~

other government-sponsored enterprises (GSEs), and/or investors in the Federal Home Loan Bank System's (FHLBank System) debt securities, which are called Consolidated Obligations or Obligations;


▪	competitive forces, including those related to other sources of funding available to members, to purchases of mortgage loans, and to our issuance of Consolidated Obligations;


▪	the financial results and actions of other FHLBanks that could affect our ability, in relation to the FHLBank System's joint and several liability for Consolidated Obligations, to access the capital markets on favorable terms or preserve our profitability, or could alter the regulations and legislation to which we are subject;


▪	changes in ratings assigned to FHLBank System Obligations or the FHLB that could raise our funding cost;


▪	changes in investor demand for Obligations;


▪	the volatility of market prices, interest rates, credit quality, and other indices that could affect the value of investments and collateral we hold as security for member obligations and/or for counterparty obligations;


▪	uncertainties relating to the phasing out of the London InterBank Offered Rate (LIBOR) that could impact our mortgage-backed securities (MBS) investments, Advances, Consolidated Obligations, derivatives, and collateral;


▪	the ability to attract and retain skilled management and other key employees;


▪	the ability to develop and support technology and information systems that effectively manage the risks we face (including cybersecurity risks);


▪	the risk of loss arising from failures or interruptions in our ongoing business operations, internal controls, information systems or other operating technologies;


▪	the ability to successfully manage new products and services; and


▪	the risk of loss arising from litigation filed against us or one or more other FHLBanks.

We do not undertake any obligation to update any forward-looking statements made in this document.

EXECUTIVE OVERVIEW

The following table presents selected Statement of Condition data, Statement of Income data and financial ratios for the periods indicated.


(Dollars in millions)	March 31, 2019			December 31, 2018			September 30, 2018			June 30, 2018			March 31, 2018			March 31, 2020			December 31, 2019			September 30, 2019			June 30, 2019			March 31, 2019
STATEMENT OF CONDITION DATA AT PERIOD END:
Total assets	$	103,378		$	99,203		$	99,796		$	108,072		$	111,709		$	122,510		$	93,492		$	100,211		$	96,424		$	103,378
Advances	54,880			54,822			57,771			60,559			63,883			80,425			47,370			46,358			42,869			54,880
Mortgage loans held for portfolio	10,520			10,502			10,182			9,845			9,732			11,923			11,236			10,885			10,640			10,520
Allowance for credit losses on mortgage loans(1)	1			1			1			1			1			—			1			1			1			1
Investments ⁽¹⁾⁽²⁾	37,550			33,614			31,580			37,382			36,012			25,665			34,389			42,442			42,444			37,550
Consolidated Obligations, net:
Discount Notes	44,212			46,944			45,313			50,063			53,089			79,660			49,084			49,553			41,493			44,212
Bonds	52,124			45,659			46,913			51,173			51,767			34,668			38,440			44,591			48,780			52,124
Total Consolidated Obligations, net	96,336			92,603			92,226			101,236			104,856			114,328			87,524			94,144			90,273			96,336
Mandatorily redeemable capital stock	23			23			22			23			28			572			22			26			23			23
Capital:
Capital stock - putable	4,059			4,320			4,242			4,539			4,524			4,739			3,367			3,597			3,806			4,059
Retained earnings	1,031			1,023			1,008			984			961			1,153			1,094			1,055			1,037			1,031
Accumulated other comprehensive loss	(13		)	(13		)	(15		)	(16		)	(16		)	(17		)	(16		)	(12		)	(12		)	(13		)
Total capital	5,077			5,330			5,235			5,507			5,469			5,875			4,445			4,640			4,831			5,077
STATEMENT OF INCOME DATA FOR THE QUARTER:
Net interest income	$	122		$	121		$	130		$	129		$	118		$	82		$	99		$	87		$	97		$	122
Non-interest income (loss)	(18		)	(11		)	(9		)	(13		)	(4		)	31			6			5			(3		)	(18		)
Non-interest expense	23			21			19			22			22			24			21			22			23			23
Affordable Housing Program assessments	8			9			10			9			9			9			8			7			7			8
Net income	$	73		$	80		$	92		$	85		$	83		$	80		$	76		$	63		$	64		$	73
FINANCIAL RATIOS FOR THE QUARTER:
Dividend payout ratio ⁽²⁾⁽³⁾	89.4		%	80.8		%	74.0		%	73.8		%	74.1		%	27.4		%	47.7		%	71.7		%	90.1		%	89.4		%
Weighted average dividend rate ⁽³⁾⁽⁴⁾	6.00			6.00			6.00			5.75			5.75			2.50			4.00			4.50			5.50			6.00
Return on average equity	5.59			5.90			6.87			6.15			6.23			6.94			6.64			5.36			5.09			5.59
Return on average assets	0.28			0.30			0.36			0.32			0.30			0.34			0.34			0.26			0.26			0.28
Net interest margin ⁽⁴⁾⁽⁵⁾	0.47			0.46			0.52			0.48			0.44			0.36			0.44			0.36			0.40			0.47
Average equity to average assets	5.07			5.16			5.27			5.15			4.89			4.95			5.06			4.86			5.15			5.07
Regulatory capital ratio ⁽⁵⁾⁽⁶⁾	4.95			5.41			5.28			5.13			4.94			5.28			4.79			4.67			5.05			4.95
Operating expense to average assets ⁽⁶⁾⁽⁷⁾	0.070			0.064			0.060			0.061			0.066			0.084			0.071			0.069			0.069			0.070


(1)	The methodology for determining the allowance for credit losses on mortgage loans changed on January 1, 2020 with the adoption of new accounting guidance on the measurement of credit losses on financial instruments. Consistent with the modified retrospective method of adoption, the prior periods have not been revised to conform to the new basis of accounting.


(2)	Investments include interest bearing deposits in banks, securities purchased under agreements to resell, Federal funds sold, trading securities, available-for-sale securities, and held-to-maturity securities.


~~(2)~~(3)	Dividend payout ratio is dividends declared in the period as a percentage of net income.


~~(3)~~(4)	Weighted average dividend rates are dividends paid divided by the average number of shares of capital stock eligible for dividends.


~~(4)~~(5)	Net interest margin is net interest income as a percentage of average earning assets.


~~(5)~~(6)	Regulatory capital ratio is period-end regulatory capital (capital stock, mandatorily redeemable capital stock and retained earnings) as a percentage of period-end total assets.


~~(6)~~(7)	Operating expenses comprise compensation and benefits and other operating expenses, which are included in non-interest expense.

~~Financial Condition~~Recent Developments

~~Mission Asset Activity~~Coronavirus Pandemic (COVID-19)

InThe global outbreak of COVID-19 has resulted in extraordinary market stress and caused financial hardship for many, including communities and businesses worldwide. The effects of COVID-19 are rapidly evolving, and the ~~first three months~~full impact and duration of ~~2019~~, the ~~FHLB fulfilled its~~virus are unknown. During these times of extraordinary market stress, we continued to fulfill our mission byof providing robust access to a key source of readily available and competitively priced wholesale funding to ~~its~~ member financial institutions and supporting ~~its~~our commitment to affordable housing and community investment, while maintaining strong capital and ~~paying stockholders~~liquidity positions.

We have been engaging with our members to develop programs to assist them during this unprecedented time. In support of our members, beginning in April 2020, we have temporarily modified our existing discounted Advance programs and, effective May 1, 2020, created a ~~competitive dividend~~new Advance program that will offer up to $2 billion in six-month Advances at zero percent interest to members. These Advances can be used to support COVID-19 related assistance made by all Fifth District members.

In order to assist homeowners affected by COVID-19 within our Mortgage Purchase Program (MPP), we are allowing various relief options, such as forbearance plans to help with short-term hardships such as illness, unemployment or loss of income when homeowners meet certain eligibility requirements. Additionally, effective March 25, 2020, we have asked servicers of the mortgage loans we own to suspend all foreclosure sales and evictions for the next 60 days, unless a home is vacant, in order to allow homeowners to stay in their homes during this period.

We have also remained focused on the health and safety of our employees while maintaining full business operations. To the extent possible, employees are working from home with only a limited number of operationally critical employees working from either our downtown Cincinnati location or our back-up facility.

At this time, we cannot predict when our full employee base will return to work in our offices or the potential impact of COVID-19 on ~~their capital investment.~~our members, counterparties, vendors, and other third parties we rely upon to conduct our business. To date, we have met our members' needs in stressed market conditions and have not experienced significant operational difficulties or disruptions; however, this possibility exists, which could impair our ability to conduct and manage our business effectively. For additional information on the risks associated with the COVID-19 pandemic, see Part II, Item 1A. "Risk Factors."

Financial Condition

Mission Asset Activity

Mission Assets, which we define as Advances, Letters of Credit, and total ~~Mortgage Purchase Program (MPP)~~MPP are the primary means by which we fulfill our mission with direct connections to members. We regularly monitor our balance sheet concentration of Mission Asset Activity. One measure we use to assess mission achievement is our Primary Mission Asset ratio, which measures the sum of average Advances and mortgage loans as a percentage of average Consolidated Obligations (adjusted for certain high-quality liquid assets, as permitted by regulation). In the first three months of ~~2019, our~~2020, the Primary Mission Asset ratio ~~was 73~~averaged 71 percent, ~~exceeding~~slightly over the ~~Federal Housing~~ Finance ~~Agency (Finance Agency)~~Agency's preferred ratio of 70 percent. In assessing overall mission achievement, we also consider supplemental sources of Mission Asset Activity, the most significant of which is Letters of Credit issued to members.

The following table summarizes our Mission Asset Activity.


	Ending Balances						Average Balances						Ending Balances						Average Balances
	March 31,				December 31,		Three Months Ended March 31,				Year Ended December 31,		March 31,				December 31,		Three Months Ended March 31,				Year Ended December 31,
(In millions)	2019		2018		2018		2019		2018		2018		2020		2019		2019		2020		2019		2019
Mission Asset Activity:
Advances (principal)	$	54,878	$	63,985	$	54,872	$	61,370	$	73,217	$	65,593	$	79,929	$	54,878	$	47,264	$	43,083	$	61,370	$	47,894
Mortgage Purchase Program (MPP):
Mortgage loans held for portfolio (principal)	10,290		9,509		10,272		10,281		9,494		9,743		11,644		10,290		10,981		11,491		10,281		10,499
Mandatory Delivery Contracts (notional)	341		252		146		187		213		287		765		341		936		685		187		516
Total MPP	10,631		9,761		10,418		10,468		9,707		10,030		12,409		10,631		11,917		12,176		10,468		11,015
Letters of Credit (notional)	13,812		15,606		14,847		13,903		15,112		14,619		15,785		13,812		16,205		15,583		13,903		15,150
Total Mission Asset Activity	$	79,321	$	89,352	$	80,137	$	85,741	$	98,036	$	90,242	$	108,123	$	79,321	$	75,386	$	70,842	$	85,741	$	74,059

The balance of Mission Asset Activity was ~~$79.3~~$108.1 billion at March 31, ~~2019, a decrease~~2020, an increase of ~~$0.8~~$32.7 billion ~~(one~~(43 percent) from year-end ~~2018,~~2019, which was driven by ~~lower Letters of Credit~~higher Advance balances. Advance principal balances increased $32.7 billion (69 percent) from year-end 2019. We experienced Advance growth across our membership at ~~March 31, 2019 were flat compared~~the end of the first quarter as the financial markets reacted to ~~balances at year-end 2018.~~the COVID-19 pandemic. However, average Advance principal balances for the three months ended March 31, ~~2019~~2020 declined ~~$11.8~~$18.3 billion compared to the same period of ~~2018 primarily due to a reduction in borrowings from~~2019 as balances were lower for most of the quarter after a few large-asset ~~members.~~members had reduced their borrowings throughout 2019 and early 2020. Advance balances are often volatile due to ~~our~~ members' ability to quickly, normally on the same day, increase or decrease their amount of Advances. We believe providing members flexibility in their funding levels helps support their asset-liability management needs and is a key benefit of membership. At March 31, ~~2019,~~2020, 68 percent of members held Mission Asset Activity, which was relatively stable compared to prior periods.

Based on the most-recently available figures, members funded an average of 2.9 percent of their assets with Advances. As in recent years, most members continued to have modest demand for Advance borrowings. Demand for Advances is affected by the accessibility and cost of other sources of liquidity and funding, such as deposits, available to members.

The MPP principal balance ~~at March 31, 2019 was similar to the balance at~~rose $0.7 billion (six percent) from year-end ~~2018.~~2019. During the first three months of ~~2019,~~2020, we purchased ~~$0.2~~$1.2 billion of mortgage loans, while principal reductions totaled ~~$0.2~~$0.5 billion.

Based on earnings in the first three months of ~~2019~~2020, we accrued $8$9 million for the Affordable Housing Program (AHP) pool of funds to be available to members in ~~2020.~~2021. In addition to the required AHP assessment, we continued our voluntary sponsorship of two other housing programs ~~which~~and announced one new voluntary housing program in April 2020. The two existing programs provide resources to pay for accessibility rehabilitation and emergency repairs for special needs and elderly homeowners and to help members aid their communities following natural disasters. The new program provides up to $2 billion of zero interest rate Advances in response to the COVID-19 pandemic, as noted above.

Investments ~~and Other Assets~~

The balance of investments at March 31, ~~2019~~2020 was ~~$37.6~~$25.7 billion, ~~an increase~~a decrease of ~~$3.9~~$8.7 billion ~~(12~~(25 percent) from year-end 2018. Investments averaged $32.6 billion in the first three months of 2019, an increase of $5.6 billion (21 percent) from the average balance during the same period of 2018. The increases in the ending and average balances of investments were primarily driven by higher liquidity investments. Liquidity investments were higher in 2019 primarily due to purchases of U.S. Treasury obligations as part of our plan to manage the March 31, 2019 implementation of the Finance Agency's Advisory Bulletin on the maintenance of sufficient liquidity. See the "Business Outlook and Risk Management" section below for further details on the Liquidity Advisory Bulletin. In addition, liquidity investments can vary significantly on a daily basis during times of volatility in Advance balances.2019. At March 31, ~~2019,~~2020, investments included ~~$15.8~~$12.6 billion of ~~mortgage-backed securities (MBS)~~MBS and ~~$21.8~~$13.1 billion of other investments, which consisted primarily of highly-rated short-term instruments and longer-term U.S. Treasury and GSE obligations held for liquidity. All of our MBS held at March 31, ~~2019~~2020 were issued and guaranteed by Fannie Mae, Freddie Mac or a U.S. agency. The decrease in investments at March 31, 2020 was primarily driven by lower liquidity investments as we decided to hold more of our liquidity portfolio as deposits at the Federal Reserve in light of volatile market conditions and limited returns on other available liquidity investments. At March 31, 2020, we held $3.9 billion in deposits at the Federal Reserve, which are reflected in cash and due from banks on the Statements of Condition.

Investments averaged $37.4 billion in the first three months of 2020, an increase of $4.8 billion (15 percent) from the average balance during the same period of 2019. Average investments were higher in the first three months of 2020 as we began holding more asset liquidity throughout 2019, which we obtained primarily by purchasing U.S. Treasury obligations as part of our plan to manage the Finance Agency's requirements on the maintenance of sufficient liquidity. In addition, liquidity investments can vary significantly on a daily basis during times of volatility in Advance balances. We maintained a robust amount of asset liquidity throughout the first three months of ~~2019~~2020 across a variety of liquidity measures, as discussed in the "Liquidity Risk" section of "Quantitative and Qualitative Disclosures About Risk Management."

Capital

Capital adequacy ~~remained strong~~surpassed all minimum regulatory capital requirements in the first three months of ~~2019, surpassing all minimum regulatory capital requirements.~~2020. The GAAP capital-to-assets ratio at March 31, ~~2019~~2020 was ~~4.91~~4.80 percent, while the regulatory capital-to-assets ratio was ~~4.95~~5.28 percent. Both ratios exceeded the regulatory required minimum of four percent. Regulatory capital includes mandatorily redeemable capital stock accounted for as a liability under GAAP. ~~Both~~ GAAP and regulatory capital ~~decreased $253 million~~increased $1.4 billion and $2.0 billion, respectively, in the first three months of ~~2019,~~2020, primarily due to ~~repurchases~~purchases of ~~$489 million in excess~~capital stock ~~from~~by members ~~as part of our capital management strategy.~~to support Advance growth. Retained earnings totaled ~~$1.0~~$1.2 billion at March 31, ~~2019,~~2020, an increase of ~~one~~five percent from year-end ~~2018. The decrease in capital was partially offset by purchases of capital stock associated with Advance activity.~~2019.

Results of Operations

Overall Results

The table below summarizes our results of operations.


	Three Months Ended March 31,						Year Ended December 31,			Three Months Ended March 31,						Year Ended December 31,
(Dollars in millions)	2019			2018			2018			2020			2019			2019
Net income	$	73		$	83		$	339		$	80		$	73		$	276
Affordable Housing Program assessments	8			9			38			9			8			31
Return on average equity (ROE)	5.59		%	6.23		%	6.29		%	6.94		%	5.59		%	5.65		%
Return on average assets	0.28			0.30			0.32			0.34			0.28			0.28
Weighted average dividend rate	6.00			5.75			5.88			2.50			6.00			5.05
Average 3-month LIBOR	2.69			1.93			2.31
ROE spread to 3-month LIBOR	2.90			4.30			3.98
Dividend rate spread to 3-month LIBOR	3.31			3.82			3.57
Average short-term interest rates ⁽¹⁾										1.40			2.54			2.24
ROE spread to average short-term interest rates										5.54			3.05			3.41
Dividend rate spread to average short-term interest rates										1.10			3.46			2.81


(1)	Average short-term interest rates consist of 3-month LIBOR and the Federal funds effective rate.

Net income ~~decreased $10~~increased $7 million ~~(12~~(nine percent) in the first three months of ~~2019~~2020 compared to the same period of ~~2018. The decreases in net~~2019. Net income ~~and ROE were primarily the~~increased as a result of higher non-interest ~~losses~~income primarily due to ~~decreases in~~gains on the ~~fair value~~sale of certain derivatives ~~and~~during the quarter. These gains were partially offset by unrealized losses on other ~~financial~~ instruments ~~carried~~held at fair ~~value. However,~~value in response to changes in interest rates. Although net income increased, net interest income ~~was higher~~decreased in the first three months of ~~2019 compared to the same period of 2018~~2020. The decline in net interest income was primarily due to ~~the rise in short-term~~higher net amortization as a result of accelerated prepayments of financial instruments during a period of historically low interest ~~rates, which improved earnings from funding assets with interest-free capital.~~rates.

Earnings levels continued to represent competitive returns on stockholders' capital investment. ROE was higher than average short-term rates in the periods presented above, while we maintained risk exposures in line with our appetite for a moderate ~~to low~~ risk profile. The spread between ROE and average short-term rates, ~~such as~~consisting of 3-month LIBOR and the Federal funds effective rate, is a market benchmark we believe member stockholders actively use to assess the competitiveness of the return on their capital investment.

In March ~~2019,~~2020, we paid stockholders a quarterly ~~6.00~~2.50 percent annualized dividend rate on their capital investment in our company. The lower dividend rate in the first quarter of 2020 compared to those in 2019 was in part due to the decline in the interest rate environment over the last several quarters, including the Federal Reserve's 150 basis point decrease in the target overnight Federal funds rate in March 2020.

We believe that our operations and financial condition will continue to generate competitive profitability over time, reflecting the combination of a stable business model ~~and a consistent~~ and conservative management of risk. Our business model is structured to be able to absorb sharp changes in Mission Asset Activity because we can execute commensurate changes in liability ~~balances~~ and ~~capital.~~capital stock balances. Key factors that can cause significant periodic ~~earnings~~ volatility in our profitability are changes in the level of interest rates, changes in spreads between benchmark interest rates ~~(such as LIBOR)~~ and our short-term funding costs, recognition of net amortization due to accelerated prepayments of mortgage assets, and fair value adjustments related to the use of derivatives and the associated hedged items.

Effect of Interest Rate Environment

Trends in market interest rates and the resulting shapes of the market yield curves strongly influence the results of operations and profitability because of how they affect members' demand for Mission Asset Activity, spreads on assets, funding costs and decisions in managing the tradeoffs in our market risk/return profile. The following table presents key market interest rates (obtained from Bloomberg L.P.).


	Quarter 1 2019				Year 2018				Quarter 1 2018				Quarter 1 2020				Year 2019				Quarter 1 2019
	Ending		Average		Ending		Average		Ending		Average		Ending		Average		Ending		Average		Ending		Average
Federal funds effective	2.43	%	2.40	%	2.40	%	1.83	%	1.67	%	1.45	%	0.08	%	1.25	%	1.55	%	2.16	%	2.43	%	2.40	%
Secured Overnight Financing Rate (SOFR)													0.01		1.25		1.55		2.20		2.65		2.44
3-month LIBOR	2.60		2.69		2.81		2.31		2.31		1.93		1.45		1.54		1.91		2.33		2.60		2.69
2-year LIBOR	2.38		2.62		2.66		2.75		2.58		2.40		0.49		1.18		1.70		2.03		2.38		2.62
10-year LIBOR	2.41		2.67		2.71		2.95		2.79		2.77		0.72		1.34		1.90		2.09		2.41		2.67
2-year U.S. Treasury	2.26		2.49		2.49		2.52		2.27		2.15		0.25		1.10		1.57		1.97		2.26		2.49
10-year U.S. Treasury	2.41		2.65		2.69		2.91		2.74		2.76		0.67		1.38		1.92		2.14		2.41		2.65
15-year mortgage current coupon ⁽¹⁾	2.67		2.97		3.06		3.20		3.03		2.93		1.07		1.86		2.28		2.52		2.67		2.97
30-year mortgage current coupon ⁽¹⁾	3.11		3.41		3.51		3.65		3.47		3.40		1.63		2.31		2.71		2.95		3.11		3.41


(1)	Simple average of current coupon rates of Fannie Mae and Freddie Mac par MBS indications.

~~Over the last several quarters, the~~The target overnight Federal funds rate ~~has increased to its current~~was in the range of ~~2.25~~zero to ~~2.50 percent.~~ 0.25 percent at March 31, 2020, a decrease from the range of 1.50 to 1.75 percent at December 31, 2019. The decrease reflects the evolving risks to economic activity from the COVID-19 pandemic.

Average short-term rates ~~(i.e., federal funds effective and 3-month LIBOR)~~ were approximately ~~0.80~~115 to ~~0.90 percentage~~145 basis points ~~higher~~lower in the first three months of ~~2019~~2020 compared to the same period of ~~2018, while~~2019 and average ~~mortgage~~long-term rates ~~were nearly unchanged~~decreased by approximately 110 to 135 basis points during that same period. The ~~rising~~decline in interest rates on short-term ~~interest rate environment continued to benefit~~assets negatively impacted income ~~during 2019~~in the first three months of 2020 primarily because of the lower earnings generated by funding assets with interest-free capital. However, the trends of rising short-term interest rates without comparable trends for long-term rates have resulted in flatter, and at certain maturity points inverted, market yield curves, which could lower profitability if they are to continue for a prolonged period. For example, earnings may decrease as a consequence of a flat to inverted yield curve due to narrower spreads between yields earned on new mortgage assets and the costs of new Consolidated Obligations used to fund them.

Business Outlook and Risk Management

Other than the updates noted below, our major business strategies, outlook for our business, and risk profiles and management have not changed substantially since our ~~2018~~2019 Annual Report on Form 10-K. “Quantitative and Qualitative Disclosures About Risk Management” provides details on current risk exposures.

Regulatory and Legislative Risk and Significant Developments

Finance Agency Supervisory Letter - Paycheck Protection Program (PPP) Loans as Collateral for FHLBank Advances:On April 23, 2020, the Finance Agency issued a Supervisory Letter (PPP Supervisory Letter) permitting the FHLBanks to accept PPP loans as collateral for Advances as “Agency Securities,” given the Small Business Administration’s (SBA) 100 percent guarantee of the unpaid principal balance. On April 20, 2020, the SBA's third interim final rule related to PPP loans was published. The rule explicitly waived certain regulatory requirements that must be satisfied before a member could pledge PPP loans to the FHLBanks as collateral. The PPP Supervisory Letter establishes a series of conditions under which the FHLBanks may accept PPP loans as collateral that focus on the financial condition of members, collateral discounts, and pledge dollar limits.

We have reviewed the PPP Supervisory Letter and decided to accept PPP loans as collateral. On May 4, 2020, we issued a member communication detailing the terms on which we would accept such collateral. We do not expect the PPP Supervisory Letter to materially effect our financial condition or results of operations.

Coronavirus Aid, Relief, and Economic Security (CARES) Act: The CARES Act was signed into law on March 27, 2020. The $2.2 trillion package is the largest stimulus bill in United States history. The CARES Act is in addition to previous relief legislation passed by Congress in March 2020. The legislation provides the following:


▪	Assistance to businesses, states, and municipalities.


▪	A loan program for small businesses, non-profits and physician practices that can be forgiven through employee retention incentives.


▪	Treasury Secretary authority to make loans or loan guarantees to states, municipalities, and eligible businesses and loosens some regulations imposed through the Dodd-Frank Act.


▪	Direct payments to eligible taxpayers and their families.


▪	Expanded eligibility for unemployment insurance and payment amounts.


▪	Mortgage forbearance provisions and a foreclosure moratorium.

Additional phases of the CARES Act or other COVID-19 relief legislation may be enacted by Congress. We are evaluating the potential impact of the CARES Act on our business, including its impact to the U.S. economy, which is unknown; and impacts to mortgages held or serviced by our members that we accept as collateral; and impacts on our MPP portfolio.

LIBOR ~~Replacement:~~Replacement; Finance Agency Supervisory Letter:We are planning for the replacement of LIBOR given ~~the announcement~~ that the LIBOR index is expected to be phased out by no later than the end of 2021 and the Federal Reserve Bank of New York's establishment of ~~the Secured Overnight Financing Rate (SOFR)~~SOFR as its recommended alternative to U.S. dollar LIBOR. ~~In the first three months~~At March 31, 2020, all $11.8 billion of ~~2019, we have continued~~our adjustable-rate Consolidated Bonds were indexed to ~~participate in the FHLBank System's issuances of SOFR-linked Consolidated Bonds.~~SOFR. We ~~have~~ also continued ~~to offer~~offering SOFR-linked Advances and swapping certain instruments to adjustable-rates tied to SOFR and the overnight Federal funds effective rate in ~~2019.~~2020. However, the majority of our variable-rate assets ~~and liabilities~~ still remain indexed to LIBOR. Therefore, we are continuing to plan for the eventual replacement of our LIBOR-indexed instruments away from the LIBOR benchmark interest rate. Part of our LIBOR transition plan includes our previously implemented fallback language for our LIBOR-indexed Advances and Consolidated Bonds in new and legacy contracts. As for our derivatives and investments that are tied to LIBOR, we are monitoring market-wide efforts to enhance fallback language for new activity and develop frameworks to address existing transactions. We are also evaluating and plan to utilize the transition relief provided by the Financial Accounting Standards Board (FASB) concerning the accounting for contract modifications during the replacement of LIBOR.

The Finance Agency has issued directives designed to ensure the FHLBanks will be able to identify and prudently manage the risks associated with the termination of LIBOR in a safe and sound manner. As a result of the recent market conditions triggered in part by COVID-19, the Finance Agency has extended the date by three months from March 31, 2020 to June 30, 2020 for when the FHLBanks are required to cease entering into new LIBOR-based instruments that mature after December 31, 2021, except for investments and option embedded products. With respect to investments, the Finance Agency required the FHLBanks, by December 31, 2019, to stop purchasing investments that reference LIBOR and mature after December 31, 2021. These phase-out dates do not apply to collateral accepted by the FHLBanks. The Finance Agency also directed the FHLBanks to update their pledged collateral certification reporting requirements by September 30, 2020 in an effort to encourage members to identify LIBOR-linked collateral maturing after December 31, 2021.

We have Advances, investment securities and derivatives with interest rates indexed to LIBOR. The following table presents LIBOR-indexed Advances, investment securities and derivatives at March 31, 2020. See the "Credit Services" section of "Analysis of Financial Condition" for further information.



(In millions)	Maturing in 2020-2021		Maturing after 2021
LIBOR-Indexed Variable Rate Financial Instruments
Advances by redemption term	$	20,576	$	8,313
MBS by contractual maturity ⁽¹⁾	154		7,246
Total principal amount	$	20,730	$	15,559
Derivatives, notional amount by termination date	$	8,263	$	8,834


(1)	MBS are presented by contractual maturity; however, their expected maturities will likely differ from contractual maturities as borrowers may have the right to call or prepay obligations with or without call or prepayment fees.

The market transition away from LIBOR towards SOFR is expected to be gradual and complicated, including the development of term structures and credit adjustments to accommodate differences between LIBOR and SOFR. As such, we are not currently able to predict the ultimate impact of such a transition on our business, financial condition, and results of operations.

~~Liquidity Advisory Bulletin:Advisory Bulletin 2018-07 Federal Home Loan Bank Liquidity Guidance~~ ~~(Liquidity AB)~~. In August 2018, the Finance Agency issued the Liquidity AB, which provides expectations on the maintenance of sufficient liquidity to enable the FHLBanks to provide Advances and Letters of Credit to members for a specified number of days without access to the capital markets or other unsecured funding sources. The Liquidity AB rescinds the 2009 liquidity guidance previously issued by the Finance Agency. The Liquidity AB defines liquidity as non-Advance cash inflows during the measurement period plus certain high-quality liquid assets. High-quality liquid assets includes U.S. Treasury obligations with remaining maturities of 10 years or less held as trading securities or available-for-sale securities.

In addition, the Liquidity AB provides guidance related to asset/liability maturity funding gap limits. Funding gap metrics measure the difference between assets and liabilities that are scheduled to mature during a specified period of time and are expressed as a percentage of total assets. The Liquidity AB provides for the funding gap limits to reduce the liquidity risks associated with a mismatch in asset and liability maturities, including an undue reliance on short-term debt funding, which may increase debt rollover risk.

The Liquidity AB also addresses liquidity stress testing, contingent funding plans and an adjustment to the calculation of the Primary Mission Asset ratio. Portions of the Liquidity AB were implemented on December 31, 2018 and March 31, 2019, with full implementation to take place on December 31, 2019.

In order to help meet the new guidelines, we purchased U.S. Treasury obligations and classified them as trading securities in the first quarter of 2019. As we anticipate full implementation of the Liquidity AB on December 31, 2019, we may purchase an additional amount of liquid assets to meet the new base case liquidity expectations, which may raise our cost of funding. We currently do not believe these requirements will have a material effect on our results of operations, but they will make managing liquidity and the balance sheet more operationally challenging. Refer to the "Liquidity Risk" section of "Quantitative and Qualitative Disclosures About Risk Management" for further discussion of the requirements set forth in the Liquidity AB.

~~Final Rule on FHLBank Capital Requirements:~~ On February 20, 2019, the Finance Agency published a final rule, effective January 1, 2020, that adopts, with amendments, the regulations of the Federal Housing Finance Board (predecessor to the Finance Agency) (the Finance Board) pertaining to the capital requirements for the FHLBanks. The final rule carries over most of the prior Finance Board regulations without material change, but substantively revises the credit risk component of the risk-based capital requirement, as well as the limitations on extensions of unsecured credit. The main revisions remove requirements that we calculate credit risk capital charges and unsecured credit limits based on ratings issued by a Nationally Recognized Statistical Rating Organization (NRSRO), and instead require that we establish and use our own internal rating methodology (which may include, but not solely rely on, NRSRO ratings). In addition, the rule imposes a new credit risk capital charge for cleared derivatives, revises the percentages used in the regulation’s tables to calculate credit risk capital charges for Advances and for non-mortgage assets and rescinds certain contingency liquidity requirements, as these requirements are now addressed in the Liquidity AB. We do not expect this rule to materially affect our financial condition or results of operations.

ANALYSIS OF FINANCIAL CONDITION

Credit Services

Credit Activity and Advance Composition

The table below shows trends in Advance balances by major programs and in the notional amount of Letters of Credit.


(Dollars in millions)	March 31, 2019				December 31, 2018				March 31, 2018				March 31, 2020				December 31, 2019				March 31, 2019
	Balance		Percent⁽¹⁾		Balance		Percent⁽¹⁾		Balance		Percent⁽¹⁾		Balance		Percent⁽¹⁾		Balance		Percent⁽¹⁾		Balance		Percent⁽¹⁾
Adjustable/Variable-Rate Indexed:
LIBOR	$	20,262	37	%	$	28,740	52	%	$	31,646	50	%	$	28,889	36	%	$	10,430	22	%	$	20,462	38	%
SOFR													2,000		3		500		1		1,400		2
Other	1,794		3		2,144		4		781		1		247		—		221		1		394		1
Total	22,056		40		30,884		56		32,427		51		31,136		39		11,151		24		22,256		41
Fixed-Rate:
Repurchase based (REPO)	15,187		28		7,003		13		14,540		23		28,058		35		19,386		41		15,187		28
Regular Fixed-Rate	10,991		20		10,972		20		11,677		18		14,452		18		11,476		24		10,991		20
Putable ⁽²⁾	1,085		2		460		1		175		—		3,164		4		1,444		3		885		1
Amortizing/Mortgage Matched	2,753		5		2,702		5		2,810		4		2,439		3		2,358		5		2,753		5
Other	2,806		5		2,851		5		2,355		4		680		1		1,449		3		2,806		5
Total	32,822		60		23,988		44		31,557		49		48,793		61		36,113		76		32,622		59
Other Advances	—		—		—		—		1		—
Total Advances Principal	$	54,878	100	%	$	54,872	100	%	$	63,985	100	%	$	79,929	100	%	$	47,264	100	%	$	54,878	100	%

Letters of Credit (notional)	$	13,812			$	14,847			$	15,606			$	15,785			$	16,205			$	13,812


(1)	As a percentage of total Advances principal.


(2)	Excludes Putable Advances where the related put options have ~~expired.~~expired or where the Advance is indexed to a variable-rate. These Advances are classified based on their current terms.

Advance balances at March 31, ~~2019 were flat~~2020 increased 69 percent compared to year-end ~~2018. However,~~2019. We experienced Advance growth across our membership at the ~~average Advance principal balance~~end of ~~$61.4 billion during~~ the first ~~three months~~quarter as the financial markets reacted to the COVID-19 pandemic, and members turned to us for liquidity, primarily in the form of ~~2019 was significantly higher than the ending balance at March 31, 2019.~~LIBOR and REPO Advances. REPOs, which traditionally have the most volatile balances because a majority of them have overnight maturities, allow our members the most flexibility as their liquidity needs may change daily.

Advance Usage

In addition to analyzing Advance balances by dollar trends, we monitor the degree to which members use Advances to fund their balance sheets. The following table shows the unweighted, average ratio of each member's Advance balance to its most-recently available figures for total assets.


	March 31, 2019		December 31, 2018		March 31, 2020		December 31, 2019
Average Advances-to-assets for members
Assets less than $1.0 billion (557 members)	2.82	%	3.05	%
Assets over $1.0 billion (90 members)	3.67		4.26
Assets less than $1.0 billion (538 members)					2.73	%	2.55	%
Assets over $1.0 billion (96 members)					3.92		3.31
All members	2.94		3.22		2.91		2.67

The following tables present principal balances for the five members with the largest Advance borrowings.


(Dollars in millions)
March 31, 2019					December 31, 2018
March 31, 2020										March 31, 2020					December 31, 2019
Name	Principal Amount of Advances		Percent of Total Principal Amount of Advances		Name	Principal Amount of Advances		Percent of Total Principal Amount of Advances			Principal Amount of Advances		Percent of Total Principal Amount of Advances		Name	Principal Amount of Advances		Percent of Total Principal Amount of Advances
U.S. Bank, N.A.											$	24,374	30	%	U.S. Bank, N.A.	$	13,874	29	%
JPMorgan Chase Bank, N.A.	$	24,900	45	%	JPMorgan Chase Bank, N.A.	$	23,400	43	%		15,000		19		JPMorgan Chase Bank, N.A.	4,500		10
Third Federal Savings and Loan Association	3,583		7		U.S. Bank, N.A.	4,574		8			4,077		5		Third Federal Savings and Loan Association	3,883		8
U.S. Bank, N.A.	3,574		7		Third Federal Savings and Loan Association	3,727		7
Nationwide Life Insurance Company	2,377		4		Nationwide Life Insurance Company	2,510		5
Pinnacle Bank	2,121		4		Pinnacle Bank	1,444		3
First Horizon Bank											3,900		5		First Horizon Bank	2,200		5
Keybank National Association											3,616		5		Pinnacle Bank	2,063		4
Total of Top 5	$	36,555	67	%	Total of Top 5	$	35,655	66	%		$	50,967	64	%	Total of Top 5	$	26,520	56	%

Advance concentration ratios are influenced by, and generally similar to, concentration ratios of financial activity among our Fifth District financial institutions. We believe that having large financial institutions that actively use our Mission Assets augments the value of membership to all members. For example, such activity improves our operating efficiency, increases our earnings and thereby contributions to housing and community investment programs. This activity may enable us to obtain more favorable funding costs, and helps us maintain competitively priced Mission Assets.

Mortgage Loans Held for Portfolio (Mortgage Purchase Program, or MPP)

The table below shows principal purchases and reductions of loans in the MPP for the first three months of ~~2019.~~2020.


(In millions)	March 31, 2019			MPP Principal
Balance at December 31, 2018	$	10,272
Balance at December 31, 2019				$	10,981
Principal purchases	245			1,202
Principal reductions	(227		)	(539		)
Balance at March 31, 2019	$	10,290
Balance at March 31, 2020				$	11,644

Although there were 6072 active members participating in the MPP atduring the three months ended March 31, ~~2019, nearly 50~~2020, approximately 74 percent of the principal purchases in the first three months of ~~2019~~2020 resulted from activity of our ~~three~~four largest sellers. All loans acquired in the first quarter of ~~2019~~2020 were conventional loans.

We closely track the refinancing incentives of our mortgage assets (including loans in the MPP and MBS) because the option for homeowners to change their principal payments normally represents the largest portion of our market risk exposure and can affect MPP balances. MPP principal paydowns in the first three months of ~~2019~~2020 equated to a ~~six~~15 percent annual constant prepayment rate, ~~down from~~compared to the ~~eight~~14 percent rate for all of ~~2018.~~

~~The MPP's composition~~2019. In the fourth quarter of ~~balances by loan type, original final maturity,~~2019, mortgage rates were steady, remaining at historically low levels and ~~weighted-average~~resulted in a similar prepayment rate during the first three months of 2020 as all of 2019. Given the reductions in mortgage ~~note rate did not change materially~~rates that occurred in the first three months of ~~2019.~~2020, we expect prepayments to increase throughout 2020 unless mortgage rates rise. MPP yields ~~earned~~on purchases in the first three months of ~~2019,~~2020, after consideration of funding and hedging costs, continued to offer favorable ~~returns~~returns. However, MPP yields on existing portfolio balances, net of funding and hedging costs, have declined and we believe will continue to do so if prepayment speeds increase, as noted above. The metrics of portfolio return relative to their market and credit ~~risk exposure.~~risks continue to indicate that the MPP has generated, and will continue to generate, a profitable long-term, risk-adjusted return.

Housing and Community Investment

Other than the updates noted below, our housing and community investment programs have not changed substantially since our 2019 Annual Report on Form 10-K.

In April 2020, we announced a new, zero interest rate Advance program, RISE (Responsive, Inclusive, Supportive and Empowering). The newly created RISE Program will offer up to $2 billion in six-month Advances at zero percent interest, for a limited time beginning May 1, 2020. These Advances can be used to support COVID-19 related assistance by all Fifth District

members, including loans originated by member financial institutions under the CARES Act, loans to support members’ customers who have been directly impacted by COVID-19, assisting mortgage servicers with required investor remittances during borrower forbearance periods as well as deferring insurance premium payments and lease payments.

Beginning April 2020, we have also expanded our Community Investment Program and Economic Development Program, which offer Advances with below-market interest rates at or near funding costs. Total funding for these programs was increased to $1.50 billion from $1.25 billion and the maturity requirement of one-year or greater will be temporarily suspended for COVID-19 related activity initiated by September 30, 2020.

Investments

The table below presents the ending and average balances of ~~the~~our investment portfolio.


	Three Months Ended				Year Ended				Three Months Ended				Year Ended
(In millions)	March 31, 2019				December 31, 2018				March 31, 2020				December 31, 2019
	Ending Balance		Average Balance		Ending Balance		Average Balance		Ending Balance		Average Balance		Ending Balance		Average Balance
Liquidity investments	$	21,726	$	16,653	$	17,858	$	13,989	$	13,128	$	23,938	$	20,924	$	22,525
MBS	15,824		15,873		15,756		15,741		12,537		13,051		13,465		15,029
Other investments ⁽¹⁾	—		83		—		64		—		373		—		232
Total investments	$	37,550	$	32,609	$	33,614	$	29,794	$	25,665	$	37,362	$	34,389	$	37,786


(1)	The average balance includes the rights or obligations to cash collateral, which are included in the fair value of derivative assets or derivative liabilities on the Statements of Condition at period end.

~~We continued~~Liquidity investments are either short-term (primarily overnight), or longer-term, but can be easily sold and converted to ~~maintain~~cash. It is normal for liquidity investments to vary by up to several billion dollars on a ~~robust amount of asset liquidity.~~daily basis. Liquidity investment levels can vary significantly based on changes in the amount of actual Advances, anticipated demand for Advances, liquidity needs, the availability of acceptable net spreads, and the number of eligible counterparties that meet our unsecured credit risk criteria. ~~It is normal for~~

The balance of liquidity investments ~~to vary by up to several billion dollars on a daily basis. The increase in liquidity investments~~dropped at March 31, ~~2019 was driven by volatility~~2020 as we decided to hold more of our liquidity portfolio as deposits at the Federal Reserve in ~~short-term~~light of volatile market conditions and ~~variable-rate Advance borrowings~~limited returns on other available liquidity investments. At March 31, 2020, we held $3.9 billion in deposits at the Federal Reserve, which are reflected in cash and due from banks on the ~~purchases~~Statements of Condition. Average liquidity investments for the three months ended March 31, 2020 remained elevated as we continued to hold U.S. Treasury obligations to help meet ~~the new~~ regulatory liquidity requirements. Under the regulatory requirements, ~~that went into effect on March 31, 2019.~~liquidity includes certain high-quality liquid assets, which are defined as U.S. Treasury obligations with remaining maturities of 10 years or less held as trading securities or available-for-sale securities.

Our overarching strategy for balances of MBS is to keep holdings as close as possible to the regulatory maximum, subject to the availability of securities that we believe provide acceptable risk/return tradeoffs. Finance Agency regulations prohibit us from purchasing MBS if our investment in these securities exceeds three times regulatory capital on the day we intend to purchase the securities. The ratio of MBS to regulatory capital averaged 2.78 in the first three months of 2020. However, the ratio declined in March 2020 to end the quarter at 1.94. The MBS ratio was ~~3.09 at~~ ~~March 31, 2019, which exceeded the current regulatory limit~~lower than normal primarily due to the increase in regulatory capital in March 2020 as a result of members purchasing $2.1 billion of capital stock ~~repurchases that occurred during the quarter. Per regulation, we will suspend~~to support Advance growth as well as regulatory limitations regarding the purchase of ~~new MBS until regular principal paydowns result in the ratio falling below three times regulatory capital.~~ investments that reference LIBOR.

The balance of MBS at March 31, ~~2019~~2020 consisted of ~~$13.9~~$11.1 billion of securities issued by Fannie Mae or Freddie Mac (of which $~~9.1~~7.2 billion were floating-rate securities), ~~$0.3~~$0.2 billion of floating-rate securities issued by the National Credit Union Administration (NCUA), and ~~$1.6~~$1.3 billion of securities issued by Ginnie Mae (which are primarily fixed rate). ~~We held no private-label MBS.~~

The table below shows principal purchases and paydowns of our MBS for the first three months of ~~2019.~~2020.

(In millions) MBS Principal
Balance at December 31, 2018 $ 15,734
Principal purchases 571
Principal paydowns (503 )
Balance at March 31, 2019 $ 15,802



(In millions)	MBS Principal
Balance at December 31, 2019	$	13,447
Principal paydowns	(924		)
Balance at March 31, 2020	$	12,523

~~Principal~~MBS principal paydowns in the first three months of ~~2019~~2020 equated to a 1224 percent annual constant prepayment rate, ~~compared to~~up from the 20 percent rate experienced in 2019. The higher prepayment rate experienced in the first three months of 2020 is a result of the historically low mortgage rate ~~of 16 percent in all of 2018.~~environment.

Consolidated Obligations

~~The table below presents the ending and average balances of our participations in Consolidated Obligations.~~

Three Months Ended Year Ended
(In millions) March 31, 2019 December 31, 2018
Ending Balance Average Balance Ending Balance Average Balance
Discount Notes:
Par $ 44,336
$ 51,786
$ 47,071
$ 49,273
Discount (124 ) (138 ) (127 ) (88 )
Total Discount Notes 44,212
51,648
46,944
49,185
Bonds:
Unswapped fixed-rate 25,548
25,998
25,982
26,566
Unswapped adjustable-rate 20,643
16,153
15,470
16,967
Swapped fixed-rate 5,910
4,268
4,195
5,982
Total par Bonds 52,101
46,419
45,647
49,515
Other items ⁽¹⁾
23
16
12
(13 )
Total Bonds 52,124
46,435
45,659
49,502
Total Consolidated Obligations⁽²⁾
$ 96,336
$ 98,083
$ 92,603
$ 98,687


~~(1)~~	~~Includes unamortized premiums/discounts, fair value option valuation adjustments, hedging and other basis adjustments.~~


~~(2)~~	The 11 FHLBanks have joint and several liability for the par amount of all of the Consolidated Obligations issued on their behalves. The par amount of the outstanding Consolidated Obligations for all of the FHLBanks was (in millions) ~~$1,010,895~~ ~~and~~ ~~$1,031,617~~ at ~~March 31, 2019~~ ~~and December 31, 2018, respectively.~~

We fund variable-rate assets with Discount Notes (a portion of which are swapped), adjustable-rate Bonds, and swapped fixed-rate Bonds because they give us the ability to effectively match the underlying rate reset periods embedded in these assets. The balances and composition of our Consolidated Obligations tend to fluctuate with changes in the balances and composition of our assets. ~~For example,~~In addition, changes in the ~~volatility~~amount and composition of our funding may be necessary from time to time to meet the days positive liquidity and asset/liability maturity funding gap requirements under the regulatory liquidity guidance discussed in ~~certain Advances~~the "Liquidity Risk" section of "Quantitative and ~~liquidity investments contributed~~Qualitative Disclosures About Risk Management."

The table below presents the ending and average balances of our participations in Consolidated Obligations.



	Three Months Ended						Year Ended
(In millions)	March 31, 2020						December 31, 2019
	Ending Balance			Average Balance			Ending Balance			Average Balance
Discount Notes:
Unswapped	$	70,427		$	38,702		$	36,776		$	39,286
Swapped	9,321			11,078			12,401			5,291
Total par Discount Notes	79,748			49,780			49,177			44,577
Other items ⁽¹⁾	(88		)	(84		)	(93		)	(95		)
Total Discount Notes	79,660			49,696			49,084			44,482
Bonds:
Unswapped fixed-rate	18,328			21,433			22,420			24,423
Unswapped adjustable-rate ⁽²⁾	11,823			10,819			11,012			16,132
Swapped fixed-rate	4,424			4,773			4,949			5,310
Total par Bonds	34,575			37,025			38,381			45,865
Other items ⁽¹⁾	93			65			59			44
Total Bonds	34,668			37,090			38,440			45,909
Total Consolidated Obligations⁽³⁾	$	114,328		$	86,786		$	87,524		$	90,391


(1)	Includes unamortized premiums/discounts, fair value option valuation adjustments, hedging and other basis adjustments.


(2)	Unswapped adjustable-rate Bonds are indexed to either LIBOR or SOFR. At March 31, 2020, 100 percent were indexed to SOFR. At December 31, 2019, 1 percent were indexed to LIBOR and 99 percent were indexed to SOFR.


(3)	The 11 FHLBanks have joint and several liability for the par amount of all of the Consolidated Obligations issued on their behalves. The par amount of the outstanding Consolidated Obligations for all of the FHLBanks was (in millions) $1,174,670 and $1,025,895 at March 31, 2020 and December 31, 2019, respectively.

The balances of Discount Notes were higher at March 31, 2020 due to the ~~higher~~growth in short-term and variable-rate Advances across our membership at the end of the first quarter as the financial markets reacted to the COVID-19 pandemic. The average balance of swapped Discount Notes in the first three months of 2020 was higher than the average for all of 2019 because beginning in the third quarter of 2019, we began swapping term Discount Notes to adjustable-rates tied to the overnight Federal funds effective rate in order to reduce the repricing risk of Discount Notes being used to fund certain overnight and shorter-term assets.

The balance of unswapped fixed-rate Bonds, which typically have initial maturities greater than one year, declined in the first three months of 2020 compared to the ~~ending balance at March 31, 2019.~~same period in 2019 driven by actions taken to terminate higher coupon fixed-rate Bonds with embedded options as interest rates fell.

Deposits

Total deposits with us are normally a relatively minor source of low-cost funding. Total ~~interest bearing~~interest-bearing deposits at March 31, ~~2019~~2020 were ~~$0.8~~$1.2 billion, an increase of ~~16 percent~~$0.2 billion from year-end ~~2018. The average balance of total interest bearing deposits in the first three months of 2019 was $0.7 billion, an eight percent increase from the average balance during the same period of 2018.~~2019.

Derivatives Hedging Activity and Liquidity

Our use of derivatives is discussed in the "Effect of the Use of Derivatives on Net Interest Income" section in "Results of Operations." Liquidity is discussed in the "Liquidity Risk" section in “Quantitative and Qualitative Disclosures About Risk Management.”

Capital Resources

The following tables present capital amounts and capital-to-assets ratios, on both a GAAP and regulatory basis. We consider the regulatory ratio to be a better representation of financial leverage than the GAAP ratio because, although the GAAP ratio treats mandatorily redeemable capital stock as a liability, it protects investors in our debt in the same manner as GAAP capital stock and retained earnings.


	Three Months Ended				Year Ended				Three Months Ended				Year Ended
(In millions)	March 31, 2019				December 31, 2018				March 31, 2020				December 31, 2019
	Period End		Average		Period End		Average		Period End		Average		Period End		Average
GAAP and Regulatory Capital
GAAP Capital Stock	$	4,059	$	4,263	$	4,320	$	4,387	$	4,739	$	3,489	$	3,367	$	3,827
Mandatorily Redeemable Capital Stock	23		23		23		30		572		52		22		25
Regulatory Capital Stock	4,082		4,286		4,343		4,417		5,311		3,541		3,389		3,852
Retained Earnings	1,031		1,067		1,023		1,025		1,153		1,145		1,094		1,069
Regulatory Capital	$	5,113	$	5,353	$	5,366	$	5,442	$	6,464	$	4,686	$	4,483	$	4,921


	Three Months Ended				Year Ended				Three Months Ended				Year Ended
	March 31, 2019				December 31, 2018				March 31, 2020				December 31, 2019
	Period End		Average		Period End		Average		Period End		Average		Period End		Average
GAAP and Regulatory Capital-to-Assets Ratio
GAAP	4.91	%	5.07	%	5.37	%	5.11	%	4.80	%	4.95	%	4.75	%	5.04	%
Regulatory ⁽¹⁾	4.95		5.11		5.41		5.16		5.28		5.02		4.79		5.08


(1)	At all times, the FHLBanks must maintain at least a four percent minimum regulatory capital-to-assets ratio.

See the "Capital Adequacy" section in “Quantitative and Qualitative Disclosures About Risk Management” for discussion of our retained earnings.

A portion of our capital stock is excess, meaning it is not required as a condition to being a member and is not currently capitalizing Mission Asset Activity. Excess capital stock provides a base of capital to manage financial leverage at prudent levels, augments loss protections for bondholders, and may be used to capitalize a portion of growth in Mission Assets. ~~The~~At March 31, 2020, the amount of excess ~~capital~~ stock, as defined by our Capital Plan, was ~~$679~~$82 million, similar to the balance at ~~March 31, 2019,~~year-end 2019. The balance of excess stock was minimal at the end of the quarter as a ~~decrease~~result of ~~$336 million from December 31, 2018 due~~a member's request to ~~our repurchase of $489~~redeem $550 million of excess stock and the growth in Advances. The increase in GAAP and regulatory capital ~~stock in~~balances and the ~~first three months~~related capital-to-assets ratios was primarily due to members purchasing $2.1 billion of ~~2019. We periodically repurchase excess~~ capital stock to ~~help manage our~~support Advance growth. The higher increase in regulatory capital ~~and financial performance~~compared to ~~levels that we believe are efficient and effective. We have~~GAAP capital was driven by the ~~ability to repurchase all~~large redemption request of excess stock, onwhich resulted in the stock becoming a ~~timely basis~~liability and ~~continue to meet our regulatory and prudential~~recognized as mandatorily redeemable capital ~~requirements.~~stock. In April 2020, we settled the $550 million outstanding redemption request.

Membership and Stockholders

In the first three months of ~~2019,~~2020, we added two new member stockholders and lost ~~one~~eight member ~~stockholder,~~stockholders, ending the quarter at ~~647~~634 member stockholders. The ~~one member stockholder that we lost merged with another Fifth District member.~~decline in membership during the first three months of 2020 was attributable to intra-district merger activity.

RESULTS OF OPERATIONS

Components of Earnings and Return on Equity

The following table is a summary income statement for the three months ended March 31, ~~2019~~2020 and ~~2018.~~2019. Each ROE percentage is computed by dividing income or expense for the category by the average amount of stockholders' equity for the period.


	Three Months Ended March 31,										Three Months Ended March 31,
(Dollars in millions)	2019					2018					2020					2019
	Amount			ROE ⁽¹⁾		Amount			ROE ⁽¹⁾		Amount			ROE ⁽¹⁾		Amount			ROE ⁽¹⁾
Net interest income	$	122		9.32	%	$	118		8.88	%	$	82		7.15	%	$	122		9.32	%
Non-interest income (loss):
Net gains (losses) on investment securities	22			1.69		—			—		373			32.43		22			1.69
Net losses on derivatives and hedging activities	(26		)	(1.98	)	(27		)	(1.98	)
Net (losses) gains on financial instruments held under fair value option	(17		)	(1.31	)	20			1.48
Net gains (losses) on derivatives and hedging activities											(294		)	(25.60	)	(26		)	(1.98	)
Net gains (losses) on financial instruments held under fair value option											(51		)	(4.43	)	(17		)	(1.31	)
Other non-interest income, net	3			0.20		3			0.21		3			0.27		3			0.20
Total non-interest income (loss)	(18		)	(1.40	)	(4		)	(0.29	)	31			2.67		(18		)	(1.40	)
Total income	104			7.92		114			8.59		113			9.82		104			7.92
Non-interest expense	23			1.71		22			1.66		24			2.11		23			1.71
Affordable Housing Program assessments	8			0.62		9			0.70		9			0.77		8			0.62
Net income	$	73		5.59	%	$	83		6.23	%	$	80		6.94	%	$	73		5.59	%


(1)	The ROE amounts have been computed using dollars in thousands. Accordingly, recalculations based upon the disclosed amounts in millions may produce nominally different results.

Details on the individual factors contributing to the level and changes in profitability are explained in the sections below.

Net Interest Income

Components of Net Interest Income

The following table shows selected components of net interest income.


	Three Months Ended March 31,										Three Months Ended March 31,
(Dollars in millions)	2019					2018					2020					2019
	Amount			% of Earning Assets		Amount			% of Earning Assets		Amount			% of Earning Assets		Amount			% of Earning Assets
Components of net interest rate spread:
Net (amortization)/accretion ^{(1) (2)}	$	(3	)	(0.01	)%	$	(4	)	(0.02	)%	$	(22	)	(0.09	)%	$	(3	)	(0.01	)%
Prepayment fees on Advances, net ⁽²⁾											4			0.02		—			—
Other components of net interest rate spread	92			0.36		100			0.37		81			0.35		92			0.36
Total net interest rate spread	89			0.35		96			0.35		63			0.28		89			0.35
Earnings from funding assets with interest-free capital	33			0.12		22			0.09		19			0.08		33			0.12
Total net interest income/net interest margin ⁽³⁾	$	122		0.47	%	$	118		0.44	%	$	82		0.36	%	$	122		0.47	%


(1)	Includes monthly recognition of premiums and discounts paid on purchases of mortgage assets, premiums, discounts and concessions paid on Consolidated Obligations and other hedging basis adjustments.


(2)	This component of net interest rate spread has been segregated to display its relative impact.


(3)	Net interest margin is net interest income as a percentage of average total ~~interest earning~~interest-earning assets.

Net Amortization/Accretion (generally referred to as "amortization"): While net amortization has been moderate over the past few years, it can become substantial and volatile when mortgage rates decrease. Amortization increased $19 million in the ~~past, it was moderate in the~~

first three months of ~~both 2019 and 2018. Periodic amortization adjustments do not~~

~~necessarily indicate a trend in economic return over the entire life of mortgage assets, although it is one component of lifetime economic returns.~~

~~Other Components of Net Interest Rate Spread:~~ ~~Excluding net amortization, the total other components of net interest rate spread decreased $8 million in the first three months of 2019~~2020 compared to the same period in ~~2018. The net decrease was~~2019 primarily due to ~~the factors below.~~


▪	~~Lower spreads on Advances-Unfavorable~~: ~~Lower spreads earned on certain Advances decreased net interest income by an estimated $8 million.~~


▪	~~Lower average Advance balances-Unfavorable~~: ~~The $11.8 billion decline in average Advance balances decreased net interest income by an estimated $7 million.~~


▪	~~Growth in average mortgage asset balances-Favorable~~: ~~The $0.8 billion increase in the average balance~~a decline in mortgage rates, which led to accelerated prepayments of ~~mortgage loans held for portfolio and the $1.1 billion increase in the average balance of MBS improved net interest income by an estimated $4 million.~~


▪	~~Higher spreads on mortgage assets-Favorable~~: ~~Higher spreads earned on~~ mortgage assets ~~increased net interest income by an estimated $3 million. Spreads improved primarily due to the rising interest rate environment.~~

~~Earnings from Capital:~~ Earnings from capital increased $11 million in the three months ended March 31, 2019, compared to the same period in 2018 primarily due to higher short-term interest rates. Average short-term rates were approximately 0.80 to 0.90 percentage points higher in the first ~~three months~~quarter of ~~2019 compared~~2020. We expect the recent trend of faster prepayments to ~~the same period in 2018.~~continue throughout 2020 unless mortgage rates rise.

Prepayment Fees on Advances: Fees for members' early repayment of certain Advances, which are included in net interest income, are designed to make us economically indifferent to whether members hold Advances to maturity or repay them before maturity. Although Advance prepayment fees can be ~~and have been~~ significant, they were moderate in the ~~past, they were minimal~~first three months of 2020. Advance prepayment fees increased in the first three months of 2020 compared to the same period of 2019 due to a higher amount of member prepayments of Advances as interest rates declined.

Other Components of Net Interest Rate Spread: The total other components of net interest rate spread decreased $11 million in the first three months of 2020 compared to the same period in 2019. The net decrease was primarily due to the factors below.

▪

Lower spreads on Advances-Unfavorable: Lower spreads earned on certain Advances decreased net interest income by an estimated $13 million. The lower spreads were a result of a shift in composition of Advance balances to overnight and shorter-term Advances. However, the decrease in net interest income was partially offset by a decrease of $10 million in net interest payments on related derivatives not receiving hedge accounting, which was a benefit reflected in non-interest income (loss).


▪	Losses on designated fair value hedges-Unfavorable: Net unrealized losses on hedged items and derivatives in qualifying fair value hedge relationships lowered net interest income by $13 million.


▪	Lower average Advance balances-Unfavorable: The $18.0 billion decline in average Advance balances decreased net interest income by an estimated $8 million. The decline in average Advance balances was primarily due to the reduction in borrowings by a few large-asset members in 2019, the impact of which was experienced for most of the first quarter of 2020.


▪	Lower spreads on mortgage assets balances-Unfavorable: Lower spreads on mortgage assets decreased net interest income by an estimated $4 million due to the falling interest rate environment.


▪	Lower average balances of mortgage-backed securities -Unfavorable: The $2.8 billion decrease in the average balance of mortgage-backed securities decreased net interest income by an estimated $3 million.

▪

Higher spreads on liquidity investment balances-Favorable: Higher spreads on liquidity investments improved net interest income by an estimated $22 million. The increase in net interest income was partially offset by earnings reductions recognized in non-interest income from an increase of $12 million in net interest payments on related derivatives not receiving hedge accounting and from a $4 million market value decline reflecting the impact of purchase premiums on certain trading securities.


▪	Growth in average MPP balances-Favorable: The $1.3 billion increase in the average balance of mortgage loans held for portfolio improved net interest income by an estimated $4 million.


▪	Growth in average liquidity investment balances-Favorable: The $7.3 billion increase in the average balance of liquidity investments improved net interest income by an estimated $4 million.

Earnings from Capital: Earnings from capital decreased $14 million in the three months ended March 31, 2020 compared to the same period in 2019 ~~and 2018, reflecting a low amount of member prepayments of Advances.~~primarily due to average short-term rates declining more than 100 basis points as the Federal Reserve responded to the evolving risks to economic activity from the COVID-19 pandemic.

Average Balance Sheet and Rates

The following table provides average balances and rates for major balance sheet accounts, which determine the changes in net interest rate spreads. Interest amounts and average rates are affected by our use of derivatives and the related accounting elections we make. ~~In connection with the January 1, 2019, prospective adoption of the FASB's~~ ~~Targeted Improvements to Accounting for Hedging Activities~~ ~~standard, interest~~Interest amounts reported for Advances, Other investments and Swapped Bonds include gains (losses) on hedged items and derivatives in qualifying fair value hedge ~~relationships for the three months ended March 31, 2019.~~relationships.

In addition, the net interest settlements of interest receivables or payables associated with derivatives in a fair value hedge relationship are included in net interest income and interest rate spread. However, if the derivatives do not qualify for fair value hedge accounting, the related net interest settlements of interest receivables or payables are recorded in “Non-interest income (loss)” as ~~“Net losses~~“Net gains (losses) on derivatives and hedging ~~activities”~~activities” and therefore are excluded from the calculation of net interest rate spread. Amortization associated with some hedging-related basis adjustments is also reflected in net interest income, which affects interest rate spread.


(Dollars in millions)	Three Months Ended						Three Months Ended						Three Months Ended						Three Months Ended
	March 31, 2019						March 31, 2018						March 31, 2020						March 31, 2019
	Average Balance		Interest		Average Rate ⁽¹⁾		Average Balance		Interest		Average Rate ⁽¹⁾		Average Balance		Interest		Average Rate ⁽¹⁾		Average Balance		Interest		Average Rate ⁽¹⁾
Assets:
Advances	$	61,327	$	403	2.66	%	$	73,131	$	318	1.77	%	$	43,299	$	176	1.64	%	$	61,327	$	403	2.66	%
Mortgage loans held for portfolio ⁽²⁾	10,512		89		3.42		9,719		78		3.24		11,767		89		3.05		10,512		89		3.42
Federal funds sold and securities purchased under resale agreements	13,585		83		2.47		11,353		42		1.49		10,615		39		1.47		13,585		83		2.47
Interest-bearing deposits in banks ^{(3) (4) (5)}	2,220		14		2.67		863		3		1.59		1,793		7		1.45		2,220		14		2.67
Mortgage-backed securities	15,873		106		2.72		14,790		83		2.27		13,051		68		2.10		15,873		106		2.72
Other investments⁽⁴⁾	931		6		2.54		33		—		1.53		11,902		68		2.31		931		6		2.54
Loans to other FHLBanks	3		—		2.43		5		—		1.46		20		—		1.22		3		—		2.43
Total interest-earning assets	104,451		701		2.72		109,894		524		1.93		92,447		447		1.95		104,451		701		2.72
Less: allowance for credit losses on mortgage loans	1						1						—						1
Other assets	314						269						924						314
Total assets	$	104,764					$	110,162					$	93,371					$	104,764
Liabilities and Capital:
Term deposits	$	61	1		2.38		$	53	—		1.32		$	32	—		1.86		$	61	1		2.38
Other interest bearing deposits ⁽⁵⁾	612		3		2.22		570		2		1.22		1,040		3		1.09		612		3		2.22
Discount Notes	51,648		312		2.45		51,768		181		1.42		49,696		176		1.43		51,648		312		2.45
Unswapped fixed-rate Bonds	26,043		144		2.24		26,875		136		2.05		21,471		131		2.44		26,043		144		2.24
Unswapped adjustable-rate Bonds	16,153		99		2.48		18,224		67		1.48		10,819		35		1.32		16,153		99		2.48
Swapped Bonds	4,239		20		1.91		6,674		20		1.23		4,800		20		1.69		4,239		20		1.91
Mandatorily redeemable capital stock	23		—		6.00		30		—		6.02		52		—		1.47		23		—		6.00
Other borrowings	—		—		—		—		—		—		—		—		—		—		—		—
Total interest-bearing liabilities	98,779		579		2.37		104,194		406		1.58		87,910		365		1.67		98,779		579		2.37
Non-interest bearing deposits	9						4						10						9
Other liabilities	659						575						833						659
Total capital	5,317						5,389						4,618						5,317
Total liabilities and capital	$	104,764					$	110,162					$	93,371					$	104,764

Net interest rate spread					0.35	%					0.35	%					0.28	%					0.35	%
Net interest income and net interest margin ⁽⁶⁾			$	122	0.47	%			$	118	0.44	%			$	82	0.36	%			$	122	0.47	%
Average interest-earning assets to interest-bearing liabilities					105.74	%					105.47	%					105.16	%					105.74	%


(1)	Amounts used to calculate average rates are based on dollars in thousands. Accordingly, recalculations based upon the disclosed amounts in millions may not produce the same results.


(2)	Non-accrual loans are included in average balances used to determine average rate.


(3)	Includes certificates of deposit that are classified as available-for-sale securities.


(4)	Includes available-for-sale securities based on their amortized costs. The yield information does not give effect to changes in fair value that are reflected as a component of stockholders' equity for available-for-sale securities.


(5)	The average balance amounts include the rights or obligations to cash collateral, which are included in the fair value of derivative assets or derivative liabilities on the Statements of Condition at period end.


(6)	Net interest margin is net interest income as a percentage of average total ~~interest earning~~interest-earning assets.

Rates on most of our ~~short-term and adjustable-rate~~interest-bearing assets and liabilities ~~rose more substantially than rates on our longer-term assets and liabilities~~decreased in the first three months ~~of 2019~~2020 compared to the same period in ~~2018~~2019 due to the ~~increases~~decline in ~~short-term LIBOR and the Federal funds target rate. The result was an increase of 0.79 percentage points in the average~~interest rates. Average rates ~~of both interest-earning~~on short-term assets and ~~interest-bearing liabilities.~~liabilities declined more notably as they repriced quicker to lower rates.

~~The increase in net interest margin in the first three months of 2019 compared to the same period in 2018 was driven by higher earnings from funding assets with interest-free capital.~~

Volume/Rate Analysis

Changes in both average balances (volume) and interest rates influence changes in net interest income, as shown in the following table.


(In millions)	Three Months Ended March 31, 2019 over 2018							2020 over 2019
	Volume ⁽¹⁾⁽³⁾			Rate ⁽²⁾⁽³⁾		Total		Volume ⁽¹⁾⁽³⁾			Rate ⁽²⁾⁽³⁾			Total
Increase (decrease) in interest income
Advances	$	(58	)	$	143	$	85	$	(99	)	$	(128	)	$	(227	)
Mortgage loans held for portfolio	7			4		11		10			(10		)	—
Federal funds sold and securities purchased under resale agreements	9			32		41		(16		)	(28		)	(44		)
Interest-bearing deposits in banks	8			3		11		(2		)	(5		)	(7		)
MBS	6			17		23		(17		)	(21		)	(38		)
Other investments	6			—		6		63			(1		)	62
Loans to other FHLBanks	—			—		—		—			—			—
Total	(22		)	199		177		(61		)	(193		)	(254		)
Increase (decrease) in interest expense
Term deposits	—			1		1		—			(1		)	(1		)
Other interest-bearing deposits	—			1		1		2			(2		)	—
Discount Notes	—			131		131		(12		)	(124		)	(136		)
Unswapped fixed-rate Bonds	(5		)	13		8		(26		)	13			(13		)
Unswapped adjustable-rate Bonds	(8		)	40		32		(27		)	(37		)	(64		)
Swapped Bonds	(9		)	9		—		2			(2		)	—
Mandatorily redeemable capital stock	—			—		—		—			—			—
Other borrowings	—			—		—		—			—			—
Total	(22		)	195		173		(61		)	(153		)	(214		)
Increase in net interest income	$	—		$	4	$	4
Increase (decrease) in net interest income								$	—		$	(40	)	$	(40	)


(1)	Volume changes are calculated as the change in volume multiplied by the prior year rate.


(2)	Rate changes are calculated as the change in rate multiplied by the prior year average balance.


(3)	Changes that are not identifiable as either volume-related or rate-related, but rather are equally attributable to both volume and rate changes, have been allocated to the volume and rate categories based upon the proportion of the absolute value of the volume and rate changes.

Effect of the Use of Derivatives on Net Interest Income

The following table shows the impact on net interest income from the effect of derivatives and hedging activities. As noted above, ~~for the three months ended March 31, 2019,~~ gains (losses) on hedged items and derivatives in qualifying fair value hedge relationships are recorded in interest income or ~~expense as a result of the prospective adoption of new hedge accounting guidance.~~expense. In addition, for derivatives designated as a fair value hedge, the net interest settlements of interest receivables or payables related to such derivatives are recognized as adjustments to the interest income or expense of the designated hedged item. As such, ~~beginning in 2019,~~ all the effects on earnings of derivatives qualifying for fair value hedge accounting are reflected in net interest income. The effect on earnings from derivatives not receiving hedge accounting is provided in the “Non-Interest Income ~~and Non-Interest Expense.~~(Loss)” section below.


(In millions)	Three Months Ended March 31,						Three Months Ended March 31,
	2019			2018			2020			2019
Advances:
Gains (losses) on designated fair value hedges	$	(1	)				$	(14	)	$	(1	)
Net interest settlements included in net interest income	14			$	1		(2		)	14
Mortgage loans:
Amortization of derivative fair value adjustments in net interest income	—			(1		)	(1		)	—
Consolidated Obligation Bonds:
Net interest settlements included in net interest income	—			(1		)
Increase (decrease) to net interest income	$	13		$	(1	)	$	(17	)	$	13

Most of our use of derivatives is to synthetically convert the fixed interest rates on certain Advances, investments and ~~Bonds~~Consolidated Obligations to adjustable rates tied to ~~short-term~~an eligible benchmark rate (e.g., LIBOR, ~~(one- and three-month repricing resets) or~~ the Federal funds effective ~~rate.~~rate, or SOFR). The ~~positive~~negative net effect of derivatives on net interest income in ~~the~~ first three months of ~~2019~~2020 was primarily due to ~~increases~~lower short-term benchmark interest rates in ~~short-term LIBOR and~~ the ~~Federal funds effective rate,~~first quarter of 2020 compared to the same period of 2019, which resulted in ~~higher~~in net interest settlements being paid, rather than received, on certain Advances where the fixed interest rates were converted to adjustable-coupon rates. The fluctuation in earnings from the use of derivatives was acceptable because it enabled us to lower market risk exposure by matching actual cash flows between assets and liabilities more closely than would otherwise occur.

Non-Interest Income ~~and Non-Interest Expense~~(Loss)

~~The following table presents non-interest income and non-interest expense.~~

Three Months Ended March 31,
(Dollars in millions) 2019 2018
Non-interest income (loss)
Net gains (losses) on investment securities $ 22
$ —
Net losses on derivatives and hedging activities (26 ) (27 )
Net (losses) gains on financial instruments held under fair value option (17 ) 20
Other non-interest income, net 3
3
Total non-interest income (loss) $ (18 ) $ (4 )
Non-interest expense
Compensation and benefits $ 13
$ 13
Other operating expense 6
5
Finance Agency 2
2
Office of Finance 1
1
Other 1
1
Total non-interest expense $ 23
$ 22
Average total assets $ 104,764
$ 110,162
Average regulatory capital 5,353
5,435
Total non-interest expense to average total assets ⁽¹⁾
0.09 % 0.08 %
Total non-interest expense to average regulatory capital ⁽¹⁾
1.70
1.65


~~(1)~~	~~Amounts used to calculate percentages are based on dollars in thousands. Accordingly, recalculations based upon the disclosed amounts in millions may not produce the same results.~~

Non-interest income (loss) ~~decreased $14 million in the first three months~~consists of ~~2019 compared to the same period in 2018, primarily due to decreases in~~certain realized and unrealized gains (losses) on investment securities, derivatives activities, financial instruments held under the fair ~~values of certain derivatives~~value option, and other ~~financial instruments carried at fair value. The table below presents further information on the net effect of derivatives and hedging activities on~~ non-interest ~~income.~~

~~Effect of Derivatives and Hedging Activities on Non-Interest Income~~

earning activities. The following tables present the net effect of derivatives and hedging activities on non-interest income. In connection with the prospective adoption of new hedge accounting guidance, gains (losses) on hedged items and derivatives in qualifying fair value hedge relationship are no longer recorded in non-interest income ~~for the three months ended March 31, 2019. As such, beginning in 2019, the~~(loss). The effects of derivatives and hedging activities on non-interest income relate only to derivatives not qualifying for fair value hedge accounting.

(In millions) Three Months Ended March 31, 2019
Advances Investment Securities Mortgage Loans Consolidated Obligation Bonds
Balance Sheet ⁽¹⁾
Total
Net effect of derivatives and hedging activities
Gains (losses) on derivatives not receiving hedge accounting $ (1 ) $ (24 ) $ 1
$ 19
$ (12 ) $ (17 )
Net interest settlements on derivatives not receiving hedge accounting —
—
—
(9 ) —
(9 )
Net gains (losses) on derivatives and hedging activities (1 ) (24 ) 1
10
(12 ) (26 )
Gains (losses) on trading securities ⁽²⁾
—
22
—
—
—
22
Gains (losses) on financial instruments held under fair value option ⁽³⁾
—
—
—
(17 ) —
(17 )
Total net effect on non-interest income $ (1 ) $ (2 ) $ 1
$ (7 ) $ (12 ) $ (21 )


(In millions)	Three Months Ended March 31, 2018												Three Months Ended March 31,2020
	Advances		Mortgage Loans		Consolidated Obligation Bonds			Balance Sheet ⁽¹⁾		Total			Advances			Investment Securities			Mortgage Loans			Bonds			Discount Notes			Balance Sheet ⁽¹⁾		Other		Total
Net effect of derivatives and hedging activities
Gains (losses) on fair value hedges	$	1	$	—	$	—		$	—	$	1
Gains (losses) on derivatives not receiving hedge accounting	1		—		(26		)	4		(21		)	$	(8	)	$	(404	)	$	(9	)	$	31		$	14		$	92	$	—	$	(284	)
Net interest settlements on derivatives not receiving hedge accounting	—		—		(7		)	—		(7		)	1			(19		)	—			—			7			—		—		(11		)
Price alignment amount													—			—			—			—			—			—		1		1
Net gains (losses) on derivatives and hedging activities	2		—		(33		)	4		(27		)	(7		)	(423		)	(9		)	31			21			92		1		(294		)
Gains (losses) on trading securities ⁽²⁾													—			373			—			—			—			—		—		373
Gains (losses) on financial instruments held under fair value option ⁽³⁾	—		—		20			—		20			—			—			—			(37		)	(14		)	—		—		(51		)
Total net effect on non-interest income	$	2	$	—	$	(13	)	$	4	$	(7	)	$	(7	)	$	(50	)	$	(9	)	$	(6	)	$	7		$	92	$	1	$	28



(In millions)	Three Months Ended March 31,2019
	Advances			Investment Securities			Mortgage Loans		Bonds			Balance Sheet ⁽¹⁾			Total
Net effect of derivatives and hedging activities
Gains (losses) on derivatives not receiving hedge accounting	$	(1	)	$	(24	)	$	1	$	19		$	(12	)	$	(17	)
Net interest settlements on derivatives not receiving hedge accounting	—			—			—		(9		)	—			(9		)
Net gains (losses) on derivatives and hedging activities	(1		)	(24		)	1		10			(12		)	(26		)
Gains (losses) on trading securities ⁽²⁾	—			22			—		—			—			22
Gains (losses) on financial instruments held under fair value option ⁽³⁾	—			—			—		(17		)	—			(17		)
Total net effect on non-interest income	$	(1	)	$	(2	)	$	1	$	(7	)	$	(12	)	$	(21	)


(1)	Balance sheet includes swaptions, which are not designated as hedging a specific financial instrument.


(2)	Includes only those gains (losses) on trading securities that have an assigned economic derivative; therefore, this line item may not agree to the Statement of Income.


(3)	Includes only those gains or losses on financial instruments held at fair value that have an economic derivative "assigned."

The ~~total~~net amount of income volatility in derivatives and hedging activities was moderate and consistent with the close hedging relationships of our derivative transactions. Most of the volatility was a result of both unrealized fair value gains and losses on instruments we expect to hold to maturity and the ~~costs~~sale of ~~utilizing~~certain swaptions as interest rates fell during the quarter. We use swaptions to hedge market risk exposure associated with fixed-rate mortgage assets and may sell swaptions as interest rates change in order to offset actual and anticipated risks associated with holding fixed-rate mortgage assets.

At March 31, 2020, we held $12.0 billion of fixed-rate U.S. Treasury and GSE obligations and swapped them to a variable rate. These investments are classified as trading securities and are recorded at fair value, with changes in fair value reported in non-interest income (loss). There are a number of factors that affect the fair value of these securities, including changes in interest rates, the passage of time, and volatility. By hedging these trading securities, the gains or losses on these securities will generally be offset by the changes in fair value of the associated interest rate swaps. In the first quarter of 2020, a significant

decline in longer-term interest rates led to large market value gains on investments held as trading securities and corresponding market value losses on the swaps hedging those investments.

Non-Interest Expense

The ~~higher net losses~~following table presents non-interest expense and related financial ratios.



	Three Months Ended March 31,
(Dollars in millions)	2020			2019
Non-interest expense
Compensation and benefits	$	13		$	13
Other operating expense	6			6
Finance Agency	2			2
Office of Finance	1			1
Other	2			1
Total non-interest expense	$	24		$	23
Average total assets	$	93,371		$	104,764
Average regulatory capital	4,686			5,353
Total non-interest expense to average total assets ⁽¹⁾	0.10		%	0.09		%
Total non-interest expense to average regulatory capital ⁽¹⁾	2.08			1.70


(1)	Amounts used to calculate percentages are based on dollars in thousands. Accordingly, recalculations based upon the disclosed amounts in millions may not produce the same results.

Total non-interest expense remained relatively stable in the first three months of 2020 compared to same period in 2019. The ratio of non-interest expense to average regulatory capital increased in the first three months of 2020 compared to same period in 2019 ~~were primarily~~due to the lower average capital balance, which was a remaining result from the repurchases of ~~decreases in average long-term LIBOR, which drove larger net losses on our swaptions portfolio.~~excess stock throughout 2019.

Segment Information

Note 1713 of the Notes to Unaudited Financial Statements presents information on our two operating business segments. We manage financial operations and market risk exposure primarily at the macro level, and within the context of the entire balance sheet, rather than exclusively at the level of individual segments. Under this approach, the market risk/return profile of each segment may not match, or possibly even have the same trends as, what would occur if we managed each segment on a stand-alone basis. The ~~table~~tables below ~~summarizes~~summarize each segment's operating results for the periods shown.


(Dollars in millions)	Traditional Member Finance			MPP			Total			Traditional Member Finance			MPP			Total
Three Months Ended March 31, 2020
Net interest income										$	65		$	17		$	82
Net income										$	18		$	62		$	80
Average assets										$	81,339		$	12,032		$	93,371
Assumed average capital allocation										$	4,023		$	595		$	4,618
Return on average assets⁽¹⁾										0.09		%	2.06		%	0.34		%
Return on average equity⁽¹⁾										1.79		%	41.67		%	6.94		%
Three Months Ended March 31, 2019
Net interest income	$	90		$	32		$	122		$	90		$	32		$	122
Net income	$	53		$	20		$	73		$	53		$	20		$	73
Average assets	$	91,449		$	13,315		$	104,764		$	91,449		$	13,315		$	104,764
Assumed average capital allocation	$	4,642		$	675		$	5,317		$	4,642		$	675		$	5,317
Return on average assets⁽¹⁾	0.24		%	0.61		%	0.28		%	0.24		%	0.61		%	0.28		%
Return on average equity⁽¹⁾	4.64		%	12.10		%	5.59		%	4.64		%	12.10		%	5.59		%
Three Months Ended March 31, 2018
Net interest income	$	93		$	25		$	118
Net income	$	61		$	22		$	83
Average assets	$	98,647		$	11,515		$	110,162
Assumed average capital allocation	$	4,826		$	563		$	5,389
Return on average assets⁽¹⁾	0.25		%	0.76		%	0.30		%
Return on average equity⁽¹⁾	5.14		%	15.59		%	6.23		%


(1)	Amounts used to calculate returns are based on numbers in thousands. Accordingly, recalculations based upon the disclosed amounts in millions may not produce the same results.

Traditional Member Finance Segment

~~The decrease in net~~Net income decreased in the first three months of ~~2019~~2020 compared to the same period in ~~2018 was~~2019 primarily due ~~primarily~~ to ~~losses on~~lower earnings from funding assets with interest-free capital, decreases in the fair values of certain derivatives and ~~hedging activities,~~other financial instruments carried at fair value, lower spreads earned on certain Advances and lower average Advance balances. ~~However, these negative factors were partially offset by higher earnings from funding assets with interest-free capital.~~

MPP Segment

The MPP continued to earn a substantial level of profitability compared to market interest rates, with a moderate amount of market risk and a minimal amount of credit risk. In the first three months of ~~2019,~~2020, the MPP averaged 13 percent of total average assets while accounting for 2877 percent of earnings. Net income ~~decreased slightly~~increased in the first three months ~~ended March 31, 2019~~of 2020 compared to the same period in ~~2018 primarily~~2019 due to ~~losses~~net gains on derivatives and hedging activities, which ~~were partially offset~~resulted from the sale of certain swaptions as rates fell during the quarter. The decrease in net interest income in the first three months of 2020 compared to the same period of 2019 was driven by higher ~~spreads due to the rising interest rate environment and the growth in average MPP balances.~~net amortization.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT RISK MANAGEMENT

Market Risk

Market Value of Equity and Duration of Equity - Entire Balance Sheet

Two key measures of long-term market risk exposure are the sensitivities of the market value of equity and the duration of equity to changes in interest rates and other variables, as presented in the following tables for various instantaneous and permanent interest rate shocks (in basis points). We compiled average results using data for each month end. Given the current level of rates, some down rate shocks are nonparallel scenarios, with short-term rates decreasing less than long-term rates such that no rate falls below zero.

Market Value of Equity


(Dollars in millions)	Down 300			Down 200			Down 100			Flat Rates		Up 100			Up 200			Up 300			Down 300			Down 200			Down 100			Flat Rates		Up 100			Up 200			Up 300
Average Results
2019 Year-to-Date
2020 Year-to-Date
Market Value of Equity	$	4,693		$	4,823		$	5,070		$	5,118	$	5,024		$	4,947		$	4,914		$	4,778		$	4,778		$	4,766		$	4,853	$	4,950		$	4,871		$	4,767
% Change from Flat Case	(8.3		)%	(5.8		)%	(0.9		)%	—		(1.8		)%	(3.3		)%	(4.0		)%	(1.5		)%	(1.5		)%	(1.8		)%	—		2.0		%	0.4		%	(1.8		)%
2018 Full Year
2019 Full Year
Market Value of Equity	$	4,936		$	5,154		$	5,306		$	5,264	$	5,176		$	5,105		$	5,045		$	4,545		$	4,580		$	4,652		$	4,729	$	4,674		$	4,586		$	4,528
% Change from Flat Case	(6.2		)%	(2.1		)%	0.8		%	—		(1.7		)%	(3.0		)%	(4.2		)%	(3.9		)%	(3.1		)%	(1.6		)%	—		(1.1		)%	(3.0		)%	(4.3		)%
Month-End Results
March 31, 2019
March 31, 2020
Market Value of Equity	$	4,630		$	4,671		$	4,904		$	4,994	$	4,921		$	4,854		$	4,827		$	5,928		$	5,928		$	5,923		$	6,078	$	6,346		$	6,371		$	6,303
% Change from Flat Case	(7.3		)%	(6.5		)%	(1.8		)%	—		(1.5		)%	(2.8		)%	(3.3		)%	(2.5		)%	(2.5		)%	(2.5		)%	—		4.4		%	4.8		%	3.7		%
December 31, 2018
December 31, 2019
Market Value of Equity	$	4,736		$	4,911		$	5,130		$	5,149	$	5,043		$	4,951		$	4,906		$	4,257		$	4,262		$	4,236		$	4,372	$	4,313		$	4,213		$	4,144
% Change from Flat Case	(8.0		)%	(4.6		)%	(0.4		)%	—		(2.1		)%	(3.8		)%	(4.7		)%	(2.6		)%	(2.5		)%	(3.1		)%	—		(1.3		)%	(3.6		)%	(5.2		)%

Duration of Equity

(In years) Down 300 Down 200 Down 100 Flat Rates Up 100 Up 200 Up 300
Average Results
2019 Year-to-Date (3.0 ) (5.5 ) (3.2 ) 0.9
2.0
0.8
0.5
2018 Full Year (4.5 ) (4.7 ) (0.9 ) 1.7
1.4
1.2
1.1
Month-End Results
March 31, 2019 (1.3 ) (4.2 ) (3.9 ) 0.3
1.8
0.6
0.5
December 31, 2018 (3.8 ) (5.6 ) (2.5 ) 1.2
2.0
1.0
0.6



(In years)	Down 300		Down 200		Down 100		Flat Rates		Up 100		Up 200	Up 300
Average Results
2020 Year-to-Date	—		—		—		(3.5	)	0.4		2.3	1.9
2019 Full Year	(0.8	)	(1.4	)	(1.7	)	(0.8	)	1.7		1.4	1.1
Month-End Results
March 31, 2020	—		—		(1.0	)	(4.5	)	(2.1	)	0.6	0.8
December 31, 2019	(0.1	)	0.6		(2.1	)	(1.2	)	2.0		1.7	1.4

The overall market risk exposure to changing interest rates was ~~stable, at a moderate level, and~~ within policy ~~limits.~~limits during the periods presented. At March 31, 2020, exposure to falling interest rates in the down shock scenarios was muted as some rates become floored at near zero rate levels. Exposure to rising rate shocks decreased materially due to the reduction in all market rates that occurred during the first quarter. The duration of equity provides an estimate of the change in market value of equity for a 1.00 percentage point further change in interest rates from the rate shock level.

Based on the totality of our risk analysis, we expect that profitability, defined as the level of ROE compared with short-term market rates, will remain competitive over the long term unless interest rates change by large amounts in a short period of time. ~~Large decreases~~Further declines in long-term interest rates could substantially decrease ~~profitability~~income in the near term (one to two years) before reverting over time to ~~levels above market interest rates. Similarly, we~~average levels. This temporary reduction in income would be driven by the accelerated recognition of mortgage asset premiums as the incentive for borrowers to refinance results in faster than anticipated repayments of those mortgage assets. We believe that profitability would not become uncompetitive in a rising rate environment unless interest rates were to permanently increase in a short period of time by ~~four~~three percentage points or more and persist at the higher levels for a long period of time.

Market Risk Exposure of the Mortgage Assets Portfolio

The mortgage assets portfolio normally accounts for almost all market risk exposure because of prepayment volatility that we cannot completely hedge while maintaining sufficient net spreads. Sensitivities of the market value of equity allocated to the mortgage assets portfolio under interest rate shocks (in basis points) are shown below. The average mortgage assets portfolio had an assumed capital allocation of ~~$1.3~~$1.2 billion in the first three months of ~~2019~~2020 based on the entire balance sheet's average regulatory capital-to-assets ratio. Average results shown in the table below are compiled using data for each month end. The market value sensitivities are one measure we use to analyze the portfolio's estimated market risk exposure.

% Change in Market Value of Equity-Mortgage Assets Portfolio

Down 300 Down 200 Down 100 Flat Rates Up 100 Up 200 Up 300
Average Results
2019 Year-to-Date (42.1 )% (29.4 )% (6.1 )% — (6.1 )% (11.2 )% (13.0 )%
2018 Full Year (35.9 )% (15.2 )% 0.3 % — (4.3 )% (7.4 )% (10.0 )%
Month-End Results
March 31, 2019 (43.0 )% (36.7 )% (10.9 )% — (4.2 )% (8.5 )% (9.5 )%
December 31, 2018 (41.2 )% (24.7 )% (3.6 )% — (7.0 )% (13.2 )% (15.9 )%



	Down 300		Down 200		Down 100		Flat Rates	Up 100		Up 200		Up 300
Average Results
2020 Year-to-Date	(15.9	)%	(15.9	)%	(15.4	)%	—	11.2	%	2.8	%	(8.9	)%
2019 Full Year	(28.6	)%	(24.1	)%	(10.4	)%	—	(2.4	)%	(8.3	)%	(11.7	)%
Month-End Results
March 31, 2020	(19.9	)%	(19.9	)%	(20.5	)%	—	24.1	%	23.6	%	13.1	%
December 31, 2019	(17.7	)%	(17.2	)%	(12.5	)%	—	(5.6	)%	(14.6	)%	(20.5	)%

The average risk exposure of the mortgage assets portfolio in the first three months of ~~2019~~2020 remained aligned with our preference to keep our exposure to market risk at a low to moderate level. The variances between periods ~~shown reflect normal changes in the balance sheet composition and the~~primarily show impact of ~~modestly~~ lower long-term interest rates observed in the first three months of ~~2019.~~2020. These lower long-term interest rates result in reduced exposure to rising rate shocks and muted exposure to falling rate shocks as they become floored when they reach near zero rate levels. We believe the mortgage asset portfolio will continue to provide an acceptable risk adjusted return consistent with our risk appetite philosophy.

Capital Adequacy

Retained Earnings

We must hold sufficient capital to protect against exposure to various risks, including market, credit, and operational. We regularly conduct a variety of measurements and assessments for capital adequacy. At March 31, ~~2019,~~2020, our capital management policy set forth ~~a range of $330 million to $530~~$650 million as the minimum amount of retained earnings we believe is necessary to mitigate impairment ~~risk and to provide for dividend stability from factors that could cause earnings to be volatile.~~risk.

The following table presents retained earnings.


(In millions)	March 31, 2019		December 31, 2018		March 31, 2020		December 31, 2019
Unrestricted retained earnings	$	625	$	632	$	691	$	648
Restricted retained earnings ⁽¹⁾	406		391		462		446
Total retained earnings	$	1,031	$	1,023	$	1,153	$	1,094


(1)	Pursuant to the FHLBank System's Joint Capital Enhancement Agreement we are not permitted to distribute as dividends.

As ~~noted~~indicated in the table above, our current balance of retained earnings exceeds the policy range, which we expect will continue to be the case as we bolster capital adequacy over time by allocating a portion of earnings to the restricted retained earnings account.

Market Capitalization Ratios

We measure two sets of market capitalization ratios. One measures the market value of equity (i.e., total capital) relative to the par value of regulatory capital stock (which is GAAP capital stock and mandatorily redeemable capital stock). The other measures the market value of total capital relative to the book value of total capital, which includes all components of capital, and mandatorily redeemable capital stock. The measures provide a point-in-time indication of the FHLB's liquidation or franchise value and can also serve as a measure of realized or potential market risk exposure. The down shocks used are either 100 or 200 basis points depending on the benchmark interest rate levels at the time.

The following table presents the market value of equity to regulatory capital stock (excluding retained earnings) for several interest rate environments.


	March 31, 2019		December 31, 2018		March 31, 2020		December 31, 2019
Market Value of Equity to Par Value of Regulatory Capital Stock - Base Case (Flat Rates) Scenario	122	%	119	%	114	%	129	%
Market Value of Equity to Par Value of Regulatory Capital Stock - Down Shock ⁽¹⁾	120		118		112		125
Market Value of Equity to Par Value of Regulatory Capital Stock - Up Shock ⁽²⁾	119		114		120		124


(1)	Represents a down shock of 100 basis points.


(2)	Represents an up shock of 200 basis points.

A base case value below 100 percent could indicate that, in the remote event of an immediate liquidation scenario involving redemption of all capital stock, capital stock may be returned to stockholders at a value below par. This could be due to experiencing risks that lower the market value of capital and/or to having an insufficient amount of retained earnings. In the first three months of ~~2019,~~2020, the market capitalization ratios in the scenarios presented continued to be above our policy requirements. The base case ratio ~~of 122 percent was slightly higher~~ at ~~the end of~~ March 31, ~~2019 compared to the end of 2018, and it~~2020 was well above 100 percent because retained earnings were 2522 percent of regulatory capital stock ~~at March 31, 2019~~ and we maintained risk exposures at moderate levels. The decrease observed in the first quarter was driven primarily by increases in capital stock, due to purchases to support Advance growth, which reduces this ratio.

The following table presents the market value of equity to the book value of total capital and mandatorily redeemable capital stock.


	March 31, 2019		December 31, 2018		March 31, 2020		December 31, 2019
Market Value of Equity to Book Value of Capital - Base Case (Flat Rates) Scenario ⁽¹⁾	98	%	96	%	94	%	98	%
Market Value of Equity to Book Value of Capital - Down Shock ⁽¹⁾⁽²⁾	96		96		92		95
Market Value of Equity to Book Value of Capital - Up Shock ⁽¹⁾⁽³⁾	95		93		99		94


(1)	Capital includes total capital and mandatorily redeemable capital stock.


(2)	Represents a down shock of 100 basis points.


(3)	Represents an up shock of 200 basis points.

A base-case value below 100 percent indicates that we have realized or could realize risks (especially market risk), such that the market value of total capital owned by stockholders is below the book value of total capital. The base-case ratio of 9894 percent at March 31, ~~2019~~2020 indicates that the market value of total capital is ~~$106~~$369 million below the book value of total capital. In a scenario in which interest rates increase 200 basis points, the market value of total capital would be ~~$246~~$76 million below the book value of total capital. This indicates that in a liquidation scenario, stockholders would not receive the full sum of their total equity ownership in the FHLB. We believe the likelihood of a liquidation scenario is extremely remote; and therefore, we accept the risk of diluting equity ownership in such a scenario.

Credit Risk

Overview

Our business entails a significant amount of inherent credit risk exposure. We believe our risk management practices, discussed below, bring the amount of residual credit risk to a minimal level. We have no loan loss reserves or impairment recorded for Credit Services, investments, and derivatives and a minimal amount of legacy credit risk exposure to the MPP.

Credit Services

Overview: We have policies and practices to manage credit risk exposure from our secured lending activities, which include Advances and Letters of Credit. The objective of our credit risk management is to equalize risk exposure across members and counterparties to a zero level of expected losses, consistent with our conservative risk management principles and desire to have no residual credit risk related to member borrowings.

Collateral: We require each member to provide a security interest in eligible collateral before it can undertake any secured borrowing. Eligible collateral includes single-family loans, multi-family loans, home equity loans and lines of credit, commercial real estate, bond securities and farm real estate. The estimated value of pledged collateral is discounted in order to

offset market, credit and liquidity risks that may affect the collateral's realizable value in the event it must be liquidated. ~~Over-~~

~~collateralization~~Over-collateralization by one member is not applied to another member. At March 31, ~~2019,~~2020, our policy of over-collateralization resulted in total collateral pledged of ~~$349.7~~$388.2 billion to serve members' total borrowing capacity of ~~$285.0~~$303.6 billion of which ~~$68.7~~$95.7 billion was used to support outstanding Advances and Letters of Credit. Borrowers often pledge collateral in excess of their collateral requirement to demonstrate available liquidity and to have the ability to borrow additional amounts in the future. The collateral composition remained relatively stable compared to the end of ~~2018.~~2019.

Borrowing Capacity/Lendable Value: We determine borrowing capacity against pledged collateral by applying collateral discounts, or haircuts, to the value of the collateral. These haircuts result in Lendable Value Rates (LVRs) that are less than the amount of pledged collateral.

LVRs are determined by statistical analysis and management assumptions relating to historical price volatility, inherent credit risks, liquidation costs, and the current credit and economic environment. We apply LVR results to the estimated values of pledged assets. LVRs vary among pledged assets and members based on the member institution type, the financial strength of the member institution, the form of valuation, the issuer of bond collateral or the quality of securitized assets, the quality of the loan collateral as reflected in the manner in which it was underwritten, and the marketability of the pledged assets.

Internal Credit Ratings: We perform credit underwriting of our members and nonmember borrowers and assign them an internal credit rating. These credit ratings are based on internal ratings models, credit analyses and consideration of credit ratings from independent credit rating organizations. Credit ratings are used in conjunction with other measures of credit risk in managing secured credit risk exposure.

Member Failures, Closures, and Receiverships: There ~~were~~have been no member failures in ~~2019~~2020 through the date of this filing.

MPP

Overview: We believe that the residual amount of credit risk exposure to loans in the MPP is minimal, based on the same factors described in the ~~2018~~2019 Annual Report on Form 10-K. In light of the COVID-19 pandemic, we are closely monitoring the credit risk of our MPP portfolio. We ~~believe, based on our analysis, that future credit losses will not harm capital adequacy~~may see an increase in delinquencies due to the rising unemployment rate and ~~will not significantly affect profitability except under~~cannot predict the ~~most extreme and unlikely credit conditions.~~overall impact. However, we have implemented temporary relief provisions for MPP loans, including forbearance plans to help with short-term hardships, in response to the negative economic impacts associated with COVID-19.

Conventional Loan Portfolio Characteristics:The levels of loan-to-value ratios are consistent with the portfolio's excellent credit quality. At March 31, ~~2019,~~2020, the weighted average loan-to-value ratios for conventional loans based on origination values and estimated current values were 74 percent and 6260 percent, respectively. These ratios were ~~unchanged from~~similar at December 31, ~~2018.~~2019.

Credit Performance: The table below provides an analysis of conventional loans delinquent or in the process of foreclosure, along with the national average serious delinquency rate.


	Conventional Loan Delinquencies						Conventional Loan Delinquencies
(Dollars in millions)	March 31, 2019			December 31, 2018			March 31, 2020			December 31, 2019
Early stage delinquencies - unpaid principal balance ⁽¹⁾	$	42		$	36		$	38		$	40
Serious delinquencies - unpaid principal balance ⁽²⁾	$	12		$	13		$	11		$	12
Early stage delinquency rate ⁽³⁾	0.4		%	0.4		%	0.3		%	0.4		%
Serious delinquency rate⁽⁴⁾	0.1		%	0.1		%	0.1		%	0.1		%
National average serious delinquency rate ⁽⁵⁾	1.5		%	1.6		%	1.2		%	1.3		%


(1)	Includes conventional loans 30 to 89 days delinquent and not in foreclosure.


(2)	Includes conventional loans that are 90 days or more past due or where the decision of foreclosure or a similar alternative such as pursuit of deed-in-lieu has been reported.


(3)	Early stage delinquencies expressed as a percentage of the total conventional loan portfolio.


(4)	Serious delinquencies expressed as a percentage of the total conventional loan portfolio.


(5)	National average number of fixed-rate prime and subprime conventional loans that are 90 days or more past due or in the process of foreclosure is based on the most recent national delinquency data available. The March 31, ~~2019~~2020 rate is based on December 31, ~~2018~~2019 data.

The MPP has experienced a ~~small~~minimal amount of delinquencies, with delinquency rates continuing to be well below national averages. This further supports our view that the overall portfolio is comprised of high-quality, well-performing loans.

Credit Enhancements: Conventional mortgage loans are supported against credit losses by various combinations of primary mortgage insurance (PMI), supplemental mortgage insurance (SMI) (for loans purchased before February 2011), and the Lender Risk Account (LRA). The LRA is a hold back of a portion of the initial purchase price to cover expected credit losses for a specific pool of loans. Starting after five years from the loan purchase date, we may return the hold back to Participating Financial Institutions (PFIs) if they manage credit risk to predefined acceptable levels of exposure on the loan pools they sell to us. As a result, some pools of loans may have sufficient credit enhancements to recapture all losses while other pools of loans may not. The LRA had balances of ~~$214~~$243 million and ~~$213~~$233 million at March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively. For more information, see Note 95 of the Notes to Unaudited Financial Statements.

Credit Losses: The following table shows the effects of credit enhancements on the estimation of credit losses at the noted periods. Estimated ~~incurred~~ credit losses, after credit enhancements, are accounted for in the allowance for credit losses or as a charge off (i.e., a reduction to the principal of mortgage loans held for portfolio). Our methodology for determining the allowance for credit losses on mortgage loans changed on January 1, 2020 with the adoption of new accounting guidance on the measurement of credit losses on financial instruments. Consistent with the modified retrospective method of adoption, the prior period has not been revised to conform to the new basis of accounting.


(In millions)	March 31, 2019			December 31, 2018			March 31, 2020			December 31, 2019
Estimated incurred credit losses, before credit enhancements	$	(4	)	$	(4	)
Estimated credit losses, before credit enhancements							$	8		$	4
Estimated amounts deemed recoverable by:
Primary mortgage insurance	—			1			—			—
Supplemental mortgage insurance	2			1			(2		)	(2		)
Lender Risk Account	1			1			(5		)	(1		)
Estimated incurred credit losses, after credit enhancements	$	(1	)	$	(1	)
Estimated credit losses, after credit enhancements							$	1		$	1

The minimal amount of ~~incurred~~estimated credit losses provides further ~~support on~~evidence of the overall health of the portfolio. ~~Credit~~As a result of adopting new accounting guidance, the estimated credit losses before credit enhancements increased at March 31, 2020 as our estimate now includes a forecast of housing prices, including the potential impact of the COVID-19 pandemic. Residual credit risk exposure depends on the actual and potential credit performance of the loans in each pool compared to the pool's equity (on individual loans) and credit enhancements, including PMI, the LRA, and SMI. WeOur available credit enhancements at March 31, 2020 were ample and able to cover the increase in estimated gross credit losses. In addition, we have assessed that we do not have any credit risk exposure to our PMI providers, and our estimation of credit exposure to SMI providers was not material at March 31, ~~2019~~2020 or December 31, ~~2018.~~2019.

~~In addition to the~~Separate from our allowance for credit losses ~~recorded,~~analysis, we regularly analyze potential ~~ranges~~adverse scenarios of ~~additional~~ lifetime credit risk exposure for the loans in the MPP. Even under adverse macroeconomic scenarios, we expect that further credit losses would not significantly decrease profitability.

Investments

Liquidity Investments: We purchase liquidity investments from counterparties that have a strong ability to repay principal and interest. Liquidity investments are either short-term, or longer-term, but can be easily converted to cash and may be unsecured, guaranteed or supported by the U.S. government, or secured (i.e., collateralized). For unsecured liquidity investments, we invest in the debt securities of highly rated, investment-grade institutions, have appropriate and conservative limits on dollar and maturity exposure to each institution, and have strong credit underwriting practices, including active monitoring of credit quality of our counterparties and of the environment in which they operate.

The following table presents the carrying value of liquidity investments outstanding in relation to the counterparties' lowest long-term credit ratings provided by Standard & Poor's, Moody's, and/or Fitch Advisory Services. For resale agreements, the ratings shown are based on ratings of the associated collateral. Our internal ratings of these investments may differ from those obtained from Standard & Poor's, Moody's, and/or Fitch Advisory Services. The historical or current ratings displayed in this table should not be taken as an indication of future ratings.


(In millions)	March 31, 2019						March 31, 2020
	Long-Term Rating						Long-Term Rating
	AA		A		Total		AA		A		Total
Unsecured Liquidity Investments
Interest-bearing deposits	$	—	$	390	$	390	$	—	$	780	$	780
Federal funds sold	5,015		6,805		11,820
Certificates of deposit	—		950		950
Total unsecured liquidity investments	5,015		8,145		13,160		—		780		780
Guaranteed/Secured Liquidity Investments
Securities purchased under agreements to resell	2,829		—		2,829		184		—		184
U.S. Treasury obligations	5,003		—		5,003		9,895		—		9,895
GSE obligations	734		—		734		2,269		—		2,269
Total guaranteed/secured liquidity investments	8,566		—		8,566		12,348		—		12,348
Total liquidity investments	$	13,581	$	8,145	$	21,726	$	12,348	$	780	$	13,128


	December 31, 2018						December 31, 2019
	Long-Term Rating						Long-Term Rating
	AA		A		Total		AA		A		Total
Unsecured Liquidity Investments
Interest-bearing deposits							$	—	$	550	$	550
Federal funds sold	$	5,640	$	5,153	$	10,793	1,023		3,810		4,833
Certificates of deposit	800		1,550		2,350		500		910		1,410
Total unsecured liquidity investments	6,440		6,703		13,143		1,523		5,270		6,793
Guaranteed/Secured Liquidity Investments
Securities purchased under agreements to resell	4,402		—		4,402		2,349		—		2,349
U.S. Treasury obligations	36		—		36		9,662		—		9,662
GSE obligations	277		—		277		2,120		—		2,120
Total guaranteed/secured liquidity investments	4,715		—		4,715		14,131		—		14,131
Total liquidity investments	$	11,155	$	6,703	$	17,858	$	15,654	$	5,270	$	20,924

~~During~~Our balance of liquidity investments decreased during the first three months of ~~2019,~~2020 primarily because we ~~purchased~~decided to hold more of our liquidity portfolio as deposits at the Federal Reserve in light of volatile market conditions and limited returns on other available liquidity investments. At March 31, 2020, we held $3.9 billion in deposits at the Federal Reserve, which are reflected in cash and due from banks on the Statements of Condition. In addition, a portion of our total liquidity investments ~~from~~are with counterparties for which the investments are secured with collateral (secured resale agreements). We believe these investments present no credit risk exposure to us.

The following table presents the lowest long-term credit ratings provided by Standard & Poor's, Moody's, and/or Fitch Advisory Services of our unsecured investment credit exposure 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.~~counterparty. Our internal ratings of these investments may differ from those obtained from Standard & Poor's, Moody's, and/or Fitch Advisory Services. The historical or current ratings displayed in this table should not be taken as an indication of future ratings.

(In millions) March 31, 2019
Counterparty Rating
Domicile of Counterparty AA A Total
Domestic $ 265
$ 3,380
$ 3,645
U.S. subsidiaries of foreign commercial banks 950
—
950
Total domestic and U.S. subsidiaries of foreign commercial banks 1,215
3,380
4,595
U.S. branches and agency offices of foreign commercial banks:
Canada 1,400
1,000
2,400
Germany 1,000
1,300
2,300
France —
1,450
1,450
Australia 1,400
—
1,400
Netherlands —
500
500
United Kingdom —
315
315
Belgium —
200
200
Total U.S. branches and agency offices of foreign commercial banks 3,800
4,765
8,565
Total unsecured investment credit exposure $ 5,015
$ 8,145
$ 13,160



(In millions)	March 31, 2020
	Counterparty Rating
Domicile of Counterparty	A		Total
Domestic	$	780	$	780
Total unsecured investment credit exposure	$	780	$	780

The following table presents the remaining contractual maturity of our unsecured investment credit exposure 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.~~counterparty.

(In millions) March 31, 2019
Domicile of Counterparty Overnight Due 2 days through 30 days Due 31 days through 90 days Total
Domestic $ 3,645
$ —
$ —
$ 3,645
U.S. subsidiaries of foreign commercial banks 950
—
—
950
Total domestic and U.S. subsidiaries of foreign commercial banks 4,595
—
—
4,595
U.S. branches and agency offices of foreign commercial banks:
Canada 2,400
—
—
2,400
Germany 1,550
350
400
2,300
France 1,450
—
—
1,450
Australia 1,400
—
—
1,400
Netherlands 500
—
—
500
United Kingdom 315
—
—
315
Belgium —
200
—
200
Total U.S. branches and agency offices of foreign commercial banks 7,615
550
400
8,565
Total unsecured investment credit exposure $ 12,210
$ 550
$ 400
$ 13,160



(In millions)	March 31, 2020
Domicile of Counterparty	Overnight		Total
Domestic	$	780	$	780
Total unsecured investment credit exposure	$	780	$	780

At March 31, ~~2019,~~2020, all of the ~~$13.2~~$0.8 billion of unsecured investment exposure was to counterparties with holding companies domiciled in ~~countries receiving either AAA or AA long-term sovereign ratings.~~the United States. Furthermore, ~~we restrict a significant portion of~~all unsecured lending toat March 31, 2020 had overnight maturities, which further limits risk exposure to these counterparties. By Finance Agency regulation, all counterparties exposed to non-U.S. countries are required to be domestic U.S. branches of foreign counterparties.

MBS:

GSE MBS

At March 31, ~~2019, $13.9~~2020, $11.1 billion of MBS held were GSE securities issued by Fannie Mae and Freddie Mac, which provide credit safeguards by guaranteeing either timely or ultimate payments of principal and interest. We believe that the conservatorships of Fannie Mae and Freddie Mac lower the chance that they would not be able to fulfill their credit guarantees and that the securities issued by these two GSEs are effectively government guaranteed. In addition, based on the data available to us and our purchase practices, we believe that most of the mortgage loans backing our GSE MBS are of high quality with acceptable credit performance.

MBS Issued by Other Government Agencies

We also invest in MBS issued and guaranteed by Ginnie Mae and the NCUA. These investments totaled ~~$1.9~~$1.5 billion at March 31, ~~2019.~~2020. We believe that the strength of the issuers' guarantees and backing by the full faith and credit of the U.S. government is sufficient to protect us against credit losses on these securities.

Derivatives

Credit Risk Exposure: We mitigate most of the credit risk exposure resulting from derivative transactions through collateralization or use of daily settled contracts. The table below presents the lowest long-term counterparty credit ratings provided by Standard & Poor's, Moody's, and/or Fitch Advisory Services for derivative positions to which we had credit risk exposure at March 31, ~~2019.~~2020. The historical or current ratings displayed in this table should not be taken as an indication of future ratings.


(In millions)
	Total Notional		Net Derivatives Fair Value Before Collateral			Cash Collateral Pledged to (from) Counterparties			Net Credit Exposure to Counterparties		Total Notional		Net Derivatives Fair Value Before Collateral			Cash Collateral Pledged to (from) Counterparties			Net Credit Exposure to Counterparties
Nonmember counterparties:
Asset positions with credit exposure:
Uncleared derivatives:
AA-rated	$	60	$	1		$	(1	)	$	—
A-rated	1,395		—			—			—		$	893	$	3		$	(2	)	$	1
BBB-rated	1,007		—			1			1		12		—			—			—
Total uncleared derivatives	2,462		1			—			1		905		3			(2		)	1
Cleared derivatives ⁽¹⁾	11,287		13			126			139		30,734		8			317			325
Liability positions with credit exposure:
Uncleared derivatives:
BBB-rated	1,386		(13		)	15			2
Total uncleared derivatives	1,386		(13		)	15			2
Cleared derivatives ⁽¹⁾	5,582		(2		)	13			11		2,953		(1		)	16			15
Total derivative positions with credit exposure to nonmember counterparties	20,717		(1		)	154			153		34,592		10			331			341
Member institutions ⁽²⁾	247		2			—			2		580		11			—			11
Total	$	20,964	$	1		$	154		$	155	$	35,172	$	21		$	331		$	352


(1)	Represents derivative transactions cleared with LCH Ltd. and CME Clearing, the FHLB's clearinghouses. LCH Ltd. is rated A+AA- by Standard & Poor's, and CME Clearing is not rated, but its parent company, CME Group Inc., is rated Aa3 by Moody's and AA- by Standard & Poor's.


(2)	Represents Mandatory Delivery Contracts.

Our exposure to cleared derivatives is primarily associated with our requirement to post initial margin through the clearing agent to the Derivatives Clearing Organizations. The amount of cash collateral pledged as initial margin has increased from our use of cleared derivatives. However, the use of cleared derivatives mitigates credit risk exposure because a central counterparty is substituted for individual counterparties.

At March 31, ~~2019,~~2020, the ~~gross and~~ net exposure of uncleared derivatives with residual credit risk exposure was ~~minimal. Gross exposure would likely increase if~~less than $2 million. If interest rates rise ~~and could increase if~~or the composition of our derivatives ~~change. However,~~change resulting in an increase to our gross exposure to uncleared derivatives, the contractual collateral provisions in these derivatives would limit our net exposure to acceptable levels.

Although we cannot predict if we will realize credit risk losses from any of our derivatives counterparties, we believe that all of the counterparties will be able to continue making timely interest payments and, more generally, to continue to satisfy the terms and conditions of their derivative contracts with us. As of March 31, ~~2019,~~2020, we had ~~$504~~$491 million of notional principal of interest rate swaps with one member, JPMorgan Chase Bank, N.A., which also had outstanding credit services with us. Due to the amount of market value collateralization, we had no outstanding credit exposure to this counterparty related to interest rate swaps outstanding.

Liquidity Risk

Liquidity Overview

We strive to be in a liquidity position at all times to meet the borrowing needs of our members and to meet all current and future financial commitments. This objective is achieved by managing liquidity positions to maintain stable, reliable, and cost-effective sources of funds while taking into account market conditions, member demand, and the maturity profile of assets and liabilities. Our liquidity position complies with the FHLBank Act, Finance Agency regulations, and internal policies.

The FHLBank System's primary source of funds is the sale of Consolidated Obligations in the capital markets. Our ability to obtain funds through the sale of Consolidated Obligations at acceptable interest costs depends on the financial market's ~~perceived~~

perception of the riskiness of the Obligations and on prevailing conditions in the capital markets, particularly the short-term capital markets. The System's favorable debt ratings, the implicit U.S. government backing of our debt, and our effective risk management practices are instrumental in ensuring stable and satisfactory access to the capital markets.

We believe our liquidity position, as well as that of the System, continued to be strong during the first three months of ~~2019.~~2020, even in light of the market disruptions caused by the COVID-19 pandemic during the period. Our overall ability to effectively fund our operations through debt issuances remained sufficient. Investor demand for System debt was robust in the first three months of ~~2019. Although we can make no assurances, we expect this~~2020, as investors preferred short-term, high-quality money market instruments amid the uncertainty in the financial markets due to ~~continue to be~~ the ~~case.~~COVID-19 pandemic. We believe the possibility of a liquidity or funding crisis in the System that would impair our ability to participate, on a cost-effective basis, in issuances of debt, service outstanding debt, maintain adequate capitalization, or pay competitive dividends is remote.

The System works collectively to manage and monitor the System-wide liquidity and funding risks. Liquidity risk includes the risk that the System could have difficulty rolling over short-term Obligations when market conditions change, also called refinancing risk. The System has a large reliance on short-term funding; therefore, it has a sharp focus on managing liquidity risk to very low levels. As shown on the Statements of Cash Flows, in the first three months of ~~2019,~~2020, our portion of the System's debt issuances totaled ~~$125.6~~$151.0 billion for Discount Notes and ~~$11.3~~$9.4 billion for Bonds. Access to short-term debt markets has been reliable because investors, driven by liquidity preferences and risk aversion, have sought the System’s short-term debt, which has resulted in strong demand for debt maturing in one year or less.

See the Notes to Unaudited Financial Statements for more detailed information regarding maturities of certain financial assets and liabilities which are instrumental in determining the amount of liquidity risk. In addition to contractual maturities, other assumptions regarding cash flows such as estimated prepayments, embedded call optionality, and scheduled amortization are considered when managing liquidity risks.

Liquidity Management and Regulatory Requirements

We manage liquidity risk by ensuring compliance with our regulatory liquidity requirements and regularly monitoring other metrics.

~~As discussed in the "Business Outlook and Risk Management" section of "Executive Overview,"~~We adhere to the Finance ~~Agency issued the~~Agency's Advisory Bulletin 2018-07 Federal Home Loan Bank Liquidity Guidance (Liquidity AB). The Liquidity AB ~~in August 2018, increasing~~establishes the expectations with respect to the maintenance of sufficient liquidity for a specified number of days. However, in the first three months of 2019, we were still subject to the Finance Agency's previous guidance that required us to target at least 5 to 15 consecutive days of a positive amount of liquidity based on specific assumptions under

~~a scenario where no Advances are renewed and a scenario where certain Advances are renewed. We targeted holding at least three extra days of positive liquidity under each scenario.~~ Under the ~~new~~ Liquidity AB, the calculation of liquidity is intended to provide additional assurance that we can continue to provide Advances and Letters of Credit to members over an extended period without access to the capital markets. Under ~~the new~~this guidance, all Advance maturities are ~~now~~ assumed to renew, unless the Advances relate to former members who are ineligible to borrow new Advances.

As part of the base case liquidity expectations, the Liquidity AB requires the FHLBanks to maintain sufficient liquidity for ~~an increased~~a period of between 10 to 30 calendar days. ~~Contemporaneously with the issuance of the Liquidity AB, the Finance Agency issued a supervisory letter that identifies initial thresholds for measures of liquidity.~~ As of March 31, ~~2019,~~2020, we maintained a sufficient number of days of positive daily cash balances under the ~~new~~Liquidity AB guidance.

The Liquidity AB also ~~provided~~provides guidance related to asset/liability maturity funding gap ~~limits, which was implemented beginning December 31, 2018.~~limits. Funding gap metrics measure the difference between assets and liabilities that are scheduled to mature during a specified period of time and are expressed as a percentage of total assets. ~~The~~Although subject to change depending on conditions in the financial markets, the Liquidity AB provides guidance on maintaining appropriate funding gaps for three-month (-10 percent to -20 percent) and one-year (-25 percent to -35 percent) maturity horizons. ~~The Finance Agency's supervisory letter set forth initial funding gap percentage limits.~~ As of March 31, ~~2019,~~2020, we were operating within those limits.

We also meet operational and contingency liquidity requirements. We satisfy the operational liquidity requirement by both meeting a contingency liquidity requirement, discussed below, and because we are able to adequately access the capital markets to issue debt. In addition, we focus on maintaining an adequate liquidity balance and a funding balance between our financial assets and financial liabilities.

Contingency liquidity risk is the potential inability to meet liquidity needs because our access to the capital markets to issue Consolidated Obligations is restricted or suspended for a period of time due to a market disruption, operational failure, or real or perceived credit quality problems. We continued to hold an ample amount of liquidity reserves to protect against contingency liquidity risk. The following table presents the components of the contingency liquidity requirement.

(In millions) March 31, 2019 December 31, 2018
Contingency Liquidity Requirement
Total Contingency Liquidity Reserves ⁽¹⁾
$ 39,141
$ 34,808
Total Requirement ⁽²⁾
(20,435 ) (18,745 )
Excess Contingency Liquidity Available $ 18,706
$ 16,063


~~(1)~~	Includes, among others, cash, overnight Federal funds, overnight deposits, self-liquidating term Federal funds, 95 percent of the market value of available-for-sale negotiable securities, and 75 percent of the market value of certain held-to-maturity obligations, including obligations of the United States, U.S. government agency obligations and MBS.


~~(2)~~	Includes net liabilities maturing in the next seven business days, assets traded not yet settled, Advance commitments outstanding, Advances maturing in the next seven business days, and a three percent hypothetical increase in Advances.

To support our member deposits, we also must meet a statutory deposit reserve requirement. The sum of our investments in obligations of the United States, deposits in eligible banks or trust companies, and Advances with a final maturity not exceeding five years must equal or exceed the current amount of member deposits. The following table presents the components of this liquidity requirement.


(In millions)	March 31, 2019			December 31, 2018			March 31, 2020			December 31, 2019
Deposit Reserve Requirement
Total Eligible Deposit Reserves	$	70,453		$	66,643		$	90,311		$	61,590
Total Member Deposits	(768		)	(664		)	(1,186		)	(942		)
Excess Deposit Reserves	$	69,685		$	65,979		$	89,125		$	60,648

Contractual Obligations

The following table summarizes our contractual obligations at March 31, ~~2019~~2020. We believe that, as in the past, we will continue to have sufficient liquidity, including from access to the debt markets to issue Consolidated Obligations, to satisfy these obligations on a timely basis.


(In millions)	< 1 year		1 < 3 years		3 < 5 years		> 5 years		Total		< 1 year		1 < 3 years		3 < 5 years		> 5 years		Total
Contractual Obligations
Long-term debt (Bonds) - par ⁽¹⁾	$	27,407	$	14,008	$	6,095	$	4,591	$	52,101	$	20,410	$	6,577	$	3,229	$	4,359	$	34,575
Operating leases (include premises and equipment)	1		2		2		3		8		1		2		2		2		7
Mandatorily redeemable capital stock	17		—		5		1		23		15		1		555		1		572
Commitments to fund mortgage loans	341		—		—		—		341		765		—		—		—		765
Pension and other postretirement benefit obligations	2		5		5		30		42		2		5		4		37		48
Total Contractual Obligations	$	27,768	$	14,015	$	6,107	$	4,625	$	52,515	$	21,193	$	6,585	$	3,790	$	4,399	$	35,967


(1)	Does not include Discount Notes and contractual interest payments related to Bonds. Total is based on contractual maturities; the actual timing of payments could be affected by factors affecting redemptions.

Off-Balance Sheet Arrangements

The following table summarizes our off-balance sheet items at March 31, ~~2019~~2020. For more information, see Note 1915 of the Notes to Unaudited Financial Statements.


(In millions)	< 1 year		1 < 3 years		3 < 5 years		> 5 years		Total		< 1 year		1 < 3 years		3 < 5 years		> 5 years		Total
Off-balance sheet items ⁽¹⁾
Commitments to fund additional Advances	$	1,002	$	—	$	—	$	—	$	1,002
Standby Letters of Credit	13,504		63		229		16		13,812		$	14,690	$	1,026	$	68	$	1	$	15,785
Standby bond purchase agreements	21		56		—		—		77		26		48		—		—		74
Consolidated Obligations traded, not yet settled	—		—		50		97		147		700		—		—		48		748
Total off-balance sheet items	$	14,527	$	119	$	279	$	113	$	15,038	$	15,416	$	1,074	$	68	$	49	$	16,607


(1)	Represents notional amount of off-balance sheet obligations.

Member Concentration Risk

We regularly assess concentration risks from business activity. We believe that the concentration of Advance activity is consistent with our risk management philosophy, and the impact of borrower concentration on market risk, credit risk, and operational risk, after considering mitigating controls, is minimal.

Operational Risks

There were no material developments regarding our operational risk exposure during the first three months of ~~2019.~~

2020.


Item 3.	Quantitative and Qualitative Disclosures About Market Risk.

Information required by this Item is set forth under the caption “Quantitative and Qualitative Disclosures About Risk Management” in Part I, Item 2, of this Report.


Item 4.	Controls and Procedures.

DISCLOSURE CONTROLS AND PROCEDURES

As of March 31, ~~2019,~~2020, the FHLB's management, including its principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”). Based upon that evaluation, these two officers each concluded that, as of March 31, ~~2019,~~2020, the FHLB maintained effective disclosure controls and procedures designed to ensure that information required to be disclosed in the reports that it files under the Exchange Act is (1) accumulated and communicated to management

as appropriate to allow timely decisions regarding disclosure and (2) recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

As of March 31, ~~2019,~~2020, the FHLB's management, including its principal executive officer and principal financial officer, evaluated the FHLB's internal control over financial reporting. Based upon that evaluation, these two officers each concluded that there were no changes in the FHLB's internal control over financial reporting that occurred during the quarter ended March 31, ~~2019~~2020 that materially affected, or are reasonably likely to materially affect, the FHLB's internal control over financial reporting.

PART II - OTHER INFORMATION


Item 1A.	Risk Factors.

For a discussion of our risk factors, see Part I, Item 1A. "Risk Factors" in our ~~2018~~2019 Annual Report on Form 10-K. ~~There~~Other than the risk factor noted below, there have been no material changes from the risk factors in our ~~2018~~2019 Annual Report on Form 10-K.

Other External Risk. Natural disasters, pandemics, terrorist attacks, or other catastrophic events could adversely affect our operations, business activities, results of operations and financial condition.


~~Item 5.~~	~~Other Information.~~

~~PricewaterhouseCoopers LLP (PwC) serves~~Natural disasters, pandemics or other widespread health emergencies (such as the ~~independent registered public accounting firm~~recent outbreak of COVID-19), terrorist attacks, or other unanticipated or catastrophic events could create economic and financial disruptions and uncertainties, which may lead to reduced demand for Advances and an increased risk of credit losses and may adversely affect our cost of funding or access to funding. These events may also lead to operational difficulties that could adversely affect the ability of the FHLBanks and the Office of Finance to conduct and manage their businesses. Any of these factors could adversely affect our business activities and results of operations.

In particular, the current COVID-19 pandemic has disrupted the credit markets in which we operate, and the decline in interest rates has affected, or may in the future adversely affect, the fair values of some of our assets, the valuation of collateral, and our net income and capital. Many businesses in our district and across the U.S. have been forced to suspend operations for an indefinite period of time in an attempt to slow the spread of the virus, and unemployment claims have increased dramatically as more employers layoff workers. Ultimately, the significant slowdown in economic activity caused by the COVID-19 pandemic could reduce demand at our member institutions, which could impact members’ demand for our products and services and have an adverse effect on our profitability and financial condition. It could also lead to a devaluation of our assets, the collateral pledged by members to secure Advances and other extensions of credit, or our MPP portfolio, all of which could have an adverse impact on the our financial condition and results of operations, including as a result of reduced business volumes, reduced income or credit losses. Market volatility and economic stress during a prolonged COVID-19 outbreak may adversely affect the FHLBanks’ access to the debt markets and possibly affect our liquidity. Our decision to have most employees work remotely in accordance with local “stay-at-home” orders could create additional cybersecurity risks and operational challenges that could affect our ability to conduct business or increase the risk of operational incidents and errors. In addition, we rely on vendors and other third parties to perform certain services, and if a critical vendor or third party experiences a failure or any interruption to their business due to the COVID-19 pandemic, we may be unable to conduct and manage our business effectively.

The outlook for the ~~FHLB. Rule 201(c)(1)(ii)(A)~~remainder of ~~SEC Regulation S-X (the Loan Rule) prohibits an accounting firm, such as PwC, from having certain financial relationships with its audit clients~~2020 is uncertain, and affiliated entities. Specifically, the Loan Rule provides, in relevant part, that an accounting firm generally would not be independent if it or a covered person in the firm receives a loan from a lender thatthere is a ~~“record~~possibility that the Federal Reserve keeps interest rates low or beneficial owner of more than ten percent of the audit client’s equity securities.” A covered person in the firm includes personnel on the audit engagement team, personnel in the chain of command, partnerseven uses negative interest rates, which could significantly affect our business and ~~managers who provide ten or more hours of non-audit services to the audit client, and partners in the office where the lead engagement partner practices in connection with the client.~~profitability.

PwC has advised the FHLB that for the period ended March 31, 2019, PwC and certain covered persons had borrowing relationships with two FHLB members (referred below as the “lenders”) who own more than ten percent of the FHLB’s capital stock, which under the Loan Rule, may reasonably be thought to bear on PwC’s independence with respect to the FHLB. The FHLB is providing this disclosure to explain the facts and circumstances, as well as PwC’s and the Audit Committee’s conclusions, concerning PwC’s objectivity and impartiality with respect to the audit of the FHLB.

PwC advised the Audit Committee of the Board that it believes that, in light of the facts of these borrowing relationships, its ability to exercise objective and impartial judgment on all matters encompassed within PwC’s audit engagement has not been impaired and that a reasonable investor with knowledge of all relevant facts and circumstances would reach the same conclusion. PwC has advised the Audit Committee that this conclusion is based in part on the following considerations:


▪	~~the firm's borrowings are in good standing and neither lender has the right to take action against PwC, as borrower, in connection with the financings;~~


▪	~~the debt balances outstanding are immaterial to PwC and to each lender;~~


▪	~~PwC has borrowing relationships with a diverse group of lenders, therefore PwC is not dependent on any single lender or group of lenders; and~~


▪	~~the PwC audit engagement team has no involvement in PwC’s treasury function and PwC’s treasury function has no oversight or ability to influence the PwC audit engagement team.~~

Additionally, the Audit Committee assessed PwC’s ability to perform an objective and impartial audit, including consideration of the ownership structure of the FHLB, the limited voting rights of members and the composition of the Board of Directors. In addition to the above listed considerations, the Audit Committee considered the following:


▪	~~although the lenders owned more than ten percent of the FHLB’s capital stock, the lenders' voting rights are each less than ten percent;~~


▪	~~no individual officer or director that serves on the Board of Directors has the ability to significantly influence the FHLB based on the composition of the Board of Directors; and~~


▪	~~as of March 31, 2019, and as of the date of the filing of this Form 10-Q, no officer or director of either lender served on the Board of Directors of the FHLB.~~

Based on this evaluation, the Audit Committee has concluded that PwC’s ability to exercise objective and impartial judgment on all issues encompassed within PwC’s audit engagement has not been impaired.


Item 6.	Exhibits.


~~(a)~~	~~Exhibits.~~

~~See Index of Exhibits~~

~~SIGNATURES~~

Pursuant to the requirements of Section 13 or 15(d) 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, as of the 9th day of May 2019.

~~FEDERAL HOME LOAN BANK OF CINCINNATI~~

~~(Registrant)~~



~~By:~~	~~/s/ Andrew S. Howell~~
	~~Andrew S. Howell~~
	~~President and Chief Executive Officer~~
	~~(principal executive officer)~~

~~By:~~	~~/s/ Stephen J. Sponaugle~~
	~~Stephen J. Sponaugle~~
	~~Executive Vice President - Chief Financial Officer~~
	~~(principal financial officer)~~

~~INDEX OF EXHIBITS~~



Exhibit Number ⁽¹⁾	Description of exhibit	Document filed or furnished, as indicated below

31.1	Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer	Filed Herewith

31.2	Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer	Filed Herewith

32	Section 1350 Certifications	Furnished Herewith

101.INS	XBRL Instance Document	~~Filed Herewith~~ The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document

101.SCH	XBRL Taxonomy Extension Schema Document	Filed Herewith

101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document	Filed Herewith

101.LAB	XBRL Taxonomy Extension Label Linkbase Document	Filed Herewith

101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document	Filed Herewith

101.DEF	XBRL Taxonomy Extension Definition Linkbase Document	Filed Herewith

104	Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)	Filed Herewith


(1)	Numbers coincide with Item 601 of Regulation S-K.

SIGNATURES

FEDERAL HOME LOAN BANK OF CINCINNATI

(Registrant)



By:	/s/ Andrew S. Howell
	Andrew S. Howell
	President and Chief Executive Officer
	(principal executive officer)

By:	/s/ Stephen J. Sponaugle
	Stephen J. Sponaugle
	Executive Vice President - Chief Financial Officer
	(principal financial officer)

7475



	March 31, 2019			December 31, 2018
Unpaid principal balance:
Fixed rate medium-term single-family mortgage loans ⁽¹⁾	$	894,039		$	933,340
Fixed rate long-term single-family mortgage loans	9,395,962			9,338,814
Total unpaid principal balance	10,290,001			10,272,154
Premiums	225,092			227,161
Discounts	(2,525		)	(2,603		)
Hedging basis adjustments ⁽²⁾	7,429			5,045
Total mortgage loans held for portfolio	$	10,519,997		$	10,501,757



	March 31, 2019		December 31, 2018
Allowance for credit losses:
Collectively evaluated for impairment	$	779	$	840
Individually evaluated for impairment	—		—
Total allowance for credit losses	$	779	$	840
Recorded investment:
Collectively evaluated for impairment	$	10,277,146	$	10,249,169
Individually evaluated for impairment	10,886		10,554
Total recorded investment	$	10,288,032	$	10,259,723



	March 31, 2019		December 31, 2018
Interest bearing:
Demand and overnight	$	704,091	$	605,979
Term	57,800		51,600
Other	4,513		4,959
Total interest bearing	766,404		662,538
Non-interest bearing:
Other	9,747		6,478
Total non-interest bearing	9,747		6,478
Total deposits	$	776,151	$	669,016



	March 31, 2019					December 31, 2018
Year of Contractual Maturity	Amount			Weighted Average Interest Rate		Amount			Weighted Average Interest Rate
Due in 1 year or less	$	27,407,000		2.42	%	$	21,085,800		2.20	%
Due after 1 year through 2 years	8,812,565			2.07		6,998,565			2.13
Due after 2 years through 3 years	5,195,595			2.31		6,829,595			2.05
Due after 3 years through 4 years	3,003,830			2.43		2,958,620			2.39
Due after 4 years through 5 years	3,091,175			2.72		3,248,975			2.63
Thereafter	4,590,405			2.96		4,525,635			2.94
Total principal amount	52,100,570			2.42		45,647,190			2.29
Premiums	70,972					75,809
Discounts	(28,989		)			(29,275		)
Hedging adjustments	965					(196		)
Fair value option valuation adjustment and accrued interest	(19,464		)			(34,390		)
Total	$	52,124,054				$	45,659,138



	Net unrealized (losses) gains on available-for-sale securities			Pension and postretirement benefits			Total accumulated other comprehensive (loss) income
BALANCE, DECEMBER 31, 2017	$	(124	)	$	(16,536	)	$	(16,660	)
Other comprehensive income before reclassification:
Net unrealized gains	143			—			143
Reclassifications from other comprehensive income to net income:
Amortization - pension and postretirement benefits	—			486			486
Net current period other comprehensive income	143			486			629
BALANCE, MARCH 31, 2018	$	19		$	(16,050	)	$	(16,031	)


BALANCE, DECEMBER 31, 2018	$	(110	)	$	(12,933	)	$	(13,043	)
Other comprehensive income before reclassification:
Net unrealized gains	187			—			187
Reclassifications from other comprehensive income to net income:
Amortization - pension and postretirement benefits	—			401			401
Net current period other comprehensive income	187			401			588
BALANCE, MARCH 31, 2019	$	77		$	(12,532	)	$	(12,455	)



	Three Months Ended March 31,
Net (Losses) Gains from Changes in Fair Value Recognized in Earnings	2019			2018
Advances	$	100		$	(28	)
Consolidated Bonds	(17,281		)	19,753
Total net (losses) gains	$	(17,181	)	$	19,725