UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q



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

For the quarterly period ended March 31, ~~2020~~2021



☐						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,	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.

☒ Yes ☐ No

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

☒ Yes ☐ No

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



Large accelerated Filer ☐		Accelerated Filer ☐
Non-accelerated Filer	☒	Smaller reporting company	☐
		Emerging growth company	☐

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

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

☐ Yes ☒ No

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, ~~2020,~~2021, the registrant had ~~47,608,735~~30,264,135 shares of capital stock outstanding, which included stock classified as mandatorily redeemable.



Page 1 of			7572

Table of Contents


		PART I - FINANCIAL INFORMATION

		~~PART I - FINANCIAL INFORMATION~~

Item 1.	Financial Statements (Unaudited):

		Statements of Condition - March 31, ~~2020~~2021 and December 31, ~~2019~~2020	3

		Statements of Income - Three months ended March 31, ~~2020~~2021 and ~~2019~~2020	4

		Statements of Comprehensive Income - Three months ended March 31, ~~2020~~2021 and ~~2019~~2020	5

		Statements of Capital - Three months ended March 31, ~~2020~~2021 and ~~2019~~2020	6

		Statements of Cash Flows - Three months ended March 31, ~~2020~~2021 and ~~2019~~2020	7

		Notes to Unaudited Financial Statements	9

Item 2.		Management's Discussion and Analysis of Financial Condition and Results of Operations	4240

Item 3.		Quantitative and Qualitative Disclosures About Market Risk	7269

Item 4.		Controls and Procedures	7270

		PART II - OTHER INFORMATION

Item ~~1A.~~1.		~~Risk Factors~~Legal Proceedings	7370

Item 6.1A.		~~Exhibits~~Risk Factors	7470

~~Signatures~~Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds	7570

Item 3.		Defaults Upon Senior Securities	70

Item 4.		Mine Safety Disclosures	70

Item 5.		Other Information	70

Item 6.		Exhibits	71

Signatures			72

Table of Contents

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, 2021		December 31, 2020
ASSETS
Cash and due from banks	$	3,113,972	$	2,984,073
Interest-bearing deposits	340,252		555,104
Securities purchased under agreements to resell	288,300		1,818,268
Federal funds sold	4,805,000		4,240,000
Investment securities:
Trading securities	9,585,217		10,488,124
Available-for-sale securities (amortized cost of $271,072 and $286,869 at March 31, 2021 and December 31, 2020, respectively)	278,477		291,587
Held-to-maturity securities (includes $0 and $0 pledged as collateral at March 31, 2021 and December 31, 2020, respectively, that may be repledged) (a)	8,911,352		9,648,171
Total investment securities	18,775,046		20,427,882
Advances (includes $25,902 and $27,202 at fair value under fair value option at March 31, 2021 and December 31, 2020, respectively)	24,365,438		25,362,003
Mortgage loans held for portfolio, net of allowance for credit losses of $248 and $248 at March 31, 2021 and December 31, 2020, respectively	8,598,461		9,548,506
Accrued interest receivable	122,676		113,701
Derivative assets	197,213		215,888
Other assets, net	27,493		30,814
TOTAL ASSETS	$	60,633,851	$	65,296,239
LIABILITIES
Deposits	$	1,402,489	$	1,327,202



Consolidated Obligations:
Discount Notes (includes $1,019,989 and $0 at fair value under fair value option at March 31, 2021 and December 31, 2020, respectively)	26,872,494		27,500,244
Bonds (includes $448,843 and $2,262,388 at fair value under fair value option at March 31, 2021 and December 31, 2020, respectively)	27,798,441		31,996,311
Total Consolidated Obligations	54,670,935		59,496,555
Mandatorily redeemable capital stock	15,330		19,454
Accrued interest payable	67,314		77,521
Affordable Housing Program payable	108,242		110,772
Derivative liabilities	973		3,813
Other liabilities	323,380		331,008
Total liabilities	56,588,663		61,366,325
Commitments and contingencies	0		0
CAPITAL
Capital stock Class B putable ($100 par value); issued and outstanding shares: 27,479 shares at March 31, 2021 and 26,409 shares at December 31, 2020	2,747,938		2,640,863
Retained earnings:
Unrestricted	803,806		802,715
Restricted	505,066		501,321
Total retained earnings	1,308,872		1,304,036
Accumulated other comprehensive loss	(11,622)		(14,985)
Total capital	4,045,188		3,929,914
TOTAL LIABILITIES AND CAPITAL	$	60,633,851	$	65,296,239

March 31, 2020 December 31, 2019
ASSETS
Cash and due from banks $ 3,923,890
$ 20,608
Interest-bearing deposits 780,081
550,160
Securities purchased under agreements to resell 183,504
2,348,584
Federal funds sold —
4,833,000
Investment securities:
Trading securities 11,988,073
11,615,693
Available-for-sale securities 142,074
1,542,185
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 24,700,773
26,657,197
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 197,718
182,252
Derivative assets 352,410
267,165
Other assets 23,440
27,667
TOTAL ASSETS $ 122,509,844
$ 93,491,559
LIABILITIES
Deposits $ 1,185,476
$ 951,296
Consolidated Obligations:
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 114,327,870
87,523,943
Mandatorily redeemable capital stock 571,546
21,669
Accrued interest payable 98,157
126,091
Affordable Housing Program payable 118,120
115,295
Derivative liabilities 22,691
1,310
Other liabilities 310,713
307,499
Total liabilities 116,634,573
89,047,103
Commitments and contingencies

CAPITAL
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 690,615
648,374
Restricted 461,979
446,048
Total retained earnings 1,152,594
1,094,422
Accumulated other comprehensive loss (16,736 ) (16,394 )
Total capital 5,875,271
4,444,456
TOTAL LIABILITIES AND CAPITAL $ 122,509,844
$ 93,491,559
(a)Fair values: $9,029,550 and $9,792,136 at March 31, 2021 and December 31, 2020, respectively.


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

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

Table of Contents

FEDERAL HOME LOAN BANK OF CINCINNATI

STATEMENTS OF INCOME

(Unaudited)


(In thousands)	Three Months Ended March 31,						(In thousands)	Three Months Ended March 31,
	2020			2019				2021		2020
INTEREST INCOME:							INTEREST INCOME:
Advances	$	172,167		$	402,777		Advances	$	41,160	$	172,167
Prepayment fees on Advances, net	4,274			15			Prepayment fees on Advances, net	1,340		4,274
Interest-bearing deposits	3,350			1,544			Interest-bearing deposits	217		3,350
Securities purchased under agreements to resell	10,154			18,825			Securities purchased under agreements to resell	214		10,154
Federal funds sold	28,526			63,829			Federal funds sold	1,342		28,526
Investment securities:							Investment securities:
Trading securities	67,904			5,171			Trading securities	58,052		67,904
Available-for-sale securities	3,396			13,559			Available-for-sale securities	1,335		3,396
Held-to-maturity securities	68,304			106,473			Held-to-maturity securities	29,731		68,304
Total investment securities	139,604			125,203			Total investment securities	89,118		139,604
Mortgage loans held for portfolio	89,257			88,665			Mortgage loans held for portfolio	44,414		89,257
Loans to other FHLBanks	60			20			Loans to other FHLBanks	0		60
Total interest income	447,392			700,878			Total interest income	177,805		447,392
INTEREST EXPENSE:							INTEREST EXPENSE:
Consolidated Obligations:							Consolidated Obligations:
Discount Notes	176,124			311,710			Discount Notes	5,468		176,124
Bonds	185,987			262,863			Bonds	96,186		185,987
Total Consolidated Obligations	362,111			574,573			Total Consolidated Obligations	101,654		362,111
Deposits	2,976			3,698			Deposits	151		2,976

Mandatorily redeemable capital stock	190			349			Mandatorily redeemable capital stock	94		190

Total interest expense	365,277			578,620			Total interest expense	101,899		365,277
NET INTEREST INCOME	82,115			122,258			NET INTEREST INCOME	75,906		82,115

NON-INTEREST INCOME (LOSS):							NON-INTEREST INCOME (LOSS):
Net gains (losses) on investment securities	372,406			22,126			Net gains (losses) on investment securities	(138,860)		372,406
Net gains (losses) on financial instruments held under fair value option	(50,830		)	(17,181		)	Net gains (losses) on financial instruments held under fair value option	3,905		(50,830)
Net gains (losses) on derivatives and hedging activities	(293,966		)	(25,959		)	Net gains (losses) on derivatives and hedging activities	97,144		(293,966)
Standby Letters of Credit fees							Standby Letters of Credit fees	5,811		2,470
Other, net	3,079			2,615			Other, net	435		609
Total non-interest income (loss)	30,689			(18,399		)	Total non-interest income (loss)	(31,565)		30,689
NON-INTEREST EXPENSE:							NON-INTEREST EXPENSE:
Compensation and benefits	13,340			12,659			Compensation and benefits	12,903		13,340
Other operating expenses	6,103			5,477			Other operating expenses	5,952		6,103
Finance Agency	1,628			1,696			Finance Agency	1,879		1,628
Office of Finance	1,258			1,366			Office of Finance	1,271		1,258

Other	1,951			1,225			Other	1,518		1,951
Total non-interest expense	24,280			22,423			Total non-interest expense	23,523		24,280
INCOME BEFORE ASSESSMENTS	88,524			81,436			INCOME BEFORE ASSESSMENTS	20,818		88,524
Affordable Housing Program assessments	8,871			8,179			Affordable Housing Program assessments	2,091		8,871

NET INCOME	$	79,653		$	73,257		NET INCOME	$	18,727	$	79,653

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

Table of Contents

FEDERAL HOME LOAN BANK OF CINCINNATI

STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


(In thousands)	Three Months Ended March 31,
	2021		2020
Net income	$	18,727	$	79,653
Other comprehensive income adjustments:
Net unrealized gains (losses) on available-for-sale securities	2,687		(905)
Pension and postretirement benefits	676		563
Total other comprehensive income (loss) adjustments	3,363		(342)
Comprehensive income	$	22,090	$	79,311

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

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

Table of Contents

FEDERAL HOME LOAN BANK OF CINCINNATI

STATEMENTS OF CAPITAL

(Unaudited)


(In thousands)	Capital Stock Class B - Putable					Retained Earnings								Accumulated Other Comprehensive			Total			(In thousands)	Capital Stock Class B - Putable			Retained Earnings						Accumulated Other Comprehensive		Total
	Shares		Par Value			Unrestricted			Restricted		Total			Loss			Capital				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		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			Adjustment for cumulative effect of accounting change				366				366				366
Comprehensive income (loss)						63,722			15,931		79,653			(342		)	79,311			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			Proceeds from sale of capital stock	20,729	2,072,862										2,072,862
Repurchase of capital stock	(1,500	)	(150,000		)												(150,000		)	Repurchase of capital stock	(1,500)	(150,000)										(150,000)
Net shares reclassified to mandatorily redeemable capital stock	(5,499	)	(549,877		)												(549,877		)	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		)	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		BALANCE, MARCH 31, 2020	47,394	$	4,739,413	$	690,615	$	461,979	$	1,152,594	$	(16,736)	$	5,875,271

BALANCE, DECEMBER 31, 2020																				BALANCE, DECEMBER 31, 2020	26,409	$	2,640,863	$	802,715	$	501,321	$	1,304,036	$	(14,985)	$	3,929,914

Comprehensive income (loss)																				Comprehensive income (loss)				14,982		3,745		18,727		3,363		22,090
Proceeds from sale of capital stock																				Proceeds from sale of capital stock	3,760	376,078										376,078
Repurchase of capital stock																				Repurchase of capital stock	(2,680)	(268,000)										(268,000)
Net shares reclassified to mandatorily redeemable capital stock																				Net shares reclassified to mandatorily redeemable capital stock	(10)	(1,003)										(1,003)

Cash dividends on capital stock																				Cash dividends on capital stock				(13,891)				(13,891)				(13,891)
BALANCE, MARCH 31, 2021																				BALANCE, MARCH 31, 2021	27,479	$	2,747,938	$	803,806	$	505,066	$	1,308,872	$	(11,622)	$	4,045,188

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

Table of Contents

FEDERAL HOME LOAN BANK OF CINCINNATI

STATEMENTS OF CASH FLOWS

(Unaudited)


(In thousands)	Three Months Ended March 31,
	2021		2020
OPERATING ACTIVITIES:
Net income	$	18,727	$	79,653
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization	20,233		29,025
Net change in derivative and hedging activities	90,177		(204,187)
Net change in fair value adjustments on trading securities	138,860		(372,406)
Net change in fair value adjustments on financial instruments held under fair value option	(3,905)		50,830
Other adjustments, net	223		177
Net change in:
Accrued interest receivable	(8,968)		(15,359)
Other assets	2,746		3,741
Accrued interest payable	(18,542)		(28,574)
Other liabilities	(9,436)		6,632
Total adjustments	211,388		(530,121)
Net cash provided by (used in) operating activities	230,115		(450,468)

INVESTING ACTIVITIES:
Net change in:
Interest-bearing deposits	300,462		(496,833)
Securities purchased under agreements to resell	1,529,968		2,165,080
Federal funds sold	(565,000)		4,833,000
Premises, software, and equipment	(252)		(263)
Trading securities:

Proceeds from maturities	750,038		27
Proceeds from sale	14,008		0

Available-for-sale securities:
Proceeds from maturities	0		1,810,000
Purchases	0		(400,000)
Held-to-maturity securities:

Proceeds from maturities	777,871		958,486

Purchases	(40,483)		(34,234)
Advances:
Repaid	49,540,950		256,213,831
Originated	(48,690,088)		(288,877,977)
Mortgage loans held for portfolio:
Principal collected	1,165,828		539,328
Purchases	(247,646)		(1,231,879)
Net cash provided by (used in) investing activities	4,535,656		(24,521,434)



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

Table of Contents

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

INVESTING ACTIVITIES:
Net change in:
Interest-bearing deposits (496,833 ) (473,043 )
Securities purchased under agreements to resell 2,165,080
1,573,412
Federal funds sold 4,833,000
(1,027,000 )
Premises, software, and equipment (263 ) (455 )
Trading securities:
Proceeds from maturities 27
31
Purchases —
(4,738,086 )
Available-for-sale securities:
Proceeds from maturities 1,810,000
2,350,000
Purchases (400,000 ) (1,026,000 )
Held-to-maturity securities:
Proceeds from maturities 958,486
538,649
Purchases (34,234 ) (622,454 )
Advances:
Repaid 256,213,831
410,450,110
Originated (288,877,977 ) (410,455,274 )
Mortgage loans held for portfolio:
Principal collected 539,328
226,964
Purchases (1,231,879 ) (249,754 )
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.



(continued from previous page)
FEDERAL HOME LOAN BANK OF CINCINNATI
STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)	Three Months Ended March 31,
	2021		2020
FINANCING ACTIVITIES:
Net change in deposits and pass-through reserves	$	76,707	$	233,060
Net proceeds (payments) on derivative contracts with financing elements	0		(303)
Net proceeds from issuance of Consolidated Obligations:
Discount Notes	48,587,907		150,972,042
Bonds	9,575,470		9,381,318

Payments for maturing and retiring Consolidated Obligations:
Discount Notes	(49,208,016)		(120,420,948)
Bonds	(13,757,000)		(13,191,000)
Proceeds from issuance of capital stock	376,078		2,072,862
Payments for repurchase of capital stock	(268,000)		(150,000)
Payments for repurchase/redemption of mandatorily redeemable capital stock	(5,127)		0
Cash dividends paid	(13,891)		(21,847)

Net cash provided by (used in) financing activities	(4,635,872)		28,875,184
Net increase (decrease) in cash and due from banks	129,899		3,903,282
Cash and due from banks at beginning of the period	2,984,073		20,608
Cash and due from banks at end of the period	$	3,113,972	$	3,923,890
Supplemental Disclosures:
Interest paid	$	123,211	$	388,791
Affordable Housing Program payments, net	$	4,621	$	6,046

(continued from previous page)
FEDERAL HOME LOAN BANK OF CINCINNATI
STATEMENTS OF CASH FLOWS
(Unaudited)

(In thousands) Three Months Ended March 31,
2020 2019
FINANCING ACTIVITIES:
Net change in deposits and pass-through reserves $ 233,060
$ 102,205
Net proceeds (payments) on derivative contracts with financing elements (303 ) (92 )
Net proceeds from issuance of Consolidated Obligations:
Discount Notes 150,972,042
125,632,457
Bonds 9,381,318
11,340,789
Payments for maturing and retiring Consolidated Obligations:
Discount Notes (120,420,948 ) (128,399,569 )
Bonds (13,191,000 ) (4,885,800 )
Proceeds from issuance of capital stock 2,072,862
228,106
Payments for repurchase of capital stock (150,000 ) (488,544 )
Payments for repurchase/redemption of mandatorily redeemable capital stock —
(754 )
Cash dividends paid (21,847 ) (65,473 )
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 20,608
10,037
Cash and due from banks at end of the period $ 3,923,890
$ 20,685
Supplemental Disclosures:
Interest paid $ 388,791
$ 535,427
Affordable Housing Program payments, net $ 6,046
$ 3,266

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

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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, ~~2019~~2020 filed with the Securities and Exchange Commission (SEC). Results for the three months ended March 31, ~~2020~~2021 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 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 ~~2019~~2020 Annual Report on Form 10-K.

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

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 and Adopted Accounting ~~Standards and Interpretations~~Guidance

Facilitation of the Effects of Reference Rate Reform on Financial ~~Reporting.~~Reporting, as amended. On March 12, 2020, the Financial Accounting Standards Board (FASB) issued temporary, optional guidance to ease the potential burden in accounting for reference rate reform. The new guidance provides optional expedients and exceptions for applying GAAP to transactions affected by reference rate reform if certain criteria are met. The transactions primarily include (1) contract modifications, (2) hedging relationships, and (3) sale and/or transfer of debt securities classified as held-to-maturity. This guidance isbecame effective immediately for the FHLB, and the amendments may be applied prospectively through December 31, 2022. The FHLB ~~is in~~either elected or plans to elect the ~~process~~majority of ~~evaluating~~ the ~~guidance,~~optional expedients and ~~its~~exceptions provided; however, the full effect on the FHLB's financial condition, results of operations and cash flows has not yet been determined. In particular, during the

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~~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 became effective forfourth quarter of 2020, the FHLB ~~for~~elected optional practical expedients specific to the ~~interim and annual periods beginning~~discounting transition on ~~January 1, 2020. The guidance~~a retrospective basis, which did not have a material ~~impact on the FHLB’s financial condition, results of operations, and cash flows.~~effect.

~~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 will adopt this guidance 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 became effective for the FHLB for the interim and annual periods beginning on January 1, 2020. The adoption of this guidance ~~affected the FHLB's disclosures, but did not have any effect 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 became effective for the FHLB for the interim and annual periods beginning on January 1, 2020. The guidance 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 was effective. The adoption of this guidance did not 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 adoption of this guidance did not have a material impact on the FHLB's 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~~Finance Agency regulations include a limit on the amount of unsecured credit the FHLB may extend to a counterparty. At March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, 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~~2021 and December 31, ~~2019.~~2020. Carrying values of interest-bearing deposits and Federal funds sold exclude accrued interest receivable of (in thousands) ~~$599~~$64 and $0$8 as of March 31, ~~2020,~~2021, and ~~$1,162~~$72 and ~~$210~~$10 as of December 31, ~~2019.~~2020.

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~~2021 and December 31, ~~2019.~~2020. The carrying value of securities purchased under agreements to resell excludes accrued interest receivable of (in thousands) ~~$474~~$8 and ~~$3,503~~$13 as of March 31, ~~2020~~2021 and December 31, ~~2019.~~2020.

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.

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Trading Securities

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


Fair Value	March 31, 2021		December 31, 2020
Non-mortgage-backed securities (non-MBS):
U.S. Treasury obligations	$	7,573,745	$	8,362,211
GSE obligations	2,011,179		2,125,580
Total non-MBS	9,584,924		10,487,791
Mortgage-backed securities (MBS):
U.S. obligation single-family MBS	293		333
Total	$	9,585,217	$	10,488,124

Fair Value March 31, 2020 December 31, 2019
Non-mortgage-backed securities (non-MBS):
U.S. Treasury obligations $ 9,860,650
$ 9,626,964
GSE obligations 2,126,978
1,988,259
Total non-MBS 11,987,628
11,615,223
Mortgage-backed securities (MBS):
U.S. obligation single-family MBS 445
470
Total $ 11,988,073
$ 11,615,693

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


	Three Months Ended March 31,
	2021		2020
Net unrealized gains (losses) on trading securities held at period end	$	(135,239)	$	372,406
Net gains (losses) on trading securities sold/matured during the period	(3,621)		0
Net gains (losses) on trading securities	$	(138,860)	$	372,406

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

Available-for-Sale Securities

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


	March 31, 2021
	Amortized Cost (1)		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Non-MBS:

GSE obligations	$	134,518	$	2,726	$	0	$	137,244
Total non-MBS	134,518		2,726		0		137,244
MBS:
GSE multi-family MBS	136,554		4,679		0		141,233
Total MBS	136,554		4,679		0		141,233
Total	$	271,072	$	7,405	$	0	$	278,477

	December 31, 2020
	Amortized Cost (1)		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Non-MBS:

GSE obligations	$	140,600	$	1,802	$	0	$	142,402
Total non-MBS	140,600		1,802		0		142,402
MBS:
GSE multi-family MBS	146,269		2,916		0		149,185
Total MBS	146,269		2,916		0		149,185
Total	$	286,869	$	4,718	$	0	$	291,587

(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, and excludes accrued interest receivable of (in thousands) $652 and $1,242 at March 31, 2021 and December 31, 2020.

All securities outstanding at March 31, 2021 and December 31, 2020 had gross unrealized gains.

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March 31, 2020

Amortized
Cost ⁽¹⁾

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Fair
Value
GSE obligations $ 142,609
$ 409
$ (944 ) $ 142,074
Total $ 142,609
$ 409
$ (944 ) $ 142,074

December 31, 2019

Amortized
Cost ⁽¹⁾

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Fair
Value
Certificates of deposit $ 1,410,000
$ 111
$ —
$ 1,410,111
GSE obligations 131,815
601
(342 ) 132,074
Total $ 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, and excludes accrued interest receivable of (in thousands) $493 and $5,149 at March 31, 2020 and December 31, 2019.

Table 3.4 summarizes the 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 3.4 - 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, 2021				December 31, 2020
Year of Maturity	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Non-MBS:
Due in 1 year or less	$	0	$	0	$	0	$	0
Due after 1 year through 5 years	82,893		84,158		11,248		11,309
Due after 5 years through 10 years	39,560		40,433		116,096		117,507
Due after 10 years	12,065		12,653		13,256		13,586
Total non-MBS	134,518		137,244		140,600		142,402
MBS (1)	136,554		141,233		146,269		149,185
Total	$	271,072	$	278,477	$	286,869	$	291,587

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
(1)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 ~~3.6~~3.5 - Interest Rate Payment Terms of Available-for-Sale Securities (in thousands)


	March 31, 2021		December 31, 2020
Amortized cost of non-MBS:
Fixed-rate	$	134,518	$	140,600
Total amortized cost of non-MBS	134,518		140,600
Amortized cost of MBS:
Fixed-rate	136,554		146,269
Total amortized cost of MBS	136,554		146,269
Total	$	271,072	$	286,869

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~~2021 or 2020.

~~2019~~.

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Held-to-Maturity Securities

Table ~~3.7~~3.6 - Held-to-Maturity Securities by Major Security Types (in thousands)


	March 31, 2020										March 31, 2021
	Amortized Cost ⁽¹⁾		Gross Unrecognized Holding Gains		Gross Unrecognized Holding Losses			Fair Value			Amortized Cost (1)		Gross Unrecognized Holding Gains		Gross Unrecognized Holding Losses		Fair Value
Non-MBS:										Non-MBS:

U.S. Treasury obligations	$	34,345	$	144	$	—		$	34,489	U.S. Treasury obligations	$	40,490	$	7	$	0	$	40,497

Total non-MBS	34,345		144		—			34,489		Total non-MBS	40,490		7		0		40,497
MBS:										MBS:
U.S. obligation single-family MBS	1,493,694		57,446		(373		)	1,550,767		U.S. obligation single-family MBS	877,941		28,596		0		906,537
GSE single-family MBS	4,232,995		116,453		(2,558		)	4,346,890		GSE single-family MBS	2,643,473		88,668		0		2,732,141
GSE multi-family MBS	6,809,592		28		(56,317		)	6,753,303		GSE multi-family MBS	5,349,448		6,186		(5,259)		5,350,375

Total MBS	12,536,281		173,927		(59,248		)	12,650,960		Total MBS	8,870,862		123,450		(5,259)		8,989,053
Total	$	12,570,626	$	174,071	$	(59,248	)	$	12,685,449	Total	$	8,911,352	$	123,457	$	(5,259)	$	9,029,550

	December 31, 2019										December 31, 2020
	Amortized Cost ⁽¹⁾		Gross Unrecognized Holding Gains		Gross Unrecognized Holding Losses			Fair Value			Amortized Cost (1)		Gross Unrecognized Holding Gains		Gross Unrecognized Holding Losses		Fair Value
Non-MBS:										Non-MBS:
U.S. Treasury obligations	$	35,171	$	5	$	—		$	35,176	U.S. Treasury obligations	$	41,398	$	1	$	0	$	41,399

Total non-MBS	35,171		5		—			35,176		Total non-MBS	41,398		1		0		41,399
MBS:										MBS:
U.S. obligation single-family MBS	1,670,783		13,499		(239		)	1,684,043		U.S. obligation single-family MBS	986,399		41,218		—		1,027,617
GSE single-family MBS	4,500,471		40,386		(24,072		)	4,516,785		GSE single-family MBS	3,013,326		105,657		(2)		3,118,981
GSE multi-family MBS	7,292,894		54		(27,745		)	7,265,203		GSE multi-family MBS	5,607,048		5,146		(8,055)		5,604,139

Total MBS	13,464,148		53,939		(52,056		)	13,466,031		Total MBS	9,606,773		152,021		(8,057)		9,750,737
Total	$	13,499,319	$	53,944	$	(52,056	)	$	13,501,207	Total	$	9,648,171	$	152,022	$	(8,057)	$	9,792,136


~~(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.

(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) $8,532 and $9,609 as of March 31, 2021 and December 31, 2020.

Table ~~3.8~~3.7 - Net Purchased Premiums Included in the Amortized Cost of MBS Classified as Held-to-Maturity (in thousands)


	March 31, 2021		December 31, 2020
Premiums	$	18,821	$	18,299
Discounts	(7,222)		(7,269)
Net purchased premiums	$	11,599	$	11,030

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

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Table ~~3.9~~3.8 - Held-to-Maturity Securities by Contractual Maturity (in thousands)


	March 31, 2021				December 31, 2020
Year of Maturity	Amortized Cost (1)		Fair Value		Amortized Cost (1)		Fair Value
Non-MBS:
Due in 1 year or less	$	40,490	$	40,497	$	41,398	$	41,399
Due after 1 year through 5 years	0		0		0		0
Due after 5 years through 10 years	0		0		0		0
Due after 10 years	0		0		0		0
Total non-MBS	40,490		40,497		41,398		41,399
MBS (2)	8,870,862		8,989,053		9,606,773		9,750,737
Total	$	8,911,352	$	9,029,550	$	9,648,171	$	9,792,136

March 31, 2020 December 31, 2019
Year of Maturity
Amortized Cost ⁽¹⁾
Fair Value
Amortized Cost ⁽¹⁾
Fair Value
Non-MBS:
Due in 1 year or less $ 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 34,345
34,489
35,171
35,176
MBS ⁽²⁾
12,536,281
12,650,960
13,464,148
13,466,031
Total $ 12,570,626
$ 12,685,449
$ 13,499,319
$ 13,501,207
(1)Carrying value equals amortized cost.


~~(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.

(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 ~~3.10~~3.9 - Interest Rate Payment Terms of Held-to-Maturity Securities (in thousands)


	March 31, 2021		December 31, 2020
Amortized cost of non-MBS:
Fixed-rate	$	40,490	$	41,398

Total amortized cost of non-MBS	40,490		41,398
Amortized cost of MBS:
Fixed-rate	3,237,301		3,677,199
Variable-rate	5,633,561		5,929,574
Total amortized cost of MBS	8,870,862		9,606,773
Total	$	8,911,352	$	9,648,171

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

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, ~~2020~~2021 and ~~2019,~~2020, the FHLB did 0t sell any held-to-maturity securities.

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

The FHLB evaluates available-for-sale and held-to-maturity investment securities 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 and 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, 2021 and December 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). At March 31, 2021 and December 31, 2020, ~~certain~~0 available-for-sale securities were in an unrealized loss position. These losses are considered temporary as the FHLB expects to recover the entire amortized cost basis on these available-for-sale investment securities and does not intend to sell these securities nor considers it more likely than not that it will be required to sell these

securities before its anticipated recovery of each security's remaining amortized cost basis. 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, 2021 and December 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, 2021 and December 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 the FHLB expect, any payment default on the instruments, and (3) in the case of 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 zero.

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Note 4 - 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 4.1 - Advances by Redemption Term (dollars in thousands)


	March 31, 2021				December 31, 2020
Redemption Term	Amount		Weighted Average Interest Rate		Amount		Weighted Average Interest Rate

Due in 1 year or less	$	11,768,921	0.76	%	$	12,064,753	0.75	%
Due after 1 year through 2 years	1,757,161		1.66		1,986,446		1.88
Due after 2 years through 3 years	1,904,266		2.29		1,445,139		2.15
Due after 3 years through 4 years	1,542,056		1.66		1,809,523		1.97
Due after 4 years through 5 years	3,400,359		0.82		2,361,604		1.02
Thereafter	3,783,772		1.55		5,339,932		1.34
Total principal amount	24,156,535		1.14		25,007,397		1.16
Commitment fees	(163)				(170)
Discount on Affordable Housing Program (AHP) Advances	(1,888)				(2,053)

Discounts	(1,812)				(2,046)
Hedging adjustments	213,364				358,173
Fair value option valuation adjustments and accrued interest	(598)				702
Total (1)	$	24,365,438			$	25,362,003

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) $23,872 and $26,426 as of March 31, 2021 and December 31, 2020.


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

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


Redemption Term or Next Call Date	March 31, 2021		December 31, 2020

Due in 1 year or less	$	15,094,822	$	15,375,354
Due after 1 year through 2 years	1,464,941		1,716,058
Due after 2 years through 3 years	1,878,036		1,434,377
Due after 3 years through 4 years	1,539,205		1,785,672
Due after 4 years through 5 years	417,259		877,504
Thereafter	3,762,272		3,818,432
Total principal amount	$	24,156,535	$	25,007,397

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

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.

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


Redemption Term or Next Put Date	March 31, 2021		December 31, 2020

Due in 1 year or less	$	14,206,171	$	14,407,003
Due after 1 year through 2 years	1,882,161		2,146,446
Due after 2 years through 3 years	1,884,266		1,485,139
Due after 3 years through 4 years	1,572,806		1,855,273
Due after 4 years through 5 years	3,400,359		2,346,604
Thereafter	1,210,772		2,766,932
Total principal amount	$	24,156,535	$	25,007,397

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

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


	March 31, 2021		December 31, 2020



Total fixed-rate (1)	$	18,589,559	$	19,195,790



Total variable-rate (1)	5,566,976		5,811,607
Total principal amount	$	24,156,535	$	25,007,397

March 31, 2020 December 31, 2019
Total fixed-rate ⁽¹⁾
$ 48,793,003
$ 36,113,108
Total variable-rate ⁽¹⁾
31,135,499
11,151,036
Total principal amount $ 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.


~~(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.~~

Credit Risk Exposure and Security Terms

The FHLB's Advances are made to member financial institutions. The FHLB manages its credit exposure to 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.~~

▪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. In addition, community financial institutions are eligible to utilize expanded statutory collateral provisions for small business and 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 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 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

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party that would otherwise be entitled to priority under 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, ~~2020~~2021 and December 31, ~~2019,~~2020, 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~~2021 or ~~2019~~.2020. At March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, the FHLB had rights to collateral on a member-by-member basis with an estimated value in excess of its outstanding extensions of credit.

Based upon the collateral held as security, its credit extension and collateral policies and the repayment history on Advances, the FHLB did not expect any credit losses on Advances as of March 31, ~~2020~~2021 and, therefore, 0 allowance for credit losses on Advances was recorded. For the same reasons, the FHLB did 0t record any allowance for credit losses on Advances at December 31, ~~2019.~~2020.

Advance Concentrations

The FHLB's Advances are concentrated in commercial banks, savings institutions, and insurance companies. Advance borrower concentrations can change significantly due to members' ability to quickly increase or decrease their amount of Advances based on their current funding needs.

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, 2021					December 31, 2020
	Principal		% of Total Principal Amount of Advances			Principal		% of Total Principal Amount of Advances
U.S. Bank, N.A.	$	4,273	18	%	U.S. Bank, N.A.	$	4,273	17	%
Third Federal Savings and Loan Association	3,292		14		Third Federal Savings and Loan Association	3,443		14
Protective Life Insurance Company	2,285		9		Nationwide Life Insurance Company	2,062		8
Nationwide Life Insurance Company	2,036		8		Protective Life Insurance Company	1,955		8
Western-Southern Life Assurance Co.	1,477		6		Western-Southern Life Assurance Co.	1,344		5
Total	$	13,363	55	%	Total	$	13,077	52	%

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.

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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~~.


	March 31, 2021		December 31, 2020
Fixed rate medium-term single-family mortgage loans (1)	$	710,566	$	731,756
Fixed rate long-term single-family mortgage loans	7,680,137		8,584,239
Total unpaid principal balance	8,390,703		9,315,995
Premiums	188,611		208,281
Discounts	(1,497)		(1,636)
Hedging basis adjustments (2)	20,892		26,114
Total mortgage loans held for portfolio (3)	8,598,709		9,548,754
Allowance for credit losses on mortgage loans	(248)		(248)
Mortgage loans held for portfolio, net	$	8,598,461	$	9,548,506

(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) $27,152 and $30,109 at March 31, 2021 and December 31, 2020.

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


	March 31, 2020		December 31, 2019			March 31, 2021		December 31, 2020
Conventional mortgage loans	$	11,423,290	$	10,750,526	Conventional mortgage loans	$	8,219,067	$	9,133,942
FHA mortgage loans	220,449		230,416
Federal Housing Administration (FHA) mortgage loans					Federal Housing Administration (FHA) mortgage loans	171,636		182,053
Total unpaid principal balance	$	11,643,739	$	10,980,942	Total unpaid principal balance	$	8,390,703	$	9,315,995

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, 2021					December 31, 2020
	Principal		% of Total			Principal		% of Total
Union Savings Bank	$	2,384	28	%	Union Savings Bank	$	2,826	30	%
Guardian Savings Bank FSB	695		8		Guardian Savings Bank FSB	796		9

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.

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Table 5.4 - Changes in the LRA (in thousands)


	Three Months Ended

	March 31, 2021
LRA at beginning of year	$	246,435
Additions	2,971
Claims	(3)
Scheduled distributions	(1,952)
LRA at end of period	$	247,451

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

Mortgage Loans Forbearance Plans. In response to the COVID-19 pandemic, which has caused economic strain on many home loan borrowers, the FHLB’s mortgage loan servicers may grant a forbearance period to borrowers who have had COVID-19 related hardships regardless of the payment status of the loan at the time of the request. Based on the most recent information received from mortgage servicers, as of March 31, 2021, there was approximately (in thousands) $57,899 in unpaid principal balance of conventional mortgage loans under a forbearance plan as a result of COVID-19, which represented one percent of conventional mortgage loans held for portfolio.

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 a full payment of principal and interest within one month of its due date. Although certain loans have been granted a forbearance period as noted above, there has been no change in the terms of the loan. Accordingly, when a borrower fails to make timely payments of principal and/or interest for loans under forbearance, they are considered past due. Table 5.5presents the payment status of conventional mortgage loans. As of March 31, 2021, (in thousands) $7,872 in ~~accordance with the terms~~unpaid principal balance of ~~the loan.~~ conventional loans under forbearance had a current payment status, (in thousands) $3,880 was 30 to 59 days past due, (in thousands) $5,003 was 60 to 89 days past due, and (in thousands) $41,144 was greater than 90 days past due.

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


	March 31, 2021
	Origination Year
Payment status, at amortized cost:	Prior to 2017		2017 to March 31, 2021		Total
Past due 30-59 days	$	19,950	$	15,306	$	35,256
Past due 60-89 days	6,432		3,840		10,272
Past due 90 days or more	27,313		30,436		57,749
Total past due mortgage loans	53,695		49,582		103,277
Current mortgage loans	3,565,220		4,757,177		8,322,397
Total conventional mortgage loans	$	3,618,915	$	4,806,759	$	8,425,674

	December 31, 2020
	Origination Year
Payment status, at amortized cost:	Prior to 2016		2016 to 2020		Total
Past due 30-59 days delinquent	$	16,812	$	19,036	$	35,848
Past due 60-89 days delinquent	7,245		7,553		14,798
Past due 90 days or more delinquent	24,651		39,921		64,572
Total past due	48,708		66,510		115,218
Total current mortgage loans	2,555,139		6,694,837		9,249,976
Total mortgage loans	$	2,603,847	$	6,761,347	$	9,365,194

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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~~Table 5.6 ~~present the payment status of conventional mortgage loans and~~presents other delinquency ~~statistics.~~statistics of mortgage loans.

~~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, 2021
Amortized Cost:	Conventional MPP Loans			FHA Loans			Total
In process of foreclosure (1)	$	5,449		$	546		$	5,995
Serious delinquency rate (2)	0.69		%	2.98		%	0.73		%
Past due 90 days or more still accruing interest (3)	$	52,285		$	5,153		$	57,438
Loans on non-accrual status	$	6,482		$	0		$	6,482

	December 31, 2020
Amortized Cost:	Conventional MPP Loans			FHA Loans			Total
In process of foreclosure (1)	$	5,031		$	617		$	5,648
Serious delinquency rate (2)	0.69		%	3.28		%	0.74		%
Past due 90 days or more still accruing interest (3)	$	58,881		$	5,961		$	64,842
Loans on non-accrual status	$	6,721		$	0		$	6,721

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. During the three months endedMarch 31, 2021 and year ended December 31, 2020, there were foreclosure moratoriums enacted in response to the COVID-19 pandemic.


~~(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.

(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, ~~2020~~2021 or December 31, ~~2019.~~2020.

Evaluation of Current Expected Credit Losses

~~See~~ ~~Note 10 - Allowance for Credit Losses~~ ~~in the FHLB's 2019 Annual Report on Form 10-K, for information on the prior methodology for evaluating credit losses.~~

MortgageLoans- 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 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 - Conventional MPP. Conventional loans are evaluated collectively when similar risk characteristics ~~exist. Conventional~~exist; 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 credit losses through analyses that include consideration of various loan portfolio and collateral-related characteristics, such as past performance, current conditions, and reasonable and supportable forecasts of expected economic conditions. The 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 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 includes a forecast of home prices over the entire contractual terms of its conventional loans rather than a reversion to historical home price trends after an initial forecast period. The FHLB also incorporates associated credit enhancements to determine estimated expected credit losses.

If a loan is required to be evaluated on an individual basis, the FHLB estimates the present value of expected cash flows, the loan's observable market price, or 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 may estimate the 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 is equal to the difference between the amortized cost of the loan and the estimated

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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.

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 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 table presents a rollforward of the allowance for credit losses on conventional mortgage loans.

Table 5.7 - Allowance for Credit Losses on Conventional Mortgage Loans (in thousands)


	Three Months Ended March 31,
	2021		2020
Balance, beginning of period	$	248	$	711
Adjustment for cumulative effect of accounting change	0		(366)
Net charge offs	0		(48)

Balance, end of period	$	248	$	297

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

Note 6 - 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 117 - Derivatives and Hedging Activities in the FHLB's ~~2019~~2020 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 with a counterparty, ~~(uncleared derivatives)~~referred to as uncleared derivatives, or cleared through a Futures Commission Merchant (i.e., clearing agent) with a Derivative Clearing Organization, ~~(cleared derivatives).~~referred to as 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.

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


	March 31, 2021
	Notional Amount of Derivatives		Derivative Assets		Derivative Liabilities
Derivatives designated as fair value hedging instruments:
Interest rate swaps	$	10,278,209	$	3,354	$	102,648
Derivatives not designated as hedging instruments:
Interest rate swaps	10,549,264		4,040		120
Interest rate swaptions	1,740,000		4,502		0

Mortgage delivery commitments	87,643		22		953
Total derivatives not designated as hedging instruments	12,376,907		8,564		1,073
Total derivatives before adjustments	$	22,655,116	11,918		103,721
Netting adjustments and cash collateral (1)			185,295		(102,748)
Total derivative assets and total derivative liabilities			$	197,213	$	973

	December 31, 2020
	Notional Amount of Derivatives		Derivative Assets		Derivative Liabilities
Derivatives designated as fair value hedging instruments:
Interest rate swaps	$	10,477,703	$	272	$	163,174
Derivatives not designated as hedging instruments:
Interest rate swaps	13,267,539		691		2,563
Interest rate swaptions	2,175,000		713		0

Mortgage delivery commitments	137,352		1,056		0
Total derivatives not designated as hedging instruments	15,579,891		2,460		2,563
Total derivatives before adjustments	$	26,057,594	2,732		165,737
Netting adjustments and cash collateral (1)			213,156		(161,924)
Total derivative assets and total derivative liabilities			$	215,888	$	3,813

(1)Amounts represent the application of the netting requirements that allow the FHLB to settle positive and negative positions, and also cash collateral, including accrued interest, held or placed by the FHLB with the same clearing agent and/or counterparty. Cash collateral posted, including accrued interest, was (in thousands) $289,773 and $375,390 at March 31, 2021 and December 31, 2020. Cash collateral received, including accrued interest, was (in thousands) $1,730 and $310 at March 31, 2021 and December 31, 2020.

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March 31, 2020
Notional Amount of Derivatives Derivative Assets Derivative Liabilities
Derivatives designated as fair value hedging instruments:
Interest rate swaps $ 11,947,085
$ 5,467
$ 231,639
Derivatives not designated as hedging instruments:
Interest rate swaps 24,987,214
8,062
10,291
Interest rate swaptions 2,901,000
5,945
—
Forward rate agreements 1,392,000
1,558
15,964
Mortgage delivery commitments 764,574
10,972
823
Total derivatives not designated as hedging instruments 30,044,788
26,537
27,078
Total derivatives before adjustments $ 41,991,873
32,004
258,717
Netting adjustments and cash collateral ⁽¹⁾
320,406
(236,026 )
Total derivative assets and total derivative liabilities $ 352,410
$ 22,691

December 31, 2019
Notional Amount of Derivatives Derivative Assets Derivative Liabilities
Derivatives designated as fair value hedging instruments:
Interest rate swaps $ 9,310,089
$ 7,227
$ 53,641
Derivatives not designated as hedging instruments:
Interest rate swaps 28,501,469
9,685
363
Interest rate swaptions 6,000,000
12,464
—
Forward rate agreements 849,000
21
782
Mortgage delivery commitments 936,269
2,798
64
Total derivatives not designated as hedging instruments 36,286,738
24,968
1,209
Total derivatives before adjustments $ 45,596,827
32,195
54,850
Netting adjustments and cash collateral ⁽¹⁾
234,970
(53,540 )
Total derivative assets and total derivative liabilities $ 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) $559,952 and $293,148 at March 31, 2020 and December 31, 2019. Cash collateral received and related accrued interest was (in thousands) $3,520 and $4,638 at March 31, 2020 and December 31, 2019.

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

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


	Three Months Ended March 31, 2021
	Advances		Available-for-Sale Securities		Consolidated Bonds
Total interest income (expense) recorded in the Statements of Income	$	41,160	$	1,335	$	(96,186)
Impact of Fair Value Hedging Relationships
Interest rate swaps:
Net interest settlements	$	(32,844)	$	(879)	$	251
Gain (loss) on derivatives	148,614		16,607		(375)
Gain (loss) on hedged items	(144,809)		(15,774)		370
Effect on net interest income	$	(29,039)	$	(46)	$	246


	Three Months Ended March 31, 2020
	Advances		Available-for-Sale Securities		Consolidated Bonds
Total interest income (expense) recorded in the Statements of Income	$	172,167	$	3,396	$	(185,987)
Impact of Fair Value Hedging Relationships
Interest rate swaps:
Net interest settlements	$	(1,714)	$	(274)	$	384
Gain (loss) on derivatives	(404,311)		(11,183)		2,523
Gain (loss) on hedged items	390,464		10,795		(2,546)
Effect on net interest income	$	(15,561)	$	(662)	$	361

Three Months Ended March 31, 2020
Advances Available-for-sale Securities Consolidated Bonds
Total interest income (expense) recorded in the Statements of Income $ 172,167
$ 3,396
$ (185,987 )
Impact of Fair Value Hedging Relationships on the Statements of Income ⁽¹⁾

Interest income/expense:
Net interest settlements $ (1,714 ) $ (274 ) $ 384
Gain (loss) on derivatives (404,311 ) (11,183 ) 2,523
Gain (loss) on hedged items 390,464
10,795
(2,546 )
Effect on net interest income $ (15,561 ) $ (662 ) $ 361

Three Months Ended March 31, 2019
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 $ 13,676
$ (15 ) $ 195
Gain (loss) on derivatives (52,594 ) (2,228 ) 1,042
Gain (loss) on hedged items 51,621
2,212
(1,161 )
Effect on net interest income $ 12,703
$ (31 ) $ 76


~~(1)~~	~~Includes interest rate swaps.~~

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


	March 31, 2021
	Advances		Available-for-Sale Securities		Consolidated Bonds
Amortized cost of hedged asset or liability (1)	$	10,056,759	$	271,072	$	209,389
Fair value hedging adjustments
Basis adjustments for active hedging relationships included in amortized cost	$	211,948	$	(4,013)	$	1,716
Basis adjustments for discontinued hedging relationships included in amortized cost	1,416		380		0
Total amount of fair value hedging basis adjustments	$	213,364	$	(3,633)	$	1,716

	December 31, 2020
	Advances		Available-for-Sale Securities		Consolidated Bonds
Amortized cost of hedged asset or liability (1)	$	10,483,218	$	286,869	$	132,852
Fair value hedging adjustments
Basis adjustments for active hedging relationships included in amortized cost	$	356,624	$	11,751	$	2,086
Basis adjustments for discontinued hedging relationships included in amortized cost	1,549		389		0
Total amount of fair value hedging basis adjustments	$	358,173	$	12,140	$	2,086

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

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
Advances $ 12,277,322
$ 499,638
$ 922
$ 500,560
Available-for-sale securities 142,609
18,110
—
18,110
Consolidated Bonds 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 6.4 presents net gains (losses) recorded in non-interest income (loss) on derivatives not designated as hedging instruments.

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


	Three Months Ended March 31,
	2021		2020


Derivatives not designated as hedging instruments:
Economic hedges:
Interest rate swaps	$	140,780	$	(367,001)
Interest rate swaptions	3,789		92,077
Forward rate agreements	0		(25,884)
Net interest settlements	(44,208)		(11,282)
Mortgage delivery commitments	(3,264)		17,094
Total net gains (losses) related to derivatives not designated as hedging instruments	97,097		(294,996)
Price alignment amount (1)	47		1,030
Net gains (losses) on derivatives and hedging activities	$	97,144	$	(293,966)

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

Three Months Ended March 31,
2020 2019
Derivatives not designated as hedging instruments:
Economic hedges:
Interest rate swaps $ (367,001 ) $ (6,530 )
Interest rate swaptions 92,077
(12,476 )
Forward rate agreements (25,884 ) (2,167 )
Net interest settlements (11,282 ) (8,167 )
Mortgage delivery commitments 17,094
3,356
Total net gains (losses) related to derivatives not designated as hedging instruments (294,996 ) (25,984 )
Price alignment amount ⁽¹⁾
1,030
25
Net gains (losses) on derivatives and hedging activities $ (293,966 ) $ (25,959 )

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~~(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 with the collateral delivery threshold 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. On the Statements of Cash Flows, the variation margin cash payments, or daily settlement payments, are included in net change in derivative and hedging activities, as an operating activity.

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, ~~2020,~~2021, 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 it expects that the exercise of those offsetting rights by a non-defaulting party under these transactions 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.

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Table 6.5 presents separately the fair value of derivative instruments meeting or not meeting netting requirements, including the related collateral. At March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, 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 6.5 - Offsetting of Derivative Assets and Derivative Liabilities (in thousands)

March 31, 2020
Derivative Instruments Meeting Netting Requirements
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 $ 7,148
$ (7,100 ) $ 12,530
$ 12,578
Cleared 12,326
327,506
—
339,832
Total

$ 352,410
Derivative Liabilities:
Uncleared $ 235,907
$ (230,003 ) $ 16,787
$ 22,691
Cleared 6,023
(6,023 ) —
—
Total

$ 22,691

December 31, 2019
Derivative Instruments Meeting Netting Requirements
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 $ 16,637
$ (13,903 ) $ 2,819
$ 5,553
Cleared 12,739
248,873
—
261,612
Total

$ 267,165
Derivative Liabilities:
Uncleared $ 53,533
$ (53,069 ) $ 846
$ 1,310
Cleared 471
(471 ) —
—
Total

$ 1,310

~~(1)~~

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


	March 31, 2021
	Derivative Instruments Meeting Netting Requirements
	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	$	6,185	$	(5,113)	$	22	$	1,094
Cleared	5,711		190,408		0		196,119
Total							$	197,213
Derivative Liabilities:
Uncleared	$	102,739	$	(102,719)	$	953	$	973
Cleared	29		(29)		0		0
Total							$	973

	December 31, 2020
	Derivative Instruments Meeting Netting Requirements
	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	$	1,047	$	(1,047)	$	1,056	$	1,056
Cleared	629		214,203		0		214,832
Total							$	215,888
Derivative Liabilities:
Uncleared	$	161,633	$	(157,820)	$	0	$	3,813
Cleared	4,104		(4,104)		0		0
Total							$	3,813

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

Note 7 - Deposits

Table 7.1 - Deposits (in thousands)


	March 31, 2021		December 31, 2020
Interest-bearing:
Demand and overnight	$	1,302,638	$	1,190,508
Term	88,925		123,675
Other	10,926		13,019
Total interest-bearing deposits	$	1,402,489	$	1,327,202

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

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Note 8 - Consolidated Obligations

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


	Book Value		Principal Amount		Weighted Average Interest Rate (1)
March 31, 2021	$	26,872,494	$	26,873,163	0.03	%
December 31, 2020	$	27,500,244	$	27,502,730	0.11	%

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.


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

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


	March 31, 2021				December 31, 2020
Year of Original Contractual Maturity	Amount		Weighted Average Interest Rate		Amount		Weighted Average Interest Rate
Due in 1 year or less	$	15,205,595	0.61	%	$	18,676,595	0.72	%
Due after 1 year through 2 years	2,857,830		2.31		2,728,885		2.38
Due after 2 years through 3 years	2,967,175		2.08		3,388,120		2.09
Due after 3 years through 4 years	1,676,405		2.14		1,793,405		2.21
Due after 4 years through 5 years	1,860,000		1.61		1,910,000		1.45
Thereafter	3,203,000		2.28		3,454,000		2.39

Total principal amount	27,770,005		1.30		31,951,005		1.32
Premiums	38,880				43,235
Discounts	(20,003)				(21,403)
Hedging adjustments	1,716				2,086
Fair value option valuation adjustment and accrued interest	7,843				21,388
Total	$	27,798,441			$	31,996,311

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

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


	March 31, 2021		December 31, 2020
Principal Amount of Consolidated Bonds:
Non-callable	$	23,454,005	$	26,539,005
Callable	4,316,000		5,412,000
Total principal amount	$	27,770,005	$	31,951,005

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

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Table 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 Original Contractual Maturity or Next Call Date	March 31, 2021		December 31, 2020
Due in 1 year or less	$	19,521,595	$	22,968,595
Due after 1 year through 2 years	2,832,830		2,823,885
Due after 2 years through 3 years	1,962,175		2,452,120
Due after 3 years through 4 years	1,160,405		1,253,405
Due after 4 years through 5 years	723,000		728,000
Thereafter	1,570,000		1,725,000

Total principal amount	$	27,770,005	$	31,951,005

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


	March 31, 2021		December 31, 2020
Principal Amount of Consolidated Bonds:
Fixed-rate	$	18,932,005	$	21,312,005
Variable-rate	8,838,000		10,639,000

Total principal amount	$	27,770,005	$	31,951,005

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

Note 9 - 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 9.1 - Analysis of AHP Liability (in thousands)



Balance at December 31, 2020	$	110,772
Assessments (current year additions)	2,091
Subsidy uses, net	(4,621)
Balance at March 31, 2021	$	108,242

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

Note 10 - Capital

~~Note 10~~
~~- Capital~~

Table 10.1 - Capital Requirements (dollars in thousands)


	March 31, 2021						December 31, 2020
	Minimum Requirement			Actual			Minimum Requirement			Actual
Risk-based capital	$	651,154		$	4,072,140		$	539,321		$	3,964,353
Capital-to-assets ratio (regulatory)	4.00		%	6.72		%	4.00		%	6.07		%
Regulatory capital	$	2,425,354		$	4,072,140		$	2,611,850		$	3,964,353
Leverage capital-to-assets ratio (regulatory)	5.00		%	10.07		%	5.00		%	9.11		%
Leverage capital	$	3,031,693		$	6,108,210		$	3,264,812		$	5,946,530

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

Restricted Retained Earnings. At March 31, ~~2020~~2021 and December 31, ~~2019~~2020 the FHLB had (in thousands) ~~$461,979~~$505,066 and $~~446,048~~$501,321 in restricted retained earnings. These restricted retained earnings are not available to pay dividends but are available to absorb unexpected losses, if any, that an FHLBank may experience.

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



Balance, December 31, 2020	$	19,454
Capital stock subject to mandatory redemption reclassified from equity	1,003



Repurchase/redemption of mandatorily redeemable capital stock	(5,127)


Balance, March 31, 2021	$	15,330

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

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

Contractual Year of Redemption March 31, 2020 December 31, 2019
Year 1 $ 224
$ 371
Year 2 337
298
Year 3 1,142
1,129
Year 4 2,903
2,955
Year 5 551,808
1,931
Thereafter ⁽¹⁾
650
650
Past contractual redemption date due to remaining activity ⁽²⁾
14,482
14,335
Total $ 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. 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.


Contractual Year of Redemption	March 31, 2021		December 31, 2020
Year 1	$	165	$	156
Year 2	1,142		1,124
Year 3	1,821		2,167
Year 4	270		391
Year 5	739		3,142
Thereafter (1)	0		650
Past contractual redemption date due to remaining activity (2)	11,193		11,824
Total	$	15,330	$	19,454

(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, had their membership terminated no later than February 19, 2021. 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 11 - Accumulated Other Comprehensive Income (Loss)

The following tables summarize the changes in accumulated other comprehensive income (loss) for the three months ended March 31, ~~2020~~2021 and ~~2019.~~2020.

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


	Net unrealized gains (losses) on available-for-sale securities			Pension and postretirement benefits			Total accumulated other comprehensive income (loss)				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	)	BALANCE, DECEMBER 31, 2019	$	370	$	(16,764)	$	(16,394)
Other comprehensive income before reclassification:										Other comprehensive income before reclassification:
Net unrealized gains (losses)	(905		)	—			(905		)	Net unrealized gains (losses)	(905)		0		(905)

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

Amortization - pension and postretirement benefits	—			563			563			Amortization - pension and postretirement benefits	0		563		563
Net current period other comprehensive income (loss)	(905		)	563			(342		)	Net current period other comprehensive income (loss)	(905)		563		(342)
BALANCE, MARCH 31, 2020	$	(535	)	$	(16,201	)	$	(16,736	)	BALANCE, MARCH 31, 2020	$	(535)	$	(16,201)	$	(16,736)

BALANCE, DECEMBER 31, 2020										BALANCE, DECEMBER 31, 2020	$	4,718	$	(19,703)	$	(14,985)
Other comprehensive income before reclassification:										Other comprehensive income before reclassification:
Net unrealized gains (losses)										Net unrealized gains (losses)	2,687		0		2,687

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

Amortization - pension and postretirement benefits										Amortization - pension and postretirement benefits	0		676		676
Net current period other comprehensive income (loss)										Net current period other comprehensive income (loss)	2,687		676		3,363
BALANCE, MARCH 31, 2021										BALANCE, MARCH 31, 2021	$	7,405	$	(19,027)	$	(11,622)

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Note 12 - 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 ~~$1,518,000~~$1,696,000 and ~~$1,968,000~~$1,518,000 in the three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, respectively.

Qualified Defined Contribution Plan. The FHLB also participates in the ~~Pentegra~~Fidelity 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 ~~$538,000~~$603,000 and ~~$497,000~~$538,000 in the three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, respectively.

~~Nonqualified~~Non-qualified Supplemental Defined Benefit Retirement Plan (Defined Benefit Retirement Plan). The FHLB maintains a ~~nonqualified,~~non-qualified, 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 12.1 - Net Periodic Benefit Cost (in thousands)


	Three Months Ended March 31,
	Defined Benefit Retirement Plan				Postretirement Benefits Plan
	2021		2020		2021		2020
Net Periodic Benefit Cost
Service cost	$	326	$	275	$	2	$	2
Interest cost	274		331		29		36

Amortization of net loss	663		563		13		0
Net periodic benefit cost	$	1,263	$	1,169	$	44	$	38

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

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.

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Note 13 - Segment Information

The FHLB has identified 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 13.1 - Financial Performance by Operating Segment (in thousands)



	Three Months Ended March 31,
	Traditional Member Finance		MPP		Total
2021
Net interest income (loss)	$	87,382	$	(11,476)	$	75,906


Non-interest income (loss)	(31,026)		(539)		(31,565)
Non-interest expense	20,724		2,799		23,523
Income (loss) before assessments	35,632		(14,814)		20,818
Affordable Housing Program assessments	3,572		(1,481)		2,091
Net income (loss)	$	32,060	$	(13,333)	$	18,727
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

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 13.2 - Asset Balances by Operating Segment (in thousands)


	Assets
	Traditional Member Finance		MPP		Total
March 31, 2021	$	49,101,092	$	11,532,759	$	60,633,851
December 31, 2020	53,356,209		11,940,030		65,296,239

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

Note 14 - 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

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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.~~liability, which are supported by limited to no market activity and reflect the FHLB's own assumptions.

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. The FHLB did not have any transfers of assets or liabilities into or out of Level 3 of the fair value hierarchy during the three months ended March 31, ~~2020~~2021 or 2020.

~~2019~~.

Table 14.1 presents the net carrying value/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 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 14.2 for further details about the financial assets and liabilities held at fair value on either a recurring or nonrecurring basis.

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Table 14.1 - Fair Value Summary (in thousands)


	March 31, 2021
			Fair Value
Financial Instruments	Net Carrying Value		Total		Level 1		Level 2		Level 3		Netting Adjustments and Cash Collateral (1)
Assets:
Cash and due from banks	$	3,113,972	$	3,113,972	$	3,113,972	$	0	$	0	$	—
Interest-bearing deposits	340,252		340,252		0		340,252		0		—
Securities purchased under agreements to resell	288,300		288,300		0		288,300		0		—
Federal funds sold	4,805,000		4,805,000		0		4,805,000		0		—
Trading securities	9,585,217		9,585,217		0		9,585,217		0		—
Available-for-sale securities	278,477		278,477		0		278,477		0		—
Held-to-maturity securities	8,911,352		9,029,550		0		9,029,550		0		—
Advances (2)	24,365,438		24,581,477		0		24,581,477		0		—
Mortgage loans held for portfolio	8,598,461		8,782,625		0		8,725,817		56,808		—
Accrued interest receivable	122,676		122,676		0		122,676		0		—
Derivative assets	197,213		197,213		0		11,918		0		185,295
Liabilities:
Deposits	1,402,489		1,402,497		0		1,402,497		0		—
Consolidated Obligations:
Discount Notes (3)	26,872,494		26,872,966		0		26,872,966		0		—
Bonds (4)	27,798,441		28,330,775		0		28,330,775		0		—
Mandatorily redeemable capital stock	15,330		15,330		15,330		0		0		—
Accrued interest payable	67,314		67,314		0		67,314		0		—
Derivative liabilities	973		973		0		103,721		0		(102,748)

(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) $25,902 of Advances recorded under the fair value option at March 31, 2021.

(3)Includes (in thousands) $1,019,989 of Consolidated Obligation Discount Notes recorded under the fair value option at March 31, 2021.

(4)Includes (in thousands) $448,843 of Consolidated Obligation Bonds recorded under the fair value option at March 31, 2021.

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March 31, 2020
Fair Value
Financial Instruments Carrying Value Total Level 1 Level 2 Level 3
Netting Adjustments and Cash Collateral ⁽¹⁾
Assets:
Cash and due from banks $ 3,923,890
$ 3,923,890
$ 3,923,890
$ —
$ —
$ —
Interest-bearing deposits 780,081
780,081
—
780,081
—
—
Securities purchased under agreements to resell 183,504
183,506
—
183,506
—
—
Trading securities 11,988,073
11,988,073
—
11,988,073
—
—
Available-for-sale securities 142,074
142,074
—
142,074
—
—
Held-to-maturity securities 12,570,626
12,685,449
—
12,685,449
—
—
Advances ⁽²⁾
80,424,950
80,413,947
—
80,413,947
—
—
Mortgage loans held for portfolio, net 11,923,078
12,369,024
—
12,357,555
11,469
—
Accrued interest receivable 197,718
197,718
—
197,718
—
—
Derivative assets 352,410
352,410
—
32,004
—
320,406
Liabilities:
Deposits 1,185,476
1,185,669
—
1,185,669
—
—
Consolidated Obligations:
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 571,546
571,546
571,546
—
—
—
Accrued interest payable 98,157
98,157
—
98,157
—
—
Derivative liabilities 22,691
22,691
—
258,717
—
(236,026 )


~~(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) $5,385 of Advances recorded under the fair value option at~~ ~~March 31, 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)~~ ~~$4,359,486~~ ~~of Consolidated Obligation Bonds recorded under the fair value option at~~ ~~March 31, 2020~~.


	December 31, 2020
			Fair Value
Financial Instruments	Carrying Value		Total		Level 1		Level 2		Level 3		Netting Adjustments and Cash Collateral (1)
Assets:
Cash and due from banks	$	2,984,073	$	2,984,073	$	2,984,073	$	0	$	0	$	—
Interest-bearing deposits	555,104		555,104		0		555,104		0		—
Securities purchased under agreements to resell	1,818,268		1,818,268		0		1,818,268		0		—
Federal funds sold	4,240,000		4,240,000		0		4,240,000		0		—
Trading securities	10,488,124		10,488,124		0		10,488,124		0		—
Available-for-sale securities	291,587		291,587		0		291,587		0		—
Held-to-maturity securities	9,648,171		9,792,136		0		9,792,136		0		—
Advances (2)	25,362,003		25,573,785		0		25,573,785		0		—
Mortgage loans held for portfolio	9,548,506		9,861,802		0		9,798,019		63,783		—
Accrued interest receivable	113,701		113,701		0		113,701		0		—
Derivative assets	215,888		215,888		0		2,732		0		213,156
Liabilities:
Deposits	1,327,202		1,327,267		0		1,327,267		0		—
Consolidated Obligations:
Discount Notes	27,500,244		27,501,296		0		27,501,296		0		—
Bonds (3)	31,996,311		32,785,647		0		32,785,647		0		—
Mandatorily redeemable capital stock	19,454		19,454		19,454		0		0		—
Accrued interest payable	77,521		77,521		0		77,521		0		—
Derivative liabilities	3,813		3,813		0		165,737		0		(161,924)

(2)Includes (in thousands) $27,202 of Advances recorded under the fair value option at December 31, 2020.

(3)Includes (in thousands) $2,262,388 of Consolidated Obligation Bonds recorded under the fair value option at December 31, 2020.

December 31, 2019
Fair Value
Financial Instruments Carrying Value Total Level 1 Level 2 Level 3
Netting Adjustments and Cash Collateral ⁽¹⁾
Assets:
Cash and due from banks $ 20,608
$ 20,608
$ 20,608
$ —
$ —
$ —
Interest-bearing deposits 550,160
550,160
—
550,160
—
—
Securities purchased under agreements to resell 2,348,584

2,348,607
—
2,348,607
—
—
Federal funds sold 4,833,000
4,833,000
—
4,833,000
—
—
Trading securities 11,615,693
11,615,693
—
11,615,693
—
—
Available-for-sale securities 1,542,185
1,542,185
—
1,542,185
—
—
Held-to-maturity securities 13,499,319
13,501,207
—
13,501,207
—
—
Advances⁽²⁾
47,369,573
47,458,028
—
47,458,028
—
—
Mortgage loans held for portfolio, net 11,235,353
11,437,180
—
11,424,857
12,323
—
Accrued interest receivable 182,252
182,252
—
182,252
—
—
Derivative assets 267,165
267,165
—
32,195
—
234,970
Liabilities:
Deposits 951,296
951,343
—
951,343
—
—
Consolidated Obligations:
Discount Notes⁽³⁾
49,084,219
49,086,723
—
49,086,723
—
—
Bonds⁽⁴⁾
38,439,724
38,832,230
—
38,832,230
—
—
Mandatorily redeemable capital stock 21,669
21,669
21,669
—
—
—
Accrued interest payable 126,091
126,091
—
126,091
—
—
Derivative liabilities 1,310
1,310
—
54,850
—
(53,540 )


~~(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)~~ ~~$5,238~~ ~~of Advances recorded under the fair value option at~~ ~~December 31, 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)~~ ~~$4,757,177~~ ~~of Consolidated Obligation Bonds recorded under the fair value option at~~ ~~December 31, 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 1915 - Fair Value

Disclosures in the FHLB's ~~2019~~2020 Annual Report on Form 10-K. There have been no significant changes in the valuation

methodologies during ~~2020.~~the three months ended March 31, 2021.

Table of Contents

Fair Value Measurements.

Table 14.2 presents the fair value of financial assets and liabilities that are recorded on a recurring or nonrecurring basis at March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, by level within the fair value hierarchy. The FHLB records nonrecurring fair value adjustments to reflect partial write-downs on certain mortgage loans.

Table 14.2 - Fair Value Measurements (in thousands)


	Fair Value Measurements at March 31, 2021
	Total		Level 1		Level 2		Level 3		Netting Adjustments and Cash Collateral (1)
Recurring fair value measurements - Assets
Trading securities:
U.S. Treasury obligations	$	7,573,745	$	0	$	7,573,745	$	0	$	—
GSE obligations	2,011,179		0		2,011,179		0		—
U.S. obligation single-family MBS	293		0		293		0		—
Total trading securities	9,585,217		0		9,585,217		0		—
Available-for-sale securities:


GSE obligations	137,244		0		137,244		0		—
GSE multi-family MBS	141,233		0		141,233		0		—
Total available-for-sale securities	278,477		0		278,477		0		—
Advances	25,902		0		25,902		0		—
Derivative assets:
Interest rate related	197,191		0		11,896		0		185,295

Mortgage delivery commitments	22		0		22		0		—
Total derivative assets	197,213		0		11,918		0		185,295
Total assets at fair value	$	10,086,809	$	0	$	9,901,514	$	0	$	185,295

Recurring fair value measurements - Liabilities
Consolidated Obligations:
Discount Notes	$	1,019,989	$	0	$	1,019,989	$	0	$	—
Bonds	448,843		0		448,843		0		—
Total Consolidated Obligations	1,468,832		0		1,468,832		0		—
Derivative liabilities:
Interest rate related	20		0		102,768		0		(102,748)

Mortgage delivery commitments	953		0		953		0		—
Total derivative liabilities	973		0		103,721		0		(102,748)
Total liabilities at fair value	$	1,469,805	$	0	$	1,572,553	$	0	$	(102,748)

Table of Contents

Fair Value Measurements at March 31, 2020
Total Level 1 Level 2 Level 3
Netting Adjustments and Cash Collateral ⁽¹⁾
Recurring fair value measurements - Assets
Trading securities:
U.S. Treasury obligations $ 9,860,650
$ —
$ 9,860,650
$ —
$ —
GSE obligations 2,126,978
—
2,126,978
—
—
U.S. obligation single-family MBS 445
—
445
—
—
Total trading securities 11,988,073
—
11,988,073
—
—
Available-for-sale securities:
GSE obligations 142,074
—
142,074
—
—
Total available-for-sale securities 142,074
—
142,074
—
—
Advances 5,385
—
5,385
—
—
Derivative assets:
Interest rate related 339,880
—
19,474
—
320,406
Forward rate agreements 1,558
—
1,558
—
—
Mortgage delivery commitments 10,972
—
10,972
—
—
Total derivative assets 352,410
—
32,004
—
320,406
Total assets at fair value $ 12,487,942
$ —
$ 12,167,536
$ —
$ 320,406

Recurring fair value measurements - Liabilities
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 5,904
—
241,930
—
(236,026 )
Forward rate agreements 15,964
—
15,964
—
—
Mortgage delivery commitments 823
—
823
—
—
Total derivative liabilities 22,691
—
258,717
—
(236,026 )
Total liabilities at fair value $ 13,701,840
$ —
$ 13,937,866
$ —
$ (236,026 )


~~(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.


	Fair Value Measurements at December 31, 2020
	Total		Level 1		Level 2		Level 3		Netting Adjustments and Cash Collateral (1)
Recurring fair value measurements - Assets
Trading securities:
U.S. Treasury obligations	$	8,362,211	$	0	$	8,362,211	$	0	$	—
GSE obligations	2,125,580		0		2,125,580		0		—
U.S. obligation single-family MBS	333		0		333		0		—
Total trading securities	10,488,124		0		10,488,124		0		—
Available-for-sale securities:

GSE obligations	142,402		0		142,402		0		—
GSE multi-family MBS	149,185		0		149,185		0		—
Total available-for-sale securities	291,587		0		291,587		0		—
Advances	27,202		0		27,202		0		—
Derivative assets:
Interest rate related	214,832		0		1,676		0		213,156

Mortgage delivery commitments	1,056		0		1,056		0		—
Total derivative assets	215,888		0		2,732		0		213,156
Total assets at fair value	$	11,022,801	$	0	$	10,809,645	$	0	$	213,156

Recurring fair value measurements - Liabilities


Consolidated Obligation Bonds	$	2,262,388	$	0	$	2,262,388	$	0	$	—

Derivative liabilities:
Interest rate related	3,813		0		165,737		0		(161,924)


Total derivative liabilities	3,813		0		165,737		0		(161,924)
Total liabilities at fair value	$	2,266,201	$	0	$	2,428,125	$	0	$	(161,924)

Nonrecurring fair value measurements - Assets (2)
Mortgage loans held for portfolio	$	108	$	0	$	0	$	108

(2)The fair value information presented is as of the date the fair value adjustment was recorded during the year ended December 31, 2020.

Fair Value Measurements at December 31, 2019
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 1,988,259
—
1,988,259
—
—
U.S. obligation single-family MBS 470
—
470
—
—
Total trading securities 11,615,693
—
11,615,693
—
—
Available-for-sale securities:
Certificates of deposit 1,410,111
—
1,410,111
—
—
GSE obligations 132,074
—
132,074
—
—
Total available-for-sale securities 1,542,185
—
1,542,185
—
—
Advances 5,238
—
5,238
—
—
Derivative assets:
Interest rate related 264,346
—
29,376
—
234,970
Forward rate agreements 21
—
21
—
—
Mortgage delivery commitments 2,798
—
2,798
—
—
Total derivative assets 267,165
—
32,195
—
234,970
Total assets at fair value $ 13,430,281
$ —
$ 13,195,311
$ —
$ 234,970

Recurring fair value measurements - Liabilities
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 464
—
54,004
—
(53,540 )
Forward rate agreements 782
—
782
—
—
Mortgage delivery commitments 64
—
64
—
—
Total derivative liabilities 1,310
—
54,850
—
(53,540 )
Total liabilities at fair value $ 17,145,461
$ —
$ 17,199,001
$ —
$ (53,540 )


~~(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.

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 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 of Contents

Table 14.3 presents net gains (losses) recognized in earnings related to financial assets and liabilities in which the fair value option was elected during the three months ended March 31, ~~2020~~2021 and ~~2019.~~2020.

Table 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		2021		2020
Advances		$	(1,300)	$	147
Consolidated Discount Notes		(5)		(14,026)
Consolidated Bonds		5,210		(36,951)
Total net gains (losses)		$	3,905	$	(50,830)

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 )

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) 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, ~~2020~~2021 or ~~2019.~~2020. In determining that there has been 0 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 of the United States and are not guaranteed by the United States.


▪	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 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 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 Obligations for which the fair value option has been elected.

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


	March 31, 2021						December 31, 2020
	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	$	26,500	$	25,902	$	(598)	$	26,500	$	27,202	$	702
Consolidated Discount Notes	1,020,000		1,019,989		(11)		0		0		0
Consolidated Bonds	441,000		448,843		7,843		2,241,000		2,262,388		21,388

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
Advances ⁽¹⁾
$ 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 4,305,000
4,359,486
54,486
4,739,000
4,757,177
18,177


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

Table of Contents

Note 15 - Commitments and Contingencies

Off-Balance Sheet Commitments. Table 15.1 represents off-balance sheet commitments at March 31, 2021 and December 31, 2020. The FHLB has deemed it unnecessary to record any liabilities for credit losses on these commitments at March 31, 2021 and December 31, 2020.

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


	March 31, 2021						December 31, 2020
Notional Amount	Expire within one year		Expire after one year		Total		Expire within one year		Expire after one year		Total
Standby Letters of Credit	$	32,360,840	$	1,289,107	$	33,649,947	$	27,741,220	$	1,071,029	$	28,812,249
Commitments for standby bond purchases	16,350		14,940		31,290		0		35,030		35,030

Commitments to purchase mortgage loans	87,643		0		87,643		137,352		0		137,352

Unsettled Consolidated Discount Notes, principal amount (1)	0		0		0		321,551		0		321,551

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

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
—
—
—


~~(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.~~

The carrying value of guarantees related to Standby Letters of Credit are recorded in other liabilities and were (in thousands) $9,799 and $8,675 at March 31, 2021 and December 31, 2020.

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 16 - 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, ~~2020~~2021 or December 31, ~~2019.~~2020. 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, ~~2020~~2021 and ~~2019.~~

2020.

Table 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,

	2021		2020
Loans to other FHLBanks	$	0	$	19,780

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 0 Consolidated Obligations transferred to the FHLB during the three months ended March 31, ~~2020,~~2021 or ~~2019.~~2020. The FHLB had 0 Consolidated Obligations transferred to other FHLBanks during these periods.

Table of Contents

Note 17 - 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, ~~2020~~2021 or December 31, ~~2019.~~2020.

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 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, ~~2020~~2021 or December 31, ~~2019.~~2020.

Table of Contents

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


	March 31, 2021				December 31, 2020
	Balance		% of Total (1)		Balance		% of Total (1)
Advances	$	7,126	29.5	%	$	7,048	28.2	%
MPP	158		1.9		159		1.7

Regulatory capital stock	666		24.1		467		17.6

March 31, 2020 December 31, 2019
Balance
% of Total⁽¹⁾
Balance
% of Total ⁽¹⁾
Advances $ 27,833
34.8 % $ 3,428
7.3 %
MPP 126
1.1
122
1.1
Regulatory capital stock 1,188
22.4
176
5.2
(1)Percentage of total principal (Advances), unpaid principal balance (MPP), and regulatory capital stock.


~~(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 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, 2021	Balance		% of Total		Principal		Principal Balance
U.S. Bank, N.A.	$	455	16	%	$	4,273	$	12

Third Federal Savings & Loan Association	163		6		3,292		37


	Regulatory Capital Stock				Advance		MPP Unpaid
December 31, 2020	Balance		% of Total		Principal		Principal Balance
U.S. Bank, N.A.	$	288	11	%	$	4,273	$	13
JPMorgan Chase Bank, N.A.	163		6		0		0
Third Federal Savings & Loan Association	137		5		3,443		42

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

Nonmember Affiliates. The FHLB has relationships with 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, ~~2020~~2021 or December 31, ~~2019.~~2020. The FHLB has executed standby bond purchase agreements with 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 ~~2020~~2021 and ~~2019,~~2020, 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, civil unrest, terrorism, natural disasters, climate change, pandemics, including the current COVID-19 pandemic, or other catastrophic events, and legislative, regulatory,

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government, judicial or other developments that could affect us, our members, our counterparties, other Federal Home Loan Banks (FHLBanks) 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, 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) unsecured 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;~~

▪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;

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


▪	~~changes in investor demand for Obligations;~~

▪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;

▪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;

▪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 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 ability to develop, secure 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 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 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.~~

▪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.

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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, 2021			December 31, 2020			September 30, 2020			June 30, 2020			March 31, 2020
STATEMENT OF CONDITION DATA AT PERIOD END:
Total assets	$	60,634		$	65,296		$	74,077		$	90,645		$	122,510
Advances	24,365			25,362			27,101			48,913			80,425
Mortgage loans held for portfolio	8,599			9,549			10,671			11,704			11,923

Investments (1)	24,209			27,041			34,514			29,533			25,665
Consolidated Obligations:
Discount Notes	26,873			27,500			26,668			44,324			79,660
Bonds	27,798			31,997			41,432			39,339			34,668
Total Consolidated Obligations	54,671			59,497			68,100			83,663			114,328
Mandatorily redeemable capital stock	15			19			17			19			572
Capital:
Capital stock - putable	2,748			2,641			2,935			3,813			4,739
Retained earnings	1,309			1,304			1,282			1,247			1,153
Accumulated other comprehensive loss	(12)			(15)			(12)			(16)			(17)
Total capital	4,045			3,930			4,205			5,044			5,875
STATEMENT OF INCOME DATA FOR THE QUARTER:
Net interest income	$	76		$	81		$	93		$	149		$	82

Non-interest income (loss)	(32)			(15)			(7)			(15)			31
Non-interest expense	23			22			22			24			24
Affordable Housing Program assessments	2			4			7			11			9
Net income	$	19		$	40		$	57		$	99		$	80
FINANCIAL RATIOS FOR THE QUARTER:
Dividend payout ratio (2)	74.2		%	45.5		%	38.4		%	21.7		%	27.4		%
Weighted average dividend rate (3)	2.00			2.00			2.00			2.50			2.50
Return on average equity	1.96			3.93			4.70			7.12			6.94
Return on average assets	0.12			0.23			0.26			0.37			0.34
Net interest margin (4)	0.49			0.48			0.43			0.58			0.36
Average equity to average assets	6.13			5.97			5.61			5.22			4.95
Regulatory capital ratio (5)	6.72			6.07			5.72			5.60			5.28
Operating expense to average assets (6)	0.121			0.104			0.079			0.063			0.084

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

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

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

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

(Dollars in millions) March 31, 2020 December 31, 2019 September 30, 2019 June 30, 2019 March 31, 2019
STATEMENT OF CONDITION DATA AT PERIOD END:
Total assets $ 122,510
$ 93,492
$ 100,211
$ 96,424
$ 103,378
Advances 80,425
47,370
46,358
42,869
54,880
Mortgage loans held for portfolio 11,923
11,236
10,885
10,640
10,520
Allowance for credit losses on mortgage loans ⁽¹⁾
—
1
1
1
1
Investments ⁽²⁾
25,665
34,389
42,442
42,444
37,550
Consolidated Obligations, net:
Discount Notes 79,660
49,084
49,553
41,493
44,212
Bonds 34,668
38,440
44,591
48,780
52,124
Total Consolidated Obligations, net 114,328
87,524
94,144
90,273
96,336
Mandatorily redeemable capital stock 572
22
26
23
23
Capital:
Capital stock - putable 4,739
3,367
3,597
3,806
4,059
Retained earnings 1,153
1,094
1,055
1,037
1,031
Accumulated other comprehensive loss (17 ) (16 ) (12 ) (12 ) (13 )
Total capital 5,875
4,445
4,640
4,831
5,077
STATEMENT OF INCOME DATA FOR THE QUARTER:
Net interest income $ 82
$ 99
$ 87
$ 97
$ 122
Non-interest income (loss) 31
6
5
(3 ) (18 )
Non-interest expense 24
21
22
23
23
Affordable Housing Program assessments 9
8
7
7
8
Net income $ 80
$ 76
$ 63
$ 64
$ 73
FINANCIAL RATIOS FOR THE QUARTER:
Dividend payout ratio ⁽³⁾
27.4 % 47.7 % 71.7 % 90.1 % 89.4 %
Weighted average dividend rate ⁽⁴⁾
2.50
4.00
4.50
5.50
6.00
Return on average equity 6.94
6.64
5.36
5.09
5.59
Return on average assets 0.34
0.34
0.26
0.26
0.28
Net interest margin ⁽⁵⁾
0.36
0.44
0.36
0.40
0.47
Average equity to average assets 4.95
5.06
4.86
5.15
5.07
Regulatory capital ratio ⁽⁶⁾
5.28
4.79
4.67
5.05
4.95
Operating expense to average assets ⁽⁷⁾
0.084
0.071
0.069
0.069
0.070

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~~(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.


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


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


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


~~(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.~~


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

Recent Developments

~~Coronavirus~~COVID-19 Pandemic ~~(COVID-19)~~

The global outbreak of COVID-19 has ~~resulted in extraordinary market stress and caused financial hardship for many, including~~impacted communities and businesses ~~worldwide.~~worldwide, including those in the Fifth District. The effects of COVID-19 ~~are rapidly evolving,~~continue to evolve, and the full impact and duration of the virus are unknown. ~~During these times of extraordinary market stress,~~Throughout the COVID-19 pandemic, we have continued to fulfill our mission of providing robust access to a key source of readily available and competitively priced wholesale funding to member financial institutions and supporting our commitment to affordable housing and community investment, while maintaining strong capital and 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 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~~ultimate impact of COVID-19 on our members, counterparties, vendors, and other third parties we rely upon to conduct our business. ~~To date,~~However, we ~~have met our members' needs in stressed market conditions~~continue to monitor the progression of COVID-19 and ~~have not experienced significant operational difficulties or disruptions; however, this possibility exists, which could impair our ability~~are committed to ~~conduct~~assisting members and ~~manage our business effectively. For additional information on~~their communities as impacts related to the ~~risks associated with the COVID-19~~ pandemic ~~see Part II, Item 1A. "Risk Factors."~~continue to unfold.

Financial Condition

Mission Asset Activity

Mission Assets, which we define as Advances, Letters of Credit, and total 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 ~~2020,~~2021, the Primary Mission Asset ratio averaged 7168 percent, slightly ~~over~~below the Finance 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
	March 31,				December 31,		Three Months Ended March 31,				Year Ended December 31,
(In millions)	2021		2020		2020		2021		2020		2020
Mission Asset Activity:
Advances (principal)	$	24,157	$	79,929	$	25,007	$	24,237	$	43,083	$	42,917
MPP:
Mortgage loans held for portfolio (principal)	8,391		11,644		9,316		8,876		11,491		10,995
Mandatory Delivery Contracts (notional)	88		765		137		116		685		338
Total MPP	8,479		12,409		9,453		8,992		12,176		11,333
Letters of Credit (notional)	33,650		15,785		28,812		32,031		15,583		20,141
Total Mission Asset Activity	$	66,286	$	108,123	$	63,272	$	65,260	$	70,842	$	74,391

Ending Balances Average Balances
March 31, December 31, Three Months Ended March 31, Year Ended December 31,
(In millions) 2020 2019 2019 2020 2019 2019
Mission Asset Activity:
Advances (principal) $ 79,929
$ 54,878
$ 47,264
$ 43,083
$ 61,370
$ 47,894
Mortgage Purchase Program (MPP):
Mortgage loans held for portfolio (principal) 11,644
10,290
10,981
11,491
10,281
10,499
Mandatory Delivery Contracts (notional) 765
341
936
685
187
516
Total MPP 12,409
10,631
11,917
12,176
10,468
11,015
Letters of Credit (notional) 15,785
13,812
16,205
15,583
13,903
15,150
Total Mission Asset Activity $ 108,123
$ 79,321
$ 75,386
$ 70,842
$ 85,741
$ 74,059

At March 31, 2021, 61 percent of members held Mission Asset Activity, which was relatively stable compared to prior periods. The balance of Mission Asset Activity was ~~$108.1~~$66.3 billion at March 31, ~~2020,~~2021, an increase of ~~$32.7~~$3.0 billion ~~(43~~(five percent) from year-end ~~2019,~~2020, which was driven by higher ~~Advance~~Letters of Credit balances. The increase in Letters of Credit was due in part to members using them to secure elevated levels of public unit deposits. We normally earn fees on Letters of Credit based on the actual average amount of the Letters utilized, which generally is less than the notional amount issued. Advance principal balances ~~increased $32.7~~decreased $0.9 billion ~~(69~~(three percent) from year-end ~~2019. We experienced~~2020. Advance ~~growth across our membership at the end of~~balances have remained low in the first ~~quarter as~~three months of 2021 due to increased liquidity in the financial markets ~~reacted to the COVID-19 pandemic. However, average~~and increased deposit levels at member institutions.

Average principal Advance ~~principal~~ balances for the three months ended March 31, ~~2020 declined $18.3~~2021 decreased $18.8 billion (44 percent) compared to the same period of ~~2019~~2020. Advance balances in the first quarter of 2020 were significantly higher as ~~balances were lower for~~members sought additional liquidity during the onset of the COVID-19 pandemic. However, most of these Advances matured or prepaid by the ~~quarter after a few large-asset members had reduced their borrowings throughout 2019~~end of 2020 and ~~early 2020.~~as noted above, the demand for Advances has remained low. Advance balances are often volatile due to 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, 2020, 68 percent~~

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We believe that reduced demand for Advances from many of our members ~~held Mission Asset Activity, which was relatively stable compared~~will, or is likely to, ~~prior periods.~~continue in the near future. Our business is designed to support significant changes in asset levels without having to undergo material changes in staffing, operations, risk practices, or general resource needs. A key reason for this scalability is that our Capital Plan provides for additional capital when Advances grow and the opportunity for us to retire capital when Advances decline, thereby acting, along with our efficient operating expenses, to preserve competitive profitability.

The MPP principal balance ~~rose $0.7~~fell $0.9 billion ~~(six~~(10 percent) from year-end ~~2019.~~2020. During the first three months of ~~2020,~~2021, we purchased ~~$1.2~~$0.3 billion of mortgage loans, while principal reductions ~~totaled $0.5 billion.~~

of $1.2 billion reflected the continuing high levels of mortgage loan refinance activity.

Based on earnings in the first three months of ~~2020~~,2021, we accrued $9$2 million for the Affordable Housing Program (AHP) pool of funds to be available to members in ~~2021.~~2022. In addition to the required AHP assessment, we ~~continued our~~provided voluntary sponsorship of two other housing programs. These programs ~~and announced one new voluntary housing program in April 2020. The two existing programs provide resources~~provided funds to ~~pay for~~cover accessibility ~~rehabilitation~~ and emergency repairs for special needs and elderly homeowners and ~~to help members aid their communities following~~funds for the replacement or repair of homes damaged or destroyed by natural ~~disasters. The new program provides up to $2 billion of zero interest rate Advances in response to~~disasters within the ~~COVID-19 pandemic, as noted above.~~Fifth District.

Investments

The balance of investments at March 31, ~~2020~~2021 was ~~$25.7~~$24.2 billion, a decrease of ~~$8.7~~$2.8 billion ~~(25 percent)~~ from year-end ~~2019.~~2020. At March 31, ~~2020,~~2021, investments included ~~$12.6~~$9.0 billion of MBS and ~~$13.1~~$15.2 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, ~~2020~~2021 were issued and guaranteed by Fannie Mae, Freddie Mac or a U.S. agency. The ~~decrease~~decline in the balance of investments at March 31, 2021 was due to decreases in both MBS and liquidity investments. MBS balances declined due to elevated levels of prepayments of the underlying mortgages as a result of the low interest rate environment. Due to regulatory limitations regarding the purchase of MBS that reference LIBOR, we have not been able to replace the prepaid MBS with suitable alternatives that we believe provide an acceptable risk/return tradeoff. Liquidity investments decreased as the higher level of liquidity at year-end 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~~anticipation of volatile market conditions ~~and limited returns on other available liquidity investments. At~~reverted to more normal levels by 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.~~2021.

Investments averaged ~~$37.4~~$28.9 billion in the first three months of ~~2020, an increase~~2021, a decrease of ~~$4.8~~$8.5 billion ~~(15~~(23 percent) from the average balance during the same period of ~~2019. Average~~2020. The decrease in average investments ~~were higher~~reflected lower liquidity investments needed in light of 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~~reduced Advance demand and lower MBS due to ~~manage~~ the ~~Finance Agency's requirements on the maintenance of sufficient liquidity. In addition, liquidity~~reasons noted above. 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 ~~2020~~2021 across a variety of liquidity measures, as discussed in the "Liquidity Risk" section of "Quantitative and Qualitative Disclosures About Risk Management."

Capital

Capital adequacy surpassed all minimum regulatory capital requirements in the first three months of ~~2020.~~2021. The GAAP capital-to-assets ratio at March 31, ~~2020~~2021 was ~~4.80~~6.67 percent, while the regulatory capital-to-assets ratio was ~~5.28~~6.72 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. GAAP and regulatory capital both increased ~~$1.4~~$0.1 billion ~~and $2.0 billion, respectively,~~ in the first three months of ~~2020, primarily due to purchases of capital stock by members to support Advance growth.~~2021. Retained earnings totaled ~~$1.2~~$1.3 billion at March 31, ~~2020,~~2021, an increase of ~~five~~less than one percent from year-end ~~2019.~~2020.

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Results of Operations

Overall Results

~~The table below summarizes our results of operations.~~

Three Months Ended March 31, Year Ended December 31,
(Dollars in millions) 2020 2019 2019
Net income $ 80
$ 73
$ 276
Affordable Housing Program assessments 9
8
31
Return on average equity (ROE) 6.94 % 5.59 % 5.65 %
Return on average assets 0.34
0.28
0.28
Weighted average dividend rate 2.50
6.00
5.05
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 increased $7 million (nine percent) in the first three months of 2020 compared to the same period of 2019. Net income increased as a result of higher non-interest income primarily due to gains on the sale of certain derivatives during the quarter. These gains were partially offset by unrealized losses on other instruments held at fair value in response to changes in interest rates. Although net income increased, net interest income decreased in the first three months of 2020. The decline in net interest income was primarily due to higher net amortization as a result of accelerated prepayments of financial instruments during a period of historically low interest 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 risk profile. The spread between ROE and average short-term rates, 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 2020, we paid stockholders a quarterly 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~~Our earnings reflect the combination of a stable business model 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 and capital stock balances.~~ Key factors that can cause significant periodic volatility in our profitability are changes in the level of interest rates, changes in spreads between benchmark interest rates 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. The table below summarizes our results of operations.


	Three Months Ended March 31,						Year Ended December 31,

(Dollars in millions)	2021			2020				2020
Net income	$	19		$	80			$	276
Affordable Housing Program assessments	2			9				31
Return on average equity (ROE)	1.96		%	6.94		%		5.78		%
Return on average assets	0.12			0.34				0.31
Weighted average dividend rate	2.00			2.50				2.23
Average short-term interest rates (1)	0.14			1.40				0.51

ROE spread to average short-term interest rates	1.82			5.54				5.27
Dividend rate spread to average short-term interest rates	1.86			1.10				1.72

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

Net income decreased $61 million (76 percent) in the first three months of 2021 compared to the same period of 2020. The decline in profitability in the first three months of 2021 compared to the same period of 2020 was primarily driven by:

▪Derivatives and hedging activities. We sold interest rate swaptions in the first quarter of 2020 in response to changes in interest rates, which resulted in net realized gains of approximately $69 million before assessments. The swaption gains were partially offset by unrealized losses on other derivatives and instruments held at fair value in response to changes in interest rates. We did not sell any interest rate swaptions in the first quarter of 2021. We use swaptions to hedge market risk exposure associated with holding fixed-rate mortgage assets and may sell them as interest rates change in order to offset actual and anticipated risks.

▪Earnings from capital. Lower short-term interest rates reduced the earnings generated from investing our capital. We have historically derived a substantial portion of net interest income from funding short-term assets with interest-free capital.

▪Mortgage refinancing. A higher volume of mortgage refinance activity, given the historically low interest rate environment over the past 12 months, led to a decline in balances, elevated premium amortization and lower spreads earned on our mortgage assets portfolio.

▪Advance balances. Average Advance balances declined 43 percent. Although Advances grew significantly during the onset of the COVID-19 pandemic as members sought additional liquidity, balances subsequently fell and have remained low due to increased liquidity in the financial markets and increased deposit levels at member institutions.

Earnings levels continued to represent competitive returns on stockholders' capital investment. Our business model is structured to be able to absorb sharp changes in assets because we can execute commensurate changes in liability and capital stock balances. 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 risk profile. The spread between ROE and average short-term rates, which we compute using 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 2021, we paid stockholders a quarterly dividend at a 2.00 percent annualized rate on their capital investment in our company, which is 1.86 percentage points above first quarter average short-term interest rates.

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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 2021				Year 2020				Quarter 1 2020

	Quarter 1 2020				Year 2019				Quarter 1 2019					Ending		Average		Ending		Average		Ending		Average
	Ending		Average		Ending		Average		Ending		Average
Federal funds effective	0.08	%	1.25	%	1.55	%	2.16	%	2.43	%	2.40	%	Federal funds effective	0.06	%	0.08	%	0.09	%	0.37	%	0.08	%	1.25	%
Secured Overnight Financing Rate (SOFR)	0.01		1.25		1.55		2.20		2.65		2.44		Secured Overnight Financing Rate (SOFR)	0.01		0.04		0.09		0.37		0.01		1.25
3-month LIBOR	1.45		1.54		1.91		2.33		2.60		2.69		3-month LIBOR	0.19		0.20		0.24		0.65		1.45		1.54
2-year LIBOR	0.49		1.18		1.70		2.03		2.38		2.62		2-year LIBOR	0.29		0.22		0.20		0.49		0.49		1.18
10-year LIBOR	0.72		1.34		1.90		2.09		2.41		2.67		10-year LIBOR	1.78		1.35		0.93		0.88		0.72		1.34
2-year U.S. Treasury	0.25		1.10		1.57		1.97		2.26		2.49		2-year U.S. Treasury	0.16		0.13		0.12		0.39		0.25		1.10
10-year U.S. Treasury	0.67		1.38		1.92		2.14		2.41		2.65		10-year U.S. Treasury	1.74		1.31		0.92		0.89		0.67		1.38
15-year mortgage current coupon ⁽¹⁾	1.07		1.86		2.28		2.52		2.67		2.97		15-year mortgage current coupon (1)	1.39		1.05		0.71		1.21		1.22		1.88
30-year mortgage current coupon ⁽¹⁾	1.63		2.31		2.71		2.95		3.11		3.41		30-year mortgage current coupon (1)	2.04		1.68		1.34		1.69		1.80		2.32


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

(1) Current coupon rate of Fannie Mae par MBS indications.

The target overnight Federal funds rate was in the range of zero to 0.25 percent at March 31, ~~2020, a decrease~~2021, unchanged from ~~the range of 1.50 to 1.75 percent at~~ December 31, ~~2019.~~2020. The ~~decrease~~low interest rate environment reflects the evolving risks to economic activity from the COVID-19 pandemic.

Average short-term rates were approximately 115 to ~~145~~135 basis points lower in the first three months of ~~2020~~2021 compared to the same period of ~~2019~~2020 and average ~~long-term~~mortgage rates decreased by approximately ~~110~~65 to ~~135~~85 basis points during that same period. The decline in interest rates ~~on short-term assets~~ negatively impacted income in the first three months of ~~2020~~2021 primarily because of ~~the~~ lower earnings generated ~~by funding assets with interest-free capital.~~from investing capital and increased mortgage asset prepayments.

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 ~~2019~~2020 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

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

~~Finance Agency Supervisory Letter -~~

American Rescue Plan Act of 2021:On March 11, 2021, President Biden signed into law the American Rescue Plan Act of 2021, which provided an additional $1.9 trillion dollars for COVID-19 pandemic relief. Among other appropriations, the legislation allocated $7.25 billion in additional funds to support Paycheck Protection Program (PPP) ~~Loans~~loans. Also, 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 guaranteepart of the ~~unpaid principal balance. On April 20, 2020, the SBA's third interim final rule related to~~legislation, eligibility for PPP loans was ~~published. The rule explicitly waived~~expanded to include certain ~~regulatory requirements that must be satisfied before a member could pledge PPP loans to~~nonprofits and digital news services. Since 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~~legislation did not expand 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~~application deadline beyond March 31, 2021, the PPP ~~Supervisory Letter to materially effect our financial condition or results~~Extension Act of ~~operations.~~

~~Coronavirus Aid, Relief, and Economic Security (CARES) Act:~~ ~~The CARES Act~~2021 was signed into law on March ~~27, 2020.~~30, 2021, which extended the application deadline to May 31, 2021.

Federal Reserve Board Extends Paycheck Protection Program Liquidity Facility:On March 8, 2021, the Federal Reserve Board issued a press release announcing it will extend the Paycheck Protection Program Liquidity Facility (PPPLF), which was set to expire on March 31, 2021 to June 30, 2021. The ~~$2.2 trillion package is~~Commercial Paper Funding Facility, Money Market Mutual Fund Liquidity Facility, and the ~~largest stimulus bill~~Primary Dealer Credit Facility expired on March 31, 2021 since such facilities had not received significant usage. The PPPLF provides collateralized PPP loan liquidity to eligible Federal Reserve member financial institutions in ~~United States history. The CARES Act is in addition~~order to ~~previous relief legislation passed~~facilitate PPP loan originations by ~~Congress in March 2020.~~ ~~The legislation provides the following:~~those financial institutions.


▪	~~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; Finance Agency Supervisory Letter:~~Transition: We are planning for the replacement of LIBOR ~~given 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 SOFR as ~~its~~the recommended alternative to ~~U.S. dollar~~ LIBOR. AtIn March ~~31, 2020, all $11.8 billion of our adjustable-rate Consolidated Bonds were indexed~~2021, the Financial Conduct Authority announced that LIBOR will either cease to SOFR. We also continued offering SOFR-linked Advances and swapping certain instruments to adjustable-rates tied to SOFR and the overnight Federal funds effective rate in 2020. However, the majority of our variable-rate assets 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 reliefbe 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~~any administrator or no longer 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 maturerepresentative immediately after December 31, 2021 ~~except~~(or, in the case of some more

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frequently used U.S. dollar LIBOR settings, immediately after June 30, 2023). Although the Financial Conduct Authority does not expect LIBOR to become unrepresentative before the applicable cessation date and intends to consult on requiring the administrator of LIBOR to continue publishing LIBOR of certain currencies and tenors on a non-representative, synthetic basis for ~~investments~~a period after the applicable cessation date, there is no assurance that LIBOR, of any particular currency or tenor, will continue to be published or be representative through any particular date. The market activity in SOFR-linked financial instruments has continued to develop and ~~option embedded products. With respect~~we have offered SOFR-linked Consolidated Obligations and SOFR-linked Advances on an ongoing basis. In addition, we have been using SOFR-based derivatives to ~~investments,~~manage interest-rate risk and we began purchasing SOFR-linked MBS in 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,second quarter of 2021.

~~We have Advances, investment securities and derivatives with interest rates indexed to LIBOR.~~ The following table presents our LIBOR-indexed Advances, investment securities and derivatives at March 31, ~~2020. See~~2021. At March 31, 2021, all of our variable rate Consolidated Obligations were linked to SOFR.


(In millions)	Maturing on or before June 30, 2023		Maturing after June 30, 2023
LIBOR-Indexed Variable Rate Financial Instruments
Advances by redemption term	$	2,422	$	3,011
MBS by contractual maturity (1)	—		5,633

Total principal amount	$	2,422	$	8,644
Derivatives, notional amount by termination date	$	6,838	$	4,679

(1)MBS are presented by contractual maturity; however, their expected maturities will likely differ from contractual maturities as borrowers may have the ~~"Credit Services" section of "Analysis of Financial Condition" for further information.~~right to call or prepay obligations with or without call or prepayment fees.

(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 possible 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.

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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, 2020 December 31, 2019 March 31, 2019
Balance
Percent⁽¹⁾
Balance
Percent⁽¹⁾
Balance
Percent⁽¹⁾
Adjustable/Variable-Rate Indexed:
LIBOR $ 28,889
36 % $ 10,430
22 % $ 20,462
38 %
SOFR 2,000
3
500
1
1,400
2
Other 247
—
221
1
394
1
Total 31,136
39
11,151
24
22,256
41
Fixed-Rate:
Repurchase based (REPO) 28,058
35
19,386
41
15,187
28
Regular Fixed-Rate 14,452
18
11,476
24
10,991
20
Putable ⁽²⁾
3,164
4
1,444
3
885
1
Amortizing/Mortgage Matched 2,439
3
2,358
5
2,753
5
Other 680
1
1,449
3
2,806
5
Total 48,793
61
36,113
76
32,622
59
Total Advances Principal $ 79,929
100 % $ 47,264
100 % $ 54,878
100 %

Letters of Credit (notional) $ 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 or where the Advance is indexed to a variable-rate. These Advances are classified based on their current terms.~~


(Dollars in millions)	March 31, 2021				December 31, 2020				March 31, 2020
	Balance		Percent(1)		Balance		Percent(1)			Balance		Percent(1)
Adjustable/Variable-Rate Indexed:
LIBOR	$	5,433	22	%	$	5,611	22	%		$	28,889	36	%
SOFR	118		1		118		1			2,000		3
Other	16		—		82		—			247		—
Total	5,567		23		5,811		23			31,136		39
Fixed-Rate:
Repurchase based (REPO)	3,787		16		3,780		15			28,058		35
Regular Fixed-Rate	9,047		37		9,587		38			14,452		18
Putable (2)	2,657		11		2,657		11			3,164		4
Amortizing/Mortgage Matched	1,872		8		2,021		8			2,439		3
Other	1,227		5		1,151		5			680		1
Total	18,590		77		19,196		77			48,793		61

Total Advances Principal	$	24,157	100	%	$	25,007	100	%		$	79,929	100	%

Letters of Credit (notional)	$	33,650			$	28,812				$	15,785

(1)As a percentage of total Advances principal.

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

Advance principal balances at March 31, ~~2020 increased 69~~2021 decreased three percent compared to year-end ~~2019. We~~2020. Advance balances remained low similar to year-end 2020 as members have experienced an inflow of deposits on their balance sheets, while also having access to other liquidity sources as a result of certain government actions related to the pandemic. As shown in the table above, Advance ~~growth across our membership at~~balances in the first quarter of 2020 were significantly higher as members sought additional liquidity during the onset of the pandemic. Most of these Advances matured or were prepaid by the end of the first quarter as the financial markets reacted to the COVID-19 pandemic, and members turned to us for liquidity, primarily in the form of 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.2020.

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, 2020 December 31, 2019
Average Advances-to-assets for members
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 2.91
2.67


	March 31, 2021		December 31, 2020
Average Advances-to-assets for members
Assets less than $1.0 billion (505 members)	1.66	%	1.99	%
Assets over $1.0 billion (120 members)	1.81		2.11
All members	1.69		2.01

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


(Dollars in millions)										(Dollars in millions)
March 31, 2020					December 31, 2019
March 31, 2021										March 31, 2021					December 31, 2020
Name	Principal Amount of Advances		Percent of Total Principal Amount of Advances		Name	Principal Amount of Advances		Percent of Total Principal Amount of Advances		Name	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	%	U.S. Bank, N.A.	$	4,273	18	%	U.S. Bank, N.A.	$	4,273	17	%
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		Third Federal Savings and Loan Association	3,292		14		Third Federal Savings and Loan Association	3,443		14
First Horizon Bank	3,900		5		First Horizon Bank	2,200		5
Keybank National Association	3,616		5		Pinnacle Bank	2,063		4
Protective Life Insurance Company										Protective Life Insurance Company	2,285		9		Nationwide Life Insurance Company	2,062		8
Nationwide Life Insurance Company										Nationwide Life Insurance Company	2,036		8		Protective Life Insurance Company	1,955		8
Western-Southern Life Assurance Co.										Western-Southern Life Assurance Co.	1,477		6		Western-Southern Life Assurance Co.	1,344		5
Total of Top 5	$	50,967	64	%	Total of Top 5	$	26,520	56	%	Total of Top 5	$	13,363	55	%	Total of Top 5	$	13,077	52	%

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 ~~2020.~~

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

~~Although there were 72 active members participating in the MPP during the three months ended March 31, 2020, approximately 74 percent of the principal purchases~~2021. All loans acquired in the first three months of ~~2020 resulted from activity of our four largest sellers. All loans acquired in the first quarter of 2020~~2021 were conventional loans.



(In millions)	MPP Principal
Balance at December 31, 2020	$	9,316
Principal purchases	241
Principal reductions	(1,166)
Balance at March 31, 2021	$	8,391

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 increased in the first three months of ~~2020 equated~~2021 to a 1539 percent annual constant prepayment rate, compared to the 1430 percent rate for all of ~~2019. In~~2020, driven by the ~~fourth quarter of 2019, mortgage rates were steady, remaining at~~ historically low ~~levels and resulted in a similar prepayment rate~~mortgage rates. However, our purchases of new loans were much lower than the level of repayments during the first three months of ~~2020 as all of 2019. Given the reductions in mortgage rates that occurred in the first three months of 2020, we expect prepayments to increase throughout 2020 unless mortgage rates rise.~~2021. Although MPP yields on purchases ~~in the first three months~~ of ~~2020, after consideration of funding and hedging costs,~~new loans continued to offer favorable ~~returns. However,~~returns, the lack of volume that met our risk adjusted return criteria along with other balance sheet concentration considerations prevented us from purchasing new loans to fully replace repayments received.

Overall, MPP yields on existing portfolio balances, net of funding and hedging costs, have declined and ~~we believe will continue~~are expected to ~~do so if~~remain at lower levels in the short-term due to the increased prepayment speeds ~~increase, as~~ noted above. ~~The~~Despite the lower yields on existing MPP balances, the metrics of portfolio return relative to their market and credit risks continue to indicate that the MPP has generated, and ~~will~~can be expected to 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 requirementTable of ~~one-year or greater will be temporarily suspended for COVID-19 related activity initiated by September 30, 2020.~~Contents

Investments

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


	Three Months Ended				Year Ended
(In millions)	March 31, 2021				December 31, 2020
	Ending Balance		Average Balance		Ending Balance		Average Balance
Liquidity investments	$	15,196	$	19,104	$	17,285	$	20,548
MBS	9,013		9,425		9,756		11,864
Other investments (1)	—		331		—		459
Total investments	$	24,209	$	28,860	$	27,041	$	32,871

Three Months Ended Year Ended
(In millions) March 31, 2020 December 31, 2019
Ending Balance Average Balance Ending Balance Average Balance
Liquidity investments $ 13,128
$ 23,938
$ 20,924
$ 22,525
MBS 12,537
13,051
13,465
15,029
Other investments ⁽¹⁾
—
373
—
232
Total investments $ 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.


~~(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.

Liquidity investments are either short-term (primarily overnight), or longer-term ~~but~~investments that can be easily sold and converted to cash. It is normal for liquidity investments to vary by up to several billion dollars on a 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.

The balance of liquidity investments ~~dropped~~was lower at March 31, 2021 compared to year-end 2020 as ~~we decided~~the higher level of liquidity at year-end 2020 in anticipation of volatile market conditions reverted back to ~~hold~~ more normal levels. We also held some of our liquidity portfolio as deposits at the Federal Reserve at the end of the first quarter in light of ~~volatile market conditions and~~ limited returns on other available liquidity investments. At March 31, ~~2020,~~2021, we held ~~$3.9~~$3.1 billion in deposits at the Federal Reserve, which are reflected in cash and due from banks on the Statements of Condition. ~~Average~~The average balance of liquidity investments for the three months ended March 31, 2021 only fell slightly from the average balance for all of 2020 ~~remained elevated~~ as we continued to hold longer-term U.S. Treasury obligations to help meet regulatory liquidity requirements. Under the regulatory requirements, 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.~~maximum. 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~~was 2.22 at March ~~2020 to end the quarter at 1.94.~~31, 2021. The MBS ratio was lower than normal primarily due to the ~~increase~~decline in ~~regulatory capital~~MBS balances given paydowns in ~~March 2020 as a result of members purchasing $2.1 billion of capital stock to support Advance growth as well as~~the low interest rate environment and the regulatory limitations regarding the purchase of investments that reference LIBOR.

Given these limitations, we have not been able to replace the prepaid MBS with suitable alternatives that we believe provide an acceptable risk/return tradeoff.

The balance of MBS at March 31, ~~2020~~2021 consisted of ~~$11.1~~$8.1 billion of securities issued by Fannie Mae or Freddie Mac (of which ~~$7.2~~$5.6 billion were floating-rate securities), ~~$0.2 billion of floating-rate securities issued by the National Credit Union Administration (NCUA),~~ and ~~$1.3~~$0.9 billion of securities issued by Ginnie Mae (which are primarily fixed rate).

The table below shows principal ~~purchases and~~ paydowns of our MBS for the first three months of ~~2020.~~2021.


(In millions)	MBS Principal

Balance at December 31, 2020	$	9,745

Principal paydowns	(736)

Balance at March 31, 2021	$	9,009

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

MBS principal paydowns in the first three months of ~~2020~~2021 equated to a 2427 percent annual constant prepayment rate, ~~up from~~ the ~~20 percent~~same rate experienced in ~~2019.~~2020. The ~~higher~~elevated prepayment ~~rate~~rates experienced in the first three months of 2021 and all of 2020 is a result of the historically low mortgage rate environment.

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Consolidated Obligations

We fund variable-rate assets with Discount Notes (a portion of which ~~are~~may be 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. In addition, changes in the 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 the "Liquidity Risk" section of "Quantitative and 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							Three Months Ended				Year Ended
(In millions)	March 31, 2020						December 31, 2019						(In millions)	March 31, 2021				December 31, 2020
	Ending Balance			Average Balance			Ending Balance			Average Balance				Ending Balance		Average Balance		Ending Balance		Average Balance
Discount Notes:													Discount Notes:
Unswapped	$	70,427		$	38,702		$	36,776		$	39,286		Unswapped	$	25,853	$	26,520	$	27,503	$	39,478
Swapped	9,321			11,078			12,401			5,291			Swapped	1,020		133		—		3,843
Total par Discount Notes	79,748			49,780			49,177			44,577			Total par Discount Notes	26,873		26,653		27,503		43,321
Other items ⁽¹⁾	(88		)	(84		)	(93		)	(95		)	Other items (1)	—		(2)		(3)		(37)
Total Discount Notes	79,660			49,696			49,084			44,482			Total Discount Notes	26,873		26,651		27,500		43,284
Bonds:													Bonds:
Unswapped fixed-rate	18,328			21,433			22,420			24,423			Unswapped fixed-rate	18,283		17,524		18,940		21,288
Unswapped adjustable-rate ⁽²⁾	11,823			10,819			11,012			16,132			Unswapped adjustable-rate (2)	8,838		11,045		10,639		13,394
Swapped fixed-rate	4,424			4,773			4,949			5,310			Swapped fixed-rate	649		1,544		2,372		3,547
Total par Bonds	34,575			37,025			38,381			45,865			Total par Bonds	27,770		30,113		31,951		38,229
Other items ⁽¹⁾	93			65			59			44			Other items (1)	28		37		46		68
Total Bonds	34,668			37,090			38,440			45,909			Total Bonds	27,798		30,150		31,997		38,297
Total Consolidated Obligations⁽³⁾	$	114,328		$	86,786		$	87,524		$	90,391		Total Consolidated Obligations (3)	$	54,671	$	56,801	$	59,497	$	81,581


~~(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)~~

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

(2)At March 31, 2021 and December 31, 2020, all unswapped adjustable-rate Bonds 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) $696,385 and $746,772 at March 31, 2021 and December 31, 2020, respectively.

The ending balance of Discount Notes at March 31, 2021 was similar to the balance at year-end 2020 given that short-term and variable-rate Advance balances had little change. The average balance of Discount Notes in the first three months of 2021 was significantly lower compared to the average 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 growth in short-term and variable-rate Advances ~~across our membership at~~in the first quarter of 2020 as members sought additional liquidity during the onset of the COVID-19 pandemic. However, most of these Advances matured or prepaid by the end of 2020 and the ~~first quarter as the financial markets reacted to the COVID-19 pandemic.~~ demand for Advances has remained low.

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~~2021 compared to the ~~same period~~average balance in ~~2019 driven by actions taken~~2020 due to ~~terminate~~terminating 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 deposits at March 31, ~~2020~~2021 were ~~$1.2~~$1.4 billion, an increase of ~~$0.2~~$0.1 billion from year-end ~~2019.~~2020.

Derivatives Hedging Activity and Liquidity

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

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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
(In millions)	March 31, 2021				December 31, 2020
	Period End		Average		Period End		Average
GAAP and Regulatory Capital
GAAP Capital Stock	$	2,748	$	2,575	$	2,641	$	3,567
Mandatorily Redeemable Capital Stock	15		19		19		55
Regulatory Capital Stock	2,763		2,594		2,660		3,622
Retained Earnings	1,309		1,306		1,304		1,228
Regulatory Capital	$	4,072	$	3,900	$	3,964	$	4,850

Three Months Ended Year Ended
(In millions) March 31, 2020 December 31, 2019
Period End Average Period End Average
GAAP and Regulatory Capital
GAAP Capital Stock $ 4,739
$ 3,489
$ 3,367
$ 3,827
Mandatorily Redeemable Capital Stock 572
52
22
25
Regulatory Capital Stock 5,311
3,541
3,389
3,852
Retained Earnings 1,153
1,145
1,094
1,069
Regulatory Capital $ 6,464
$ 4,686
$ 4,483
$ 4,921


	Three Months Ended				Year Ended
	March 31, 2021				December 31, 2020
	Period End		Average		Period End		Average
GAAP and Regulatory Capital-to-Assets Ratio
GAAP	6.67	%	6.13	%	6.02	%	5.39	%
Regulatory (1)	6.72		6.18		6.07		5.47

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

Three Months Ended Year Ended
March 31, 2020 December 31, 2019
Period End Average Period End Average
GAAP and Regulatory Capital-to-Assets Ratio
GAAP 4.80 % 4.95 % 4.75 % 5.04 %
Regulatory ⁽¹⁾
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. Prior to January 1, 2021, if an individual member's excess stock reached zero, our Capital Plan had permitted us, with certain limits, to capitalize additional Mission Asset Activity of that member with excess stock owned by other members (cooperative capital). Effective with the most recently amended Capital Plan, members are not able to use this cooperative capital for marginal new business after January 1, 2021. At March 31, ~~2020,~~2021, the amount of excess stock, as defined by our Capital Plan, was ~~$82~~$372 million, ~~similar to the balance at~~an increase of $144 million from year-end ~~2019.~~2020. The balance of excess stock ~~was minimal at~~grew due to the ~~end of~~requirement to purchase additional capital stock for short-term Advance borrowings during the quarter, as a result of a member's request to redeem $550 million of excess stock and the growth in Advances. The increase in GAAP and regulatory capital balances and the related capital-to-assets ratios was primarily due to members purchasing $2.1 billion of capital stock to support Advance growth. The higher increase in regulatory capital compared to GAAP capital was driven by the large redemption request of excess stock, which resulted in the stock becoming a liability and recognized as mandatorily redeemable capital stock. In April 2020, we settled the $550 million outstanding redemption request.rather than using cooperative capital.

Membership and Stockholders

In the first three months of ~~2020,~~2021, we added two new member stockholders and lost ~~eight~~five member stockholders, ending the quarter at ~~634~~625 member stockholders. The decline in membership during the first three months of ~~2020~~2021 was primarily attributable to intra-district merger activity.

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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, ~~2020~~2021 and ~~2019.~~2020. 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)	2020					2019					(Dollars in millions)	2021				2020
	Amount			ROE ⁽¹⁾		Amount			ROE ⁽¹⁾			Amount		ROE (1)		Amount		ROE (1)
Net interest income	$	82		7.15	%	$	122		9.32	%	Net interest income	$	76	7.96	%	$	82	7.15	%

Non-interest income (loss):											Non-interest income (loss):
Net gains (losses) on investment securities	373			32.43		22			1.69		Net gains (losses) on investment securities	(139)		(14.56)		373		32.43
Net gains (losses) on derivatives and hedging activities	(294		)	(25.60	)	(26		)	(1.98	)	Net gains (losses) on derivatives and hedging activities	97		10.19		(294)		(25.60)
Net gains (losses) on financial instruments held under fair value option	(51		)	(4.43	)	(17		)	(1.31	)	Net gains (losses) on financial instruments held under fair value option	4		0.41		(51)		(4.43)
Other non-interest income, net	3			0.27		3			0.20		Other non-interest income, net	6		0.65		3		0.27
Total non-interest income (loss)	31			2.67		(18		)	(1.40	)	Total non-interest income (loss)	(32)		(3.31)		31		2.67
Total income	113			9.82		104			7.92		Total income	44		4.65		113		9.82
Non-interest expense	24			2.11		23			1.71		Non-interest expense	23		2.47		24		2.11
Affordable Housing Program assessments	9			0.77		8			0.62		Affordable Housing Program assessments	2		0.22		9		0.77
Net income	$	80		6.94	%	$	73		5.59	%	Net income	$	19	1.96	%	$	80	6.94	%


~~(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.~~

(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,
(Dollars in millions)	2021				2020
	Amount		% of Earning Assets		Amount		% of Earning Assets
Components of net interest rate spread:
Net (amortization)/accretion (1) (2)	$	(28)	(0.19)	%	$	(22)	(0.09)	%
Prepayment fees on Advances, net (2)	1		0.01		4		0.02
Other components of net interest rate spread	96		0.62		81		0.35
Total net interest rate spread	69		0.44		63		0.28
Earnings from funding assets with interest-free capital	7		0.05		19		0.08
Total net interest income/net interest margin (3)	$	76	0.49	%	$	82	0.36	%

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


~~(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 assets.~~

(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 assets.

Net Amortization/Accretion (generally referred to as "amortization"): ~~While net~~Net amortization ~~has been moderate over the past few years, it~~ can become substantial and volatile ~~when~~with changes in interest rates. When mortgage rates ~~decrease.~~decrease, premium amortization of mortgage assets generally increases, which reduces net interest income. Amortization ~~increased $19 million~~ in the

~~first~~ three months ~~of 2020~~ended March 31, 2021 increased compared to

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the same period in ~~2019~~2020 primarily due to ~~a decline in~~the historically low mortgage rates, which led to accelerated prepayments of mortgage assets in the first ~~quarter~~three months of ~~2020. We expect~~2021. The $11 million increase in amortization from mortgage assets was partially offset by a $5 million decrease in amortization on Consolidated Obligations. Amortization on Consolidated Obligations was elevated in the ~~recent trend~~first three months of ~~faster prepayments to continue throughout~~ 2020 ~~unless mortgage~~as we terminated higher coupon fixed-rate Bonds as interest rates ~~rise.~~fell.

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 significant, they~~ were ~~moderate~~minimal in the ~~first~~ three months ~~of 2020.~~ended March 31, 2021. The higher Advance prepayment fees ~~increased~~ in the first three months of 2020 ~~compared to the same period of 2019~~was 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~~increased $15 million in the first three months of ~~2020~~2021 compared to the same period in ~~2019.~~2020. The net ~~decrease~~increase was primarily due to the factors below.

▪

▪Higher spreads on shorter-term and floating-rate asset balances-Favorable: Higher spreads on shorter-term and floating-rate assets improved net interest income by an estimated $33 million as the rates on the debt funding these assets declined. However, the increase in net interest income was offset by lower non-interest income (loss) primarily due to an increase of $33 million in the net interest settlements being paid on related derivatives not receiving hedge accounting.

▪Unrealized gains on designated fair value hedges-Favorable: Net unrealized gains on hedged items and derivatives in qualifying fair value hedge relationships improved net interest income by $19 million.

▪Lower spreads earned on mortgage assets-Unfavorable: Lower spreads on the mortgage assets portfolio decreased net interest income by an estimated $13 million. The lower spreads were driven by the decline in average long-term interest rates, which accelerated the prepayments of higher-yielding mortgages.

▪Lower average balances of mortgage assets-Unfavorable: The $3.6 billion decrease in the average balance of mortgage-backed securities and the $2.7 billion decrease in the average balance of mortgage loans held for portfolio lowered net interest income by an estimated $12 million. Mortgage balances declined due to the acceleration of principal cash flows driven by historically low mortgage interest rates.

▪Lower average Advance balances-Unfavorable: The $18.8 billion decrease in the average balance of Advances lowered net interest income by an estimated $9 million.

▪Lower average balances of liquidity investments-Unfavorable: The $4.8 billion decrease in the average balance of liquidity investments lowered net interest income by an estimated $3 million.

~~-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~~$12 million in the three months ended March 31, ~~2020~~2021 compared to the same period in ~~2019~~2020 primarily due to average short-term rates declining more than ~~100~~115 basis points as the Federal Reserve responded to the evolving risks to economic activity ~~from~~at the onset of the COVID-19 ~~pandemic.~~pandemic and has continued to keep rates low.

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. Interest amounts reported for Advances, MBS, Other investments and Swapped Bonds include gains (losses) on hedged items and derivatives in qualifying fair value hedge relationships.

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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~~“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
March 31, 2020 March 31, 2019
Average Balance Interest
Average Rate ⁽¹⁾
Average Balance Interest
Average Rate ⁽¹⁾
Assets:
Advances $ 43,299
$ 176
1.64 % $ 61,327
$ 403
2.66 %
Mortgage loans held for portfolio ⁽²⁾
11,767
89
3.05
10,512
89
3.42
Federal funds sold and securities purchased under resale agreements 10,615
39
1.47
13,585
83
2.47
Interest-bearing deposits in banks ^{(3) (4) (5)}
1,793
7
1.45
2,220
14
2.67
Mortgage-backed securities 13,051
68
2.10
15,873
106
2.72
Other investments⁽⁴⁾
11,902
68
2.31
931
6
2.54
Loans to other FHLBanks 20
—
1.22
3
—
2.43
Total interest-earning assets 92,447
447
1.95
104,451
701
2.72
Less: allowance for credit losses on mortgage loans —
1

Other assets 924
314

Total assets $ 93,371
$ 104,764

Liabilities and Capital:
Term deposits $ 32
—
1.86
$ 61
1
2.38
Other interest bearing deposits ⁽⁵⁾
1,040
3
1.09
612
3
2.22
Discount Notes 49,696
176
1.43
51,648
312
2.45
Unswapped fixed-rate Bonds 21,471
131
2.44
26,043
144
2.24
Unswapped adjustable-rate Bonds 10,819
35
1.32
16,153
99
2.48
Swapped Bonds 4,800
20
1.69
4,239
20
1.91
Mandatorily redeemable capital stock 52
—
1.47
23
—
6.00
Other borrowings —
—
—
—
—
—
Total interest-bearing liabilities 87,910
365
1.67
98,779
579
2.37
Non-interest bearing deposits 10
9

Other liabilities 833
659

Total capital 4,618
5,317

Total liabilities and capital $ 93,371
$ 104,764

Net interest rate spread 0.28 % 0.35 %
Net interest income and net interest margin ⁽⁶⁾
$ 82
0.36 % $ 122
0.47 %
Average interest-earning assets to interest-bearing liabilities 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 assets.~~



(Dollars in millions)	Three Months Ended						Three Months Ended
	March 31, 2021						March 31, 2020
	Average Balance		Interest		Average Rate (1)		Average Balance		Interest		Average Rate (1)
Assets:
Advances	$	24,546	$	43	0.70	%	$	43,299	$	176	1.64	%
Mortgage loans held for portfolio (2)	9,096		44		1.98		11,767		89		3.05
Federal funds sold and securities purchased under resale agreements	8,123		2		0.08		10,615		39		1.47
Interest-bearing deposits in banks (3) (4) (5)	864		—		0.10		1,793		7		1.45
MBS (4)	9,421		31		1.32		13,051		68		2.10
Other investments (4)	10,446		58		2.27		11,902		68		2.31
Loans to other FHLBanks	—		—		—		20		—		1.22
Total interest-earning assets	62,496		178		1.15		92,447		447		1.95

Other assets	569						924
Total assets	$	63,065					$	93,371
Liabilities and Capital:
Term deposits	$	109	—		0.34		$	32	—		1.86
Other interest bearing deposits (5)	1,354		—		0.02		1,040		3		1.09
Discount Notes	26,651		5		0.08		49,696		176		1.43
Unswapped fixed-rate Bonds	17,544		88		2.03		21,471		131		2.44
Unswapped adjustable-rate Bonds	11,045		3		0.10		10,819		35		1.32
Swapped Bonds	1,561		6		1.48		4,800		20		1.69
Mandatorily redeemable capital stock	19		—		2.01		52		—		1.47
Other borrowings	—		—		—		—		—		—
Total interest-bearing liabilities	58,283		102		0.71		87,910		365		1.67
Non-interest bearing deposits	—						10
Other liabilities	914						833
Total capital	3,868						4,618
Total liabilities and capital	$	63,065					$	93,371

Net interest rate spread					0.44	%					0.28	%
Net interest income and net interest margin (6)			$	76	0.49	%			$	82	0.36	%
Average interest-earning assets to interest-bearing liabilities					107.23	%					105.16	%

(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 assets.

Rates on ~~most~~nearly all of our interest-bearing assets and liabilities decreased in the ~~first~~ three months ~~2020~~ended March 31, 2021 compared to the same period in ~~2019~~2020 due to the decline in market interest rates. Average rates on short-term assets and liabilities declined more notably as they repriced quicker to lower rates.

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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, 2021 over 2020

	Volume (1)(3)		Rate (2)(3)		Total
Increase (decrease) in interest income
Advances	$	(57)	$	(76)	$	(133)
Mortgage loans held for portfolio	(18)		(27)		(45)
Federal funds sold and securities purchased under resale agreements	(7)		(30)		(37)
Interest-bearing deposits in banks	(3)		(4)		(7)
MBS	(16)		(21)		(37)
Other investments	(8)		(2)		(10)
Loans to other FHLBanks	—		—		—
Total	(109)		(160)		(269)
Increase (decrease) in interest expense
Term deposits	—		—		—
Other interest-bearing deposits	1		(4)		(3)
Discount Notes	(57)		(114)		(171)
Unswapped fixed-rate Bonds	(22)		(21)		(43)
Unswapped adjustable-rate Bonds	1		(33)		(32)
Swapped Bonds	(12)		(2)		(14)
Mandatorily redeemable capital stock	—		—		—
Other borrowings	—		—		—
Total	(89)		(174)		(263)
Increase (decrease) in net interest income	$	(20)	$	14	$	(6)

(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.

(In millions) 2020 over 2019

Volume ⁽¹⁾⁽³⁾

Rate ⁽²⁾⁽³⁾
Total
Increase (decrease) in interest income
Advances $ (99 ) $ (128 ) $ (227 )
Mortgage loans held for portfolio 10
(10 ) —
Federal funds sold and securities purchased under resale agreements (16 ) (28 ) (44 )
Interest-bearing deposits in banks (2 ) (5 ) (7 )
MBS (17 ) (21 ) (38 )
Other investments 63
(1 ) 62
Loans to other FHLBanks —
—
—
Total (61 ) (193 ) (254 )
Increase (decrease) in interest expense
Term deposits —
(1 ) (1 )
Other interest-bearing deposits 2
(2 ) —
Discount Notes (12 ) (124 ) (136 )
Unswapped fixed-rate Bonds (26 ) 13
(13 )
Unswapped adjustable-rate Bonds (27 ) (37 ) (64 )
Swapped Bonds 2
(2 ) —
Mandatorily redeemable capital stock —
—
—
Other borrowings —
—
—
Total (61 ) (153 ) (214 )
Increase (decrease) in net interest income $ —
$ (40 ) $ (40 )

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~~(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, gains (losses) on hedged items and derivatives in qualifying fair value hedge relationships are recorded in interest income or 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, 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 fair value hedge accounting is provided in the “Non-Interest Income (Loss)” section below.


(In millions)	Three Months Ended March 31,						(In millions)	Three Months Ended March 31,
	2020			2019				2021		2020
Advances:							Advances:

Gains (losses) on designated fair value hedges							Gains (losses) on designated fair value hedges	$	4	$	(14)
Net interest settlements included in net interest income							Net interest settlements included in net interest income	(33)		(2)
Investment securities:							Investment securities:
Gains (losses) on designated fair value hedges	$	(14	)	$	(1	)	Gains (losses) on designated fair value hedges	1		—
Net interest settlements included in net interest income	(2		)	14			Net interest settlements included in net interest income	(1)		—
Mortgage loans:							Mortgage loans:
Amortization of derivative fair value adjustments in net interest income	(1		)	—			Amortization of derivative fair value adjustments in net interest income	(4)		(1)

Increase (decrease) to net interest income	$	(17	)	$	13		Increase (decrease) to net interest income	$	(33)	$	(17)

Most of our use of derivatives is to synthetically convert the fixed interest rates on certain Advances, investments and Consolidated Obligations to adjustable rates tied to an eligible benchmark rate (e.g., LIBOR, the Federal funds effective rate, or SOFR). The negative net effect of derivatives on net interest income in the first three months of ~~2020~~2021 was primarily due to lower short-term benchmark interest rates in the first quarter of ~~2020~~2021 compared to the same period of ~~2019,~~2020, which resulted in inhigher 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 and efficiently than would otherwise occur.

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Non-Interest Income (Loss)

Non-interest income (loss) consists of certain realized and unrealized gains (losses) on investment securities, derivatives activities, financial instruments held under the fair value option, and other non-interest earning activities. The following tables present the net effect of derivatives and hedging activities on non-interest income (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 31,2020
Advances Investment Securities Mortgage Loans Bonds Discount Notes
Balance Sheet ⁽¹⁾
Other Total
Net effect of derivatives and hedging activities
Gains (losses) on derivatives not receiving hedge accounting $ (8 ) $ (404 ) $ (9 ) $ 31
$ 14
$ 92
$ —
$ (284 )
Net interest settlements on derivatives not receiving hedge accounting 1
(19 ) —
—
7
—
—
(11 )
Price alignment amount —
—
—
—
—
—
1
1
Net gains (losses) on derivatives and hedging activities (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⁾
—
—
—
(37 ) (14 ) —
—
(51 )
Total net effect on non-interest income $ (7 ) $ (50 ) $ (9 ) $ (6 ) $ 7
$ 92
$ 1
$ 28


(In millions)	Three Months Ended March 31,2019																	(In millions)	Advances		Investment Securities		Mortgage Loans		Bonds		Discount Notes		Balance Sheet (1)		Other		Total
	Advances			Investment Securities			Mortgage Loans		Bonds			Balance Sheet ⁽¹⁾			Total
Three Months Ended March 31, 2021																		Three Months Ended March 31, 2021
Net effect of derivatives and hedging activities																		Net effect of derivatives and hedging activities
Gains (losses) on derivatives not receiving hedge accounting	$	(1	)	$	(24	)	$	1	$	19		$	(12	)	$	(17	)	Gains (losses) on derivatives not receiving hedge accounting	$	1	$	143	$	(3)	$	(4)	$	—	$	4	$	—	$	141
Net interest settlements on derivatives not receiving hedge accounting	—			—			—		(9		)	—			(9		)	Net interest settlements on derivatives not receiving hedge accounting	—		(48)		—		4		—		—		—		(44)

Net gains (losses) on derivatives and hedging activities	(1		)	(24		)	1		10			(12		)	(26		)	Net gains (losses) on derivatives and hedging activities	1		95		(3)		—		—		4		—		97
Gains (losses) on trading securities ⁽²⁾	—			22			—		—			—			22			Gains (losses) on trading securities (2)	—		(139)		—		—		—		—		—		(139)
Gains (losses) on financial instruments held under fair value option ⁽³⁾	—			—			—		(17		)	—			(17		)	Gains (losses) on financial instruments held under fair value option (3)	(1)		—		—		5		—		—		—		4
Total net effect on non-interest income	$	(1	)	$	(2	)	$	1	$	(7	)	$	(12	)	$	(21	)	Total net effect on non-interest income	$	—	$	(44)	$	(3)	$	5	$	—	$	4	$	—	$	(38)

Three Months Ended March 31, 2020																		Three Months Ended March 31, 2020
Net effect of derivatives and hedging activities																		Net effect of derivatives and hedging activities

Gains (losses) on derivatives not receiving hedge accounting																		Gains (losses) on derivatives not receiving hedge accounting	$	(8)	$	(404)	$	(9)	$	31	$	14	$	92	$	—	$	(284)
Net interest settlements on derivatives not receiving hedge accounting																		Net interest settlements on derivatives not receiving hedge accounting	1		(19)		—		—		7		—		—		(11)
Price alignment amount																		Price alignment amount	—		—		—		—		—		—		1		1
Net gains (losses) on derivatives and hedging activities																		Net gains (losses) on derivatives and hedging activities	(7)		(423)		(9)		31		21		92		1		(294)
Gains (losses) on trading securities (2)																		Gains (losses) on trading securities (2)	—		373		—		—		—		—		—		373
Gains (losses) on financial instruments held under fair value option (3)																		Gains (losses) on financial instruments held under fair value option (3)	—		—		—		(37)		(14)		—		—		(51)
Total net effect on non-interest income																		Total net effect on non-interest income	$	(7)	$	(50)	$	(9)	$	(6)	$	7	$	92	$	1	$	28

~~(1)~~

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

(1)Balance sheet includes synthetic basis swaps and 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."

~~(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 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 sale of ~~certain~~interest rate swaptions as interest rates fell to historically low levels during the ~~quarter.~~first quarter of 2020. The sales of swaptions in the first quarter of 2020 resulted in net realized gains of approximately $69 million before assessments. We did not sell any interest rate swaptions in the first quarter of 2021. 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,~~2021, we held ~~$12.0~~$9.6 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

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rates, the passage of time, and volatility. By hedging these trading securities, the gains or losses on these trading securities will generally be offset by the ~~changes in fair value of~~gains or losses on 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 following table presents non-interest ~~expense and related financial ratios.~~expense.


								Three Months Ended March 31,
(In millions)							(In millions)	2021		2020

	Three Months Ended March 31,
(Dollars in millions)	2020			2019

Non-interest expense							Non-interest expense
Compensation and benefits	$	13		$	13		Compensation and benefits	$	13	$	13
Other operating expense	6			6			Other operating expense	6		6
Finance Agency	2			2			Finance Agency	2		2
Office of Finance	1			1			Office of Finance	1		1

Other	2			1			Other	1		2
Total non-interest expense	$	24		$	23		Total non-interest expense	$	23	$	24
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~~Our business is designed to support significant changes in asset levels without having to undergo material changes in staffing, operations, risk practices, or general resource needs. Accordingly, total non-interest ~~expense~~expenses remained ~~relatively~~ stable in the first three months of ~~2020~~2021 compared to the 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 due to the lower average capital balance, which was a remaining result from the repurchases of excess stock throughout 2019.

2020.

Segment Information

Note 13 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 ~~tables~~table below summarize each segment's operating results for the periods shown.

(Dollars in millions) 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
Net income $ 53
$ 20
$ 73
Average assets $ 91,449
$ 13,315
$ 104,764
Assumed average capital allocation $ 4,642
$ 675
$ 5,317
Return on average assets⁽¹⁾
0.24 % 0.61 % 0.28 %
Return on average equity⁽¹⁾
4.64 % 12.10 % 5.59 %



(Dollars in millions)	Traditional Member Finance			MPP			Total
Three Months Ended March 31, 2021
Net interest income (loss)	$	87		$	(11)		$	76
Net income (loss)	$	32		$	(13)		$	19
Average assets	$	51,265		$	11,800		$	63,065
Assumed average capital allocation	$	3,144		$	724		$	3,868
Return on average assets (1)	0.25		%	(0.46)		%	0.12		%
Return on average equity (1)	4.14		%	(7.48)		%	1.96		%
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		%


~~(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.~~

(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.

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Traditional Member Finance Segment

Net income ~~decreased~~increased in the first three months of ~~2020~~2021 compared to the same period in ~~2019~~2020 primarily due to higher spreads earned on liquidity investments and net unrealized gains on derivative and hedging activities. However, these favorable factors were partially offset by lower earnings from funding assets with interest-free capital, ~~decreases~~the decline in ~~the fair values of certain derivatives and other financial instruments carried at fair value, lower spreads earned on certain Advances and lower~~ average Advance ~~balances.~~and MBS balances, and an increase in net interest settlements paid on derivatives not receiving hedge accounting, which are recorded in non-interest income (loss).

MPP Segment

The ~~MPP continued to earn a substantial level~~net loss in the first three months of ~~profitability~~2021 compared to ~~market~~net income in same period in 2020 was due to higher net amortization, lower MPP balances, and lower portfolio spreads earned on MPP driven by the low interest ~~rates, with a moderate amount of market risk and a minimal amount of credit risk.~~rate environment. In addition, the first three months of 2020 ~~the MPP averaged 13 percent of total average assets while accounting for 77 percent of earnings. Net income increased in the first three months of 2020 compared to the same period in 2019~~significantly benefited from gains due to ~~net gains on derivatives and hedging activities, which resulted from~~ the sale of ~~certain~~interest rate swaptions as rates fell ~~during the quarter. The decrease in net interest income~~to historically low levels in the first ~~three months~~quarter of ~~2020 compared to~~2020. We did not sell any swaptions in the ~~same period~~first quarter of ~~2019 was driven by higher net amortization.~~2021.

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
Average Results
2020 Year-to-Date
Market Value of Equity $ 4,778
$ 4,778
$ 4,766
$ 4,853
$ 4,950
$ 4,871
$ 4,767
% Change from Flat Case (1.5 )% (1.5 )% (1.8 )% —
2.0 % 0.4 % (1.8 )%
2019 Full Year
Market Value of Equity $ 4,545
$ 4,580
$ 4,652
$ 4,729
$ 4,674
$ 4,586
$ 4,528
% Change from Flat Case (3.9 )% (3.1 )% (1.6 )% —
(1.1 )% (3.0 )% (4.3 )%
Month-End Results
March 31, 2020
Market Value of Equity $ 5,928
$ 5,928
$ 5,923
$ 6,078
$ 6,346
$ 6,371
$ 6,303
% Change from Flat Case (2.5 )% (2.5 )% (2.5 )% —
4.4 % 4.8 % 3.7 %
December 31, 2019
Market Value of Equity $ 4,257
$ 4,262
$ 4,236
$ 4,372
$ 4,313
$ 4,213
$ 4,144
% Change from Flat Case (2.6 )% (2.5 )% (3.1 )% —
(1.3 )% (3.6 )% (5.2 )%


(Dollars in millions)	Down 300			Down 200			Down 100			Flat Rates		Up 100			Up 200			Up 300
Average Results
2021 Year-to-Date
Market Value of Equity	$	3,818		$	3,825		$	3,865		$	3,885	$	3,838		$	3,735		$	3,684
% Change from Flat Case	(1.7)		%	(1.6)		%	(0.5)		%	—		(1.2)		%	(3.9)		%	(5.2)		%
2020 Full Year
Market Value of Equity	$	4,541		$	4,541		$	4,547		$	4,624	$	4,723		$	4,608		$	4,466
% Change from Flat Case	(1.8)		%	(1.8)		%	(1.7)		%	—		2.1		%	(0.3)		%	(3.4)		%
Month-End Results
March 31, 2021
Market Value of Equity	$	4,023		$	4,038		$	4,084		$	4,057	$	3,977		$	3,898		$	3,867
% Change from Flat Case	(0.9)		%	(0.5)		%	0.7		%	—		(2.0)		%	(3.9)		%	(4.7)		%
December 31, 2020
Market Value of Equity	$	3,765		$	3,765		$	3,791		$	3,835	$	3,893		$	3,777		$	3,676
% Change from Flat Case	(1.8)		%	(1.8)		%	(1.1)		%	—		1.5		%	(1.5)		%	(4.2)		%

Duration of Equity


(In years)	Down 300	Down 200	Down 100	Flat Rates	Up 100	Up 200	Up 300
Average Results
2021 Year-to-Date	(0.2)	(0.6)	(1.3)	0.5	2.5	2.1	0.3
2020 Full Year	—	—	(0.9)	(2.6)	1.0	3.4	2.0
Month-End Results
March 31, 2021	(0.4)	(0.8)	(1.0)	2.3	2.3	1.1	0.2
December 31, 2020	—	(0.1)	(1.4)	(2.3)	1.8	3.2	1.2

(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 within policy limits during the periods presented. At March 31, ~~2020,~~2021, exposure to falling interest rates in the down shock scenarios was muted as some rates become floored at near zero rate levels. Exposure to moderate rising rate shocks ~~decreased materially~~increased marginally due primarily to the ~~reduction~~increase in ~~all market~~long-term interest rates

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that occurred ~~during~~in the first ~~quarter.~~quarter of 2021. 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. ~~Further declines~~Declines in long-term interest rates could substantially decrease income in the near term (one to two years) before reverting over time to average levels. This temporary reduction in income would be driven by ~~the accelerated~~additional recognition of mortgage asset premiums as the further 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 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 ~~$1.2~~$1.1 billion in the first three months of ~~2020~~2021 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
2021 Year-to-Date	(17.6)	%	(16.1)	%	(8.7)	%	—	0.4	%	(4.7)	%	(5.3)	%
2020 Full Year	(15.9)	%	(15.9)	%	(14.6)	%	—	11.9	%	2.4	%	(10.3)	%
Month-End Results
March 31, 2021	(16.5)	%	(12.8)	%	(4.4)	%	—	(3.2)	%	(6.6)	%	(5.6)	%
December 31, 2020	(15.3)	%	(15.3)	%	(11.3)	%	—	10.6	%	3.9	%	(1.7)	%

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 ~~2020~~2021 remained aligned with our preference to keep our exposure to market risk at a low to moderate level. The variances between periods primarily ~~show~~reflect the impact of ~~lower~~higher long-term interest rates observed in the first three months of ~~2020.~~2021. These ~~lower~~higher long-term interest rates ~~result~~resulted in ~~reduced~~marginally higher exposure to rising rate shocks and ~~muted~~less exposure to falling rate shocks asbefore 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, ~~2020,~~2021, our capital management policy set forth ~~$650~~approximately $260 million as the minimum amount of retained earnings we believe is necessary to mitigate impairment risk.

The following table presents retained earnings.


(In millions)	March 31, 2020		December 31, 2019		(In millions)	March 31, 2021		December 31, 2020
Unrestricted retained earnings	$	691	$	648	Unrestricted retained earnings	$	804	$	803
Restricted retained earnings ⁽¹⁾	462		446		Restricted retained earnings (1)	505		501
Total retained earnings	$	1,153	$	1,094	Total retained earnings	$	1,309	$	1,304


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

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

As indicated in the table above, our current balance of retained earnings exceeds the policy ~~range,~~minimum, 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

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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, 2020		December 31, 2019			March 31, 2021		December 31, 2020
Market Value of Equity to Par Value of Regulatory Capital Stock - Base Case (Flat Rates) Scenario	114	%	129	%	Market Value of Equity to Par Value of Regulatory Capital Stock - Base Case (Flat Rates) Scenario	147	%	144	%
Market Value of Equity to Par Value of Regulatory Capital Stock - Down Shock ⁽¹⁾	112		125		Market Value of Equity to Par Value of Regulatory Capital Stock - Down Shock (1)	148		143
Market Value of Equity to Par Value of Regulatory Capital Stock - Up Shock ⁽²⁾	120		124		Market Value of Equity to Par Value of Regulatory Capital Stock - Up Shock (2)	141		142


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


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

(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 ~~2020,~~2021, the market capitalization ratios in the scenarios presented continued to be above our policy requirements. The base case ratio at March 31, ~~2020~~2021 was well above 100 percent because retained earnings were 2247 percent of regulatory capital stock and we maintained stable market 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.~~exposure.

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


	March 31, 2021		December 31, 2020
Market Value of Equity to Book Value of Capital - Base Case (Flat Rates) Scenario (1)	100	%	97	%
Market Value of Equity to Book Value of Capital - Down Shock (1)(2)	101		96
Market Value of Equity to Book Value of Capital - Up Shock (1)(3)	96		96

March 31, 2020 December 31, 2019
Market Value of Equity to Book Value of Capital - Base Case (Flat Rates) Scenario ⁽¹⁾
94 % 98 %
Market Value of Equity to Book Value of Capital - Down Shock ⁽¹⁾⁽²⁾
92
95
Market Value of Equity to Book Value of Capital - Up Shock ⁽¹⁾⁽³⁾
99
94
(1) Capital includes total capital and mandatorily redeemable capital stock.


~~(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.~~

(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 94 percent at March 31, 2020 indicates that the market value of total capital is $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 ~~$76~~$162 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~~minimize residual credit risk ~~to a minimal level.~~levels. We have no loan loss reserves or impairment recorded for Credit Services, investments and ~~derivatives and~~derivatives. We have a minimal amount of legacy credit risk exposure toin 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 activities is to equalize risk exposure across members and counterparties to a zero level of expected ~~losses,~~losses. This approach is consistent with our conservative risk management principles and desire to have no residual credit risk related to ~~member borrowings.~~Advances and Letters of Credit.

Collateral: We require each member to provide a security interest in eligible collateral before it can undertake any secured borrowing. Eligible loan collateral ~~includes single-family loans,~~types include the following: single- and multi-family ~~loans,~~residential, home equity, ~~loans and lines~~commercial

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real estate, ~~bond securities~~government guaranteed and farm real estate. Eligible security types include those that are government or agency backed, along with highly-rated private-label residential and commercial mortgage-backed securities. We have conservative eligibility criteria within each of the above asset types. 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 by one member is not applied to another member.~~ At March 31, ~~2020, our policy of over-collateralization resulted in~~2021, total collateral pledged of ~~$388.2~~$415.3 billion ~~to serve members'~~resulted in total borrowing capacity of ~~$303.6~~$330.4 billion of which ~~$95.7~~$57.8 billion was used to support outstanding Advances and Letters of Credit. Borrowers often pledge collateral in excess of their collateral requirement to demonstrate ~~available~~access to liquidity and to have the ability to borrow additional amounts in the future. ~~The collateral composition remained relatively stable compared~~Over-collateralization by one member is not applied to ~~the end of 2019.~~another member.

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~~represent the ~~amount~~percent of ~~pledged collateral.~~

collateral value net of the haircut. 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, lien position, 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~~institutions and assign them an internal credit rating. These credit ratings are based on internal and third-party 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 have been no member failures in ~~2020~~2021 through the date of this filing.

MPP

Overview: ~~We believe that the~~The residual amount of credit risk exposure to loans in the MPP is minimal, based on the same factors described in the ~~2019~~2020 Annual Report on Form 10-K. In light of the COVID-19 pandemic, we are closely monitoring the credit risk of our MPP portfolio. WeAlthough we may see ~~an increase~~further increases in delinquencies due to the ~~rising~~current unemployment ~~rate and~~level, we cannot predict the 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, ~~2020,~~2021, the weighted average loan-to-value ratios for conventional loans based on origination values and estimated current values were 7473 percent and 6053 percent, respectively. ~~These ratios were similar~~The estimated weighted average current loan-to-value ratio decreased two percent compared to the ratio at December 31, ~~2019.~~2020 as home values have continued to increase.

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
(Dollars in millions)	March 31, 2021			December 31, 2020
Early stage delinquencies - unpaid principal balance (1)	$	44		$	49
Serious delinquencies - unpaid principal balance (2)	$	57		$	64
Early stage delinquency rate (3)	0.5		%	0.5		%
Serious delinquency rate (4)	0.7		%	0.7		%
National average serious delinquency rate (5)	3.5		%	3.7		%

(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, 2021 rate is based on December 31, 2020 data.

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Conventional Loan Delinquencies
(Dollars in millions) March 31, 2020 December 31, 2019
Early stage delinquencies - unpaid principal balance ⁽¹⁾
$ 38
$ 40
Serious delinquencies - unpaid principal balance ⁽²⁾
$ 11
$ 12
Early stage delinquency rate ⁽³⁾
0.3 % 0.4 %
Serious delinquency rate⁽⁴⁾
0.1 % 0.1 %
National average serious delinquency rate ⁽⁵⁾
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, 2020 rate is based on December 31, 2019 data.

In response to the COVID-19 pandemic, our mortgage loan servicers may grant a forbearance period to borrowers who have had COVID-19 related hardships such as illness, unemployment or loss of income when homeowners meet certain eligibility requirements. These forbearances do not alter the underlying terms of the loans, and loans not paid timely are considered past due. As a result, early stage and serious delinquencies were elevated at March 31, 2021 and December 31, 2020 compared to prior periods. At March 31, 2021, $9 million and $41 million of conventional loans with an early stage and serious delinquency, respectively, were under a forbearance plan.

~~The~~

Overall, the MPP has experienced a 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 ~~$243~~$247 million and ~~$233~~$246 million at March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. For more information, see Note 5 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 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, 2020 December 31, 2019
Estimated credit losses, before credit enhancements $ 8
$ 4
Estimated amounts deemed recoverable by:
Primary mortgage insurance —
—
Supplemental mortgage insurance (2 ) (2 )
Lender Risk Account (5 ) (1 )
Estimated credit losses, after credit enhancements $ 1
$ 1

The minimal amount of estimated credit losses provides further evidence of the overall health of the portfolio. 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. Our available credit enhancements at March 31, ~~2020~~2021 were ample and able to cover nearly all of the ~~increase in~~ estimated gross credit losses. As a result, estimated credit losses at March 31, 2021 were less than $1 million. Estimated 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). 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, ~~2020~~2021 or December 31, ~~2019.~~2020.

Separate from our allowance for credit losses analysis, we regularly analyze potential adverse scenarios of lifetime credit risk exposure for the loans in the MPP. Even under adverse macroeconomic scenarios, including the increased delinquencies as a result of COVID-19 related forbearances, we expect that further credit losses would not significantly decrease profitability.

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Investments

Liquidity Investments: We purchase liquidity investments from counterparties that have a strong ability to repay principal and interest. ~~Liquidity~~These 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. In addition, we believe the portion of our liquidity investments for which the investments are secured with collateral (secured resale agreements) present no credit risk exposure to us.

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, 2020						(In millions)	March 31, 2021
	Long-Term Rating							Long-Term Rating
	AA		A		Total			AA		A		Total
Unsecured Liquidity Investments							Unsecured Liquidity Investments
Interest-bearing deposits	$	—	$	780	$	780	Interest-bearing deposits	$	—	$	340	$	340
Federal funds sold							Federal funds sold	1,760		3,045		4,805

Total unsecured liquidity investments	—		780		780		Total unsecured liquidity investments	1,760		3,385		5,145
Guaranteed/Secured Liquidity Investments							Guaranteed/Secured Liquidity Investments
Securities purchased under agreements to resell	184		—		184		Securities purchased under agreements to resell	288		—		288
U.S. Treasury obligations	9,895		—		9,895		U.S. Treasury obligations	7,614		—		7,614
GSE obligations	2,269		—		2,269		GSE obligations	2,149		—		2,149

Total guaranteed/secured liquidity investments	12,348		—		12,348		Total guaranteed/secured liquidity investments	10,051		—		10,051
Total liquidity investments	$	12,348	$	780	$	13,128	Total liquidity investments	$	11,811	$	3,385	$	15,196


	December 31, 2020
	Long-Term Rating
	AA		A		Total
Unsecured Liquidity Investments
Interest-bearing deposits	$	—	$	555	$	555
Federal funds sold	500		3,740		4,240


Total unsecured liquidity investments	500		4,295		4,795
Guaranteed/Secured Liquidity Investments
Securities purchased under agreements to resell	1,818		—		1,818
U.S. Treasury obligations	8,404		—		8,404
GSE obligations	2,268		—		2,268

Total guaranteed/secured liquidity investments	12,490		—		12,490
Total liquidity investments	$	12,990	$	4,295	$	17,285

December 31, 2019
Long-Term Rating
AA A Total
Unsecured Liquidity Investments
Interest-bearing deposits $ —
$ 550
$ 550
Federal funds sold 1,023
3,810
4,833
Certificates of deposit 500
910
1,410
Total unsecured liquidity investments 1,523
5,270
6,793
Guaranteed/Secured Liquidity Investments
Securities purchased under agreements to resell 2,349
—
2,349
U.S. Treasury obligations 9,662
—
9,662
GSE obligations 2,120
—
2,120
Total guaranteed/secured liquidity investments 14,131
—
14,131
Total liquidity investments $ 15,654
$ 5,270
$ 20,924

~~Our balance~~Table of liquidity investments decreased during the first three months of 2020 primarily because 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. In addition, a portion of our total liquidity investments 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.Contents

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.~~counterparty or the domicile of the counterparty's immediate parent for U.S. branches and agency offices of foreign commercial banks. 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, 2020				(In millions)	March 31, 2021
	Counterparty Rating					Counterparty Rating
Domicile of Counterparty	A		Total		Domicile of Counterparty	AA		A		Total
Domestic	$	780	$	780	Domestic	$	—	$	340	$	340

U.S. branches and agency offices of foreign commercial banks:					U.S. branches and agency offices of foreign commercial banks:
Canada					Canada	680		680		1,360
Australia					Australia	—		680		680
Finland					Finland	680		—		680
Netherlands					Netherlands	—		680		680
Sweden					Sweden	—		680		680
Norway					Norway	400		—		400
Germany					Germany	—		225		225
France					France	—		100		100

Total U.S. branches and agency offices of foreign commercial banks					Total U.S. branches and agency offices of foreign commercial banks	1,760		3,045		4,805
Total unsecured investment credit exposure	$	780	$	780	Total unsecured investment credit exposure	$	1,760	$	3,385	$	5,145

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

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

~~At March 31, 2020, all~~counterparty or the domicile of the ~~$0.8 billion~~counterparty's immediate parent for U.S. branches and agency offices of foreign commercial banks.


(In millions)	March 31, 2021
Domicile of Counterparty	Overnight		Total
Domestic	$	340	$	340


U.S. branches and agency offices of foreign commercial banks:
Canada	1,360		1,360
Australia	680		680
Finland	680		680
Netherlands	680		680
Sweden	680		680
Norway	400		400
Germany	225		225
France	100		100

Total U.S. branches and agency offices of foreign commercial banks	4,805		4,805
Total unsecured investment credit exposure	$	5,145	$	5,145

We are prohibited by Finance Agency regulation from investing in financial instruments issued by non-U.S. entities. Furthermore, we restrict a significant portion of unsecured ~~investment exposure was~~lending to ~~counterparties with holding companies domiciled in the United States. Furthermore, all unsecured lending at March 31, 2020 had~~ overnight maturities, which further limits credit 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~~exposure.

Table of ~~foreign counterparties.~~Contents

MBS:

GSE MBS

At March 31, ~~2020, $11.1~~2021, $8.1 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.~~Mae. These investments totaled ~~$1.5~~$0.9 billion at March 31, ~~2020.~~2021. We believe that the strength of ~~the issuers' guarantees~~Ginnie Mae's guarantee 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, ~~2020.~~2021. 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
Nonmember counterparties:
Asset positions with credit exposure:
Uncleared derivatives:


A-rated	$	515	$	—	$	—	$	—

Total uncleared derivatives	515		—		—		—
Cleared derivatives (1)	17,438		6		188		194
Liability positions with credit exposure:
Uncleared derivatives:



A-rated	980		(8)		8		—
BBB-rated	2,535		(90)		91		1
Total uncleared derivatives	3,515		(98)		99		1
Cleared derivatives (1)	699		—		2		2
Total derivative positions with credit exposure to nonmember counterparties	22,167		(92)		289		197
Member institutions (2)	8		—		—		—
Total	$	22,175	$	(92)	$	289	$	197

(1)Represents derivative transactions cleared with LCH Ltd. and CME Clearing, the FHLB's clearinghouses. LCH Ltd. is rated 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.

(In millions)
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:
A-rated $ 893
$ 3
$ (2 ) $ 1
BBB-rated 12
—
—
—
Total uncleared derivatives 905
3
(2 ) 1
Cleared derivatives ⁽¹⁾
30,734
8
317
325
Liability positions with credit exposure:
Cleared derivatives ⁽¹⁾
2,953
(1 ) 16
15
Total derivative positions with credit exposure to nonmember counterparties 34,592
10
331
341
Member institutions ⁽²⁾
580
11
—
11
Total $ 35,172
$ 21
$ 331
$ 352

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~~(1)~~	Represents derivative transactions cleared with LCH Ltd. and CME Clearing, the FHLB's clearinghouses. LCH Ltd. is rated 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~~the requirement to post initial margin through the clearing agent to the Derivatives Clearing Organizations. ~~The amount of~~We pledge cash as collateral ~~pledged as~~to satisfy this initial margin ~~has increased from our use of cleared derivatives.~~requirement. However, the use of cleared derivatives mitigates credit risk exposure because a central counterparty is substituted for individual counterparties.

At March 31, ~~2020,~~2021, the net exposure of uncleared derivatives with residual credit risk exposure was ~~less than $2~~$1 million. If interest rates rise or the composition of our derivatives 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, ~~2020,~~2021, we had ~~$491 million~~$0.4 billion of notional principal of interest rate swaps with ~~one~~a subsidiary of our member, JPMorgan Chase Bank, N.A., which also had outstanding credit services with us. Due to the amount of market value collateralization, we had noa de minimis amount of 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

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 ~~2020, even in light of the market disruptions caused by the COVID-19 pandemic during the period.~~2021. 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 ~~2020,~~2021, as investors ~~preferred~~continued to prefer short-term, high-quality money market ~~instruments amid the uncertainty in the financial markets due to the COVID-19 pandemic.~~instruments. 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 ~~2020,~~2021, our portion of the System's debt issuances totaled ~~$151.0~~$48.6 billion for Discount Notes and ~~$9.4~~$9.6 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.

~~We adhere to the~~The Finance ~~Agency's~~ ~~Advisory Bulletin 2018-07 Federal Home Loan Bank Liquidity Guidance~~ ~~(Liquidity AB). The Liquidity AB~~Agency establishes the expectations with respect to the maintenance of sufficient liquidity without access to the capital markets for a specified number of ~~days.~~days, which was set as a period of between 10 to 30 calendar days in the base case. Under these expectations, all Advance maturities are assumed to renew, unless the ~~Liquidity AB, the calculation~~Advances relate to former members who are ineligible to borrow new Advances. The maintenance of sufficient liquidity is intended to provide additional assurance that we

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can continue to provide Advances and Letters of Credit to members over an extended period without access to the capital markets. ~~Under this guidance, all Advance maturities are 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 a period of between 10 to 30 calendar days.~~ As of March 31, ~~2020, we maintained a sufficient number of~~2021, our days of positive daily cash balances ~~under the Liquidity AB guidance.~~were within these expectations.

The ~~Liquidity AB~~Finance Agency also 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. Although subject to change depending on conditions in the financial markets, the ~~Liquidity AB provides guidance on maintaining appropriate~~current regulatory requirement for funding gaps ~~for three-month (-10~~is between -10 percent to -20 ~~percent)~~percent for the three-month maturity horizon and ~~one-year (-25~~is between -25 percent to -35 ~~percent)~~percent for the one-year maturity ~~horizons.~~horizon. As of March 31, ~~2020,~~2021, we were operating within those limits.

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, 2020 December 31, 2019
Deposit Reserve Requirement
Total Eligible Deposit Reserves $ 90,311
$ 61,590
Total Member Deposits (1,186 ) (942 )
Excess Deposit Reserves $ 89,125
$ 60,648

~~Contractual Obligations~~

~~The following table summarizes our contractual obligations at~~ ~~March 31, 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)	March 31, 2021		December 31, 2020
Deposit Reserve Requirement
Total Eligible Deposit Reserves	$	36,049	$	37,185
Total Member Deposits	(1,402)		(1,327)
Excess Deposit Reserves	$	34,647	$	35,858

(In millions) < 1 year 1 < 3 years 3 < 5 years > 5 years Total
Contractual Obligations
Long-term debt (Bonds) - par ⁽¹⁾
$ 20,410
$ 6,577
$ 3,229
$ 4,359
$ 34,575
Operating leases (include premises and equipment) 1
2
2
2
7
Mandatorily redeemable capital stock 15
1
555
1
572
Commitments to fund mortgage loans 765
—
—
—
765
Pension and other postretirement benefit obligations 2
5
4
37
48
Total Contractual Obligations $ 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, ~~2020~~.2021. For more information, see Note 15 of the Notes to Unaudited Financial Statements.


(In millions)	< 1 year		1 < 3 years		3 < 5 years		> 5 years		Total
Off-balance sheet items (1)

Standby Letters of Credit	$	32,361	$	1,217	$	71	$	1	$	33,650
Standby bond purchase agreements	16		15		—		—		31

Total off-balance sheet items	$	32,377	$	1,232	$	71	$	1	$	33,681

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

(In millions) < 1 year 1 < 3 years 3 < 5 years > 5 years Total
Off-balance sheet items ⁽¹⁾

Standby Letters of Credit $ 14,690
$ 1,026
$ 68
$ 1
$ 15,785
Standby bond purchase agreements 26
48
—
—
74
Consolidated Obligations traded, not yet settled 700
—
—
48
748
Total off-balance sheet items $ 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 ~~2020.~~2021.


~~Item 3.~~	~~Quantitative and Qualitative Disclosures About Market Risk.~~

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

There have been no material changes in the first three months of 2021 to our critical accounting policies and estimates. Our critical accounting policies and estimates are described in detail in our 2020 Annual Report on Form 10-K.

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.

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~~Item 4.~~	~~Controls and Procedures.~~

Item 4.Controls and Procedures.

DISCLOSURE CONTROLS AND PROCEDURES

As of March 31, ~~2020,~~2021, 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, ~~2020,~~2021, 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, ~~2020,~~2021, 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, ~~2020~~2021 that materially affected, or are reasonably likely to materially affect, the FHLB's internal control over financial reporting.

PART II - OTHER INFORMATION


~~Item 1A.~~	Item 1.Legal Proceedings. Information regarding legal proceedings is set forth in Note 15 - Commitments and Contingencies in Part I, Item I, of this Report. Item 1A.Risk Factors.

For a discussion of our risk factors, see Part I, Item 1A. "Risk Factors" in our ~~2019~~2020 Annual Report on Form 10-K. ~~Other than the risk factor noted below, there~~There have been no material changes from the risk factors in our ~~2019~~2020 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 2.Unregistered Sales of Equity Securities and Use of Proceeds.

~~Natural disasters, pandemics or other widespread health emergencies (such as the recent outbreak~~

None.

Item 3.Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

Table 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.Contents

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.Item 6. Exhibits.

The outlook for the remainder of 2020 is uncertain, and there is a possibility that the Federal Reserve keeps interest rates low or even uses negative interest rates, which could significantly affect our business and profitability.


~~Item 6.~~	~~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

Section 1350 Certifications

Furnished Herewith

~~101.INS~~

101.INS

XBRL Instance Document

The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document

101.SCH

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

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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 ~~7th~~6th day of May ~~2020.~~2021.

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/ 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)



	March 31, 2020
	Amortized Cost ⁽¹⁾		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
GSE obligations	$	142,609	$	409	$	(944	)	$	142,074
Total	$	142,609	$	409	$	(944	)	$	142,074

	December 31, 2019
	Amortized Cost ⁽¹⁾		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Certificates of deposit	$	1,410,000	$	111	$	—		$	1,410,111
GSE obligations	131,815		601		(342		)	132,074
Total	$	1,541,815	$	712	$	(342	)	$	1,542,185



	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	)



	March 31, 2020		December 31, 2019
Total fixed-rate ⁽¹⁾	$	48,793,003	$	36,113,108
Total variable-rate ⁽¹⁾	31,135,499		11,151,036
Total principal amount	$	79,928,502	$	47,264,144



	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



	Three Months Ended March 31, 2019
	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	$	13,676		$	(15	)	$	195
Gain (loss) on derivatives	(52,594		)	(2,228		)	1,042
Gain (loss) on hedged items	51,621			2,212			(1,161		)
Effect on net interest income	$	12,703		$	(31	)	$	76



	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
Advances	$	12,277,322	$	499,638	$	922	$	500,560
Available-for-sale securities	142,609		18,110		—		18,110
Consolidated Bonds	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



	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	%



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, 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



(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



(In millions)	2020 over 2019
	Volume ⁽¹⁾⁽³⁾			Rate ⁽²⁾⁽³⁾			Total
Increase (decrease) in interest income
Advances	$	(99	)	$	(128	)	$	(227	)
Mortgage loans held for portfolio	10			(10		)	—
Federal funds sold and securities purchased under resale agreements	(16		)	(28		)	(44		)
Interest-bearing deposits in banks	(2		)	(5		)	(7		)
MBS	(17		)	(21		)	(38		)
Other investments	63			(1		)	62
Loans to other FHLBanks	—			—			—
Total	(61		)	(193		)	(254		)
Increase (decrease) in interest expense
Term deposits	—			(1		)	(1		)
Other interest-bearing deposits	2			(2		)	—
Discount Notes	(12		)	(124		)	(136		)
Unswapped fixed-rate Bonds	(26		)	13			(13		)
Unswapped adjustable-rate Bonds	(27		)	(37		)	(64		)
Swapped Bonds	2			(2		)	—
Mandatorily redeemable capital stock	—			—			—
Other borrowings	—			—			—
Total	(61		)	(153		)	(214		)
Increase (decrease) in net interest income	$	—		$	(40	)	$	(40	)



(In millions)	Three Months Ended March 31,2020
	Advances			Investment Securities			Mortgage Loans			Bonds			Discount Notes			Balance Sheet ⁽¹⁾		Other		Total
Net effect of derivatives and hedging activities
Gains (losses) on derivatives not receiving hedge accounting	$	(8	)	$	(404	)	$	(9	)	$	31		$	14		$	92	$	—	$	(284	)
Net interest settlements on derivatives not receiving hedge accounting	1			(19		)	—			—			7			—		—		(11		)
Price alignment amount	—			—			—			—			—			—		1		1
Net gains (losses) on derivatives and hedging activities	(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⁾	—			—			—			(37		)	(14		)	—		—		(51		)
Total net effect on non-interest income	$	(7	)	$	(50	)	$	(9	)	$	(6	)	$	7		$	92	$	1	$	28