UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM10-Q

––––––––––––––––––––––––––––––––––––––––––––––––––––

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

For the quarterly period ended June 30, ~~2021~~2022

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

FOR THE TRANSITION PERIOD FROM ________ TO ________ .

Commission file number: 000-51402

FEDERAL HOME LOAN BANK OF BOSTON

(Exact name of registrant as specified in its charter)

Federally chartered corporation of the United States

04-6002575

(State or other jurisdiction of incorporation or organization)

(I.R.S. employer identification number)

800 Boylston Street,

Boston

02199

(Address of principal executive offices)

(Zip code)

(617) 292-9600

(Registrant's telephone number, including area code)

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


Title of each class	Trading Symbol(s)	Name of each exchange on which registered

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 x No o

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or 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. (Check one):

Large accelerated filer o

Accelerated filer o

Non-accelerated filer

Smaller reporting company

☐

Emerging growth company

☐

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

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

~~Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.~~

Shares outstanding as of July 31, 2021
Class A Stock, par value $100 0
Class B Stock, par value $100 10,689,989


		Shares outstanding as of July 31, 2022
Class B Stock, par value	$100	16,266,828

Federal Home Loan Bank of Boston

Form 10-Q

Table of Contents


PART I.	FINANCIAL INFORMATION	3

Item 1.	Financial Statements (unaudited)	3
	Statements of Condition	3
	Statements of Operations	4
	Statements of Comprehensive Income	5
	Statements of Capital	6
	Statements of Cash Flows	7
	Notes to Financial Statements	9
	Note 1 — Basis of Presentation	9
	Note 2 — Recently Issued and Adopted Accounting Guidance	9
	Note 3 — Investments	9
	Note 4 — Advances	14
	Note 5 — Mortgage Loans Held for Portfolio	17
	Note 6 — Derivatives and Hedging Activities	2019
	Note 7 — Deposits	26
	Note 8 — Consolidated Obligations	26
	Note 9 — Affordable Housing Program	2728
	Note 10 — Capital	2728
	Note 11 — Accumulated Other Comprehensive Loss	29
	Note 12 — Fair Value	31
	Note 13 — Commitments and Contingencies	3635
	Note 14 — Transactions with Shareholders	3736
	Note 15 — Subsequent Events	3837

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3837
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	6963
Item 4.	Controls and Procedures	7367

PART II.	OTHER INFORMATION	7468

Item 1.	Legal Proceedings	7468
Item 1A.	Risk Factors	7468
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	7468
Item 3.	Defaults Upon Senior Securities	7468
Item 4.	Mine Safety Disclosures	7468
Item 5.	Other Information	7469
Item 6.	Exhibits	7569

~~Table of Contents~~

PART I FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS


FEDERAL HOME LOAN BANK OF BOSTON STATEMENTS OF CONDITION (dollars and shares in thousands, except par value) (unaudited)	FEDERAL HOME LOAN BANK OF BOSTON STATEMENTS OF CONDITION (dollars and shares in thousands, except par value) (unaudited)					FEDERAL HOME LOAN BANK OF BOSTON STATEMENTS OF CONDITION (dollars and shares in thousands, except par value) (unaudited)
		June 30, 2021		December 31, 2020			June 30, 2022		December 31, 2021
ASSETS	ASSETS					ASSETS
Cash and due from banks	Cash and due from banks	$	496,877	$	2,050,028	Cash and due from banks	$	65,965	$	204,993
Interest-bearing deposits	Interest-bearing deposits	150		299,149		Interest-bearing deposits	395,230		85,153
Securities purchased under agreements to resell	Securities purchased under agreements to resell	750,000		750,000		Securities purchased under agreements to resell	11,250,000		800,000
Federal funds sold	Federal funds sold	1,768,000		2,260,000		Federal funds sold	2,998,000		1,944,000
Investment securities:	Investment securities:					Investment securities:
Trading securities	Trading securities	2,525,095		3,605,079		Trading securities	980		501,867
Available-for-sale securities		10,832,111		6,220,148
Available-for-sale securities (amortized cost of $13,730,648 and $12,837,974 at June 30, 2022, and December 31, 2021, respectively)						Available-for-sale securities (amortized cost of $13,730,648 and $12,837,974 at June 30, 2022, and December 31, 2021, respectively)	13,496,627		12,895,987
Held-to-maturity securities (a)	Held-to-maturity securities (a)	177,755		207,162		Held-to-maturity securities (a)	113,697		145,492
Total investment securities	Total investment securities	13,534,961		10,032,389		Total investment securities	13,611,304		13,543,346
Advances	Advances	15,176,625		18,817,002		Advances	30,318,486		12,340,020
Mortgage loans held for portfolio, net of allowance for credit losses of $2,125 and $3,100 at June 30, 2021 and December 31, 2020, respectively		3,470,505		3,930,252
Mortgage loans held for portfolio, net of allowance for credit losses of $1,500 and $1,700 at June 30, 2022, and December 31, 2021, respectively						Mortgage loans held for portfolio, net of allowance for credit losses of $1,500 and $1,700 at June 30, 2022, and December 31, 2021, respectively	2,897,373		3,120,159

Accrued interest receivable	Accrued interest receivable	83,432		87,582		Accrued interest receivable	85,367		68,360

Derivative assets, net	Derivative assets, net	328,171		161,238		Derivative assets, net	389,239		378,532
Other assets	Other assets	74,881		73,395		Other assets	53,030		60,729
Total Assets	Total Assets	$	35,683,602	$	38,461,035	Total Assets	$	62,063,994	$	32,545,292
LIABILITIES	LIABILITIES					LIABILITIES
Deposits	Deposits					Deposits
Interest-bearing	Interest-bearing	$	897,250	$	977,994	Interest-bearing	$	1,035,235	$	833,007
Non-interest-bearing	Non-interest-bearing	73,032		110,993		Non-interest-bearing	31,224		51,025
Total deposits	Total deposits	970,282		1,088,987		Total deposits	1,066,459		884,032
Consolidated obligations (COs):	Consolidated obligations (COs):					Consolidated obligations (COs):
Bonds	Bonds	23,475,165		21,471,590		Bonds	32,721,605		26,613,032
Discount notes	Discount notes	8,365,460		12,878,310		Discount notes	25,096,230		2,275,320
Total consolidated obligations	Total consolidated obligations	31,840,625		34,349,900		Total consolidated obligations	57,817,835		28,888,352
Mandatorily redeemable capital stock	Mandatorily redeemable capital stock	7,432		6,282		Mandatorily redeemable capital stock	10,703		13,562
Accrued interest payable	Accrued interest payable	60,656		61,918		Accrued interest payable	86,722		60,968
Affordable Housing Program (AHP) payable	Affordable Housing Program (AHP) payable	77,116		78,640		Affordable Housing Program (AHP) payable	85,086		70,503
Derivative liabilities, net	Derivative liabilities, net	19,144		24,062		Derivative liabilities, net	—		38,944
Other liabilities	Other liabilities	63,946		69,293		Other liabilities	49,177		57,920
Total liabilities	Total liabilities	33,039,201		35,679,082		Total liabilities	59,115,982		30,014,281
Commitments and contingencies (Note 13)		0		0
Commitments and contingencies (Note 13)						Commitments and contingencies (Note 13)	0		0
CAPITAL	CAPITAL					CAPITAL
Capital stock – Class B – putable ($100 par value), 10,811 shares and 12,672 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively		1,081,057		1,267,172
Capital stock – Class B – putable ($100 par value), 15,572 shares and 9,536 shares issued and outstanding at June 30, 2022, and December 31, 2021, respectively						Capital stock – Class B – putable ($100 par value), 15,572 shares and 9,536 shares issued and outstanding at June 30, 2022, and December 31, 2021, respectively	1,557,243		953,638
Retained earnings:	Retained earnings:					Retained earnings:
Unrestricted	Unrestricted	1,147,279		1,130,222		Unrestricted	1,230,558		1,179,986
Restricted	Restricted	368,420		368,420		Restricted	376,620		368,420
Total retained earnings	Total retained earnings	1,515,699		1,498,642		Total retained earnings	1,607,178		1,548,406
Accumulated other comprehensive income		47,645		16,139
Accumulated other comprehensive (loss) income						Accumulated other comprehensive (loss) income	(216,409)		28,967
Total capital	Total capital	2,644,401		2,781,953		Total capital	2,948,012		2,531,011
Total Liabilities and Capital	Total Liabilities and Capital	$	35,683,602	$	38,461,035	Total Liabilities and Capital	$	62,063,994	$	32,545,292

(a) Fair values of held-to-maturity securities were ~~$181,799~~$114,516 and ~~$211,837~~$148,068 at June 30, ~~2021,~~2022, and December 31, ~~2020,~~2021, respectively.

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

Table of Contents


FEDERAL HOME LOAN BANK OF BOSTON STATEMENTS OF OPERATIONS (dollars in thousands) (unaudited)	FEDERAL HOME LOAN BANK OF BOSTON STATEMENTS OF OPERATIONS (dollars in thousands) (unaudited)									FEDERAL HOME LOAN BANK OF BOSTON STATEMENTS OF OPERATIONS (dollars in thousands) (unaudited)
		For the Three Months Ended June 30,				For the Six Months Ended June 30,					For the Three Months Ended June 30,				For the Six Months Ended June 30,
		2021		2020		2021		2020			2022		2021		2022		2021
INTEREST INCOME	INTEREST INCOME									INTEREST INCOME
Advances	Advances	$	43,230	$	100,818	$	92,782	$	269,477	Advances	$	69,277	$	43,230	$	103,270	$	92,782
Prepayment fees on advances, net	Prepayment fees on advances, net	4,232		4,164		11,965		5,002		Prepayment fees on advances, net	2,364		4,232		3,278		11,965
Interest-bearing deposits	Interest-bearing deposits	10		385		94		5,354		Interest-bearing deposits	2,369		10		2,529		94
Securities purchased under agreements to resell	Securities purchased under agreements to resell	168		213		292		14,574		Securities purchased under agreements to resell	9,109		168		9,280		292
Federal funds sold	Federal funds sold	482		424		1,096		17,141		Federal funds sold	6,758		482		7,572		1,096
Investment securities:	Investment securities:									Investment securities:
Trading securities	Trading securities	15,141		21,799		32,449		39,379		Trading securities	17		15,141		551		32,449
Available-for-sale securities	Available-for-sale securities	10,841		17,137		33,836		29,498		Available-for-sale securities	62,405		10,841		107,138		33,836
Held-to-maturity securities	Held-to-maturity securities	632		6,008		1,399		16,146		Held-to-maturity securities	683		632		1,279		1,399
Total investment securities	Total investment securities	26,614		44,944		67,684		85,023		Total investment securities	63,105		26,614		108,968		67,684
Mortgage loans held for portfolio	Mortgage loans held for portfolio	23,007		33,333		48,144		70,179		Mortgage loans held for portfolio	21,419		23,007		42,947		48,144
Other		0		0		0		47

Total interest income	Total interest income	97,743		184,281		222,057		466,797		Total interest income	174,401		97,743		277,844		222,057
INTEREST EXPENSE	INTEREST EXPENSE									INTEREST EXPENSE
Consolidated obligations:	Consolidated obligations:									Consolidated obligations:
Bonds	Bonds	53,684		94,256		115,285		217,803		Bonds	78,242		53,684		122,142		115,285
Discount notes	Discount notes	683		47,582		3,085		175,064		Discount notes	26,109		683		26,716		3,085
Total consolidated obligations	Total consolidated obligations	54,367		141,838		118,370		392,867		Total consolidated obligations	104,351		54,367		148,858		118,370
Deposits	Deposits	25		27		50		865		Deposits	326		25		348		50
Mandatorily redeemable capital stock	Mandatorily redeemable capital stock	25		64		49		138		Mandatorily redeemable capital stock	97		25		166		49
Other borrowings	Other borrowings	5		5		9		229		Other borrowings	310		5		313		9
Total interest expense	Total interest expense	54,422		141,934		118,478		394,099		Total interest expense	105,084		54,422		149,685		118,478
NET INTEREST INCOME	NET INTEREST INCOME	43,321		42,347		103,579		72,698		NET INTEREST INCOME	69,317		43,321		128,159		103,579
Provision for (reduction of) credit losses		199		2,903		(1,027)		2,219
NET INTEREST INCOME AFTER PROVISION FOR (REDUCTION OF) CREDIT LOSSES		43,122		39,444		104,606		70,479
(Reduction of) provision for credit losses										(Reduction of) provision for credit losses	(99)		199		(199)		(1,027)
NET INTEREST INCOME AFTER (REDUCTION OF) PROVISION FOR CREDIT LOSSES										NET INTEREST INCOME AFTER (REDUCTION OF) PROVISION FOR CREDIT LOSSES	69,416		43,122		128,358		104,606
OTHER INCOME (LOSS)	OTHER INCOME (LOSS)									OTHER INCOME (LOSS)

Loss on early extinguishment of debt	Loss on early extinguishment of debt	(1,523)		0		(4,948)		0		Loss on early extinguishment of debt	—		(1,523)		(432)		(4,948)
Service fees	Service fees	2,684		3,520		5,380		6,842		Service fees	3,943		2,684		6,495		5,380
Net unrealized (losses) gains on trading securities		(14,599)		(18,750)		(29,442)		27,370
Net gains (losses) on derivatives		447		(1,161)		(401)		(53,719)
Net losses on trading securities										Net losses on trading securities	(252)		(14,599)		(887)		(29,442)
Net (losses) gains on derivatives										Net (losses) gains on derivatives	(114)		447		(787)		(401)

Realized net gain from sale of held-to-maturity securities		0		0		0		40,733

Other, net	Other, net	(113)		214		544		194		Other, net	241		(113)		495		544
Total other (loss) income		(13,104)		(16,177)		(28,867)		21,420
Total other income (loss)										Total other income (loss)	3,818		(13,104)		4,884		(28,867)
OTHER EXPENSE	OTHER EXPENSE									OTHER EXPENSE
Compensation and benefits	Compensation and benefits	10,461		9,487		20,699		21,626		Compensation and benefits	10,773		10,461		22,012		20,699
Other operating expenses	Other operating expenses	6,012		6,023		11,864		12,006		Other operating expenses	6,249		6,012		12,668		11,864
Federal Housing Finance Agency (the FHFA)	Federal Housing Finance Agency (the FHFA)	957		947		1,914		1,894		Federal Housing Finance Agency (the FHFA)	1,014		957		2,103		1,914
Office of Finance	Office of Finance	661		736		1,750		1,833		Office of Finance	1,532		661		2,035		1,750
AHP voluntary contribution										AHP voluntary contribution	5,455		1,713		13,980		4,789
Other	Other	5,086		2,953		9,463		5,128		Other	2,644		3,373		3,942		4,674
Total other expense	Total other expense	23,177		20,146		45,690		42,487		Total other expense	27,667		23,177		56,740		45,690
INCOME BEFORE ASSESSMENTS	INCOME BEFORE ASSESSMENTS	6,841		3,121		30,049		49,412		INCOME BEFORE ASSESSMENTS	45,567		6,841		76,502		30,049
AHP assessments	AHP assessments	687		319		3,010		4,955		AHP assessments	4,567		687		7,667		3,010

NET INCOME	NET INCOME	$	6,154	$	2,802	$	27,039	$	44,457	NET INCOME	$	41,000	$	6,154	$	68,835	$	27,039

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

Table of Contents

FEDERAL HOME LOAN BANK OF BOSTON
STATEMENTS OF COMPREHENSIVE INCOME
(dollars in thousands)
(unaudited)
For the Three Months Ended June 30, For the Six Months Ended June 30,
2021 2020 2021 2020
Net income $ 6,154 $ 2,802 $ 27,039 $ 44,457
Other comprehensive income:
Net unrealized gains on available-for-sale securities 37,811 115,659 35,892 29,922
Net noncredit portion of other-than-temporary impairment gains on held-to-maturity securities 0 2,585 0 25,629
Net unrealized (losses) gains relating to hedging activities (12,718) 1,619 (5,975) 2,251
Pension and postretirement benefits 1,329 (97) 1,589 699
Total other comprehensive income 26,422 119,766 31,506 58,501
Comprehensive income $ 32,576 $ 122,568 $ 58,545 $ 102,958


FEDERAL HOME LOAN BANK OF BOSTON STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (dollars in thousands) (unaudited)
	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2022		2021		2022		2021
Net income	$	41,000	$	6,154	$	68,835	$	27,039
Other comprehensive (loss) income:

Net unrealized (losses) gains on available-for-sale securities	(150,748)		37,811		(292,034)		35,892


Net unrealized gains (losses) relating to hedging activities	23,637		(12,718)		47,133		(5,975)
Pension and postretirement benefits	(498)		1,329		(475)		1,589
Total other comprehensive (loss) income	(127,609)		26,422		(245,376)		31,506
Comprehensive (loss) income	$	(86,609)	$	32,576	$	(176,541)	$	58,545

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

Table of Contents

FEDERAL HOME LOAN BANK OF BOSTON
STATEMENTS OF CAPITAL
THREE AND SIX MONTHS ENDED JUNE 30, 2021 and 2020
(dollars and shares in thousands)
(unaudited)

Capital Stock Class B – Putable Retained Earnings Accumulated Other Comprehensive (Loss) Income
Shares Par Value Unrestricted Restricted Total Total
Capital
BALANCE, MARCH 31, 2020 22,663 $ 2,266,329 $ 1,116,001 $ 357,148 $ 1,473,149 $ (248,237) $ 3,491,241
Comprehensive income 2,241 561 2,802 119,766 122,568
Proceeds from issuance of capital stock 1,097 109,691 109,691
Repurchase of capital stock (8,574) (857,376) (857,376)
Shares reclassified to mandatorily redeemable capital stock (1) (129) (129)
Partial recovery of prior capital distribution to Financing Corporation 3,726 3,726 3,726
Cash dividends on capital stock (24,093) (24,093) (24,093)
BALANCE, JUNE 30, 2020 15,185 $ 1,518,515 $ 1,097,875 $ 357,709 $ 1,455,584 $ (128,471) $ 2,845,628
BALANCE, MARCH 31, 2021 11,817 $ 1,181,665 $ 1,145,756 $ 368,420 $ 1,514,176 $ 21,223 $ 2,717,064
Comprehensive income 6,154 0 6,154 26,422 32,576
Proceeds from issuance of capital stock 584 58,347 58,347
Repurchase of capital stock (1,574) (157,373) (157,373)
Shares reclassified to mandatorily redeemable capital stock (16) (1,582) (1,582)
Cash dividends on capital stock (4,631) (4,631) (4,631)
BALANCE, JUNE 30, 2021 10,811 $ 1,081,057 $ 1,147,279 $ 368,420 $ 1,515,699 $ 47,645 $ 2,644,401
BALANCE, DECEMBER 31, 2019 18,691 $ 1,869,130 $ 1,114,337 $ 348,817 $ 1,463,154 $ (186,972) $ 3,145,312
Cumulative effect of change in accounting principle (7,530) 0 (7,530) 0 (7,530)
Comprehensive income 35,565 8,892 44,457 58,501 102,958
Proceeds from issuance of capital stock 15,759 1,575,906 1,575,906
Repurchase of capital stock (19,261) (1,926,086) (1,926,086)
Shares reclassified to mandatorily redeemable capital stock (4) (435) (435)
Partial recovery of prior capital distribution to Financing Corporation 3,726 3,726 3,726
Cash dividends on capital stock (48,223) (48,223) (48,223)
BALANCE, JUNE 30, 2020 15,185 $ 1,518,515 $ 1,097,875 $ 357,709 $ 1,455,584 $ (128,471) $ 2,845,628
BALANCE, DECEMBER 31, 2020 12,672 $ 1,267,172 $ 1,130,222 $ 368,420 $ 1,498,642 $ 16,139 $ 2,781,953
Comprehensive income 27,039 0 27,039 31,506 58,545
Proceeds from issuance of capital stock 982 98,184 98,184
Repurchase of capital stock (2,827) (282,717) (282,717)
Shares reclassified to mandatorily redeemable capital stock (16) (1,582) (1,582)
Cash dividends on capital stock (9,982) (9,982) (9,982)
BALANCE, JUNE 30, 2021 10,811 $ 1,081,057 $ 1,147,279 $ 368,420 $ 1,515,699 $ 47,645 $ 2,644,401


FEDERAL HOME LOAN BANK OF BOSTON STATEMENTS OF CAPITAL THREE AND SIX MONTHS ENDED JUNE 30, 2022 and 2021 (dollars and shares in thousands) (unaudited)

	Capital Stock Class B – Putable			Retained Earnings						Accumulated Other Comprehensive (Loss) Income
	Shares	Par Value		Unrestricted		Restricted		Total				Total Capital
BALANCE, MARCH 31, 2021	11,817	$	1,181,665	$	1,145,756	$	368,420	$	1,514,176	$	21,223	$	2,717,064
Comprehensive income				6,154		—		6,154		26,422		32,576
Proceeds from issuance of capital stock	584	58,347										58,347
Repurchase of capital stock	(1,574)	(157,373)										(157,373)
Shares reclassified to mandatorily redeemable capital stock	(16)	(1,582)										(1,582)
Cash dividends on capital stock				(4,631)				(4,631)				(4,631)
BALANCE, JUNE 30, 2021	10,811	$	1,081,057	$	1,147,279	$	368,420	$	1,515,699	$	47,645	$	2,644,401

BALANCE, MARCH 31, 2022	9,295	$	929,482	$	1,202,685	$	368,420	$	1,571,105	$	(88,800)	$	2,411,787
Comprehensive income				32,800		8,200		41,000		(127,609)		(86,609)
Proceeds from issuance of capital stock	19,394	1,939,415										1,939,415
Repurchase of capital stock	(13,027)	(1,302,693)										(1,302,693)
Shares reclassified to mandatorily redeemable capital stock	(90)	(8,961)										(8,961)
Cash dividends on capital stock				(4,927)				(4,927)				(4,927)
BALANCE, JUNE 30, 2022	15,572	$	1,557,243	$	1,230,558	$	376,620	$	1,607,178	$	(216,409)	$	2,948,012

BALANCE, DECEMBER 31, 2020	12,672	$	1,267,172	$	1,130,222	$	368,420	$	1,498,642	$	16,139	$	2,781,953
Comprehensive income				27,039		—		27,039		31,506		58,545
Proceeds from issuance of capital stock	982	98,184										98,184
Repurchase of capital stock	(2,827)	(282,717)										(282,717)
Shares reclassified to mandatorily redeemable capital stock	(16)	(1,582)										(1,582)
Cash dividends on capital stock				(9,982)				(9,982)				(9,982)
BALANCE, JUNE 30, 2021	10,811	$	1,081,057	$	1,147,279	$	368,420	$	1,515,699	$	47,645	$	2,644,401

BALANCE, DECEMBER 31, 2021	9,536	$	953,638	$	1,179,986	$	368,420	$	1,548,406	$	28,967	$	2,531,011
Comprehensive income				60,635		8,200		68,835		(245,376)		(176,541)
Proceeds from issuance of capital stock	20,613	2,061,275										2,061,275
Repurchase of capital stock	(14,487)	(1,448,709)										(1,448,709)
Shares reclassified to mandatorily redeemable capital stock	(90)	(8,961)										(8,961)
Cash dividends on capital stock				(10,063)				(10,063)				(10,063)
BALANCE, JUNE 30, 2022	15,572	$	1,557,243	$	1,230,558	$	376,620	$	1,607,178	$	(216,409)	$	2,948,012

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

Table of Contents

FEDERAL HOME LOAN BANK OF BOSTON
STATEMENTS OF CASH FLOWS
(dollars in thousands)
(unaudited)

For the Six Months Ended June 30,
2021 2020
OPERATING ACTIVITIES
Net income $ 27,039 $ 44,457
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization (457) (9,098)
(Reduction of) provision for credit losses (1,027) 2,219
Change in net fair-value adjustments on derivatives and hedging activities 100,227 (298,567)
Loss on early extinguishment of debt 4,948 0
Other adjustments, net 1,524 2,233
Realized net gain from sale of held-to-maturity securities 0 (40,733)
Net change in:
Market value of trading securities 29,442 (27,370)
Accrued interest receivable 4,150 9,581
Other assets (4,307) 2,589
Accrued interest payable (1,262) (21,970)
Other liabilities (4,630) (13,185)
Total adjustments 128,608 (394,301)
Net cash provided by (used in) operating activities 155,647 (349,844)
INVESTING ACTIVITIES
Net change in:
Interest-bearing deposits 99,288 157,832
Securities purchased under agreements to resell 0 2,250,000
Federal funds sold 492,000 (1,155,000)
Trading securities:
Proceeds 1,050,543 1,125,687
Purchases 0 (3,293,082)
Available-for-sale securities:
Proceeds 568,035 838,272
Purchases (5,269,292) 0
Held-to-maturity securities:
Proceeds 29,453 315,746
Advances to members:
Repaid 22,112,465 193,794,847
Originated (18,523,434) (183,875,145)
Mortgage loans held for portfolio:
Proceeds 738,567 519,084
Purchases (291,307) (442,197)
Other investing activities, net (423) 396
Net cash provided by investing activities 1,005,895 10,236,440

~~Table of Contents~~

FEDERAL HOME LOAN BANK OF BOSTON
STATEMENTS OF CASH FLOWS — (Continued)
(dollars in thousands)
(unaudited)

For the Six Months Ended June 30,
2021 2020
FINANCING ACTIVITIES
Net change in deposits (118,705) 517,328
Net payments on derivatives with a financing element 30,092 (108,774)
Net proceeds from issuance of consolidated obligations:
Discount notes 153,007,790 58,947,874
Bonds 10,008,979 7,058,587
Payments for maturing and retiring consolidated obligations:
Discount notes (157,518,396) (69,294,882)
Bonds (7,755,500) (6,433,775)
Bonds transferred to other FHLBanks (173,984) 0
Payment of financing lease (22) 0
Partial recovery of prior capital distribution to Financing Corporation 0 3,726
Proceeds from issuance of capital stock 98,184 1,575,906
Payments for repurchase of capital stock (282,717) (1,926,086)
Payments for redemption of mandatorily redeemable capital stock (432) (106)
Cash dividends paid (9,982) (48,223)
Net cash used in financing activities (2,714,693) (9,708,425)
Net (decrease) increase in cash and due from banks (1,553,151) 178,171
Cash and due from banks at beginning of the period 2,050,028 69,416
Cash and due from banks at end of the period $ 496,877 $ 247,587
Supplemental disclosures:
Interest paid $ 144,512 $ 457,024
AHP payments $ 7,838 $ 9,903
Noncash transfers of mortgage loans held for portfolio to other assets $ 245 $ 394

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

~~Table of Contents~~

FEDERAL HOME LOAN BANK OF BOSTON

~~NOTES TO FINANCIAL~~ STATEMENTS OF CASH FLOWS

(dollars in thousands)

~~Note 1 — Basis of Presentation~~

The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information. In the opinion of management, all adjustments considered necessary have been included. All such adjustments consist of normal recurring accruals. The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. The results of operations for interim periods are not necessarily indicative of the results to be expected for the year ending December 31, 2021. These interim financial statements do not include all the information and footnotes required by GAAP for complete annual financial statements and accordingly should be read in conjunction with the Federal Home Loan Bank of Boston's audited financial statements and related notes in our Annual Report on Form 10-K for the year ended December 31, 2020, filed with the Securities and Exchange Commission (the SEC) on March 19, 2021 (the 2020 Annual Report). Unless otherwise indicated or the context requires otherwise, all references in this discussion to “the Bank,” "we," "us," "our," or similar references mean the Federal Home Loan Bank of Boston.

~~Note 2 — Recently Issued and Adopted Accounting Guidance~~

~~Effective Beginning in 2020~~(unaudited)

~~Facilitation~~

For the Six Months Ended June 30,

2022

2021

OPERATING ACTIVITIES

Net income

68,835

27,039

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and (accretion)/amortization

(21,913)

(457)

Reduction of ~~the Effects of Reference Rate Reform on Financial Reporting.~~ ~~On March 12, 2020, the Financial Accounting Standards Board (FASB) released temporary optional guidance that provides transition relief~~provision for reference rate reform. The guidance contains optional expedients and exceptions for applying generally accepted accounting principles to contract modifications, hedging relationships, and other transactions that reference London inter-bank offered rate (LIBOR) or a reference rate that is expected to be discontinued as a result of reference rate reform if certain criteria are met.credit losses

(199)

~~In addition to the optional expedients for contract modifications~~

(1,027)

Net change in derivatives and hedging ~~relationships, this update provides a one-time election to sell, transfer, or both sell and transfer~~activities

1,126,266

100,227

Loss on early extinguishment of debt

432

4,948

Other adjustments, net

2,170

1,524

Net change in:

Market value of trading securities ~~classified as held-to-maturity that reference a rate affected~~

887

29,442

Accrued interest receivable

(17,007)

4,150

Other assets

3,805

(4,307)

Accrued interest payable

25,754

(1,262)

Other liabilities

5,202

(4,630)

Total adjustments

1,125,397

128,608

Net cash provided by ~~reference rate reform and that are classified as held-to-maturity before January 1, 2020.~~

operating activities

1,194,232

This standard was effective upon issuance and the provisions generally can be applied prospectively as of January 1, 2020 through December 31, 2022. In the third quarter of 2020, we adopted the provision of this guidance which allows a one-time election to sell, transfer, or both sell and transfer debt securities classified as held-to-maturity. Refer to the 2020 Annual Report for additional information related to these sales and transfers. In the fourth quarter of 2020, we retrospectively elected to adopt the provision of Reference Rate Reform guidance issued by the FASB specific to the modification of interest rates used for the discounting of derivative instruments. This did not have a material effect on our financial condition, results of operations, or cash flows.

155,647

We are in the process of evaluating the remaining provisions of this guidance, and the anticipated effects on our financial condition, results of operations, and cash flows have not yet been determined.

INVESTING ACTIVITIES

~~Note 3 — Investments~~

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

~~We invest in interest-bearing~~

Net change in:

Interest-bearing deposits securities purchased under agreements to resell, and federal funds sold to provide short-term liquidity. These investments are generally transacted with counterparties that have received, or whose guarantors have received, a credit rating of triple-B or greater (investment grade) by a nationally recognized statistical rating organization (NRSRO), or the equivalent. At June 30, 2021, NaN of these investments were made to counterparties or, if applicable, guaranteed by entities rated below triple-B.

(1,228,327)

99,288

Securities purchased under agreements to resell are short-term and structured such that they are evaluated daily 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 amount of additional securities as collateral or remit an equivalent amount of cash sufficient to comply with collateral maintenance provisions, generally by the next business day. Based upon the collateral held as security and collateral maintenance provisions with our counterparties, we determined that 0 allowance for credit losses was needed for our securities purchased under agreements to resell at June 30, 2021. The carrying

~~Table of Contents~~(10,450,000)

~~value of securities purchased under agreements to resell excludes accrued interest receivable of $1 thousand at both June 30, 2021, and December 31, 2020.~~

—

Federal funds sold ~~are unsecured~~

(1,054,000)

492,000

Trading securities:

Proceeds

500,000

1,050,543

Available-for-sale securities:

Proceeds

382,354

568,035

Purchases

(2,205,484)

(5,269,292)

Held-to-maturity securities:

Proceeds

32,920

29,453

Advances to members:

Repaid

114,877,033

22,112,465

Originated

(133,007,490)

(18,523,434)

Mortgage loans to banks that are generally transacted on an overnight basis. FHFA regulations include a limit on the amount of unsecured credit we may extend to a counterparty. At June 30, 2021, and December 31, 2020, all investments in interest-bearing demand deposits and federal funds sold were repaid according to the contractual terms. NaN allowanceheld for credit losses was recorded for these assets at June 30, 2021. Carrying values of interest-bearing deposits and federal funds sold exclude accrued interest receivable of $9 thousand and $4 thousand, respectively, at June 30, 2021, and $31 thousand and $5 thousand, respectively, at December 31, 2020.

portfolio:

The effects of the COVID-19 pandemic (and related fiscal stimulus and monetary policies) on the global economy and financial markets could put pressure on our bank counterparties’ profitability, asset quality, and in some cases, capitalization. We continually monitor the creditworthiness of our counterparties and may reduce or suspend individual credit lines as conditions warrant.

~~Debt Securities~~

Proceeds

~~We invest in debt securities, which are classified as either trading, available-for-sale, or held-to-maturity. We are prohibited~~

276,785

738,567

Purchases

(60,013)

(291,307)

Other investing activities, net

(86)

(423)

Net cash (used in) provided by ~~FHFA regulations from~~ investing in certain higher-risk securities, such as equity securities and debt instruments that are not investment quality, other than certain investments targeted at low-income persons or communities, but we are not required to divest instruments that experienced credit deterioration after their purchase.

activities

(31,936,308)

~~Trading Securities~~

~~Table 3.1 - Trading Securities by Major Security Type~~

~~(dollars in thousands)~~

June 30, 2021 December 31, 2020
Corporate bonds $ 5,436 $ 5,422
U.S. Treasury obligations 2,517,241 3,596,718
2,522,677 3,602,140
Mortgage-backed securities (MBS)
U.S. government-guaranteed – single-family 2,371 2,884
Government-sponsored enterprises (GSE) – single-family 47 55
2,418 2,939
Total $ 2,525,095 $ 3,605,079

1,005,895

~~Table 3.2 - Unrealized and Realized Gains (Losses) on Trading Securities~~

~~(dollars in thousands)~~

For the Three Months Ended June 30, For the Six Months Ended June 30,
2021 2020 2021 2020
Net unrealized (losses) gains on trading securities held at period end $ (12,659) $ (18,387) $ (23,698) $ 27,335
Net unrealized and realized (losses) gains on trading securities sold or matured during the period (1,940) (363) (5,744) 35
Net unrealized (losses) gains on trading securities $ (14,599) $ (18,750) $ (29,442) $ 27,370

~~We do not participate in speculative trading practices and typically hold these investments over a longer time horizon.~~

~~Available-for-sale Securities~~

~~Table of Contents~~

~~Table 3.3 - Available-for-Sale Securities by Major Security Type~~

~~(dollars in thousands)~~

June 30, 2021
Amounts Recorded in Accumulated Other Comprehensive Income

Amortized
Cost (1)
Unrealized
Gains Unrealized
Losses Fair
Value
U.S. Treasury obligations $ 3,405,041 $ 1,195 $ (795) $ 3,405,441
State housing-finance-agency obligations (HFA securities) 87,125 3 (1,051) 86,077
Supranational institutions 423,458 97 (8,233) 415,322
U.S. government-owned corporations 330,173 0 (21,370) 308,803
GSE 132,661 0 (4,676) 127,985
4,378,458 1,295 (36,125) 4,343,628
MBS
U.S. government guaranteed – single-family 24,568 392 0 24,960
U.S. government guaranteed – multifamily 180,920 215 0 181,135
GSE – single-family 1,366,071 23,595 (49) 1,389,617
GSE – multifamily 4,797,634 95,570 (433) 4,892,771
6,369,193 119,772 (482) 6,488,483
Total $ 10,747,651 $ 121,067 $ (36,607) $ 10,832,111

December 31, 2020
Amounts Recorded in Accumulated Other Comprehensive Income

Amortized
Cost (1)
Unrealized
Gains Unrealized
Losses Fair
Value
HFA securities $ 126,930 $ 0 $ (4,381) $ 122,549
Supranational institutions 442,225 0 (12,156) 430,069
U.S. government-owned corporations 350,052 0 (27,991) 322,061
GSE 140,136 0 (5,144) 134,992
1,059,343 0 (49,672) 1,009,671
MBS
U.S. government guaranteed – single-family 29,148 260 0 29,408
U.S. government guaranteed – multifamily 46,829 351 0 47,180
GSE – single-family 1,442,282 26,790 (24) 1,469,048
GSE – multifamily 3,593,978 70,863 0 3,664,841
5,112,237 98,264 (24) 5,210,477
Total $ 6,171,580 $ 98,264 $ (49,696) $ 6,220,148

~~_______________________~~

~~(1)~~Amortized cost of available-for-sale securities includes adjustments made to the cost basis of an investment for accretion, amortization, collection of cash, and fair-value hedge accounting adjustments. Amortized cost excludes accrued interest receivable of $29.4 million and $24.0 million at June 30, 2021, and December 31, 2020, respectively.

~~Table of Contents~~

~~Table 3.4 - Available-for-Sale Securities in a Continuous Unrealized Loss Position~~

~~(dollars in thousands)~~

June 30, 2021
Continuous Unrealized Loss Less than 12 Months Continuous Unrealized Loss 12 Months or More Total
Fair
Value Unrealized
Losses Fair
Value Unrealized
Losses Fair
Value Unrealized
Losses
U.S. Treasury obligations $ 1,446,085 $ (795) $ 0 $ 0 $ 1,446,085 $ (795)
HFA securities 0 0 60,669 (1,051) 60,669 (1,051)
Supranational institutions 0 0 400,187 (8,233) 400,187 (8,233)
U.S. government-owned corporations 0 0 308,803 (21,370) 308,803 (21,370)
GSE 0 0 127,985 (4,676) 127,985 (4,676)
1,446,085 (795) 897,644 (35,330) 2,343,729 (36,125)
MBS
GSE – single-family 86,181 (49) 0 0 86,181 (49)
GSE – multifamily 231,934 (433) 0 0 231,934 (433)
318,115 (482) 0 0 318,115 (482)
Total $ 1,764,200 $ (1,277) $ 897,644 $ (35,330) $ 2,661,844 $ (36,607)

December 31, 2020
Continuous Unrealized Loss Less than 12 Months Continuous Unrealized Loss 12 Months or More Total
Fair
Value Unrealized
Losses Fair
Value Unrealized
Losses Fair
Value Unrealized
Losses
HFA securities $ 0 $ 0 $ 109,780 $ (4,381) $ 109,780 $ (4,381)
Supranational institutions 0 0 430,069 (12,156) 430,069 (12,156)
U.S. government-owned corporations 0 0 322,061 (27,991) 322,061 (27,991)
GSE 0 0 134,992 (5,144) 134,992 (5,144)
0 0 996,902 (49,672) 996,902 (49,672)
MBS
GSE – single-family 0 0 10,271 (24) 10,271 (24)
Total $ 0 $ 0 $ 1,007,173 $ (49,696) $ 1,007,173 $ (49,696)

~~Table 3.5 - Available-for-Sale Securities by Contractual Maturity~~

~~(dollars in thousands)~~

June 30, 2021 December 31, 2020
Year of Maturity Amortized
Cost Fair
Value Amortized
Cost Fair
Value
Due in one year or less $ 10,600 $ 10,570 $ 10,600 $ 10,524
Due after one year through five years 165,026 163,429 169,570 166,813
Due after five years through 10 years 3,787,798 3,780,527 400,477 389,753
Due after 10 years 415,034 389,102 478,696 442,581
4,378,458 4,343,628 1,059,343 1,009,671
MBS (1)
6,369,193 6,488,483 5,112,237 5,210,477
Total $ 10,747,651 $ 10,832,111 $ 6,171,580 $ 6,220,148

~~_______________________~~

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

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FEDERAL HOME LOAN BANK OF BOSTON STATEMENTS OF CASH FLOWS — (Continued) (dollars in thousands) (unaudited)
	For the Six Months Ended June 30,
	2022		2021
FINANCING ACTIVITIES
Net change in deposits	182,427		(118,705)
Net payments on derivatives with a financing element	94,558		30,092
Net proceeds from issuance of consolidated obligations:
Discount notes	121,903,886		153,007,790
Bonds	10,444,334		10,008,979

Payments for maturing and retiring consolidated obligations:
Discount notes	(99,096,517)		(157,518,396)
Bonds	(3,516,301)		(7,755,500)
Bonds transferred to other FHLBanks	—		(173,984)
Payment of financing lease	(22)		(22)

Proceeds from issuance of capital stock	2,061,275		98,184
Payments for repurchase of capital stock	(1,448,709)		(282,717)
Payments for redemption of mandatorily redeemable capital stock	(11,820)		(432)
Cash dividends paid	(10,063)		(9,982)
Net cash provided by (used in) financing activities	30,603,048		(2,714,693)
Net decrease in cash and due from banks	(139,028)		(1,553,151)
Cash and due from banks at beginning of the period	204,993		2,050,028
Cash and due from banks at end of the period	$	65,965	$	496,877
Supplemental disclosures:
Interest paid	$	122,494	$	144,512
AHP payments	$	6,708	$	7,838


Noncash transfers of mortgage loans held for portfolio to other assets	$	306	$	245

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

Table of Contents

FEDERAL HOME LOAN BANK OF BOSTON

NOTES TO FINANCIAL STATEMENTS

Note 1 — Basis of Presentation

In the second quarter of 2022 we identified an accounting error related to changes in fair value of certain available-for-sale securities that are in fair-value hedge relationships. As a result of this error, cumulatively from the second quarter of 2019 through the first quarter of 2022, net income and retained earnings were understated by $6.2 million. We determined the error did not have a material effect on our financial condition, results of operations, or cash flows for the impacted periods, and a correcting adjustment was recorded in interest income from available-for-sale securities in the second quarter of 2022.

The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. The results of operations for interim periods are not necessarily indicative of the results to be expected for the year ending December 31, 2022. These interim financial statements do not include all the information and footnotes required by GAAP for complete annual financial statements and accordingly should be read in conjunction with the Federal Home Loan Bank of Boston's audited financial statements and related notes in our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the Securities and Exchange Commission (the SEC) on March 18, 2022 (the 2021 Annual Report). Unless otherwise indicated or the context requires otherwise, all references in this discussion to “the Bank,” "we," "us," "our," or similar references mean the Federal Home Loan Bank of Boston.

Note 2 — Recently Issued and Adopted Accounting Guidance

Effective Beginning in 2020

Facilitation of the Effects of Reference Rate Reform on Financial Reporting. On March 12, 2020, the Financial Accounting Standards Board (FASB) released temporary optional guidance that provides transition relief for reference rate reform. The guidance contains optional expedients and exceptions for applying GAAP to contract modifications, hedging relationships, and other transactions that reference the London Interbank Offered Rate (LIBOR) or a reference rate that is expected to be discontinued as a result of reference rate reform if certain criteria are met. This standard was effective upon issuance and the provisions generally can be applied prospectively as of January 1, 2020, through December 31, 2022.

In addition to the optional expedients for contract modifications and hedging relationships, this update provides a one-time election to sell, transfer, or both sell and transfer debt securities classified as held-to-maturity that reference a rate affected by reference rate reform and that were classified as held-to-maturity before January 1, 2020. In the third quarter of 2020, we adopted the provision of this guidance which allows a one-time election to sell, transfer, or both sell and transfer debt securities classified as held-to-maturity.

In the fourth quarter of 2020, we retrospectively elected to adopt the provision of this guidance specific to the modification of interest rates used for the discounting of derivative instruments. This did not have a material effect on our financial condition, results of operations, or cash flows.

Note 3 — Investments

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

We invest in interest-bearing deposits, securities purchased under agreements to resell, and federal funds sold to provide short-term liquidity. These investments are generally transacted with counterparties that have received, or whose guarantors have received, a credit rating of triple-B or greater (investment grade) by a nationally recognized statistical rating organization (NRSRO), or the equivalent. At June 30, 2022, and December 31, 2021, none of these investments were made to counterparties or, if applicable, guaranteed by entities rated below single-A.

Table of Contents

Securities purchased under agreements to resell are short-term and are structured such that they are evaluated daily 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 amount of additional securities as collateral or remit an equivalent amount of cash sufficient to comply with collateral maintenance provisions, generally by the next business day. Based upon the collateral held as security and collateral maintenance provisions with our counterparties, we determined that no allowance for credit losses was needed for our securities purchased under agreements to resell at June 30, 2022, and December 31, 2021.

Federal funds sold are unsecured loans that are transacted on an overnight term or short-term basis. FHFA regulations include a limit on the amount of unsecured credit we may extend to a counterparty. All investments in interest-bearing deposits and federal funds sold outstanding as of June 30, 2022, and December 31, 2021, have been repaid according to the contractual terms. No allowance for credit losses was recorded for these assets at June 30, 2022, and December 31, 2021.

Debt Securities

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

Trading Securities

Table 3.1 - Trading Securities by Major Security Type

(dollars in thousands)


	June 30, 2022		December 31, 2021
Corporate bonds	$	980	$	1,442
U.S. Treasury obligations	—		500,425
Total	$	980	$	501,867

Table 3.2 - Net Losses on Trading Securities

(dollars in thousands)


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2022		2021		2022		2021
Net losses on trading securities held at period end	$	(252)	$	(12,659)	$	(462)	$	(23,698)
Net losses on trading securities sold or matured during the period	—		(1,940)		(425)		(5,744)
Net losses on trading securities	$	(252)	$	(14,599)	$	(887)	$	(29,442)

We do not participate in speculative trading practices and typically hold these investments over a longer time horizon.

Available-for-sale Securities

Table of Contents

Table 3.3 - Available-for-Sale Securities by Major Security Type

(dollars in thousands)


	June 30, 2022
			Amounts Recorded in Accumulated Other Comprehensive Income
	Amortized Cost (1)		Unrealized Gains		Unrealized Losses		Fair Value
U.S. Treasury obligations	$	5,913,640	$	610	$	(24,637)	$	5,889,613
State housing-finance-agency obligations (HFA securities)	62,470		—		(1,937)		60,533
Supranational institutions	375,108		12		(5,873)		369,247

U.S. government-owned corporations	274,680		—		(25,501)		249,179
Government-sponsored enterprises (GSE)	112,367		—		(5,861)		106,506
	6,738,265		622		(63,809)		6,675,078
Mortgage-backed securities (MBS)
U.S. government guaranteed – single-family	19,625		4		(1,658)		17,971
U.S. government guaranteed – multifamily	536,937		—		(18,325)		518,612
GSE – single-family	923,641		649		(40,866)		883,424
GSE – multifamily	5,512,180		18,737		(129,375)		5,401,542
	6,992,383		19,390		(190,224)		6,821,549
Total	$	13,730,648	$	20,012	$	(254,033)	$	13,496,627


	December 31, 2021
			Amounts Recorded in Accumulated Other Comprehensive Income
	Amortized Cost (1)		Unrealized Gains		Unrealized Losses		Fair Value
U.S. Treasury obligations	$	5,081,536	$	3,380	$	(370)	$	5,084,546
HFA securities	63,330		2		(1,067)		62,265
Supranational institutions	409,337		96		(5,668)		403,765
U.S. government-owned corporations	325,567		—		(18,703)		306,864
GSE	130,143		—		(3,671)		126,472
	6,009,913		3,478		(29,479)		5,983,912
MBS
U.S. government guaranteed – single-family	21,435		100		—		21,535
U.S. government guaranteed – multifamily	541,238		219		(52)		541,405
GSE – single-family	1,093,890		9,945		(121)		1,103,714
GSE – multifamily	5,171,498		99,119		(25,196)		5,245,421
	6,828,061		109,383		(25,369)		6,912,075
Total	$	12,837,974	$	112,861	$	(54,848)	$	12,895,987

_______________________

(1)Amortized cost of available-for-sale securities includes adjustments made to the cost basis of an investment for accretion, amortization, collection of cash, and fair-value hedge accounting adjustments. Amortized cost excludes accrued interest receivable of $37.1 million and $31.6 million at June 30, 2022, and December 31, 2021, respectively.

Table of Contents

Table 3.4 - Available-for-Sale Securities in a Continuous Unrealized Loss Position

(dollars in thousands)


	June 30, 2022
	Continuous Unrealized Loss Less than 12 Months				Continuous Unrealized Loss 12 Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
U.S. Treasury obligations	$	4,768,902	$	(19,582)	$	878,735	$	(5,055)	$	5,647,637	$	(24,637)
HFA securities	11,315		(35)		49,218		(1,902)		60,533		(1,937)
Supranational institutions	—		—		355,775		(5,873)		355,775		(5,873)
U.S. government-owned corporations	—		—		249,179		(25,501)		249,179		(25,501)
GSE	—		—		106,505		(5,861)		106,505		(5,861)
	4,780,217		(19,617)		1,639,412		(44,192)		6,419,629		(63,809)

MBS
U.S. government guaranteed – single-family	17,220		(1,658)		—		—		17,220		(1,658)
U.S. government guaranteed – multifamily	518,612		(18,325)		—		—		518,612		(18,325)
GSE – single-family	739,239		(32,937)		78,231		(7,929)		817,470		(40,866)
GSE – multifamily	4,739,498		(121,950)		198,174		(7,425)		4,937,672		(129,375)
	6,014,569		(174,870)		276,405		(15,354)		6,290,974		(190,224)
Total	$	10,794,786	$	(194,487)	$	1,915,817	$	(59,546)	$	12,710,603	$	(254,033)


	December 31, 2021
	Continuous Unrealized Loss Less than 12 Months				Continuous Unrealized Loss 12 Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
U.S. Treasury obligations	$	1,212,443	$	(370)	$	—	$	—	$	1,212,443	$	(370)
HFA securities	—		—		50,053		(1,067)		50,053		(1,067)
Supranational institutions	—		—		389,180		(5,668)		389,180		(5,668)
U.S. government-owned corporations	—		—		306,864		(18,703)		306,864		(18,703)
GSE	—		—		126,472		(3,671)		126,472		(3,671)
	1,212,443		(370)		872,569		(29,109)		2,085,012		(29,479)
MBS

U.S. government guaranteed – multifamily	187,437		(52)		—		—		187,437		(52)
GSE – single-family	93,020		(121)		—		—		93,020		(121)
GSE – multifamily	1,507,051		(25,196)		—		—		1,507,051		(25,196)
	1,787,508		(25,369)		—		—		1,787,508		(25,369)
Total	$	2,999,951	$	(25,739)	$	872,569	$	(29,109)	$	3,872,520	$	(54,848)

Table of Contents

Table 3.5 - Available-for-Sale Securities by Contractual Maturity

(dollars in thousands)


	June 30, 2022				December 31, 2021
Year of Maturity	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in one year or less	$	27,000	$	26,711	$	27,000	$	26,780
Due after one year through five years	2,981,336		2,970,217		1,898,894		1,898,308
Due after five years through 10 years	3,384,900		3,364,172		3,674,762		3,671,798
Due after 10 years	345,029		313,978		409,257		387,026
	6,738,265		6,675,078		6,009,913		5,983,912
MBS (1)	6,992,383		6,821,549		6,828,061		6,912,075
Total	$	13,730,648	$	13,496,627	$	12,837,974	$	12,895,987

_______________________

Held-to-Maturity Securities

Table 3.6 - Held-to-Maturity Securities by Major Security Type

(dollars in thousands)


		June 30, 2021									June 30, 2022
		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

MBS	MBS									MBS
U.S. government guaranteed – single-family	U.S. government guaranteed – single-family	$	4,814	$	110	$	0	$	4,924	U.S. government guaranteed – single-family	$	3,914	$	59	$	—	$	3,973

GSE – single-family	GSE – single-family	172,941		4,012		(78)		176,875		GSE – single-family	109,783		1,152		(392)		110,543

Total	Total	$	177,755	$	4,122	$	(78)	$	181,799	Total	$	113,697	$	1,211	$	(392)	$	114,516

December 31, 2020

Amortized Cost(1)
Gross Unrecognized Holding Gains Gross Unrecognized Holding Losses Fair Value
MBS
U.S. government guaranteed – single-family $ 5,388 $ 103 $ 0 $ 5,491
GSE – single-family 201,774 4,681 (109) 206,346
Total $ 207,162 $ 4,784 $ (109) $ 211,837


	December 31, 2021
	Amortized Cost(1)		Gross Unrecognized Holding Gains		Gross Unrecognized Holding Losses		Fair Value

MBS
U.S. government guaranteed – single-family	$	4,320	$	88	$	—	$	4,408

GSE – single-family	141,172		2,605		(117)		143,660

Total	$	145,492	$	2,693	$	(117)	$	148,068

_______________________

(1) Amortized cost of held-to-maturity securities includes adjustments made to the cost basis of an investment for accretion, amortization, and collection of cash. Amortized cost excludes accrued interest receivable of ~~$261~~$214 thousand and ~~$368~~$200 thousand at June 30, ~~2021,~~2022, and December 31, ~~2020,~~2021, respectively.

Gains and Losses on Sales.

We compute gains and losses on sales of investment securities using the specific identification method and include these gains and losses in other income (loss). The following table summarizes the proceeds from sale and gains and losses on sales of securities for the three and six months ended June 30, ~~2021~~2022 and ~~2020.~~2021.

Table 3.7 - Proceeds and Gains (Losses) from Sales of Investment Securities

Table of Contents~~(1)~~

(dollars in thousands)


		For the Three Months Ended June 30,				For the Six Months Ended June 30,					For the Three Months Ended June 30,				For the Six Months Ended June 30,
		2021		2020		2021		2020			2022		2021		2022		2021
Available-for-Sale Securities										Available-for-Sale Securities
Proceeds from sale										Proceeds from sale	$	—	$	—	$	142,733	$	—
Amortized cost										Amortized cost	—		—		142,735		—

Gross realized gains from sale										Gross realized gains from sale	—		—		124		—
Gross realized losses from sale										Gross realized losses from sale	—		—		(126)		—
Realized net loss from sale										Realized net loss from sale	$	—	$	—	$	(2)	$	—

Held-to-Maturity Securities(1)	Held-to-Maturity Securities(1)									Held-to-Maturity Securities(1)
Proceeds from sale	Proceeds from sale	$	0	$	0	$	0	$	161,743	Proceeds from sale	$	—	$	—	$	10,405	$	—
Less: Carrying value		0		0		0		100,771
Less: Noncredit losses recorded in accumulated other comprehensive income		0		0		0		20,239
Carrying value										Carrying value	—		—		10,385		—

Gross realized gains from sale										Gross realized gains from sale	—		—		22		—
Gross realized losses from sale										Gross realized losses from sale	—		—		(2)		—
Realized net gain from sale	Realized net gain from sale	$	0	$	0	$	0	$	40,733	Realized net gain from sale	$	—	$	—	$	20	$	—

_______________________

(1) ~~The~~Held-to-maturity securities sold had less than 15 percent of the acquired principal outstanding at the time of ~~the~~ sale. Such sales are treated as maturities for the purposes of security classification. The sale ~~did~~does not impact our ability and intent to hold the remaining investments classified as held-to-maturity through their stated maturity dates.

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

We evaluate available-for-sale and held-to-maturity investment securities for credit losses on a quarterly basis.

~~Table 3.8 - Allowance for Credit Losses on Held-to-Maturity Debt Securities~~

~~(dollars in thousands)~~

~~Table of Contents~~

For the Three Months Ended June 30, For the Six Months Ended June 30,
2021 2020 2021 2020
Balance at beginning of period $ 0 $ 3,768 $ 0 $ 0
Adjustments for cumulative effect of change in accounting principle(1)
0 0 0 5,308
Reduction of provision for credit losses due to sales of securities 0 0 0 (782)
Provision for credit losses 0 1,798 0 1,040
Balance at end of period $ 0 $ 5,566 $ 0 $ 5,566

~~_________________________~~

(1) We adopted new accounting guidance for the measurement of credit losses on financial instruments on January 1, 2020. See Item 8 — Financial Statements and Supplementary Data — Notes to Financial Statements — Note 3 — Recently Issued and Adopted Accounting Guidance in the 2020 Annual Report for information on the adoption of Financial Instruments - Credit Losses. Upon adoption of this new accounting guidance, we recorded through a cumulative effect adjustment to retained earnings an increase in the allowance for credit losses associated with held-to-maturity private-label MBS totaling $5.3 million.

Our available-for-sale and held-to-maturity securities are principally debt securities of GSE ~~and~~or U.S. government-owned corporations, supranational institutions, and state or local housing finance agency obligations, and MBS issued by Government National Mortgage Association (Ginnie Mae), Federal Home Loan Mortgage Corporation (Freddie Mac), and Federal National Mortgage Association (Fannie Mae) that are backed by single-family or multifamily mortgage loans. We only purchase investment-grade securities. At June 30, 2022, and December 31, 2021, all available-for-sale securities and held-to-maturity securities ~~based on amortized cost,~~ were rated single-A, or above, by an NRSRO, based on the lowest long-term credit rating for each security.

We evaluate ~~our~~ 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 June 30, ~~2021,~~2022, certain available-for-sale securities were in an unrealized loss position. These losses are considered temporary as we expect to recover the entire amortized cost basis on these available-for-sale investment securities and we neither intend to sell these securities nor do we consider it more likely than not that we will be required to sell these securities before the anticipated recovery of each security's remaining amortized cost basis. Further, we have not experienced any material payment defaults on the instruments. ~~In addition, substantially all~~Based on our assessment of ~~these securities carry an implicit~~the creditworthiness of the issuers or ~~explicit government guarantee. As a result, 0~~guarantors, no allowance for credit losses was recorded on available-for-sale securities at June 30, 2022, and December 31, 2021.

We evaluate ~~our~~ 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. AsWe have not experienced and do not anticipate any material payment defaults on these securities. Based on our assessment of ~~June 30, 2021, we had 0t established an~~the creditworthiness of the issuers or guarantors, no allowance for credit losses was recorded on ~~any of our~~ 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 do we expect to experience, any payment default on the instruments,~~at June 30, 2022, and ~~(3) in the case of U.S. or GSE obligations, carry an implicit or explicit government guarantee such that we consider the risk of nonpayment to be zero.~~December 31, 2021.

Note 4 — Advances

General Terms. At ~~both~~ June 30, ~~2021,~~2022, and December 31, ~~2020,~~2021, we had advances outstanding with interest rates ranging from 0.00 percent to 6.23 percent and 0.00 percent to 7.72 ~~percent.~~percent, respectively.

Table of Contents

Table 4.1 - Advances Outstanding by Year of Contractual Maturity

(dollars in thousands)

June 30, 2021 December 31, 2020
Amount Weighted
Average
Rate Amount Weighted
Average
Rate
Overdrawn demand-deposit accounts $ 483 0.59 % $ 135 0.62 %
Due in one year or less 5,933,370 1.05 9,090,900 1.00
Due after one year through two years 2,443,633 2.02 2,281,047 1.78
Due after two years through three years 1,516,776 2.13 2,014,880 2.37
Due after three years through four years 2,020,666 1.49 1,685,056 1.79
Due after four years through five years 1,957,360 1.22 2,687,456 1.34
Thereafter 1,244,437 2.08 945,038 2.38
Total par value 15,116,725 1.48 % 18,704,512 1.43 %
Premiums 951 2,248
Discounts (36,582) (37,592)
Fair value of bifurcated derivatives (1)
33,886 44,534
Hedging adjustments 61,645 103,300
Total (2)
$ 15,176,625 $ 18,817,002


	June 30, 2022				December 31, 2021
	Amount		Weighted Average Rate		Amount		Weighted Average Rate
Overdrawn demand-deposit accounts	$	126	1.90	%	$	64	0.60	%
Due in one year or less	15,572,853		1.55		5,064,776		0.76
Due after one year through two years	9,536,392		1.78		1,354,297		2.26
Due after two years through three years	1,152,769		1.74		1,541,076		1.64
Due after three years through four years	1,352,529		1.50		2,173,238		1.43
Due after four years through five years	1,372,914		1.81		1,310,971		1.07
Due after five years through fifteen years	1,457,711		2.19		871,692		2.11
Thereafter	32,564		1.28		31,591		1.33
Total par value	30,477,858		1.67	%	12,347,705		1.28	%

Discounts	(33,800)				(34,926)
Fair value of bifurcated derivatives (1)	1,580				11,890
Hedging adjustments	(127,152)				15,351
Total (2)	$	30,318,486			$	12,340,020

_________________________

(1) At June 30, ~~2021,~~2022, and December 31, ~~2020,~~2021, we had certain advances with embedded features that met the requirements to be separated from the host contract and designated as stand-alone derivatives.

(2) Excludes accrued interest receivable of ~~$23.1~~$32.2 million and ~~$25.8~~$16.3 million at June 30, ~~2021,~~2022, and December 31, ~~2020,~~2021, respectively.

We offer advances to members and eligible nonmembers that provide the borrower the right, based upon predetermined option exercise dates, to repay the advance prior to maturity without incurring prepayment or termination fees (callable advances). We also offer certain floating-rate advances that may be contractually prepaid by the borrower on a floating-rate reset date without incurring prepayment or termination fees. Other advances may only be prepaid by paying a fee (prepayment fee) that makes us financially indifferent to the prepayment of the advance.

Table 4.2 - Advances Outstanding by Year of Contractual Maturity or Next Call Date

(dollars in thousands)


		June 30, 2021		December 31, 2020			June 30, 2022		December 31, 2021
Overdrawn demand-deposit accounts	Overdrawn demand-deposit accounts	$	483	$	135	Overdrawn demand-deposit accounts	$	126	$	64
Due in one year or less	Due in one year or less	7,028,345		10,149,975		Due in one year or less	24,926,478		6,116,251
Due after one year through two years	Due after one year through two years	2,257,933		2,095,247		Due after one year through two years	1,231,392		1,354,297
Due after two years through three years	Due after two years through three years	1,306,776		1,809,880		Due after two years through three years	1,062,994		1,249,001
Due after three years through four years	Due after three years through four years	1,871,591		1,392,981		Due after three years through four years	1,316,029		2,106,238
Due after four years through five years	Due after four years through five years	1,420,860		2,335,956		Due after four years through five years	455,164		632,271
Due after five years through fifteen years						Due after five years through fifteen years	1,453,111		857,992
Thereafter	Thereafter	1,230,737		920,338		Thereafter	32,564		31,591
Total par value	Total par value	$	15,116,725	$	18,704,512	Total par value	$	30,477,858	$	12,347,705

We currently hold putable advances that provide us with the right to require repayment prior to maturity of the advance (and thereby extinguish the advance) on predetermined exercise dates (put dates). Generally, we would exercise the put options when interest rates increase relative to contractual rates.

Table of Contents

Table 4.3 - Advances Outstanding by Year of Contractual Maturity or Next Put Date

(dollars in thousands)


		June 30, 2021		December 31, 2020			June 30, 2022		December 31, 2021
Overdrawn demand-deposit accounts	Overdrawn demand-deposit accounts	$	483	$	135	Overdrawn demand-deposit accounts	$	126	$	64
Due in one year or less	Due in one year or less	7,709,795		10,755,575		Due in one year or less	15,881,753		6,088,201
Due after one year through two years	Due after one year through two years	1,676,033		2,201,797		Due after one year through two years	9,307,992		908,797
Due after two years through three years	Due after two years through three years	1,223,376		1,224,380		Due after two years through three years	1,141,769		1,497,076
Due after three years through four years	Due after three years through four years	1,452,741		1,593,056		Due after three years through four years	1,341,029		1,709,313
Due after four years through five years	Due after four years through five years	1,856,360		2,059,531		Due after four years through five years	1,358,914		1,277,471
Due after five years through fifteen years						Due after five years through fifteen years	1,413,711		835,192
Thereafter	Thereafter	1,197,937		870,038		Thereafter	32,564		31,591
Total par value	Total par value	$	15,116,725	$	18,704,512	Total par value	$	30,477,858	$	12,347,705

Table 4.4 - Advances by Current Interest Rate Terms

(dollars in thousands)


							June 30, 2022		December 31, 2021

		June 30, 2021		December 31, 2020
Fixed-rate	Fixed-rate	$	13,036,967	$	16,742,602	Fixed-rate	$	16,925,337	$	9,998,766
Variable-rate	Variable-rate	2,079,758		1,961,910		Variable-rate	13,552,521		2,348,939
Total par value	Total par value	$	15,116,725	$	18,704,512	Total par value	$	30,477,858	$	12,347,705

Credit Risk Exposure and Security Terms. Our advances are primarily made to member financial institutions, including commercial banks, insurance companies, savings institutions, and credit unions. We manage our credit exposure to secured member credit products through an integrated approach that generally includes establishing a credit limit for each borrower. This approach includes an ongoing review of each borrower's financial condition, and collateral and lending policies that are intended to limit risk of loss while balancing borrowers' needs for a reliable source of funding. For additional information on credit risk exposure and security terms see Part II — Item 8 — Financial Statements and Supplementary Data — Note 6 — Advances in the ~~2020~~2021 Annual Report.

Using a risk-based approach and taking into consideration each borrower's financial strength, we consider the types and level of collateral to be the primary indicator of credit quality on our credit products. At June 30, ~~2021,~~2022, and December 31, ~~2020,~~2021, we had rights to collateral, on a borrower-by-borrower basis, with an estimated value in excess of our outstanding extensions of credit.

We continue to evaluate and make changes to our collateral guidelines based on market conditions. At June 30, ~~2021,~~2022, and December 31, ~~2020, NaN~~2021, none of our advances were past due, on ~~non accrual~~nonaccrual status, or considered impaired. In addition, there were 0no troubled debt restructurings related to advances during the six months ended June 30, ~~2021~~2022 and ~~2020.~~2021.

Based upon the collateral held as security, our credit extension and collateral policies, management's credit analysis, and the repayment history on advances, we have 0tnot recorded any allowance for credit losses on our advances at June 30, ~~2021,~~2022, and December 31, ~~2020.~~2021.

Prepayment Fees.

Table of Contents

Table 4.5 - Advances Prepayment Fees

(dollars in thousands)


		For the Three Months Ended June 30,				For the Six Months Ended June 30,					For the Three Months Ended June 30,				For the Six Months Ended June 30,
		2021		2020		2021		2020			2022		2021		2022		2021
Prepayment fees received from borrowers	Prepayment fees received from borrowers	$	4,728	$	7,065	$	14,145	$	7,903	Prepayment fees received from borrowers	$	772	$	4,728	$	1,695	$	14,145
Hedging fair-value adjustments on prepaid advances	Hedging fair-value adjustments on prepaid advances	(479)		(2,897)		(936)		(2,897)		Hedging fair-value adjustments on prepaid advances	1,271		(479)		1,280		(936)
Net premiums associated with prepaid advances		(17)		(4)		(1,244)		(4)
Net discounts (premiums) associated with prepaid advances										Net discounts (premiums) associated with prepaid advances	321		(17)		303		(1,244)

Advance prepayment fees recognized in income, net	Advance prepayment fees recognized in income, net	$	4,232	$	4,164	$	11,965	$	5,002	Advance prepayment fees recognized in income, net	$	2,364	$	4,232	$	3,278	$	11,965

~~Table of Contents~~

Note 5 — Mortgage Loans Held for Portfolio

We invest in mortgage loans through the Mortgage Partnership Finance® (MPF®) program. These mortgage loans are either guaranteed or insured by federal agencies, as is the case with government mortgage loans, or are credit-enhanced, directly or indirectly, by the related entity that sold the loan (a participating financial institution), as is the case with conventional mortgage loans. All such investments are held for portfolio.

Table 5.1 - Mortgage Loans Held for Portfolio

(dollars in thousands)


		June 30, 2021		December 31, 2020			June 30, 2022		December 31, 2021
Real estate	Real estate					Real estate
Fixed-rate 15-year single-family mortgages	Fixed-rate 15-year single-family mortgages	$	310,949	$	322,713	Fixed-rate 15-year single-family mortgages	$	247,499	$	278,393
Fixed-rate 20- and 30-year single-family mortgages	Fixed-rate 20- and 30-year single-family mortgages	3,106,025		3,547,994		Fixed-rate 20- and 30-year single-family mortgages	2,608,527		2,793,682
Premiums	Premiums	53,871		60,050		Premiums	43,274		48,043
Discounts	Discounts	(836)		(1,094)		Discounts	(1,707)		(671)
Deferred derivative gains, net	Deferred derivative gains, net	2,621		3,689		Deferred derivative gains, net	1,280		2,412
Total mortgage loans held for portfolio(1)	Total mortgage loans held for portfolio(1)	3,472,630		3,933,352		Total mortgage loans held for portfolio(1)	2,898,873		3,121,859
Less: allowance for credit losses	Less: allowance for credit losses	(2,125)		(3,100)		Less: allowance for credit losses	(1,500)		(1,700)
Total mortgage loans, net of allowance for credit losses	Total mortgage loans, net of allowance for credit losses	$	3,470,505	$	3,930,252	Total mortgage loans, net of allowance for credit losses	$	2,897,373	$	3,120,159

________________________

(1) Excludes accrued interest receivable of ~~$17.4~~$14.7 million and ~~$19.3~~$15.7 million at June 30, ~~2021,~~2022, and December 31, ~~2020,~~2021, respectively.

Table 5.2 - Mortgage Loans Held for Portfolio by Collateral/Guarantee Type

(dollars in thousands)


		June 30, 2021		December 31, 2020			June 30, 2022		December 31, 2021
Conventional mortgage loans	Conventional mortgage loans	$	3,200,031	$	3,624,557	Conventional mortgage loans	$	2,682,484	$	2,880,354
Government mortgage loans	Government mortgage loans	216,943		246,150		Government mortgage loans	173,542		191,721
Total par value	Total par value	$	3,416,974	$	3,870,707	Total par value	$	2,856,026	$	3,072,075

Credit-Enhancements. Our allowance for credit losses factors in the credit-enhancements associated with conventional mortgage loans under the MPF program. These credit-enhancements apply after the homeowner's equity is exhausted and can include primary and/or supplemental mortgage insurance or other kinds of credit-enhancement. The credit risk analysis of our conventional loans is performed at the individual master commitment level to determine the credit-enhancements available to recover losses on loans under each individual master commitment. For additional information on credit enhancements see Part II — Item 8 — Financial Statements and Supplementary Data — Note 7 — Mortgage Loans Held for Portfolio — Credit-Enhancements in the ~~2020~~2021 Annual Report.

~~Relief to Borrowers During the COVID-19 Pandemic.~~ We have elected to apply Section 4013 of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) to our loan modifications that qualify under the CARES Act. As a result, we have elected to suspend troubled debt restructuring accounting for eligible modifications under Section 4013 of the CARES Act. As of June 30, 2021, we had $18.6 million of these modifications outstanding. See Part II — Item 8 — Financial Statements and Supplementary Data — Note 2 — Summary of Significant Accounting Policies in the 2020 Annual Report for additional information.

Servicers of our mortgage loans may grant a forbearance period to borrowers who have requested forbearance based on COVID-19 related difficulties regardless of the status of the loan at the time of the request. We continue to apply our accounting policy for past due loans and charge-offs to loans during the forbearance period unless there is a legal modification made to update the terms of the mortgage loan contract. The accrual status for loans under forbearance will be driven by the past due status of the loan based on its contractual terms.

As of June 30, 2021, we held approximately $36.1 million in par value of conventional mortgage loans that were in a forbearance plan as a result of COVID-19. Of these loans, $4.2 million had a current payment status, $3.2 million were 30 to 59 days past due, $3.2 million were 60 to 89 days past due, and $25.5 million were greater than 90 days past due and in nonaccrual

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status. The $36.1 million of conventional mortgage loans in forbearance represents 1.0 percent of our mortgage loans held for portfolio at June 30, 2021. In addition, we had approximately $8.4 million in par value of government mortgage loans in a forbearance plan as a result of COVID-19.

Payment Status of Mortgage Loans. Payment status is a key credit quality indicator for conventional mortgage loans and allows us to monitor ~~the migration of~~borrower performance. A past due ~~loans. Past due loans are those~~loan is one where the borrower has failed to make ~~timely payments~~a full payment of principal ~~and/or~~

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and interest ~~in accordance with the terms~~within 30 days of ~~the loan.~~its due date. Other delinquency statistics include ~~non-accrual~~nonaccrual loans and loans in process of foreclosure. Tables 5.3 and 5.4 present the payment status for conventional mortgage loans and other delinquency statistics for all mortgage loans at June 30, ~~2021,~~2022, and December 31, ~~2020.~~2021.

Table 5.3 - Credit Quality Indicator for Conventional Mortgage Loans

(dollars in thousands)


		June 30, 2021							June 30, 2022
		Year of Origination							Year of Origination
Payment Status at Amortized Cost(1)	Payment Status at Amortized Cost(1)	Prior to 2017		2017 to 2021		Total		Payment Status at Amortized Cost(1)	Prior to 2018		2018 to 2022		Total
Past due 30-59 days delinquent	Past due 30-59 days delinquent	$	12,424	$	9,807	$	22,231	Past due 30-59 days delinquent	$	7,149	$	4,069	$	11,218
Past due 60-89 days delinquent	Past due 60-89 days delinquent	3,576		1,977		5,553		Past due 60-89 days delinquent	3,099		2,602		5,701
Past due 90 days or more delinquent	Past due 90 days or more delinquent	18,062		17,533		35,595		Past due 90 days or more delinquent	9,838		6,754		16,592
Total past due	Total past due	34,062		29,317		63,379		Total past due	20,086		13,425		33,511
Total current loans	Total current loans	1,349,000		1,839,089		3,188,089		Total current loans	1,253,021		1,435,500		2,688,521
Total mortgage loans		$	1,383,062	$	1,868,406	$	3,251,468
Total conventional mortgage loans								Total conventional mortgage loans	$	1,273,107	$	1,448,925	$	2,722,032


	December 31, 2021
	Year of Origination
Payment Status at Amortized Cost(1)	Prior to 2017		2017 to 2021		Total
Past due 30-59 days delinquent	$	7,719	$	8,053	$	15,772
Past due 60-89 days delinquent	3,312		2,660		5,972
Past due 90 days or more delinquent	11,932		9,196		21,128
Total past due	22,963		19,909		42,872
Total current loans	1,153,115		1,730,438		2,883,553
Total conventional mortgage loans	$	1,176,078	$	1,750,347	$	2,926,425

_________________________

December 31, 2020
Year of Origination
Payment Status at Amortized Cost Prior to 2016 2016 to 2020 Total
Past due 30-59 days delinquent $ 11,743 $ 25,058 $ 36,801
Past due 60-89 days delinquent 5,263 11,178 16,441
Past due 90 days or more delinquent 20,894 43,529 64,423
Total past due 37,900 79,765 117,665
Total current loans 1,246,691 2,317,975 3,564,666
Total mortgage loans $ 1,284,591 $ 2,397,740 $ 3,682,331
(1) Amortized cost excludes accrued interest receivable.

Table 5.4 - Other Delinquency Statistics of Mortgage Loans

(dollars in thousands)


		June 30, 2021										June 30, 2022
		Amortized Cost in Conventional Mortgage Loans			Amortized Cost in Government Mortgage Loans			Total				Amortized Cost in Conventional Mortgage Loans			Amortized Cost in Government Mortgage Loans			Total
In process of foreclosure (1)	In process of foreclosure (1)	$	647		$	1,231		$	1,878		In process of foreclosure (1)	$	1,844		$	878		$	2,722
Serious delinquency rate (2)	Serious delinquency rate (2)	1.11		%	4.60		%	1.33		%	Serious delinquency rate (2)	0.62		%	1.68		%	0.68		%
Past due 90 days or more still accruing interest	Past due 90 days or more still accruing interest	$	0		$	8,954		$	8,954		Past due 90 days or more still accruing interest	$	—		$	2,966		$	2,966
Loans on nonaccrual status (3)	Loans on nonaccrual status (3)	$	35,933		$	1,220		$	37,153		Loans on nonaccrual status (3)	$	16,821		$	—		$	16,821


		December 31, 2020										December 31, 2021
		Amortized Cost in Conventional Mortgage Loans			Amortized Cost in Government Mortgage Loans			Total				Amortized Cost in Conventional Mortgage Loans			Amortized Cost in Government Mortgage Loans			Total
In process of foreclosure (1)	In process of foreclosure (1)	$	1,762		$	1,041		$	2,803		In process of foreclosure (1)	$	786		$	935		$	1,721
Serious delinquency rate (2)	Serious delinquency rate (2)	1.75		%	6.04		%	2.02		%	Serious delinquency rate (2)	0.74		%	2.24		%	0.83		%
Past due 90 days or more still accruing interest	Past due 90 days or more still accruing interest	$	0		$	5,592		$	5,592		Past due 90 days or more still accruing interest	$	—		$	4,383		$	4,383
Loans on nonaccrual status ~~(4)~~(3)	Loans on nonaccrual status ~~(4)~~(3)	$	65,039		$	10,101		$	75,140		Loans on nonaccrual status ~~(4)~~(3)	$	21,529		$	—		$	21,529

_______________________

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

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

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(3) As of June 30, 2022, and December 31, 2021, ~~the~~$7.7 million and $11.8 million, respectively, of conventional ~~and government~~ mortgage loans on ~~non-accrual~~nonaccrual status ~~that~~ did not have an associated allowance for credit losses ~~amounted to $23.1 million and $1.2 million, respectively.~~

~~(4) As~~because these loans were either charged off or the fair value of ~~December 31, 2020,~~ the ~~conventional and government mortgage loans on non-accrual status that did not have an associated allowance for~~underlying collateral, including any credit ~~losses amounted to $31.8 million and $10.1 million, respectively.~~enhancements, is greater than the amortized cost of the loans.

Allowance for Credit Losses for Mortgage Loans.

Conventional Mortgage Loans. ~~Using Financial Instruments - Credit Losses accounting guidance, conventional~~Conventional loans are evaluated collectively when similar risk characteristics exist. Conventional loans that do not share risk characteristics with other ~~pools~~loans are evaluated for expected credit losses on an individual basis. We determine our allowance for credit losses on conventional loans through analyses that include consideration of various loan portfolio and collateral-related characteristics, such as past performance, current conditions, and reasonable and supportable forecasts of expected economic conditions. We use a discounted cash flow model to project our expected losses. We use a third-party model to project cash flows to estimate the expected credit losses over the life of the loans. The model relies on a number of inputs, such as both current and forecasted property values and interest rates as well as historical borrower behavior. We incorporate associated credit enhancements and expected recoveries, if any, to determine our estimate of expected credit losses.

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 ifwhen the borrower is experiencing financial difficulty and repayment is expected to ~~be provided by~~come substantially from the sale of the underlying ~~property, that is, if it is considered likely that the borrower will default.~~collateral. We estimate the fair value of this collateral by using a third-party 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 fair value of the collateral, less estimated selling costs. We will reserve for these estimated losses or record a direct charge-off of the loan balance if certain triggering criteria are met.

Table 5.5 presents a roll forward of the allowance for credit losses on conventional mortgage loans for the three and six months ended June 30, ~~2021~~2022, and ~~2020.~~2021.

Table 5.5 - Allowance for Credit Losses on Conventional Mortgage Loans

(dollars in thousands)

For the Three Months Ended June 30, For the Six Months Ended June 30,
Allowance for credit losses(1)
2021 2020 2021 2020
Balance, beginning of period $ 1,900 $ 3,500 $ 3,100 $ 500
Adjustment for cumulative effect of change in accounting principle 0 0 0 2,221
Recoveries (charge-offs) 26 (3) 52 (80)
Provision for (reduction of) credit losses 199 1,105 (1,027) 1,961
Balance, end of period $ 2,125 $ 4,602 $ 2,125 $ 4,602


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2022		2021		2022		2021
Allowance for credit losses (1)
Balance, beginning of period	$	1,600	$	1,900	$	1,700	$	3,100

(Charge-offs) recoveries	(1)		26		(1)		52

(Reduction of) provision for credit losses	(99)		199		(199)		(1,027)
Balance, end of period	$	1,500	$	2,125	$	1,500	$	2,125

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(1) These amounts exclude government mortgage loans because we make no allowance for credit losses based on our investments in government mortgage loans, as discussed below under — Government Mortgage Loans Held for Portfolio.

Government Mortgage Loans Held for Portfolio. We invest in government mortgage loans secured by one- to four-family residential properties. Government mortgage loans are mortgage loans insured or guaranteed by the Federal Housing Administration (the FHA), the U.S. Department of Veterans Affairs (the VA), the Rural Housing Service of the U.S. Department of Agriculture (RHS), or by the U.S. Department of Housing and Urban Development (HUD).

The servicer provides and maintains insurance or a guarantee from the applicable government agency. The servicer is responsible for compliance with all government agency requirements and for obtaining the benefit of the applicable insurance or guaranty with respect to defaulted government-guaranteed mortgage loans. Any losses incurred on these loans that are not recovered from the insurer or guarantor are absorbed by the related servicer. Therefore, we only have credit risk for these loans if the servicer fails to pay for losses not covered by insurance or ~~guarantees.~~guarantees, but in such instances, we have recourse against the servicer for such failure. Due to government guarantees or insurance on our

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government loans, there is 0no allowance for credit losses for the government mortgage loan portfolio as of June 30, ~~2021,~~2022, and December 31, ~~2020.~~2021. Additionally, government mortgage loans ~~other than government mortgage loans that have been granted temporary forbearance,~~ are not placed on nonaccrual status due to the government guarantee or insurance on these loans and the contractual obligation of the loan servicers to repurchase their related loans when certain criteria are met.

Note 6 — Derivatives and Hedging Activities

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Table 6.1 - Fair Value of Derivative Instruments

(dollars in thousands)


		June 30, 2021						December 31, 2020							June 30, 2022						December 31, 2021
		Notional Amount of Derivatives		Derivative Assets		Derivative Liabilities		Notional Amount of Derivatives		Derivative Assets		Derivative Liabilities			Notional Amount of Derivatives		Derivative Assets		Derivative Liabilities		Notional Amount of Derivatives		Derivative Assets		Derivative Liabilities
Derivatives designated as hedging instruments	Derivatives designated as hedging instruments													Derivatives designated as hedging instruments
Interest-rate swaps	Interest-rate swaps	$	22,499,742	$	7,452	$	(79,289)	$	9,960,475	$	6,044	$	(41,000)	Interest-rate swaps	$	35,907,900	$	3,496	$	(1,040,253)	$	26,589,956	$	362	$	(163,457)
Forward-start interest-rate swaps	Forward-start interest-rate swaps	637,000		0		(1,243)		17,000		0		(14)		Forward-start interest-rate swaps	1,391,000		—		(3,923)		1,391,000		48		(428)
Total derivatives designated as hedging instruments	Total derivatives designated as hedging instruments	23,136,742		7,452		(80,532)		9,977,475		6,044		(41,014)		Total derivatives designated as hedging instruments	37,298,900		3,496		(1,044,176)		27,980,956		410		(163,885)

Derivatives not designated as hedging instruments	Derivatives not designated as hedging instruments													Derivatives not designated as hedging instruments
Interest-rate swaps	Interest-rate swaps	3,169,800		3,188		(36,585)		5,536,822		3,918		(47,756)		Interest-rate swaps	329,800		—		(2,689)		900,425		3,440		(13,663)
CO bond firm commitments														CO bond firm commitments	20,000		28		—		55,000		54		(30)

CO bond firm commitments		15,000		0		(1)		0		0		0
Mortgage-delivery commitments (1)	Mortgage-delivery commitments (1)	7,971		34		(5)		28,386		220		0		Mortgage-delivery commitments (1)	6,864		108		—		3,164		68		—
Total derivatives not designated as hedging instruments	Total derivatives not designated as hedging instruments	3,192,771		3,222		(36,591)		5,565,208		4,138		(47,756)		Total derivatives not designated as hedging instruments	356,664		136		(2,689)		958,589		3,562		(13,693)
Total notional amount of derivatives	Total notional amount of derivatives	$	26,329,513					$	15,542,683					Total notional amount of derivatives	$	37,655,564					$	28,939,545
Total derivatives before netting and collateral adjustments	Total derivatives before netting and collateral adjustments			10,674		(117,123)				10,182		(88,770)		Total derivatives before netting and collateral adjustments			3,632		(1,046,865)				3,972		(177,578)
Netting adjustments and cash collateral, including related accrued interest (2)	Netting adjustments and cash collateral, including related accrued interest (2)			317,497		97,979				151,056		64,708		Netting adjustments and cash collateral, including related accrued interest (2)			385,607		1,046,865				374,560		138,634
Derivative assets and derivative liabilities	Derivative assets and derivative liabilities			$	328,171	$	(19,144)			$	161,238	$	(24,062)	Derivative assets and derivative liabilities			$	389,239	$	—			$	378,532	$	(38,944)

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(1) Mortgage-delivery commitments are classified as derivatives with changes in fair value recorded in other income.

(2) Amounts represent the effect of master-netting agreements intended to allow us to settle positive and negative positions with the same counterparty. Cash collateral posted, including accrued interest, ~~posted~~ was ~~$415.5 million~~$1.4 billion and ~~$215.8~~$513.2 million at June 30, ~~2021,~~2022, and December 31, ~~2020,~~2021, respectively. The change in cash collateral posted is included in the net change in interest-bearing deposits in the statement of cash flows. ~~There was 0 cash collateral and related accrued interest received at June 30, 2021, and December 31, 2020.~~

Changes in fair value of the derivative hedging instrument and the hedged item attributable to the hedged risk for designated fair-value hedges are recorded in net interest income in the same line as the earnings effect of the hedged item. For designated cash-flow hedges, the entire change in the fair value of the hedging instrument (assuming it is included in the assessment of hedge effectiveness) is reported in other comprehensive income until the hedged transaction affects earnings. At that time, this amount is reclassified from other comprehensive income and recorded in net interest income in the same line as the earnings effect of the hedged item.

Tables 6.2 presents the net gains (losses) on qualifying fair-value hedging relationships. Gains (losses) on derivatives include unrealized changes in fair value as well as net interest settlements.

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Table 6.2 - Net Gains (Losses) on Fair Value Hedging Relationships

(dollars in thousands)


		For the Three Months Ended June 30, 2021							For the Three Months Ended June 30, 2022
		Advances		Available-for-sale Securities		CO Bonds			Advances		Available-for-sale Securities		CO Bonds
Total interest income (expense) in the statements of operations	Total interest income (expense) in the statements of operations	$	43,230	$	10,841	$	(53,684)	Total interest income (expense) in the statements of operations	$	69,277	$	62,405	$	(78,242)

Gains (losses) on hedging relationships	Gains (losses) on hedging relationships							Gains (losses) on hedging relationships
Changes in fair value:	Changes in fair value:							Changes in fair value:
Derivatives	Derivatives	$	(964)	$	(128,985)	$	36,662	Derivatives	$	48,392	$	350,986	$	(238,288)
Hedged items	Hedged items	718		124,871		(36,596)		Hedged items	(47,489)		(334,705)		238,516
Net changes in fair value before price alignment interest	Net changes in fair value before price alignment interest	(246)		(4,114)		66		Net changes in fair value before price alignment interest	903		16,281		228
Price alignment interest(1)	Price alignment interest(1)	1		16		0		Price alignment interest(1)	(185)		(949)		31
Net interest settlements on derivatives(2)(3)	Net interest settlements on derivatives(2)(3)	(16,042)		(29,847)		16,000		Net interest settlements on derivatives(2)(3)	(5,205)		(21,256)		15,049
Net (losses) gains on qualifying hedging relationships	Net (losses) gains on qualifying hedging relationships	(16,287)		(33,945)		16,066		Net (losses) gains on qualifying hedging relationships	(4,487)		(5,924)		15,308
Amortization/accretion of discontinued hedging relationships	Amortization/accretion of discontinued hedging relationships	(705)		0		(757)		Amortization/accretion of discontinued hedging relationships	(273)		—		510
Net (losses) gains on derivatives and hedging activities recorded in net interest income	Net (losses) gains on derivatives and hedging activities recorded in net interest income	$	(16,992)	$	(33,945)	$	15,309	Net (losses) gains on derivatives and hedging activities recorded in net interest income	$	(4,760)	$	(5,924)	$	15,818


		For the Three Months Ended June 30, 2020							For the Three Months Ended June 30, 2021
		Advances		Available-for-sale Securities		CO Bonds			Advances		Available-for-sale Securities		CO Bonds
Total interest income (expense) in the statements of operations		$	100,818	$	17,137	$	(94,256)
Total income (expense) in the statements of operations								Total income (expense) in the statements of operations	$	43,230	$	10,841	$	(53,684)

Gains (losses) on hedging relationships	Gains (losses) on hedging relationships							Gains (losses) on hedging relationships
Changes in fair value:	Changes in fair value:							Changes in fair value:
Derivatives	Derivatives	$	(2,232)	$	(11,397)	$	(6,103)	Derivatives	$	(964)	$	(128,985)	$	36,662
Hedged items	Hedged items	3,377		11,665		5,233		Hedged items	718		124,871		(36,596)
Net changes in fair value before price alignment interest	Net changes in fair value before price alignment interest	1,145		268		(870)		Net changes in fair value before price alignment interest	(246)		(4,114)		66
Price alignment interest(1)	Price alignment interest(1)	25		85		(7)		Price alignment interest(1)	1		16		—
Net interest settlements on derivatives(2)(3)	Net interest settlements on derivatives(2)(3)	(14,683)		(20,459)		7,040		Net interest settlements on derivatives(2)(3)	(16,042)		(29,847)		16,000
Net gains (losses) on qualifying hedging relationships		(13,513)		(20,106)		6,163
Net (losses) gains on qualifying hedging relationships								Net (losses) gains on qualifying hedging relationships	(16,287)		(33,945)		16,066
Amortization/accretion of discontinued hedging relationships	Amortization/accretion of discontinued hedging relationships	(493)		0		(947)		Amortization/accretion of discontinued hedging relationships	(705)		—		749
Net (losses) gains on derivatives and hedging activities recorded in net interest income	Net (losses) gains on derivatives and hedging activities recorded in net interest income	$	(14,006)	$	(20,106)	$	5,216	Net (losses) gains on derivatives and hedging activities recorded in net interest income	$	(16,992)	$	(33,945)	$	16,815

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		For the Six Months Ended June 30, 2021							For the Six Months Ended June 30, 2022
		Advances		Available-for-sale Securities		CO Bonds			Advances		Available-for-sale Securities		CO Bonds
Total interest income (expense) in the statements of operations		$	92,782	$	33,836	$	(115,285)
Total income (expense) in the statements of operations								Total income (expense) in the statements of operations	$	103,270	$	107,138	$	(122,142)

Gains (losses) on hedging relationships	Gains (losses) on hedging relationships							Gains (losses) on hedging relationships
Changes in fair value:	Changes in fair value:							Changes in fair value:
Derivatives	Derivatives	$	40,897	$	127,518	$	(67,857)	Derivatives	$	144,241	$	987,668	$	(807,521)
Hedged items	Hedged items	(40,140)		(124,068)		68,159		Hedged items	(141,985)		(957,045)		808,226
Net changes in fair value before price alignment interest	Net changes in fair value before price alignment interest	757		3,450		302		Net changes in fair value before price alignment interest	2,256		30,623		705
Price alignment interest(1)	Price alignment interest(1)	16		65		(3)		Price alignment interest(1)	(207)		(1,000)		33
Net interest settlements on derivatives(2)(3)	Net interest settlements on derivatives(2)(3)	(31,867)		(51,784)		23,470		Net interest settlements on derivatives(2)(3)	(15,131)		(58,647)		41,840

Net (losses) gains on qualifying hedging relationships	Net (losses) gains on qualifying hedging relationships	(31,094)		(48,269)		23,769		Net (losses) gains on qualifying hedging relationships	(13,082)		(29,024)		42,578
Amortization/accretion of discontinued hedging relationships	Amortization/accretion of discontinued hedging relationships	(1,404)		0		(1,402)		Amortization/accretion of discontinued hedging relationships	(536)		—		1,012
Net (losses) gains on derivatives and hedging activities recorded in net interest income	Net (losses) gains on derivatives and hedging activities recorded in net interest income	$	(32,498)	$	(48,269)	$	22,367	Net (losses) gains on derivatives and hedging activities recorded in net interest income	$	(13,618)	$	(29,024)	$	43,590


		For the Six Months Ended June 30, 2020							For the Six Months Ended June 30, 2021
		Advances		Available-for-sale Securities		CO Bonds			Advances		Available-for-sale Securities		CO Bonds
Total interest income (expense) in the statements of operations		$	269,477	$	29,498	$	(217,803)
Total income (expense) in the statements of operations								Total income (expense) in the statements of operations	$	92,782	$	33,836	$	(115,285)

Gains (losses) on hedging relationships	Gains (losses) on hedging relationships							Gains (losses) on hedging relationships
Changes in fair value:	Changes in fair value:							Changes in fair value:
Derivatives	Derivatives	$	(129,800)	$	(387,891)	$	57,633	Derivatives	$	40,897	$	127,518	$	(67,857)
Hedged items	Hedged items	128,069		378,183		(58,825)		Hedged items	(40,140)		(124,068)		68,159
Net changes in fair value before price alignment interest	Net changes in fair value before price alignment interest	(1,731)		(9,708)		(1,192)		Net changes in fair value before price alignment interest	757		3,450		302
Price alignment interest(1)	Price alignment interest(1)	414		1,120		(185)		Price alignment interest(1)	16		65		(3)
Net interest settlements on derivatives(2)(3)	Net interest settlements on derivatives(2)(3)	(17,308)		(29,557)		9,996		Net interest settlements on derivatives(2)(3)	(31,867)		(51,784)		23,470

Net (losses) gains on qualifying hedging relationships	Net (losses) gains on qualifying hedging relationships	(18,625)		(38,145)		8,619		Net (losses) gains on qualifying hedging relationships	(31,094)		(48,269)		23,769
Amortization/accretion of discontinued hedging relationships	Amortization/accretion of discontinued hedging relationships	(830)		0		(1,835)		Amortization/accretion of discontinued hedging relationships	(1,404)		—		1,661
Net (losses) gains on derivatives and hedging activities recorded in net interest income	Net (losses) gains on derivatives and hedging activities recorded in net interest income	$	(19,455)	$	(38,145)	$	6,784	Net (losses) gains on derivatives and hedging activities recorded in net interest income	$	(32,498)	$	(48,269)	$	25,430

_______________________

(1) Relates to derivatives for which variation margin payments are characterized as daily settled contracts.

(2) Represents interest income/expense on derivatives in qualifying fair-value hedging relationships. Net interest settlements on derivatives that are not in qualifying fair-value hedging relationships are reported in other income.

(3) Excludes the interest income/expense of the respective hedged items recorded in net interest income.

Tables 6.3 presents the net gains (losses) on qualifying cash flow hedging relationships.

Table of Contents

Table 6.3 - Net Gains (Losses) on Cash Flow Hedging Relationships

(dollars in thousands)

For the Three Months Ended June 30, For the Six Months Ended June 30,
2021 2020 2021 2020
Forward-start interest rate swaps - CO Bonds
Losses reclassified from accumulated other comprehensive income into interest expense $ (1,506) $ (1,774) $ (3,063) $ (3,530)
Losses recognized in other comprehensive income (14,224) (154) (9,038) (1,279)


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2022		2021		2022		2021
Forward-start interest rate swaps - CO Bonds
Losses reclassified from accumulated other comprehensive loss into interest expense	$	(1,455)	$	(1,506)	$	(2,893)	$	(3,063)
Gains recognized in other comprehensive income	22,182		(14,224)		44,240		(9,038)

For the ~~six~~three months ended June 30, ~~2021,~~2022 and ~~2020,~~2021, there were 0no reclassifications from accumulated other comprehensive (loss) income into earnings as a result of the discontinuance of cash-flow hedges because the original forecasted transactions were not expected to occur by the end of the originally specified time period or within a two-month period thereafter. As of June 30, ~~2021,~~2022, the maximum length of time over which we are hedging our exposure to the variability in future cash flows for forecasted transactions is ~~six~~nine years.

As of June 30, ~~2021,~~2022, the amount of deferred net losses on derivatives accumulated in other comprehensive ~~income~~loss related to cash flow hedges expected to be reclassified to earnings during the next 12 months is ~~$5.8~~$4.9 million.

Table 6.4 - Cumulative Basis Adjustments for Fair-Value Hedges

(dollars in thousands)


		June 30, 2021									June 30, 2022
Line Item in Statement of Condition	Line Item in Statement of Condition	Amortized Cost of Hedged Asset/ Liability(1)		Basis Adjustments 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		Line Item in Statement of Condition	Amortized Cost of Hedged Asset/ Liability(1)		Basis Adjustments 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	Advances	$	4,171,741	$	84,609	$	10,922	$	95,531	Advances	$	2,487,643	$	(135,508)	$	8,356	$	(127,152)
Available-for-sale securities	Available-for-sale securities	8,871,698		374,023		0		374,023		Available-for-sale securities	11,721,006		(746,699)		—		(746,699)
Consolidated obligation bonds	Consolidated obligation bonds	9,871,753		(45,484)		37,572		(7,912)		Consolidated obligation bonds	19,742,699		(983,854)		30,583		(953,271)

_______________________

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

Table 6.5 - Net Gains and Losses on Derivatives and Hedging Activities

(dollars in thousands)

For the Three Months Ended June 30, For the Six Months Ended June 30,
2021 2020 2021 2020
Derivatives not designated as hedging instruments:
Economic hedges:
Interest-rate swaps $ 193 $ (1,803) $ 7 $ (54,372)
CO bond firm commitments 0 0 19 0
Mortgage-delivery commitments 253 632 (433) 570
Total net gains (losses) related to derivatives not designated as hedging instruments 446 (1,171) (407) (53,802)
Other(1)
1 10 6 83
Net gains (losses) on derivatives $ 447 $ (1,161) $ (401) $ (53,719)


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2022		2021		2022		2021
Derivatives not designated as hedging instruments:
Economic hedges:
Interest-rate swaps	$	525	$	193	$	4	$	7
CO Bond firm commitments	(521)		—		—		19
Mortgage-delivery commitments	(118)		253		(791)		(433)
Total net (losses) gains related to derivatives not designated as hedging instruments	(114)		446		(787)		(407)

Other(1)	—		1		—		6

Net (losses) gains on derivatives and hedging activities	$	(114)	$	447	$	(787)	$	(401)

______________________

(1) Consists of price alignment amount on derivatives for which variation margin is characterized as a daily settlement amount.

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Impacts on Statement of Cash Flows. Cash paid or received for cleared derivatives variation margin is included on the statement of cash flows in either net change in derivatives and hedging activities as an operating activity or net payments on derivatives with a financing element, as a financing activity. The table below shows the impact of variation margin for cleared derivatives on the statement of cash flows:

Table 6.6 - Impact of Variation Margin for Cleared Derivatives on the Statement of Cash Flows

(dollars in thousands)


	Increase on Cash Flow Statement
	For the Six Months Ended June 30,
	2022		2021
Operating activity - net change in derivatives and hedging activities	$	1,142,853	$	100,548
Financing activity - net payments on derivatives with a financing element	107,216		42,215
Total variation margin received on cleared derivatives	$	1,250,069	$	142,763

Managing Credit Risk on Derivatives.

We enter into derivatives that we clear (cleared derivatives) with a derivatives clearing organization (DCO), our counterparty for such derivatives. We also enter into derivatives that are not cleared (uncleared derivatives) under master-netting agreements. Currently derivatives that contain any optionality are not eligible for clearing. Accordingly, such derivatives, including the derivatives used to hedge issuance of callable CO bonds, are executed with our uncleared derivatives counterparties. Certain of our uncleared derivatives master-netting agreements contain provisions that require us to post additional collateral with our uncleared derivatives counterparties if our credit ratings are lowered. Under the terms that govern such agreements, if our credit rating is lowered by Moody's or S&P to a certain level, we are required to deliver additional collateral on uncleared derivatives. In the event of a split between such credit ratings, the lower rating governs. The aggregate fair value of all uncleared derivatives with these provisions that were in a net-liability position (before cash collateral and related accrued interest) at June 30, ~~2021,~~2022, was ~~$90.9~~$941.5 million for which we had delivered collateral with a post-haircut value of ~~$93.7 million~~$1.0 billion in accordance with the terms of the master-netting agreements. Securities collateral is subject to valuation haircuts in accordance with the terms of the master-netting arrangements. Table ~~6.6~~6.7 sets forth the post-haircut value of incremental collateral that certain uncleared derivatives counterparties could have required us to deliver based on incremental credit rating downgrades at June 30, ~~2021.~~2022.

Table ~~6.6~~6.7 - Post Haircut Value of Incremental Collateral to be Delivered as of June 30, ~~2021~~2022

(dollars in thousands)

Ratings Downgrade (1)

From

Incremental Collateral

AA+

AA or AA-

~~124~~—

AA-

A+, A or A-

0—

A-

below A-

~~18,856~~43,803

_______________________

(1) Ratings are expressed in this table according to S&P's conventions but include the equivalent of such rating by Moody's. If there is a split rating, the lower rating is used.

For cleared derivatives, the DCO is our counterparty. The DCO notifies the clearing member of the required initial and variation margin and our agent (clearing member) in turn notifies us. We utilize one of two DCOs for ~~all~~each cleared derivative ~~transactions, Chicago Mercantile Exchange~~transaction, CME Inc. ~~(CME Inc.) and~~or LCH ~~Limited (LCH~~ Ltd.). Based upon their rulebooks, we characterize variation margin payments as daily settlement payments, rather than as collateral. At both DCOs, posted initial margin is considered collateral. We post initial margin and exchange variation margin through a clearing member of the DCO which clears our trades, acts as our agent to the DCO and ~~which~~ guarantees our performance to the DCO, subject to the terms of relevant agreements. These arrangements expose us to credit risk in the event that one of our clearing members or one of the DCOs fails to meet its obligations. The use of cleared derivatives is intended to mitigate credit risk exposure because the DCO, which is fully secured at all times through margin received from its clearing members, is substituted for the credit risk exposure of individual counterparties in uncleared derivatives, and collateral is posted at least once daily for changes in the fair value of cleared derivatives through a clearing member.

Table of Contents

For cleared derivatives, the DCO determines initial margin requirements. ~~We clear our trades via~~Our clearing members, ~~of the DCOs. These clearing members who act as our agent to the DCOs~~which are CFTC-registered futures commission ~~merchants. Our clearing members~~merchants, may require us to post margin in excess of DCO requirements based on our credit or other considerations, including, but not limited to, credit rating downgrades. We were not required to post any such excess margin by our clearing members based on credit or any other considerations at June 30, ~~2021.~~2022.

Offsetting of Certain Derivatives. We present derivatives, any related cash collateral received or pledged, and associated accrued interest, on a net basis by counterparty.

We have analyzed the rights, rules, and regulations governing our cleared and uncleared derivatives and determined that those rights, rules, and regulations should result in a net claim with each of our counterparties (which, in the context of cleared derivatives is through each of our clearing members with the related DCO) upon an event of default of our counterparty (solely in the case of uncleared derivatives) or the bankruptcy, insolvency or a similar proceeding involving our counterparty (and/or one of our clearing members, in the case of cleared derivatives). For this purpose, "net claim" generally means a single net amount reflecting the aggregation of all amounts owed by us to the relevant counterparty and payable to us from the relevant counterparty.

Table ~~6.7~~6.8 presents separately the fair value of derivatives that are subject to netting due to a legal right of offset based on the

~~Table of Contents~~

terms of our master netting arrangements or similar agreements as of June 30, ~~2021,~~2022, and December 31, ~~2020,~~2021, and the fair value of derivatives that are not subject to such netting. Derivatives subject to netting include any related cash collateral received from or pledged to counterparties.

Table ~~6.7~~6.8 - Netting of Derivative Assets and Derivative Liabilities

(dollars in thousands)


		June 30, 2021											June 30, 2022
		Derivative Instruments Meeting Netting Requirements				Derivative Instruments Not Meeting Netting Requirements		Total Derivative Assets and Total Derivative Liabilities			Non-cash Collateral (Received) or Pledged Not Offset(2)							Derivative Instruments Meeting Netting Requirements
		Gross Recognized Amount		Gross Amounts of Netting Adjustments (1)						Net Amount			Gross Recognized Amount			Gross Amounts of Netting Adjustments (1)				Derivative Instruments Not Meeting Netting Requirements		Total Derivative Assets and Total Derivative Liabilities				Non-cash Collateral (Received) or Pledged Not Offset	Net Amount
Derivative Assets	Derivative Assets																				Derivative Assets
Interest-rate swaps	Interest-rate swaps																Interest-rate swaps
Uncleared	Uncleared	$	5,779	$	(2,828)			$	2,951		$	0		$	2,951		Uncleared	$	1,810	$	59,771			$	61,581		$	—	$	61,581
Cleared	Cleared	4,861		320,325				325,186			0			325,186			Cleared	1,686		325,836				327,522			—		327,522

Mortgage delivery commitment						$	34	34						34
CO bond firm commitments																	CO bond firm commitments					$	28	28					28
Mortgage delivery commitments																	Mortgage delivery commitments					108		108					108
Total	Total							$	328,171					$	328,171		Total							$	389,239				$	389,239

Derivative Liabilities	Derivative Liabilities																Derivative Liabilities
Interest-rate swaps	Interest-rate swaps																Interest-rate swaps
Uncleared	Uncleared	$	(96,639)	$	77,501			$	(19,138)		$	18,901		$	(237)		Uncleared	$	(943,323)	$	943,323			$	—		$	—	$	—
Cleared	Cleared	(20,478)		20,478				0			0			0			Cleared	(103,542)		103,542				—			—		—
CO bond firm commitment						$	(1)	(1)						(1)
Mortgage delivery commitment						(5)		(5)						(5)

Total	Total							$	(19,144)					$	(243)		Total							$	—				$	—

December 31, 2020
Derivative Instruments Meeting Netting Requirements Derivative Instruments Not Meeting Netting Requirements Total Derivative Assets and Total Derivative Liabilities
Non-cash Collateral (Received) or Pledged Not Offset(2)
Gross Recognized Amount
Gross Amounts of Netting Adjustments (1)
Net Amount
Derivative Assets
Interest-rate swaps
    Uncleared $ 5,215 $ (4,899) $ 316 $ 0 $ 316
    Cleared 4,747 155,955 160,702 0 160,702
Mortgage delivery commitment $ 220 220 220
Total $ 161,238 $ 161,238
Derivative Liabilities
Interest-rate swaps
    Uncleared $ (82,625) $ 58,563 $ (24,062) $ 23,087 $ (975)
    Cleared (6,145) 6,145 0 0 0
Total $ (24,062) $ (975)

Table of Contents


	December 31, 2021
	Derivative Instruments Meeting Netting Requirements
	Gross Recognized Amount		Gross Amounts of Netting Adjustments (1)		Derivative Instruments Not Meeting Netting Requirements		Total Derivative Assets and Total Derivative Liabilities		Non-cash Collateral (Received) or Pledged Not Offset(2)		Net Amount
Derivative Assets
Interest-rate swaps
Uncleared	$	327	$	(103)			$	224	$	—	$	224
Cleared	3,523		374,663				378,186		—		378,186
CO bond firm commitments					$	54	54				54
Mortgage delivery commitment					68		68				68
Total							$	378,532			$	378,532

Derivative Liabilities
Interest-rate swaps
Uncleared	$	(171,374)	$	132,460			$	(38,914)	$	28,374	$	(10,540)
Cleared	(6,175)		6,175				—		—		—
CO bond firm commitments					$	(30)	(30)				(30)
Total							$	(38,944)			$	(10,570)

_______________________

(1) Includes gross amounts of netting adjustments and cash collateral.

(2) Includes non-cash collateral at fair value that cannot be sold or repledged by the counterparty. ~~Additionally, any overcollateralization with a counterparty is not included in the determination of the net amount. At June 30, 2021, and~~

~~Table of Contents~~

December 31, 2020, we had additional net credit exposure of $932 thousand and $925 thousand due to instances where our collateral pledged to a counterparty exceeded our net derivative liability position.

Note 7 — Deposits

We offer demand and overnight deposits for members and qualifying ~~nonmembers, and prior to February 19, 2021, we offered term deposits to our members.~~nonmembers. Members that service mortgage loans may deposit funds collected in connection with mortgage loans pending disbursement of such funds to the owners of the mortgage loans, which we classify as "other" in the following table.

Table 7.1 - Deposits

(dollars in thousands)


		June 30, 2021		December 31, 2020			June 30, 2022		December 31, 2021
Interest-bearing	Interest-bearing					Interest-bearing
Demand and overnight	Demand and overnight	$	895,043	$	975,469	Demand and overnight	$	1,033,389	$	831,009

Other	Other	2,207		2,525		Other	1,846		1,998
Noninterest-bearing	Noninterest-bearing					Noninterest-bearing
Other	Other	73,032		110,993		Other	31,224		51,025
Total deposits	Total deposits	$	970,282	$	1,088,987	Total deposits	$	1,066,459	$	884,032

Note 8 — Consolidated Obligations

CO Bonds. CO bonds for which we have received issuance proceeds and are primarily liable were as follows:

Table of Contents

Table 8.1 - CO Bonds Outstanding by Contractual Maturity

(dollars in thousands)


		June 30, 2021				December 31, 2020					June 30, 2022				December 31, 2021
		Amount		Weighted Average Rate (1)		Amount		Weighted Average Rate (1)			Amount		Weighted Average Rate (1)		Amount		Weighted Average Rate (1)
Due in one year or less	Due in one year or less	$	5,888,590	0.77	%	$	10,608,465	0.81	%	Due in one year or less	$	11,992,260	1.72	%	$	6,919,220	0.79	%
Due after one year through two years	Due after one year through two years	3,715,900		1.38		3,956,120		1.35		Due after one year through two years	3,275,075		1.92		3,069,155		1.18
Due after two years through three years	Due after two years through three years	1,343,065		1.85		1,569,315		2.20		Due after two years through three years	4,962,995		1.28		3,514,735		1.09
Due after three years through four years	Due after three years through four years	2,787,075		1.27		1,141,430		2.43		Due after three years through four years	5,080,415		0.88		3,029,600		0.88
Due after four years through five years	Due after four years through five years	5,183,915		0.85		1,776,100		1.12		Due after four years through five years	4,135,320		1.32		5,735,605		0.91
Thereafter	Thereafter	4,522,870		2.19		2,312,155		3.58		Thereafter	4,206,865		2.00		4,456,865		1.91
Total par value	Total par value	23,441,415		1.27	%	21,363,585		1.42	%	Total par value	33,652,930		1.53	%	26,725,180		1.10	%
Premiums	Premiums	51,992				58,537				Premiums	30,368				40,251
Discounts	Discounts	(10,330)				(12,278)				Discounts	(8,422)				(9,011)
Hedging adjustments	Hedging adjustments	(7,912)				61,746				Hedging adjustments	(953,271)				(143,388)
Total	Total	$	23,475,165			$	21,471,590			Total	$	32,721,605			$	26,613,032

_______________________

(1) The CO bonds' weighted-average rate excludes concession fees.

Table 8.2 - CO Bonds Outstanding by Call Feature

(dollars in thousands)


		June 30, 2021		December 31, 2020			June 30, 2022		December 31, 2021
Noncallable and nonputable	Noncallable and nonputable	$	14,119,415	$	19,668,585	Noncallable and nonputable	$	12,961,180	$	13,924,180
Callable	Callable	9,322,000		1,695,000		Callable	20,691,750		12,801,000
Total par value	Total par value	$	23,441,415	$	21,363,585	Total par value	$	33,652,930	$	26,725,180

~~Table of Contents~~

Table 8.3 - CO Bonds Outstanding by Contractual Maturity or Next Call Date

(dollars in thousands)


		June 30, 2021		December 31, 2020			June 30, 2022		December 31, 2021
Due in one year or less	Due in one year or less	$	14,720,590	$	11,728,465	Due in one year or less	$	27,530,010	$	19,150,220
Due after one year through two years	Due after one year through two years	4,115,900		4,046,120		Due after one year through two years	1,762,325		3,461,155
Due after two years through three years	Due after two years through three years	1,018,065		1,629,315		Due after two years through three years	1,221,995		1,044,735
Due after three years through four years	Due after three years through four years	1,027,075		1,011,430		Due after three years through four years	1,669,415		1,544,600
Due after four years through five years	Due after four years through five years	1,364,915		1,501,100		Due after four years through five years	499,320		539,605
Thereafter	Thereafter	1,194,870		1,447,155		Thereafter	969,865		984,865
Total par value	Total par value	$	23,441,415	$	21,363,585	Total par value	$	33,652,930	$	26,725,180

Table 8.4 - CO Bonds by Interest Rate-Payment Type

(dollars in thousands)


		June 30, 2021		December 31, 2020			June 30, 2022		December 31, 2021
Fixed-rate	Fixed-rate	$	16,066,415	$	12,524,585	Fixed-rate	$	22,652,180	$	17,707,180
Simple variable-rate	Simple variable-rate	4,877,000		8,549,000		Simple variable-rate	5,507,000		4,803,000
Step-up (1)	Step-up (1)	2,498,000		290,000		Step-up (1)	5,493,750		4,215,000
Total par value	Total par value	$	23,441,415	$	21,363,585	Total par value	$	33,652,930	$	26,725,180

_______________________

(1) Step-up bonds pay interest at increasing fixed rates for specified intervals over the life of the CO bond and can be called at our option on the step-up dates.

Table of Contents

CO Discount Notes. Outstanding CO discount notes for which we were primarily liable, all of which are due within one year, were as follows:

Table 8.5 - CO Discount Notes Outstanding

(dollars in thousands)

Book Value Par Value
Weighted Average
Rate (1)
June 30, 2021 $ 8,365,460 $ 8,365,706 0.02 %
December 31, 2020 $ 12,878,310 $ 12,879,765 0.10 %


	Book Value		Par Value		Weighted Average Rate (1)
June 30, 2022	$	25,096,230	$	25,119,223	1.36	%
December 31, 2021	$	2,275,320	$	2,275,519	0.05	%

_______________________

(1) CO discount notes' weighted-average rate represents a yield to maturity excluding concession fees.

Note 9 — Affordable Housing Program

Table 9.1 - AHP Liability

(dollars in thousands)

June 30, 2021 December 31, 2020
Balance at beginning of year $ 78,640 $ 86,131
AHP expense for the period 3,010 13,386
AHP voluntary contribution(1)
4,789 1,614
AHP direct grant disbursements (7,838) (21,374)
AHP subsidy for AHP advance disbursements (1,998) (1,216)
Return of previously disbursed grants and subsidies 513 99
Balance at end of period $ 77,116 $ 78,640
~~_______________________~~

~~(1) Recorded in other expenses in the statement of operations.~~


	For the Six Months Ended		For the Year Ended
	June 30, 2022		December 31, 2021
Balance at beginning of year	$	70,503	$	78,640
AHP expense for the period	7,667		7,739
AHP voluntary contribution	13,980		4,761
AHP direct grant disbursements	(6,708)		(17,980)
AHP subsidy for AHP advance disbursements	(1,291)		(5,806)
Return of previously disbursed grants and subsidies	935		3,149
Balance at end of period	$	85,086	$	70,503

Note 10 — Capital

~~Table of Contents~~

We are subject to capital requirements under our capital plan, the FHLBank Act, and FHFA regulations and guidance:

1. Risk-based capital. We are required to maintain at all times permanent capital, ~~defined as~~which is our Class B stock, including Class B stock classified as mandatorily redeemable capital stock, and retained earnings, in an amount at least equal to the sum of our credit-risk capital requirement, market-risk capital requirement, and ~~operations-risk~~operational-risk capital requirement, calculated in accordance with FHFA rules and regulations, referred to herein as the risk-based capital requirement. Only permanent capital satisfies the risk-based capital requirement.

2. Total regulatory capital. We are required to maintain at all times a total capital-to-assets ratio of at least 4 percent. Total regulatory capital is the sum of permanent capital, the amount ~~paid-in for Class A stock, the amount~~ of any general loss allowance if consistent with GAAP and not established for specific assets, and other amounts from sources determined by the FHFA as available to absorb losses. ~~We have never issued Class A stock.~~

3. Leverage capital. We are required to maintain at all times a leverage capital-to-assets ratio of at least 5 percent. Leverage capital is calculated by multiplying permanent capital by 1.5 and adding to this product all other components of total capital.

The FHFA has authority to require us to maintain a greater amount of permanent capital than is required as defined by the risk-based capital requirements.

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Table 10.1 - Regulatory Capital Requirements

(dollars in thousands)


Risk-Based Capital Requirements	Risk-Based Capital Requirements	June 30, 2021		December 31, 2020		Risk-Based Capital Requirements	June 30, 2022		December 31, 2021

Permanent capital	Permanent capital					Permanent capital
Class B capital stock	Class B capital stock	$	1,081,057	$	1,267,172	Class B capital stock	$	1,557,243	$	953,638
Mandatorily redeemable capital stock	Mandatorily redeemable capital stock	7,432		6,282		Mandatorily redeemable capital stock	10,703		13,562
Retained earnings	Retained earnings	1,515,699		1,498,642		Retained earnings	1,607,178		1,548,406
Total permanent capital	Total permanent capital	$	2,604,188	$	2,772,096	Total permanent capital	$	3,175,124	$	2,515,606
Risk-based capital requirement	Risk-based capital requirement					Risk-based capital requirement
Credit-risk capital	Credit-risk capital	$	86,662	$	96,143	Credit-risk capital	$	111,551	$	84,301
Market-risk capital	Market-risk capital	211,549		204,028		Market-risk capital	224,681		213,467
Operations-risk capital	Operations-risk capital	89,463		90,052		Operations-risk capital	100,870		89,330
Total risk-based capital requirement	Total risk-based capital requirement	$	387,674	$	390,223	Total risk-based capital requirement	$	437,102	$	387,098
Permanent capital in excess of risk-based capital requirement	Permanent capital in excess of risk-based capital requirement	$	2,216,514	$	2,381,873	Permanent capital in excess of risk-based capital requirement	$	2,738,022	$	2,128,508


		June 30, 2021						December 31, 2020							June 30, 2022						December 31, 2021
		Required			Actual			Required			Actual				Required			Actual			Required			Actual
Capital Ratio	Capital Ratio													Capital Ratio
Risk-based capital	Risk-based capital	$	387,674		$	2,604,188		$	390,223		$	2,772,096		Risk-based capital	$	437,102		$	3,175,124		$	387,098		$	2,515,606
Total regulatory capital	Total regulatory capital	1,427,344			2,604,188			1,538,441			2,772,096			Total regulatory capital	2,482,560			3,175,124			1,301,812			2,515,606
Total capital-to-asset ratio	Total capital-to-asset ratio	4.0		%	7.3		%	4.0		%	7.2		%	Total capital-to-asset ratio	4.0		%	5.1		%	4.0		%	7.7		%

Leverage Ratio	Leverage Ratio													Leverage Ratio
Leverage capital	Leverage capital	$	1,784,180		$	3,906,282		$	1,923,052		$	4,158,144		Leverage capital	$	3,103,200		$	4,762,686		$	1,627,265		$	3,773,409
Leverage capital-to-assets ratio	Leverage capital-to-assets ratio	5.0		%	10.9		%	5.0		%	10.8		%	Leverage capital-to-assets ratio	5.0		%	7.7		%	5.0		%	11.6		%

We are a cooperative whose members own most of our capital stock. Former members, ~~(including~~including certain nonmembers that own our capital stock as a result of merger or acquisition, relocation, or involuntary termination of ~~membership)~~membership, own the remaining capital stock to support business transactions still carried on our statement of condition or, for a small amount of capital stock held by former members, until the five-year redemption period applicable to their membership stock is ~~not yet~~ complete. Shares of

~~Table of Contents~~

capital stock cannot be purchased or sold except between us and our members at $100 per share par value. ~~We have only issued Class B stock and~~For the periods presented in these financial statements, each member is required to purchase Class B stock equal to the sum of 0.20 percent of certain member assets eligible to secure advances under the FHLBank Act, provided that this amount is neither less than $10 thousand nor more than $10 million (the membership stock investment requirement), and 3.00 percent for overnight advances, 4.00 percent for all other advances, 0.25 percent for outstanding letters of credit, and 4.50 percent of the ~~unpaid principal balance~~par value of certain mortgages we purchased through the MPF program (collectively, the activity-based stock-investment requirement). The sum of the membership stock investment requirement and the activity-based stock investment requirement, rounded up to the nearest whole share, represents the total stock investment requirement.

Restricted Retained Earnings. At June 30, ~~2021,~~2022, our total required balance to the restricted retained earnings ~~totaled $368.4~~account was $421.4 million ~~and exceeded~~compared with our total balance of $376.6 million. During the ~~contribution requirement~~quarter ended June 30, 2022, we contributed $8.2 million of ~~$329.8 million.~~our net income to restricted retained earnings. Restricted retained earnings are not available to pay dividends.

Note 11 — Accumulated Other Comprehensive Income (Loss)

Table of Contents

Table 11.1 - Accumulated Other Comprehensive Income (Loss)

(dollars in thousands)


													Net Unrealized Gain (Loss) on Available-for-sale Securities		Net Unrealized (Loss) Gain Relating to Hedging Activities		Pension and Postretirement Benefits		Total

		Net Unrealized Gain (Loss) on Available-for-sale Securities		Noncredit Portion of Other-than-temporary Impairment Losses on Held-to-maturity Securities		Net Unrealized (Loss) Gain Relating to Hedging Activities		Pension and Postretirement Benefits		Total
Balance, March 31, 2020		$	(159,659)	$	(52,992)	$	(29,575)	$	(6,011)	$	(248,237)
Other comprehensive income (loss) before reclassifications:
Net unrealized gains (losses)		115,659		—		(154)		—		115,505
Accretion of noncredit loss		—		2,585		—		—		2,585
Net actuarial loss		—		—		—		(389)		(389)
Reclassifications from other comprehensive income to net income
Amortization - hedging activities (1)		—		—		1,773		—		1,773
Amortization - pension and postretirement benefits (2)		—		—		—		292		292
Other comprehensive income (loss)		115,659		2,585		1,619		(97)		119,766
Balance, June 30, 2020		$	(44,000)	$	(50,407)	$	(27,956)	$	(6,108)	$	(128,471)

Balance, March 31, 2021	Balance, March 31, 2021	$	46,649	$	0	$	(17,622)	$	(7,804)	$	21,223	Balance, March 31, 2021	$	46,649	$	(17,622)	$	(7,804)	$	21,223
Other comprehensive income (loss) before reclassifications:

Other comprehensive (loss) income before reclassifications:												Other comprehensive (loss) income before reclassifications:
Net unrealized gains (losses)	Net unrealized gains (losses)	37,811		—		(14,224)		0		23,587		Net unrealized gains (losses)	37,811		(14,224)		—		23,587
Net actuarial gain	Net actuarial gain	—		—		—		1,292		1,292		Net actuarial gain	—		—		1,292		1,292
Reclassifications from other comprehensive income to net income	Reclassifications from other comprehensive income to net income											Reclassifications from other comprehensive income to net income

Amortization - hedging activities (1)	Amortization - hedging activities (1)	—		—		1,506		—		1,506		Amortization - hedging activities (1)	—		1,506		—		1,506
Amortization - pension and postretirement benefits (2)	Amortization - pension and postretirement benefits (2)	—		—		—		37		37		Amortization - pension and postretirement benefits (2)	—		—		37		37
Other comprehensive income (loss)	Other comprehensive income (loss)	37,811		0		(12,718)		1,329		26,422		Other comprehensive income (loss)	37,811		(12,718)		1,329		26,422
Balance, June 30, 2021		$	84,460	$	0	$	(30,340)	$	(6,475)	$	47,645
Balance June 30, 2021												Balance June 30, 2021	$	84,460	$	(30,340)	$	(6,475)	$	47,645

Balance, March 31, 2022												Balance, March 31, 2022	$	(83,273)	$	(2,795)	$	(2,732)	$	(88,800)
Other comprehensive (loss) income before reclassifications:												Other comprehensive (loss) income before reclassifications:
Net unrealized (losses) gains												Net unrealized (losses) gains	(150,748)		22,182		—		(128,566)
Net actuarial loss												Net actuarial loss	—		—		(685)		(685)
Reclassifications from other comprehensive income to net income												Reclassifications from other comprehensive income to net income
Amortization - hedging activities (1)												Amortization - hedging activities (1)	—		1,455		—		1,455
Amortization - pension and postretirement benefits (2)												Amortization - pension and postretirement benefits (2)	—		—		187		187

Other comprehensive (loss) income												Other comprehensive (loss) income	(150,748)		23,637		(498)		(127,609)
Balance, June 30, 2022												Balance, June 30, 2022	$	(234,021)	$	20,842	$	(3,230)	$	(216,409)


	Net Unrealized Gain (Loss) on Available-for-sale Securities		Net Unrealized (Loss) Gain Relating to Hedging Activities		Pension and Postretirement Benefits		Total
Balance, December 31, 2020	$	48,568	$	(24,365)	$	(8,064)	$	16,139
Other comprehensive income (loss) before reclassifications:
Net unrealized gains (losses)	35,892		(9,038)		—		26,854
Net actuarial gain	—		—		1,292		1,292
Reclassifications from other comprehensive income to net income
Amortization - hedging activities (1)	—		3,063		—		3,063
Amortization - pension and postretirement benefits (2)	—		—		297		297
Other comprehensive income (loss)	35,892		(5,975)		1,589		31,506
Balance, June 30, 2021	$	84,460	$	(30,340)	$	(6,475)	$	47,645

Balance, December 31, 2021	$	58,013	$	(26,291)	$	(2,755)	$	28,967
Other comprehensive (loss) income before reclassifications:
Net unrealized (losses) gains	(292,036)		44,240		—		(247,796)
Net actuarial loss	—		—		(685)		(685)
Reclassifications from other comprehensive income to net income
Amortization - hedging activities (1)	—		2,893		—		2,893
Amortization - pension and postretirement benefits (2)	—		—		210		210
Reclassification of realized net loss included in net income (3)	2		—		—		2
Other comprehensive (loss) income	(292,034)		47,133		(475)		(245,376)
Balance, June 30, 2022	$	(234,021)	$	20,842	$	(3,230)	$	(216,409)

_______________________

Table of Contents

Net Unrealized Gain (Loss) on Available-for-sale Securities Noncredit Portion of Other-than-temporary Impairment Losses on Held-to-maturity Securities Net Unrealized (Loss) Gain Relating to Hedging Activities Pension and Postretirement Benefits Total
Balance, December 31, 2019 $ (73,922) $ (76,036) $ (30,207) $ (6,807) $ (186,972)
Other comprehensive income (loss) before reclassifications:
Net unrealized gains (losses) 29,922 — (1,279) — 28,643
Noncredit losses included in basis of securities sold — 20,239 — — 20,239
Accretion of noncredit loss — 5,390 — — 5,390
Net actuarial gain — — — 112 112
Reclassifications from other comprehensive income to net income
Amortization - hedging activities (1)
— — 3,530 — 3,530
Amortization - pension and postretirement benefits (2)
— — — 587 587
Other comprehensive income 29,922 25,629 2,251 699 58,501
Balance, June 30, 2020 $ (44,000) $ (50,407) $ (27,956) $ (6,108) $ (128,471)
Balance, December 31, 2020 $ 48,568 $ 0 $ (24,365) $ (8,064) $ 16,139
Other comprehensive income (loss) before reclassifications:
Net unrealized gains (losses) 35,892 — (9,038) — 26,854
Net actuarial gain — — — 1,292 1,292
Reclassifications from other comprehensive income to net income
Amortization - hedging activities (1)
— — 3,063 — 3,063
Amortization - pension and postretirement benefits (2)
— — — 297 297
Other comprehensive income (loss) 35,892 0 (5,975) 1,589 31,506
Balance, June 30, 2021 $ 84,460 $ 0 $ (30,340) $ (6,475) $ 47,645
~~_______________________~~

(1) Recorded in CO bond interest expense.

(2) Recorded in other expenses in the statement of operations.

(3) Recorded in other income (loss) in the statement of operations.

Note 12 — Fair Values

A fair-value hierarchy is used to prioritize the inputs of valuation techniques used to measure fair value. A description of the application of the fair-value hierarchy, valuation techniques, and significant inputs is disclosed in Part II — Item 8 — Financial Statements and Supplementary Data — Note 1915 — Fair Values in the ~~2020~~2021 Annual Report. There have been no material changes in the fair-value hierarchy classification of financial assets and liabilities, valuation techniques, or significant inputs during the ~~three~~six months ended June 30, ~~2021.~~2022.

Table 12.1 presents the carrying value, fair value, and fair value hierarchy of our financial assets and liabilities at June 30, ~~2021,~~2022, and December 31, ~~2020.~~2021. We record trading securities, available-for-sale securities, derivative assets, derivative liabilities, and certain other assets at fair value on a recurring basis and certain mortgage loans, and certain other assets at fair value on a non-recurring basis. We record all other financial assets and liabilities at amortized cost. Refer to Table 12.2 for further details about the financial assets and liabilities held at fair value on either a recurring or non-recurring basis.

~~Table of Contents~~

Table 12.1 - Fair Value Summary

(dollars in thousands)


		June 30, 2021													June 30, 2022
		Carrying Value		Total Fair Value		Level 1		Level 2		Level 3		Netting Adjustments and Cash Collateral(2)			Carrying Value		Total Fair Value		Level 1		Level 2		Level 3		Netting Adjustments and Cash Collateral(2)
Financial instruments	Financial instruments													Financial instruments
Assets:	Assets:													Assets:
Cash and due from banks	Cash and due from banks	$	496,877	$	496,877	$	496,877	$	0	$	0	$	—	Cash and due from banks	$	65,965	$	65,965	$	65,965	$	—	$	—	$	—
Interest-bearing deposits	Interest-bearing deposits	150		150		150		0		0		—		Interest-bearing deposits	395,230		395,230		395,230		—		—		—
Securities purchased under agreements to resell	Securities purchased under agreements to resell	750,000		749,999		0		749,999		0		—		Securities purchased under agreements to resell	11,250,000		11,249,945		—		11,249,945		—		—
Federal funds sold	Federal funds sold	1,768,000		1,767,999		0		1,767,999		0		—		Federal funds sold	2,998,000		2,997,988		—		2,997,988		—		—
Trading securities(1)	Trading securities(1)	2,525,095		2,525,095		0		2,525,095		0		—		Trading securities(1)	980		980		—		980		—		—
Available-for-sale securities(1)	Available-for-sale securities(1)	10,832,111		10,832,111		0		10,746,034		86,077		—		Available-for-sale securities(1)	13,496,627		13,496,627		—		13,436,094		60,533		—
Held-to-maturity securities	Held-to-maturity securities	177,755		181,799		0		181,799		0		—		Held-to-maturity securities	113,697		114,516		—		114,516		—		—
Advances	Advances	15,176,625		15,373,949		0		15,373,949		0		—		Advances	30,318,486		30,213,245		—		30,213,245		—		—
Mortgage loans, net	Mortgage loans, net	3,470,505		3,622,469		0		3,575,743		46,726		—		Mortgage loans, net	2,897,373		2,734,981		—		2,711,151		23,830		—
Accrued interest receivable	Accrued interest receivable	83,432		83,432		0		83,432		0		—		Accrued interest receivable	85,367		85,367		—		85,367		—		—
Derivative assets(1)	Derivative assets(1)	328,171		328,171		0		10,674		0		317,497		Derivative assets(1)	389,239		389,239		—		3,632		—		385,607
Other assets (1)	Other assets (1)	39,647		39,647		15,343		24,304		0		—		Other assets (1)	30,065		30,065		13,308		16,757		—		—
Liabilities:	Liabilities:													Liabilities:
Deposits	Deposits	(970,282)		(970,281)		0		(970,281)		0		—		Deposits	(1,066,459)		(1,066,426)		—		(1,066,426)		—		—
COs:	COs:													COs:
Bonds	Bonds	(23,475,165)		(23,830,677)		0		(23,830,677)		0		—		Bonds	(32,721,605)		(32,435,784)		—		(32,435,784)		—		—
Discount notes	Discount notes	(8,365,460)		(8,365,324)		0		(8,365,324)		0		—		Discount notes	(25,096,230)		(25,093,489)		—		(25,093,489)		—		—
Mandatorily redeemable capital stock	Mandatorily redeemable capital stock	(7,432)		(7,432)		(7,432)		0		0		—		Mandatorily redeemable capital stock	(10,703)		(10,703)		(10,703)		—		—		—
Accrued interest payable	Accrued interest payable	(60,656)		(60,656)		0		(60,656)		0		—		Accrued interest payable	(86,722)		(86,722)		—		(86,722)		—		—
Derivative liabilities(1)	Derivative liabilities(1)	(19,144)		(19,144)		0		(117,123)		0		97,979		Derivative liabilities(1)	—		—		—		(1,046,865)		—		1,046,865
Other:	Other:													Other:
Commitments to extend credit for advances	Commitments to extend credit for advances	0		(5,526)		0		(5,526)		0		—		Commitments to extend credit for advances	—		(13,526)		—		(13,526)		—		—

Standby letters of credit	Standby letters of credit	(1,206)		(1,206)		0		(1,206)		0		—		Standby letters of credit	(1,366)		(1,366)		—		(1,366)		—		—

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		December 31, 2020													December 31, 2021
		Carrying Value		Total Fair Value		Level 1		Level 2		Level 3		Netting Adjustments and Cash Collateral(2)			Carrying Value		Total Fair Value		Level 1		Level 2		Level 3		Netting Adjustments and Cash Collateral(2)
Financial instruments	Financial instruments													Financial instruments
Assets:	Assets:													Assets:
Cash and due from banks	Cash and due from banks	$	2,050,028	$	2,050,028	$	2,050,028	$	0	$	0	$	—	Cash and due from banks	$	204,993	$	204,993	$	204,993	$	—	$	—	$	—
Interest-bearing deposits	Interest-bearing deposits	299,149		299,149		299,149		0		0		—		Interest-bearing deposits	85,153		85,153		85,153		—		—		—
Securities purchased under agreements to resell	Securities purchased under agreements to resell	750,000		749,995		0		749,995		0		—		Securities purchased under agreements to resell	800,000		799,998		—		799,998		—		—
Federal funds sold	Federal funds sold	2,260,000		2,259,988		0		2,259,988		0		—		Federal funds sold	1,944,000		1,943,998		—		1,943,998		—		—
Trading securities(1)	Trading securities(1)	3,605,079		3,605,079		0		3,605,079		0		—		Trading securities(1)	501,867		501,867		—		501,867		—		—
Available-for-sale securities(1)	Available-for-sale securities(1)	6,220,148		6,220,148		0		6,097,599		122,549		—		Available-for-sale securities(1)	12,895,987		12,895,987		—		12,833,722		62,265		—
Held-to-maturity securities	Held-to-maturity securities	207,162		211,837		0		211,837		0		—		Held-to-maturity securities	145,492		148,068		—		148,068		—		—
Advances	Advances	18,817,002		19,119,220		0		19,119,220		0		—		Advances	12,340,020		12,440,985		—		12,440,985		—		—
Mortgage loans, net	Mortgage loans, net	3,930,252		4,136,004		0		4,086,757		49,247		—		Mortgage loans, net	3,120,159		3,234,829		—		3,204,222		30,607		—

Accrued interest receivable	Accrued interest receivable	87,582		87,582		0		87,582		0		—		Accrued interest receivable	68,360		68,360		—		68,360		—		—
Derivative assets(1)	Derivative assets(1)	161,238		161,238		0		10,182		0		151,056		Derivative assets(1)	378,532		378,532		—		3,972		—		374,560
Other assets(1)	Other assets(1)	34,360		34,360		14,296		20,064		0		—		Other assets(1)	32,570		32,570		13,937		18,633		—		—
Liabilities:	Liabilities:													Liabilities:
Deposits	Deposits	(1,088,987)		(1,088,981)		0		(1,088,981)		0		—		Deposits	(884,032)		(884,029)		—		(884,029)		—		—
COs:	COs:													COs:
Bonds	Bonds	(21,471,590)		(22,062,476)		0		(22,062,476)		0		—		Bonds	(26,613,032)		(26,882,036)		—		(26,882,036)		—		—
Discount notes	Discount notes	(12,878,310)		(12,878,918)		0		(12,878,918)		0		—		Discount notes	(2,275,320)		(2,275,276)		—		(2,275,276)		—		—
Mandatorily redeemable capital stock	Mandatorily redeemable capital stock	(6,282)		(6,282)		(6,282)		0		0		—		Mandatorily redeemable capital stock	(13,562)		(13,562)		(13,562)		—		—		—
Accrued interest payable	Accrued interest payable	(61,918)		(61,918)		0		(61,918)		0		—		Accrued interest payable	(60,968)		(60,968)		—		(60,968)		—		—
Derivative liabilities(1)	Derivative liabilities(1)	(24,062)		(24,062)		0		(88,770)		0		64,708		Derivative liabilities(1)	(38,944)		(38,944)		—		(177,578)		—		138,634
Other:	Other:													Other:
Commitments to extend credit for advances	Commitments to extend credit for advances	0		(5,306)		0		(5,306)		0		—		Commitments to extend credit for advances	—		(6,196)		—		(6,196)		—		—

Standby letters of credit	Standby letters of credit	(1,303)		(1,303)		0		(1,303)		0		—		Standby letters of credit	(1,146)		(1,146)		—		(1,146)		—		—

_______________________

(1)Carried at fair value and measured on a recurring basis.

(2)These amounts represent the effect of master-netting agreements intended to allow us to settle positive and negative positions and also cash collateral and related accrued interest held or placed with the same clearing member and/or counterparty.

Fair Value Measured on a Recurring and Nonrecurring Basis.

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Table 12.2 - Fair Value of Assets and Liabilities Measured at Fair Value on a Recurring and Nonrecurring Basis

(dollars in thousands)


		June 30, 2021											June 30, 2022
		Level 1		Level 2		Level 3		Netting Adjustments and Cash Collateral (1)		Total			Level 1		Level 2		Level 3		Netting Adjustments and Cash Collateral (1)		Total
Assets:	Assets:											Assets:
Carried at fair value on a recurring basis	Carried at fair value on a recurring basis											Carried at fair value on a recurring basis
Trading securities:	Trading securities:											Trading securities:
Corporate bonds	Corporate bonds	$	0	$	5,436	$	0	$	—	$	5,436	Corporate bonds	$	—	$	980	$	—	$	—	$	980
U.S. Treasury obligations		0		2,517,241		0		—		2,517,241
U.S. government-guaranteed – single-family MBS		0		2,371		0		—		2,371
GSE – single-family MBS		0		47		0		—		47

Total trading securities		0		2,525,095		0		—		2,525,095

Available-for-sale securities:	Available-for-sale securities:											Available-for-sale securities:
HFA securities	HFA securities	0		0		86,077		—		86,077		HFA securities	—		—		60,533		—		60,533
U.S. Treasury obligations												U.S. Treasury obligations	—		5,889,613		—		—		5,889,613
Supranational institutions	Supranational institutions	0		415,322		0		—		415,322		Supranational institutions	—		369,247		—		—		369,247
U.S. Treasury obligations		0		3,405,441		0		—		3,405,441

U.S. government-owned corporations	U.S. government-owned corporations	0		308,803		0		—		308,803		U.S. government-owned corporations	—		249,179		—		—		249,179
GSE	GSE	0		127,985		0		—		127,985		GSE	—		106,506		—		—		106,506
U.S. government guaranteed – single-family MBS	U.S. government guaranteed – single-family MBS	0		24,960		0		—		24,960		U.S. government guaranteed – single-family MBS	—		17,971		—		—		17,971
U.S. government guaranteed – multifamily MBS	U.S. government guaranteed – multifamily MBS	0		181,135		0		—		181,135		U.S. government guaranteed – multifamily MBS	—		518,612		—		—		518,612
GSE – single-family MBS	GSE – single-family MBS	0		1,389,617		0		—		1,389,617		GSE – single-family MBS	—		883,424		—		—		883,424
GSE – multifamily MBS	GSE – multifamily MBS	0		4,892,771		0		—		4,892,771		GSE – multifamily MBS	—		5,401,542		—		—		5,401,542
Total available-for-sale securities	Total available-for-sale securities	0		10,746,034		86,077		—		10,832,111		Total available-for-sale securities	—		13,436,094		60,533		—		13,496,627
Derivative assets:	Derivative assets:											Derivative assets:
Interest-rate-exchange agreements	Interest-rate-exchange agreements	0		10,640		0		317,497		328,137		Interest-rate-exchange agreements	—		3,496		—		385,607		389,103

CO Bond firm commitments												CO Bond firm commitments	—		28		—		—		28
Mortgage delivery commitments	Mortgage delivery commitments	0		34		0		—		34		Mortgage delivery commitments	—		108		—		—		108
Total derivative assets	Total derivative assets	0		10,674		0		317,497		328,171		Total derivative assets	—		3,632		—		385,607		389,239
Other assets	Other assets	15,343		24,304		0		—		39,647		Other assets	13,308		16,757		—		—		30,065
Total assets carried at fair value on a recurring basis	Total assets carried at fair value on a recurring basis	$	15,343	$	13,306,107	$	86,077	$	317,497	$	13,725,024	Total assets carried at fair value on a recurring basis	$	13,308	$	13,457,463	$	60,533	$	385,607	$	13,916,911
Carried at fair value on a nonrecurring basis(2)	Carried at fair value on a nonrecurring basis(2)											Carried at fair value on a nonrecurring basis(2)
Mortgage loans held for portfolio	Mortgage loans held for portfolio	$	0	$	0	$	3,736	$	—	$	3,736	Mortgage loans held for portfolio	$	—	$	—	$	90	$	—	$	90

Total assets carried at fair value on a nonrecurring basis	Total assets carried at fair value on a nonrecurring basis	$	0	$	0	$	3,736	$	—	$	3,736	Total assets carried at fair value on a nonrecurring basis	$	—	$	—	$	90	$	—	$	90
Liabilities:	Liabilities:											Liabilities:
Carried at fair value on a recurring basis	Carried at fair value on a recurring basis											Carried at fair value on a recurring basis
Derivative liabilities	Derivative liabilities											Derivative liabilities
Interest-rate-exchange agreements	Interest-rate-exchange agreements	$	0	$	(117,117)	$	0	$	97,979	$	(19,138)	Interest-rate-exchange agreements	$	—	$	(1,046,865)	$	—	$	1,046,865	$	—
CO bond firm commitments		0		(1)		0		—		(1)
Mortgage delivery commitments		0		(5)		0		—		(5)

Total liabilities carried at fair value on a recurring basis	Total liabilities carried at fair value on a recurring basis	$	0	$	(117,123)	$	0	$	97,979	$	(19,144)	Total liabilities carried at fair value on a recurring basis	$	—	$	(1,046,865)	$	—	$	1,046,865	$	—

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		December 31, 2020											December 31, 2021
		Level 1		Level 2		Level 3		Netting Adjustments and Cash Collateral(1)		Total			Level 1		Level 2		Level 3		Netting Adjustments and Cash Collateral(1)		Total
Assets:	Assets:											Assets:
Carried at fair value on a recurring basis	Carried at fair value on a recurring basis											Carried at fair value on a recurring basis
Trading securities:	Trading securities:											Trading securities:
Corporate bonds	Corporate bonds	$	0	$	5,422	$	0	$	—	$	5,422	Corporate bonds	$	—	$	1,442	$	—	$	—	$	1,442
U.S. Treasury obligations	U.S. Treasury obligations	0		3,596,718		0		—		3,596,718		U.S. Treasury obligations	—		500,425		—		—		500,425
U.S. government-guaranteed – single-family MBS		0		2,884		0		—		2,884
GSE – single-family MBS		0		55		0		—		55

Total trading securities	Total trading securities	0		3,605,079		0		—		3,605,079		Total trading securities	—		501,867		—		—		501,867
Available-for-sale securities:	Available-for-sale securities:											Available-for-sale securities:
HFA securities	HFA securities	0		0		122,549		—		122,549		HFA securities	—		—		62,265		—		62,265
U.S. Treasury obligations												U.S. Treasury obligations	—		5,084,546		—		—		5,084,546
Supranational institutions	Supranational institutions	0		430,069		0		—		430,069		Supranational institutions	—		403,765		—		—		403,765
U.S. government-owned corporations	U.S. government-owned corporations	0		322,061		0		—		322,061		U.S. government-owned corporations	—		306,864		—		—		306,864
GSE	GSE	0		134,992		0		—		134,992		GSE	—		126,472		—		—		126,472
U.S. government guaranteed – single-family MBS	U.S. government guaranteed – single-family MBS	0		29,408		0		—		29,408		U.S. government guaranteed – single-family MBS	—		21,535		—		—		21,535
U.S. government guaranteed – multifamily MBS	U.S. government guaranteed – multifamily MBS	0		47,180		0		—		47,180		U.S. government guaranteed – multifamily MBS	—		541,405		—		—		541,405
GSE – single-family MBS	GSE – single-family MBS	0		1,469,048		0		—		1,469,048		GSE – single-family MBS	—		1,103,714		—		—		1,103,714
GSE – multifamily MBS	GSE – multifamily MBS	0		3,664,841		0		—		3,664,841		GSE – multifamily MBS	—		5,245,421		—		—		5,245,421
Total available-for-sale securities	Total available-for-sale securities	0		6,097,599		122,549		—		6,220,148		Total available-for-sale securities	—		12,833,722		62,265		—		12,895,987
Derivative assets:	Derivative assets:											Derivative assets:
Interest-rate-exchange agreements	Interest-rate-exchange agreements	0		9,962		0		151,056		161,018		Interest-rate-exchange agreements	—		3,850		—		374,560		378,410
CO Bond firm commitments												CO Bond firm commitments	—		54		—		—		54
Mortgage delivery commitments	Mortgage delivery commitments	0		220		0		—		220		Mortgage delivery commitments	—		68		—		—		68
Total derivative assets	Total derivative assets	0		10,182		0		151,056		161,238		Total derivative assets	—		3,972		—		374,560		378,532
Other assets	Other assets	14,296		20,064		0		—		34,360		Other assets	13,937		18,633		—		—		32,570
Total assets carried at fair value on a recurring basis	Total assets carried at fair value on a recurring basis	$	14,296	$	9,732,924	$	122,549	$	151,056	$	10,020,825	Total assets carried at fair value on a recurring basis	$	13,937	$	13,358,194	$	62,265	$	374,560	$	13,808,956
Carried at fair value on a nonrecurring basis(2)	Carried at fair value on a nonrecurring basis(2)											Carried at fair value on a nonrecurring basis(2)

Mortgage loans held for portfolio	Mortgage loans held for portfolio	$	0	$	0	$	10,782	$	—	$	10,782	Mortgage loans held for portfolio	$	—	$	—	$	3,860	$	—	$	3,860
REO		0		0		245		—		245
Real-estate owned property (REO)												Real-estate owned property (REO)	—		—		59		—		59
Total assets carried at fair value on a nonrecurring basis	Total assets carried at fair value on a nonrecurring basis	$	0	$	0	$	11,027	$	—	$	11,027	Total assets carried at fair value on a nonrecurring basis	$	—	$	—	$	3,919	$	—	$	3,919
Liabilities:	Liabilities:											Liabilities:
Carried at fair value on a recurring basis	Carried at fair value on a recurring basis											Carried at fair value on a recurring basis
Derivative liabilities	Derivative liabilities											Derivative liabilities
Interest-rate-exchange agreements	Interest-rate-exchange agreements	$	0	$	(88,770)	$	0	$	64,708	$	(24,062)	Interest-rate-exchange agreements	$	—	$	(177,548)	$	—	$	138,634	$	(38,914)
CO Bond firm commitments												CO Bond firm commitments	—		(30)		—		—		(30)

Total liabilities carried at fair value on a recurring basis	Total liabilities carried at fair value on a recurring basis	$	0	$	(88,770)	$	0	$	64,708	$	(24,062)	Total liabilities carried at fair value on a recurring basis	$	—	$	(177,578)	$	—	$	138,634	$	(38,944)

_______________________

(1)These amounts represent the effect of master-netting agreements intended to allow us to settle positive and negative positions and also cash collateral and related accrued interest held or placed with the same clearing member and/or counterparty.

(2) We measure certain ~~held-to-maturity investment securities,~~ mortgage loans held for portfolio and REO at fair value on a nonrecurring basis, that is, they are not measured at fair value on an ongoing basis but are subject to fair-value adjustments only in certain circumstances. The fair values presented are as of the date the fair value adjustment was recorded.

Table 12.3 presents a reconciliation of available-for-sale ~~HFA~~ securities that are measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the three and six months ended June 30, ~~2021~~2022 and ~~2020.~~2021.

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Table 12.3 - Roll Forward of Level 3 Available-for-Sale HFA Securities

(dollars in thousands)


		For the Three Months Ended June 30,			For the Six Months Ended June 30,						For the Three Months Ended June 30,				For the Six Months Ended June 30,
		2021		2020	2021		2020				2022		2021		2022		2021
Balance at beginning of period	Balance at beginning of period	$	107,908		$	65,395	$	122,549	$	64,652		Balance at beginning of period	$	61,444	$	107,908	$	62,265	$	122,549

Total (losses) gains included in other comprehensive income												Total (losses) gains included in other comprehensive income
Net unrealized (losses) gains												Net unrealized (losses) gains	(51)		1,129		(872)		3,333

Total net unrealized gains included in other comprehensive income		1,129			1,668		3,333		2,411

Maturities and settlements
Sales, maturities, and settlements												Sales, maturities, and settlements

Maturities	Maturities	(21,740)			(7,600)		(38,360)		(7,600)			Maturities	—		(21,740)		—		(38,360)
Settlements	Settlements	(1,220)			0		(1,445)		0			Settlements	(860)		(1,220)		(860)		(1,445)
Balance at end of period	Balance at end of period	$	86,077		$	59,463	$	86,077	$	59,463		Balance at end of period	$	60,533	$	86,077	$	60,533	$	86,077

Total amount of unrealized (losses) gains for the period included in other comprehensive income relating to securities held at period end	Total amount of unrealized (losses) gains for the period included in other comprehensive income relating to securities held at period end	$	(1,132)		$	1,668	$	217	$	2,411		Total amount of unrealized (losses) gains for the period included in other comprehensive income relating to securities held at period end	$	(51)	$	(1,132)	$	(872)	$	217

Note 13 — Commitments and Contingencies

Joint and Several Liability. COs are backed by the financial resources of the FHLBanks. The FHFA has authority to require any FHLBank to repay all or a portion of the principal and interest on COs for which another FHLBank is the primary obligor. No FHLBank has ever been asked or required to repay the principal or interest on any CO on behalf of another FHLBank. We evaluate the financial condition of the other FHLBanks primarily based on known regulatory actions, publicly available financial information, and individual long-term credit-rating action as of each period-end presented. Based on this evaluation, as of June 30, ~~2021,~~2022, and through the filing of this report, we do not believe it is likely that we will be required to repay the principal or interest on any CO on behalf of another FHLBank.

We have considered applicable FASB guidance and determined it is not necessary to recognize a liability for the fair value of our joint and several liability for all of the COs. The joint and several obligation is mandated by the FHLBank Act, as implemented by FHFA regulations, and is not the result of an arms-length transaction among the FHLBanks. The FHLBanks have no control over the amount of the guaranty or the determination of how each FHLBank would perform under the joint and several obligation. Because the FHLBanks are subject to the authority of the FHFA as it relates to decisions involving the allocation of the joint and several liability for the FHLBanks' COs, the FHLBanks' joint and several obligation is excluded from the initial recognition and measurement provisions. Accordingly, we have not recognized a liability for our joint and several obligation related to other FHLBanks' COs at June 30, ~~2021,~~2022, and December 31, ~~2020.~~2021. The par amounts of other FHLBanks' outstanding COs for which we are jointly and severally liable totaled ~~$634.9~~$823.7 billion and ~~$712.5~~$623.9 billion at June 30, ~~2021,~~2022, and December 31, ~~2020,~~2021, respectively. See Note 8 — Consolidated Obligations for additional information.

Off-Balance-Sheet Commitments

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Table 13.1 - Off-Balance Sheet Commitments (1)

(dollars in thousands)


		June 30, 2021						December 31, 2020							June 30, 2022						December 31, 2021
		Expire within one year		Expire after one year		Total		Expire within one year		Expire after one year		Total			Expire within one year		Expire after one year		Total		Expire within one year		Expire after one year		Total
Standby letters of credit outstanding (2)	Standby letters of credit outstanding (2)	$	5,383,181	$	241,784	$	5,624,965	$	6,190,479	$	233,771	$	6,424,250	Standby letters of credit outstanding (2)	$	9,997,436	$	139,160	$	10,136,596	$	5,369,701	$	132,096	$	5,501,797

Commitments for unused lines of credit - advances (3)	Commitments for unused lines of credit - advances (3)	1,119,825		0		1,119,825		1,127,432		0		1,127,432		Commitments for unused lines of credit - advances (3)	1,114,335		—		1,114,335		1,095,844		—		1,095,844
Commitments to make additional advances	Commitments to make additional advances	23,872		80,566		104,438		69,684		93,465		163,149		Commitments to make additional advances	211,367		48,302		259,669		40,917		66,318		107,235
Commitments to invest in mortgage loans	Commitments to invest in mortgage loans	7,971		0		7,971		28,386		0		28,386		Commitments to invest in mortgage loans	6,864		—		6,864		3,164		—		3,164
Unsettled CO bonds, at par	Unsettled CO bonds, at par	205,000		0		205,000		0		0		0		Unsettled CO bonds, at par	445,000		—		445,000		260,000		—		260,000
Unsettled CO discount notes, at par	Unsettled CO discount notes, at par	700,000		0		700,000		250,000		0		250,000		Unsettled CO discount notes, at par	1,336,070		—		1,336,070		—		—		—

__________________________

(1) We have determined that it is unnecessary to record any liability for credit losses on these agreements.

(2) The amount of standby letters of credit outstanding excludes commitments to issue standby letters of credit that expire within one year. At June 30, ~~2021,~~2022, and December 31, ~~2020,~~2021, these amounts totaled ~~$89.6~~$39.9 million and ~~$37.1~~$16.1 million, respectively. Also excluded are commitments to issue standby letters of credit that expire after one year totaling ~~$25~~$125 thousand at December 31, ~~2020.~~2021.

(3) Commitments for unused line-of-credit advances are generally for periods of up to 12 months. Since many of these commitments are not expected to be drawn upon, the total commitment amount does not necessarily indicate future liquidity requirements.

Standby Letters of Credit. WeFor a fee, we issue standby letters of credit on behalf of our members to support certain obligations of the members to third-party beneficiaries. These standby letters of credit are generally subject to the same collateralization and borrowing limits that are applicable to advances. Standby letters of credit may be offered to assist members and nonmember housing associates in facilitating residential housing finance, community lending, and asset-liability management, and to provide liquidity. In particular, members often use standby letters of credit as collateral for deposits from state and local government agencies. ~~Standby letters of credit are executed for members for a fee.~~ If we are required to make payment for a beneficiary's draw, our strategy is to take prompt action to recover the funds paid to the third-party beneficiary, including converting the payment amount into a collateralized advance to the primary obligor, withdrawing the payment amount from the primary obligor's demand deposit account with us, or selling collateral pledged by the primary obligor in a commercially reasonable manner to offset the payment amount. Historically, standby letters of credit usually expire without being drawn upon. At June 30, ~~2021,~~2022, the terms of these standby letters of credit have original expiration periods of up to 20 years, expiring no later than ~~2030.~~2031. Currently, we offer new standby letters of credit with terms typically up to 10 years, while terms greater than 10 years may be available on an exception basis. Unearned fees for the value of the guarantees related to standby letters of credit are recorded in other liabilities and totaled ~~$1.2~~$1.4 million and ~~$1.3~~$1.1 million at June 30, ~~2021,~~2022, and December 31, ~~2020,~~2021, respectively.

Commitments to Invest in Mortgage Loans. Commitments to invest in mortgage loans are generally for periods not to exceed 60 business days. Such commitments are recorded as derivatives at their fair values on the statement of condition.

Pledged Collateral. We have pledged securities as collateral related to derivatives. See Note 6 — Derivatives and Hedging Activities for additional information about our pledged collateral and other credit-risk-related contingent features.

Legal Proceedings. We are subject to various legal proceedings arising in the normal course of business from time to time. We would record an accrual for a loss contingency when it is probable that a loss has been incurred and the amount can be reasonably estimated. Management does not anticipate that the ultimate liability, if any, arising out of these matters will have a material effect on our financial condition, results of operations, or cash flows.

Note 14 — Transactions with Shareholders

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Shareholder Concentrations. We consider shareholder concentrations as ~~members or nonmembers whose~~holdings of capital stock ~~holdings~~ (including mandatorily redeemable capital stock) ~~are~~by individual members or nonmembers in excess of 10 percent of total capital stock outstanding at ~~June 30, 2021,~~each period end.

Table 14.1 - Shareholder Concentrations, Balance Sheet

37(dollars in thousands)


	Capital Stock Outstanding		Percent of Total Capital Stock		Par Value of Advances		Percent of Total Par Value of Advances		Total Accrued Interest Receivable		Percent of Total Accrued Interest Receivable on Advances
June 30, 2022
Citizens Bank, N.A.	$	504,748	32.2	%	$	12,019,143	39.4	%	$	7,275	22.6	%

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~~and December 31, 2020. At both June 30, 2021, and December 31, 2020, 0 shareholder had more than 10 percent of total capital stock outstanding.~~We held sufficient collateral to support the advances to the above institution such that we do not expect to incur any credit losses on these advances.

Transactions with Directors' Institutions. We provide, in the ordinary course of business, products and services to members whose officers or directors serve on our board of directors. In accordance with FHFA regulations, transactions with directors' institutions are conducted on the same terms as those with any other member.

Table ~~14.1~~14.2 - Transactions with Directors' Institutions

(dollars in thousands)

Capital Stock Outstanding Percent of Total Capital Stock Par Value of Advances Percent of Total Par Value of Advances Total Accrued Interest Receivable Percent of Total
Accrued Interest
Receivable on
Advances
June 30, 2021 $ 52,027 4.8 % $ 491,358 3.3 % $ 546 2.4 %
December 31, 2020 60,624 4.8 582,765 3.1 651 2.5


	Capital Stock Outstanding		Percent of Total Capital Stock		Par Value of Advances		Percent of Total Par Value of Advances		Total Accrued Interest Receivable		Percent of Total Accrued Interest Receivable on Advances
June 30, 2022	$	517,080	33.0	%	$	12,191,403	40.0	%	$	7,376	22.9	%
December 31, 2021	48,104		5.0		416,542		3.4		466		2.8

Note 15 — Subsequent Events

On July ~~23, 2021,~~22, 2022, the board of directors declared a cash dividend at an annualized rate of ~~1.52~~3.72 percent based on daily average capital stock balances outstanding during the second quarter of ~~2021.~~2022. The dividend, including dividends classified as interest expense on mandatorily redeemable capital stock, amounted to ~~$4.3~~$11.5 million and was paid on August ~~3, 2021.~~2, 2022.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Index to Management's Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

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This report includes statements describing anticipated developments, projections, estimates, or predictions of ours that are “forward-looking statements.” These statements may involve matters related to, but not limited to, projections of revenues, income, earnings, capital expenditures, dividends, capital structure, or other financial items; repurchases of excess stock, our minimum retained earnings target, or the interest-rate environment in which we do business; statements of management’s plans or objectives for future operations; expectations of effects or changes in fiscal and monetary policies and our future economic performance; projections or expectations regarding the COVID-19 pandemic or its effects; or statements of assumptions underlying certain of the foregoing types of statements. These statements may use forward-looking terminology such as, but not limited to, “anticipates,” “believes,” "continued" “expects,” “plans,” “intends,” “may,” “could,” “estimates,” “assumes,” “should,” “will,” “likely,” or their negatives or other variations on these terms. We caution that, by their nature, forward-looking statements are subject to a number of risks or uncertainties, including the risk factors set forth in Part I —Item 1A —Risk Factors in the ~~2020~~2021 Annual Report and in Part II — Item 1A — Risk Factors of this report, along with the risks set forth below. Actual results could differ materially from those expressed or implied in these forward-looking statements or could affect the extent to which a particular objective, projection, estimate, or prediction is realized. As a result, you are cautioned not to place undue reliance on such statements. These forward-looking statements speak only as of the date they are made, and we do not undertake to update any forward-looking statement herein or that may be made from time to time on our behalf.

~~Table of Contents~~

Some of the risks and uncertainties that could affect our forward-looking statements include the following:

•the effects of economic, financial, credit, and market conditions on our financial and regulatory condition and results of operations, including changes in economic growth, general liquidity conditions, inflation, ~~and deflation,~~ employment rates, interest rates, interest rate spreads, interest rate volatility, mortgage originations, prepayment activity, housing prices, asset delinquencies, members’ deposit flows, liquidity needs, and loan demand; changes in benchmark interest rates, including but not limited to the ~~anticipated~~ cessation of the LIBOR benchmark rate, the development of alternative rates, including the ~~Secured Overnight Financing Rate~~secured overnight financing rate (SOFR), and the adverse consequences these could have for market participants, including the Bank and its members; changes in the general economy, including changes resulting from U.S. fiscal and monetary policy, actions of the Federal Open Market Committee (FOMC), or changes in credit ratings of the U.S. federal government; the condition of the mortgage and housing markets on our mortgage-related assets; and the condition of the capital markets on our COs;

•issues and events across the FHLBank System and in the political arena that may lead to executive branch, legislative, regulatory, judicial, or other developments impacting the scope of our business, investor demand for COs, our financial obligations with respect to COs, our ability to access the capital markets, our members, our counterparties, the manner in which we operate, or the organization and structure of the FHLBank System;

•the impact of pandemics, such as the ~~coronavirus or other pandemics,~~COVID-19 pandemic, epidemics, or health emergencies and responses to such events, including, among other things, the effect on the Bank resulting from illness or quarantines of employees or business partners on which we rely or from remote work arrangements; negative effects on our members’ businesses and their demands for our products, including demand for advances; and effects on the economy and financial markets from Federal Reserve monetary policy, fiscal stimulus programs (or changes to or cessation of such programs), state and local government restrictions on business activities including, among other things, federal and state vaccine mandates and reactions thereto, or generally;

•our ability to declare and pay dividends consistent with past practices as well as any plans to repurchase excess capital ~~stock;~~stock, and any amendments to our capital plan;

•competitive forces including, without limitation, other sources of funding available to our members and other entities borrowing funds in the capital markets;

•changes in the value and liquidity of collateral we hold as security for obligations of our members and counterparties;

•the impact of new accounting standards and the application of accounting rules, including the impact of regulatory guidance on our application of such standards and rules;

•changes in the fair value and economic value of, impairments of, and risks, including risks related to changes in or cessation of benchmark interest rates such as LIBOR, overnight index swap (OIS), and SOFR, associated with the Bank’s investments in mortgage loans and MBS or other assets and the related credit-enhancement protections;

•membership conditions and changes, including changes resulting from member failures, mergers or changing financial health, changes due to member eligibility, changes in the principal place of business of members, or the addition of new members;

•external events, such as general economic and financial instabilities, political instability, wars, including hostilities and sanctions related to the war between Russia and Ukraine, and natural disasters, including disasters caused by significant climate change, which, among other things, could damage our facilities or the facilities of our members, damage or destroy collateral that members have pledged to secure advances or mortgages that we hold for our portfolio, and which could

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cause us to experience losses or be exposed to a greater risk that pledged collateral would be inadequate in the event of a default;

•the pace of technological change and our ability to develop and support internal controls, information systems, and other operating technologies that effectively manage the risks we face, including but not limited to, failures, interruptions, or security breaches ~~(cyber-attacks),~~and other cyber-attacks, which could increase as a result of the COVID-19 pandemic related changes in our operating environment; and

•our ability to attract and retain skilled ~~employees.~~employees, including our key personnel.

These risk factors are not exhaustive. New risk factors emerge from time to time. We cannot predict such new risk factors nor can we assess the impact, if any, of such new risk factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those implied by any forward-looking statements.

The Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our interim financial statements and notes, which begin on page three, and the ~~2020~~2021 Annual Report.

EXECUTIVE SUMMARY

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~~For~~Net income for the three months ended June 30, ~~2021, net income~~2022, was ~~$6.2~~$41.0 million, compared with net income of ~~$2.8~~$6.2 million for the same period in ~~2020.~~2021. The increase in net income ~~for the quarter~~ was ~~primarily due to a reduction of net unrealized losses on trading securities of $4.2 million, and~~driven by an increase of ~~$3.7~~$26.3 million in net interest income after provision for credit losses, a decrease of $14.3 million in net losses on trading securities and a decline of $1.5 million in losses on early extinguishment of debt. These increases to net income were partially offset by a $7.6 million increase in ~~part, by an increase~~contributions to ~~other expense of $3.0 million.~~the Affordable Housing Program, compared to the same period in 2021.

~~Net~~The $26.3 million increase in net interest income after provision for credit losses during the second quarter of 2022 was due to a $9.9 billion increase in average total earning assets and a significant increase in interest rates due to aggressive monetary policy tightening by the Federal Reserve. The increase in average earning assets was driven primarily by a $5.7 billion increase in average advances balances, as demand for advances returned among depository members to near pre-pandemic levels. Additionally, the increase in net interest income after provision for credit losses was in part attributable to the correction of an error related to changes in fair value of certain available-for-sale securities that are in fair-value hedge relationships. As a result of this error, cumulatively from the second quarter of 2019 through the first quarter of 2022, net interest income after provision for credit losses was understated by $6.2 million. We determined the error did not have a material effect on our financial condition, results of operations, or cash flows for the impacted periods, and a correcting adjustment was recorded in interest income from available-for-sale securities in the second quarter of 2022.

In support of our housing and community investment mission, the Bank made a voluntary contribution of $5.5 million to the Affordable Housing Program in the three months ended June 30, ~~2021, was $43.1 million, compared with $39.4 million~~2022. The increase in net income for the ~~same period in 2020. Although average total earning assets declined $18.3 billion to $36.3 billion for the three months~~quarter ended June 30, ~~2021, from $54.6 billion~~2022, correspondingly increased the Bank’s statutory contributions to the Affordable Housing Program to a more meaningful level in the opinion of management compared to originally expected amounts. If this trend continues, the Bank expects that additional voluntary contributions to the Affordable Housing Program may be reduced or eliminated for the ~~same period~~remainder of the year, but total contributions to AHP are expected to be significantly increased from the amount contributed in ~~2020,~~2021. Additional information on this and other targeted affordable housing and community investment programs is provided in the ~~impact was offset as our net interest margin increased 0.17 percent to 0.48 percent for the three months ended June 30,~~ 2021 ~~from 0.31 percent for the same period in 2020.~~Annual Report.

Our retained earnings grew to ~~$1.5~~$1.6 billion at June 30, ~~2021,~~2022, an increase of ~~$17.1~~$58.8 million from December 31, ~~2020~~2021, and ~~equal to 4.25~~equals 2.6 percent of total assets at June 30, ~~2021.~~2022. We continue to satisfy all regulatory capital requirements as of June 30, ~~2021.~~ 2022.

On July ~~23, 2021,~~22, 2022, our board of directors declared a cash dividend that was equivalent to an annual yield of ~~1.52~~3.72 percent, increasing 163 basis points from the prior quarter's dividend. The annual yield of this dividend equals the approximate daily average of SOFR for the second quarter of ~~2021~~2022 plus ~~150~~300 basis ~~points.~~points, which is increased by 100 basis points from the prior quarter's dividend.

Our overall results of operations are influenced by the economy and financial markets, and, in particular, by members’ demand for advances and our ability to maintain sufficient access to funding at relatively favorable costs. ~~The COVID-19 pandemic, which began to affect businesses and~~While the ~~economy in March 2020 and continues, and the response~~effects of ~~the U.S. government~~high inflation and the Federal ~~Reserve through changes in~~Reserve’s aggressive monetary policy ~~and implementation of fiscal stimulus programs, led to interest rates that remain historically low and substantially elevated deposits reported~~response, combined with weakening economic growth as measured by ~~depository member institutions. Elevated deposit balances at member institutions have resulted in increased liquidity at members and reduced demand for advances and have been~~gross domestic product, present uncertainties about the ~~primary cause~~future of the ~~significant decline in advances balances beginning in~~economy, the ~~second~~ quarter ~~of 2020. We experienced~~ending June 30, 2022 saw a ~~moderate additional reduction~~sharp increase in demand for ~~advances from our members in~~advances. During the first ~~half~~two quarters of 2022, advances balances increased to $30.3 billion at June 30, 2022, an increase of 145.7 percent from $12.3 billion at December 31, 2021. ~~In addition, Agency mortgage-backed security purchases~~This increase in advances was due to member depository institutions beginning to experience slowing growth or declines of deposit balances, an increase in

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lending by ~~the Federal Reserve aimed at supporting the housing market through the pandemic have tightened yield spreads we earn on new mortgage acquisitions and have provided an incentive to some of our~~ members to ~~sell loans to Fannie Mae~~their customers, and ~~Freddie Mac. This activity has~~rising interest rates and reduced ~~our outstanding balances of mortgage loans.~~market liquidity. These developments ~~have~~ impacted our financial condition as of June 30, ~~2021,~~2022, and results of operations for the three months ended June 30, ~~2021.~~2022.

Generally, investor demand for high credit quality, fixed-income investments, including COs, continued to be strong relative to other investments. ~~Moreover, a declining supply of~~Significant growth in outstanding COs ~~as a result of lower~~to fund advances ~~balances~~growth throughout the FHLBank System has ~~further increased the~~not diminished relative ~~value of COs and improved our relative cost of borrowing.~~demand for COs. Our flexibility in utilizing various funding tools, in combination with a diverse investor base and our status as a government-sponsored enterprise, have helped provide reliable market access and demand for consolidated obligations throughout fluctuating market environments and regulatory changes affecting dealers of and investors in COs. The Bank has continued to meet all funding needs during the three months ended June 30, ~~2021.~~

~~Net Interest Income, Margin, and Spread~~

For the three months ended June 30, 2021, net interest margin was 0.48 percent, an increase of 17 basis points from the three months ended June 30, 2020, and net interest spread was 0.44 percent for the quarter ended June 30, 2021, an 18-basis-point increase from the same period in 2020. The increase in both net interest spread and net interest margin mainly reflect significant improvement in funding costs relative to the same period in 2020, during which a substantial amount of short-term debt we issued prior to the Federal Reserve’s 150 basis point rate cuts in March 2020 remained outstanding through May 2020, resulting in sharp, temporary margin compression. In addition, net amortization of premium on mortgage-backed securities and mortgage loans decreased by $5.1 million, improving out net interest spread and net interest margin. The low interest rate environment triggered refinancing incentives on residential mortgage loans in 2020, resulting in increases of mortgage prepayment activity that resulted in accelerated net premium amortization of our Agency residential MBS as well as our whole mortgage loans. Refinancing activity of mortgage loans remains high but has moderated during the first half of 2021.

~~Other Income and Expense~~

Net gains and losses on derivatives and hedging activities for the three months ended June 30, 2021, totaled a net gain of $447 thousand, compared with a net loss of $1.2 million for the same period in 2020. The $447 thousand net gain for the current quarter consisted of a $6.1 million unrealized gain from changes in fair value on economic hedges offset in part by $5.6 million of interest expense on economic hedges. Additionally, unrealized losses on trading securities totaled $14.6 million for the three months ended June 30, 2021, compared to losses of $18.8 million for the three months ended June 30, 2020. Together, these realized and unrealized gains and losses provided an economic offset primarily to interest income from trading securities, which

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~~totaled $15.1 million for the three months ended June 30, 2021. See below under —~~ ~~Results of Operations — Economically Hedged Trading Securities~~ ~~for additional information.~~2022.

Advances Balances

We continue to deliver on our primary mission, supplying liquidity to our members. Advances balances totaled ~~$15.2~~$30.3 billion at June 30, ~~2021,~~2022, compared to ~~$18.8~~$12.3 billion at December 31, ~~2020.~~2021. The ~~decrease~~significant increase in advances was concentrated in ~~both short-~~variable-rate advances and ~~long-term~~short-term fixed-rate advances, ~~and was primarily due to excess liquidity~~reflecting rising demand for wholesale funding at member institutions.

Net Interest Income, Margin, and Spread

For the three months ended June 30, 2022, net interest margin was 0.60 percent, an increase of 12 basis points from the same period in 2021, and net interest spread was 0.52 percent for the three months ended June 30, 2022, an increase of 8 basis points from the same period in 2021. The increases in net interest spread and net interest margin mainly reflect the impacts of increases in advances and investments and a rising rate environment. For the quarter ended June 30, 2022, average balances of advances and investments increased $5.7 billion and $4.8 billion, respectively, compared to the same period in 2021. Additionally, the rising interest rate environment in 2022 has decreased refinancing incentives on residential mortgage loans, resulting in decreases of mortgage prepayment activity that resulted in reduced net premium amortization of our agency residential MBS as well as our whole mortgage loans. Other improvements in net interest income after provision for credit losses are described in Results of Operations — Net Interest Income. Average total earning assets increased $9.9 billion to $46.1 billion for the three months ended June 30, 2022, from $36.3 billion for the same period in 2021.

Legislative and Regulatory Developments

Legislation has been proposed ~~or enacted,~~ and the FHFA ~~the Federal Reserve~~ and others with authority over the economy, our industry, and our business activities have taken action during ~~2021~~2022 as described in — Legislative and Regulatory Developments. Such developments could affect the way we conduct business ~~and~~or could impact how we satisfy our mission as well as the value of our membership.

LIBOR Transition Preparations

~~In July 2017,~~For details regarding the ~~United Kingdom’s Financial Conduct Authority (FCA), which regulates LIBOR, announced its intention to stop persuading or compelling the major banks that sustain~~Bank's transition from LIBOR to ~~submit~~SOFR, the alternative reference rate ~~quotations after 2021. On March 5, 2021, the FCA further announced that LIBOR will either cease~~ to ~~be provided by any administrator or no longer be representative immediately after December 31, 2021, in the case of 1-week and 2-month~~ U.S. dollar LIBOR and immediately after June 30, 2023, in the case of the remaining U.S. dollar LIBOR settings. Although the FCA does not expect LIBOR to become non-representative before the applicable cessation dates and intends to consult on requiring the administrator of LIBOR to continue publishing LIBOR of certain currencies and tenors on a non-representative, synthetic basis for a period after the 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. There is no assurance that LIBOR will continue to be accepted or used in the markets generally, orrecommended by any issuers, investors, or counterparties at any time, even if LIBOR continues to be available. We recognize that the discontinuance of LIBOR as an interest rate benchmark and the transition to alternative reference rates, including SOFR, present significant risks and challenges that could affect our business. Certain of our advances, investment securities and derivatives are indexed to LIBOR, and we continue to assess legacy contracts across products and monitor risks to determine the effect of LIBOR discontinuance. Under a steering committee comprised of members of senior management and a working group of representatives from departments across the Bank, we have developed and continue to implement a multi-year plan and initiative to transition from LIBOR. We worked with the other FHLBanks and the Office of Finance to transition our floating-rate note issuance from LIBOR. In addition, we offer a SOFR-based advance. We are updating our operational processes and models to support new alternative reference rate activity. For further detailsAlternative Reference Rates Committee (ARRC), see the following Risk Factors in our ~~2020~~2021 Annual Report: Part I — Item 1A — Risk Factors — Market and Liquidity Risks — Changes to and replacement of the LIBOR benchmark interest rate could adversely affect our business, financial condition, and results of operations; and — We use derivatives to manage interest-rate risk, however, we could be unable to enter into effective derivative instruments on acceptable terms. Additional information is provided in the 2021 Annual Report Part II — Item 7 — Management's Discussion and Analysis of Financial Condition and Results of Operations — Executive Summary — LIBOR Transition Preparations, Financial Condition - Transition from LIBOR to Alternative Reference Rates and in — Legislative and Regulatory Developments - LIBOR Transition.

ECONOMIC CONDITIONS

Economic Environment

~~The economic recovery continued~~Real gross domestic product (GDP) decreased at an annual rate of 0.9 percent in the second quarter ~~as increasing vaccination rates and declines~~of 2022, following a 1.6 percent decrease in ~~COVID-19 cases resulted in most states easing social distancing and other restrictions during~~ the first quarter. The ~~U.S.~~contraction in the second quarter was driven mainly by decreases in private inventory investment, residential fixed investment, and federal government spending. Personal consumption expenditures increased at an annual rate of 1.0 percent, driven by an increase in spending on services, partially offset by a drop in spending on goods.

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The labor market ~~recorded gains of 583,000, 850,000, and 943,000 jobs in May, June, and July 2021, respectively. A majority of the~~continued to improve, with job ~~gains in July were~~growth averaging 375,000 per month in the ~~leisure~~second quarter of 2022. In July 2022, employment increased by 528,000 and ~~hospitality, local government (especially in education), and education and professional and business services. The~~the unemployment rate ~~for the U.S. stood at 5.4 percent in July 2021.~~was 3.5 percent. The unemployment rate for the New England region ~~was 5.3 percent~~ in June ~~2021, with the highest unemployment rate in the region at 7.9~~2022 was 3.5 percent, ~~in Connecticut and the lowest unemployment rate at 2.9~~ranging from 2.0 percent in New ~~Hampshire.~~Hampshire to 4.0 percent in Connecticut.

~~Real gross domestic product (GDP) increased by 6.5 percent in~~In July 2022, the ~~second quarter of 2021 reflecting~~Consumer Price Index was unchanged from the continuing economic recovery. The increase in real GDP was driven by consumer expenditures, business investment, and federal government spending. The robust expansion of the economy in the second quarter led to an increase in the inflation rate. The personal consumption expenditures (PCE) price index increased year-over-year by 3.6 percent, 4.0preceding month after rising 1.0 percent and ~~4.0~~1.3 percent in ~~April,~~ May and June ~~2021, respectively,~~2022, respectively. A decline in gasoline prices offset increases in food and shelter prices in July, resulting in a zero net change. Compared to a year earlier, the July 2022 CPI was higher by 8.5 percent, driven by prices ~~for energy~~of gasoline, shelter and ~~durable goods. Excluding food and energy, the PCE price index increased by 3.1 percent, 3.4 percent, and 3.5 percent in April, May, and June 2021, respectively.~~

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food.

The ~~housing market remained strong through April 2021 driven by strong demand and low levels of available inventory. The~~ FHFA reported that ~~housing~~house prices rose ~~15.7~~18.3 percent ~~nation-wide~~across the U.S. from ~~April 2020~~May 2021 to ~~April 2021. The rate of increase for~~May 2022. Over the same period, home prices in New England ~~region over that period was 18.0~~rose 17.1 percent. At the end of June 2022, rates for 30-year fixed-rate mortgage were above 5.7 percent, approximately 2.7 percentage points higher than a year earlier.

Interest-Rate Environment

On July ~~28, 2021,~~27, 2022, the FOMC ~~maintained~~raised the target range for the federal funds rate atto between 0225 and 25250 basis ~~points.~~points and stated that ongoing increases in the target range will likely be appropriate given elevated rates of inflation. The FOMC stated that it would maintain this range until the labor market has reached levels consistent with maximum employment and inflation is on track to moderately exceed the FOMC’s long-term target of 2.0 percent. The FOMC furtheralso stated that it would continue ~~to increase~~reducing its holdings of Treasury securities, ~~by at least $80 billion per month~~agency debt, and of agency mortgage-backed securities by ~~at least $40 billion per month until substantial further progress towards the employment and price stability goals has been achieved.~~reinvesting principal payments from its securities holdings only if they exceed monthly caps.

~~After rising sharply~~The Federal Reserve’s policy pivot from an easing to a tightening stance led to a rise in interest rates. Short-term rates rose commensurate with the magnitude of the increase in the ~~first quarter, long-term interest~~federal funds rate. The spread between short-term and longer-term rates ~~declined over~~fluctuated during the second quarter reflecting expectations of further rate hikes, tempered by concern about rising risks of an economic downturn and ~~the yield curve flattened, reflecting in part concerns about another~~ possible ~~surge in COVID-19 cases, driven by more transmissible variants~~reversal of ~~the virus, especially in areas with low vaccination rates.~~monetary policy back to an easing stance.

Table 1 - Key Interest Rates(1)


		Three Month Average		Six Month Average		Ending Rate			Three Month Daily Average		Six Month Daily Average		Ending Rate
		June 30, 2021	June 30, 2020	June 30, 2021	June 30, 2020	June 30, 2021	December 31, 2020		June 30, 2022	June 30, 2021	June 30, 2022	June 30, 2021	June 30, 2022	December 31, 2021
SOFR	SOFR	0.02%	0.05%	0.03%	0.63%	0.05%	0.07%	SOFR	0.71%	0.02%	0.40%	0.03%	1.50%	0.05%
Federal funds effective rate	Federal funds effective rate	0.07%	0.06%	0.07%	0.64%	0.08%	0.09%	Federal funds effective rate	0.76%	0.07%	0.44%	0.07%	1.58%	0.07%
3-month LIBOR	3-month LIBOR	0.16%	0.60%.	0.18%	1.07%	0.15%	0.24%	3-month LIBOR	1.53%	0.16%	1.02%	0.18%	2.29%	0.21%
3-month U.S. Treasury yield	3-month U.S. Treasury yield	0.01%	0.12%	0.03%	0.60%	0.04%	0.06%	3-month U.S. Treasury yield	1.05%	0.01%	0.67%	0.03%	1.63%	0.03%
2-year U.S. Treasury yield	2-year U.S. Treasury yield	0.17%	0.19%	0.15%	0.64%	0.25%	0.12%	2-year U.S. Treasury yield	2.71%	0.17%	2.09%	0.15%	2.95%	0.73%
5-year U.S. Treasury yield	5-year U.S. Treasury yield	0.83%	0.36%	0.72%	0.76%	0.89%	0.36%	5-year U.S. Treasury yield	2.95%	0.83%	2.39%	0.72%	3.04%	1.26%
10-year U.S. Treasury yield	10-year U.S. Treasury yield	1.58%	0.68%	1.45%	1.03%	1.47%	0.91%	10-year U.S. Treasury yield	2.92%	1.58%	2.44%	1.45%	3.01%	1.51%

________________

(1) Source: Bloomberg

SELECTED FINANCIAL DATA

The following financial highlights for the statement of condition and statement of operations for December 31, ~~2020,~~2021, have been derived from our audited financial statements. Financial highlights for the quarter-ends have been derived from our unaudited financial statements.

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Table 2 - Selected Financial Data

(dollars in thousands)

As of and for the Three Months Ended
June 30, 2021 March 31, 2021 December 31, 2020 September 30, 2020 June 30, 2020
Statement of Condition
Total assets $ 35,683,602 $ 36,676,723 $ 38,461,035 $ 45,025,341 $ 46,161,388
Investments, net(1)
16,053,111 15,474,566 13,341,538 13,345,453 16,286,588
Advances 15,176,625 16,798,082 18,817,002 26,961,561 24,827,781
Mortgage loans held for portfolio, net(2)
3,470,505 3,726,343 3,930,252 4,160,091 4,411,053
Deposits and other borrowings 970,282 1,088,187 1,088,987 1,227,702 1,191,229
Consolidated obligations:
Bonds 23,475,165 22,704,460 21,471,590 23,970,889 24,563,087
Discount notes 8,365,460 9,927,167 12,878,310 16,511,187 17,308,802
Total consolidated obligations 31,840,625 32,631,627 34,349,900 40,482,076 41,871,889
Mandatorily redeemable capital stock 7,432 6,164 6,282 6,135 6,135
Class B capital stock outstanding-putable(3)
1,081,057 1,181,665 1,267,172 1,594,859 1,518,515
Unrestricted retained earnings 1,147,279 1,145,756 1,130,222 1,121,875 1,097,875
Restricted retained earnings 368,420 368,420 368,420 368,420 357,709
Total retained earnings 1,515,699 1,514,176 1,498,642 1,490,295 1,455,584
Accumulated other comprehensive income (loss) 47,645 21,223 16,139 (24,067) (128,471)
Total capital 2,644,401 2,717,064 2,781,953 3,061,087 2,845,628
Results of Operations (for the period ended)
Net interest income after provision for credit losses $ 43,122 $ 61,484 $ 61,826 $ 62,261 $ 39,444
Litigation settlements — — 25,998 — 98
Other (loss) income, net (13,104) (15,763) (24,601) 18,110 (16,275)
Other expense 23,177 22,513 38,512 20,858 20,146
AHP assessments 687 2,323 2,474 5,957 319
Net income $ 6,154 $ 20,885 $ 22,237 $ 53,556 $ 2,802
Other Information
Dividends declared $ 4,631 $ 5,351 $ 13,890 $ 18,845 $ 24,094
Dividend payout ratio 75.25 % 25.62 % 62.46 % 35.19 % 859.89 %
Weighted-average dividend rate(4)
1.54 1.59 3.76 4.12 5.06
Return on average equity(5)
0.92 3.09 3.14 7.39 0.36
Return on average assets 0.07 0.23 0.22 0.50 0.02
Net interest margin(6)
0.48 0.68 0.60 0.54 0.31
Average equity to average assets 7.29 7.46 7.09 6.72 5.59
Total regulatory capital ratio(7)
7.30 7.37 7.21 6.87 6.46


	As of and for the Three Months Ended
	June 30, 2022			March 31, 2022			December 31, 2021			September 30, 2021			June 30, 2021
Statement of Condition
Total assets	$	62,063,994		$	32,395,662		$	32,545,292		$	34,448,917		$	35,683,602
Investments(1)	28,254,534			16,849,318			16,372,499			16,404,424			16,053,111
Advances	30,318,486			11,816,428			12,340,020			14,056,991			15,176,625
Mortgage loans held for portfolio, net(2)	2,897,373			2,998,682			3,120,159			3,283,925			3,470,505
Deposits	1,066,459			803,383			884,032			970,732			970,282
Consolidated obligations:
Bonds	32,721,605			26,070,923			26,613,032			25,097,469			23,475,165
Discount notes	25,096,230			2,878,513			2,275,320			5,554,103			8,365,460
Total consolidated obligations	57,817,835			28,949,436			28,888,352			30,651,572			31,840,625
Mandatorily redeemable capital stock	10,703			13,418			13,562			13,890			7,432
Class B capital stock outstanding-putable(3)	1,557,243			929,482			953,638			1,028,177			1,081,057
Unrestricted retained earnings	1,230,558			1,202,685			1,179,986			1,159,509			1,147,279
Restricted retained earnings	376,620			368,420			368,420			368,420			368,420
Total retained earnings	1,607,178			1,571,105			1,548,406			1,527,929			1,515,699
Accumulated other comprehensive (loss) income	(216,409)			(88,800)			28,967			40,604			47,645
Total capital	2,948,012			2,411,787			2,531,011			2,596,710			2,644,401
Results of Operations
Net interest income after provision for credit losses	$	69,416		$	58,942		$	56,412		$	51,145		$	43,122
Other income (loss), net	3,818			1,066			(7,562)			(10,453)			(13,104)
Other expense	27,667			29,073			20,061			22,330			23,177
AHP assessments	4,567			3,100			2,887			1,842			687
Net income	$	41,000		$	27,835		$	25,902		$	16,520		$	6,154
Other Information
Dividends declared	$	4,927		$	5,136		$	5,425		$	4,290		$	4,631
Dividend payout ratio	12.02		%	18.45		%	20.94		%	25.97		%	75.25		%
Weighted-average dividend rate(4)	2.09			2.05			2.05			1.52			1.54
Return on average equity(5)	6.13			4.50			4.00			2.50			0.92
Return on average assets	0.35			0.35			0.31			0.18			0.07
Net interest margin(6)	0.60			0.74			0.66			0.58			0.48
Average equity to average assets	5.78			7.69			7.65			7.36			7.29
Total regulatory capital ratio(7)	5.12			7.76			7.73			7.46			7.30

_______________________

(1)Investments include available-for-sale securities, held-to-maturity securities, trading securities, interest-bearing deposits, securities purchased under agreements to resell and federal funds sold. The allowance for credit losses relating to private label MBS amounted to $124 thousand, and $5.6 million as of September 30, 2020, and June 30, 2020, respectively. All private-label MBS were sold subsequent to September 30, 2020.

(2)The allowance for credit losses for mortgage loans amounted to $1.5 million as of June 30, 2022, $1.6 million as of March 31, 2022, $1.7 million as of December 31, 2021, $2.1 million as of September 30, 2021, and $2.1 million as of June 30, 2021, ~~$1.9 million as of March 31, 2021, $3.1 million as of December 31, 2020, $4.6 million as of September 30, 2020, and $4.6 million as of June 30, 2020,~~ respectively.

(3)Capital stock is putable at the option of a member upon five years' written notice, subject to applicable restrictions.

~~Table~~ We also conduct daily repurchases of ~~Contents~~certain excess stock from shareholders.

(4)Weighted-average dividend rate is the dividend amount declared divided by the average daily balance of capital stock eligible for dividends.

(5)Return on average equity is net income divided by the total of the average daily balance of outstanding Class B capital stock, accumulated other comprehensive ~~loss~~income and total retained earnings.

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(6)Net interest margin is net interest income before provision for credit losses as a percentage of average earning assets.

(7)Total regulatory capital ratio is capital stock (including mandatorily redeemable capital stock) plus total retained earnings as a percentage of total assets. See Item 1 8 — Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 10 12 — Capital.

RESULTS OF OPERATIONS

Second Quarter of ~~2021~~2022 Compared with Second Quarter of ~~2020~~2021

Net income ~~was $6.2~~increased to $41.0 million for the three months ended June 30, ~~2021, compared to $2.8~~2022, from $6.2 million for the ~~three months ended June 30, 2020.~~same period in 2021. The reasons for the increase are discussed under — Executive Summary.

Net interest income after provision for credit losses for the three months ended June 30, ~~2021,~~2022, was ~~$43.1~~$69.4 million, compared with ~~$39.4~~$43.1 million for the same period in 2021. The $26.3 million increase in net interest income after provision for ~~2020.~~credit losses was driven by a $5.7 billion increase in the average balance of advances, a $2.4 billion increase in the average balance of securities purchased under agreements to resell, a $1.6 billion increase in the average balance of mortgage-backed securities, an increase of fair value hedge ineffectiveness net gains of $20.6 million, an increase of net accretion of discounts and premiums on mortgage-backed securities and mortgage loans of $13.7 million resulting from significant increases in mortgage rates during the second quarter of 2022, and higher returns from investing the Bank’s capital in a higher interest-rate environment. These positive factors were partially offset by a $635.7 million decrease in the average balance of mortgage loans and a $1.9 million decrease in net prepayment fee income. Additionally, certain US Treasury securities, which were acquired prior to the significant interest rate reductions in early 2020, matured during the latter half of 2021, resulting in a reduction of interest income of $6.2 million as these securities were replaced with investments having lower yields. As a result, net interest spread was 0.52 percent for the quarter ended June 30, 2022, an increase of 8 basis points from the same period in 2021, and net interest margin was 0.60 percent, an increase of 12 basis points from the same period in 2021.

Six Months Ended June 30, 2022, Compared with Six Months Ended June 30, 2021

Net income increased to $68.8 million for the six months ended June 30, 2022, from $27.0 million for the same period in 2021. The increase in net income was driven by a decrease of ~~$3.7~~$28.6 million in net losses on trading securities, an increase of $23.8 million in net interest income after provision for credit losses, is attributable to several favorable factors, including: the absence of margin compression on liquidity investments that we experienced during the second quarter of 2020 following the sudden interest-rate cuts by the Federal Open Market Committee in March; a $5.1 million decrease in net amortization of premium on mortgage-backed securities and mortgage loans; a $2.7 million reduction in credit loss provision expense; a $1.5 billion increase in the average balance of U.S. Treasury obligations held as investment securities; and a ~~general improvement~~decline of $4.5 million in ~~funding costs.~~losses on early extinguishment of debt. These ~~factors~~increases to net income were partially offset by ~~reductions to net interest income resulting from~~ a $16.5 billion decrease in the average balance of advances, a $922.4 million decrease in the average balance of mortgage loans, an $804.2 million decrease in the average balance of mortgage-backed securities, a $4.9$9.2 million increase in net unrealized losses from fair value hedges, and a $3.3 million decrease in accretion of significant improvement in projected cash flows resulting from sales of previously impaired private-label MBS as all private-label MBS were sold in 2020. In addition, net interest income was negatively affected by lower income from investing our ~~capital, as~~voluntary contribution to the ~~average balance of outstanding capital stock declined $707.8 million in the second quarter of 2021~~Affordable Housing Program, compared to the ~~second quarter of 2020.~~

~~For additional information see — Rate and Volume Analysis.~~

~~Six Months Ended June 30, 2021, Compared with Six Months Ended June 30, 2020~~

~~Net income was $27.0 million for the six months ended June 30, 2021, compared to $44.5 million for the six months ended June 30, 2020. The $17.4 million decrease~~same period in net income was primarily due to an increase of $56.8 million in net unrealized losses on trading securities, and a $40.7 million decrease in realized net gain from sale of held-to-maturity securities, partially offset by a decrease of $53.3 million in net losses on derivatives and hedging activities as well as a $34.1 million increase in net interest income after provision for credit losses.2021.

Net interest income after provision for credit losses for the six months ended June 30, ~~2021,~~2022, was ~~$104.6~~$128.4 million, compared with ~~$70.5~~$104.6 million for the same period ~~for 2020.~~in 2021. The $23.8 million increase ~~of $34.1 million~~ in net interest income after provision for credit losses is attributable to several favorable factors, including: the absence of margin compression on liquidity investments that we experienced during the second quarter of 2020 following the sudden interest-rate cutswas driven by ~~the FOMC in March; an $18.6 million decrease in net amortization of premium on mortgage-backed securities and mortgage loans;~~ a ~~$15.9 million increase in net unrealized gains from fair value hedges; a $3.2 million reduction in credit loss provision expense; a $1.2~~$1.7 billion increase in the average balance of ~~U.S. Treasury obligations held as investment securities;~~mortgage-backed securities, an increase of fair value hedge ineffectiveness net gains of $27.8 million, an increase of net accretion of discounts and premiums on mortgage-backed securities and mortgage loans of $30.3 million resulting from significant increases in mortgage rates during the first half of 2022, and higher returns from investing the Bank’s capital in a ~~general improvement in funding costs.~~higher interest-rate environment. These positive factors were partially offset by ~~reductions to net interest income resulting from average balance decreases of $16.9 billion for advances, $1.3 billion for mortgage-backed securities, and $805.1~~a $710.2 million ~~for mortgage loans, as well as an $8.6 million~~ decrease in accretion of significant improvement in projected cash flows resulting from sales of previously impaired private-label MBS as all private-label MBS were sold in 2020. In addition, net interest income was negatively affected by lower income from investing our capital, resulting from the near zero, and substantially lower, average short-term interest rates in the first half of 2021 compared to the same period a year prior and the $701.8 million decline in the average balance of ~~outstanding capital stock~~mortgage loans and a $8.7 million decrease in ~~the first half of 2021 compared to the first half of 2020.~~

~~For the six months ended June 30, 2021,~~ net ~~interest margin was 0.58 percent, an increase of 33 basis points from the six months ended June 30, 2020, and~~prepayment fee income. As a result, net interest spread was ~~0.53~~0.59 percent for the six months ended June 30, ~~2021, a 35-basis-point~~2022, an increase of 6 basis points from the same period in ~~2020. The increase in both net interest spread~~2021, and net interest margin ~~mainly reflect significant~~

~~Table~~was 0.66 percent, an increase of ~~Contents~~

~~improvement in funding costs relative to~~8 basis points from the same period in 2020, during which a substantial amount of short-term debt issued prior to the FOMC’s combined 150 basis point rate cuts in March 2020 remained outstanding through May 2020, resulting in sharp, temporary margin compression.2021.

Table 3 presents major categories of average balances, related interest income/expense, and average yields/rates for interest-earning assets and interest-bearing liabilities. Our primary source of earnings is net interest income, which is the interest earned on advances, mortgage loans, and investments less interest paid on COs, deposits, and other sources of funds.

Table 3 - Net Interest Spread and Margin

(dollars in thousands)

For the Three Months Ended June 30,
2021 2020
Average
Balance Interest
Income /
Expense
Average
Yield/Rate(1)
Average
Balance Interest
Income /
Expense
Average
Yield/Rate(1)
Assets
Advances $ 15,880,582 $ 47,462 1.20 % $ 32,362,615 $ 104,982 1.30 %
Interest-bearing deposits 653,971 10 0.01 1,351,418 385 0.11
Securities purchased under agreements to resell 925,846 168 0.07 1,569,231 213 0.05
Federal funds sold 2,813,088 482 0.07 3,006,857 424 0.06
Investment securities(2)
12,396,086 26,614 0.86 11,781,608 44,944 1.53
Mortgage loans (2)(3)
3,582,506 23,007 2.58 4,504,857 33,333 2.98
Total interest-earning assets 36,252,079 97,743 1.08 54,576,586 184,281 1.36
Other non-interest-earning assets 174,445 345,664
Fair-value adjustments on investment securities 365,244 438,037
Total assets $ 36,791,768 $ 97,743 1.07 % $ 55,360,287 $ 184,281 1.34 %
Liabilities and capital
Consolidated obligations
Discount notes $ 10,490,710 $ 683 0.03 % $ 25,234,744 $ 47,582 0.76 %
Bonds 22,470,044 53,684 0.96 25,777,748 94,256 1.47
Other interest-bearing liabilities 989,592 55 0.02 907,818 96 0.04
Total interest-bearing liabilities 33,950,346 54,422 0.64 51,920,310 141,934 1.10
Other non-interest-bearing liabilities 160,798 347,615
Total capital 2,680,624 3,092,362
Total liabilities and capital $ 36,791,768 $ 54,422 0.59 % $ 55,360,287 $ 141,934 1.03 %
Net interest income $ 43,321 $ 42,347
Net interest spread 0.44 % 0.26 %
Net interest margin 0.48 % 0.31 %


	For the Three Months Ended June 30,
	2022						2021
	Average Balance		Interest Income / Expense		Average Yield/Rate(1)		Average Balance		Interest Income / Expense		Average Yield/Rate(1)
Assets
Advances	$	21,603,313	$	71,641	1.33	%	$	15,880,582	$	47,462	1.20	%

4543

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		For the Six Months Ended June 30,
		2021						2020
		Average Balance		Interest Income / Expense		Average Yield(1)		Average Balance		Interest Income / Expense		Average Yield(1)
Assets
Advances		$	16,755,115	$	104,747	1.26	%	$	33,662,386	$	274,479	1.64	%
Interest-bearing deposits	Interest-bearing deposits	612,285		94		0.03		1,396,329		5,354		0.77		Interest-bearing deposits	1,100,763		2,369		0.86		653,971		10		0.01
Securities purchased under agreements to resell	Securities purchased under agreements to resell	819,072		292		0.07		2,901,385		14,574		1.01		Securities purchased under agreements to resell	3,313,187		9,109		1.10		925,846		168		0.07
Federal funds sold	Federal funds sold	2,993,519		1,096		0.07		4,030,874		17,141		0.86		Federal funds sold	3,219,637		6,758		0.84		2,813,088		482		0.07
Investment securities(2)	Investment securities(2)	11,229,805		67,684		1.22		11,393,989		85,023		1.50		Investment securities(2)	13,964,590		63,105		1.81		12,396,086		26,614		0.86
Mortgage loans (2)(3)	Mortgage loans (2)(3)	3,707,510		48,144		2.62		4,512,644		70,179		3.13		Mortgage loans (2)(3)	2,946,838		21,419		2.92		3,582,506		23,007		2.58
Other earning assets		—		—		—		8,242		47		1.15

Total interest-earning assets	Total interest-earning assets	36,117,306		222,057		1.24		57,905,849		466,797		1.62		Total interest-earning assets	46,148,328		174,401		1.52		36,252,079		97,743		1.08
Other non-interest-earning assets	Other non-interest-earning assets	246,026						300,577						Other non-interest-earning assets	1,045,205						174,445
Fair-value adjustments on investment securities	Fair-value adjustments on investment securities	420,492						340,320						Fair-value adjustments on investment securities	(739,856)						365,244
Total assets	Total assets	$	36,783,824	$	222,057	1.22	%	$	58,546,746	$	466,797	1.60	%	Total assets	$	46,453,677	$	174,401	1.51	%	$	36,791,768	$	97,743	1.07	%
Liabilities and capital	Liabilities and capital													Liabilities and capital
Consolidated obligations	Consolidated obligations													Consolidated obligations
Discount notes	Discount notes	$	10,892,499	$	3,085	0.06	%	$	29,216,769	$	175,064	1.20	%	Discount notes	$	12,500,939	$	26,109	0.84	%	$	10,490,710	$	683	0.03	%
Bonds	Bonds	21,936,539		115,285		1.06		25,015,034		217,803		1.75		Bonds	28,809,891		78,242		1.09		22,470,044		53,684		0.96
Other interest-bearing liabilities	Other interest-bearing liabilities	1,001,800		108		0.02		846,810		1,232		0.29		Other interest-bearing liabilities	883,627		733		0.33		989,592		55		0.02
Total interest-bearing liabilities	Total interest-bearing liabilities	33,830,838		118,478		0.71		55,078,613		394,099		1.44		Total interest-bearing liabilities	42,194,457		105,084		1.00		33,950,346		54,422		0.64
Other non-interest-bearing liabilities	Other non-interest-bearing liabilities	240,431						296,171						Other non-interest-bearing liabilities	1,574,763						160,798
Total capital	Total capital	2,712,555						3,171,962						Total capital	2,684,457						2,680,624
Total liabilities and capital	Total liabilities and capital	$	36,783,824	$	118,478	0.65	%	$	58,546,746	$	394,099	1.35	%	Total liabilities and capital	$	46,453,677	$	105,084	0.91	%	$	36,791,768	$	54,422	0.59	%
Net interest income	Net interest income			$	103,579					$	72,698			Net interest income			$	69,317					$	43,321
Net interest spread	Net interest spread					0.53	%					0.18	%	Net interest spread					0.52	%					0.44	%
Net interest margin	Net interest margin					0.58	%					0.25	%	Net interest margin					0.60	%					0.48	%

															For the Six Months Ended June 30,
															2022						2021
															Average Balance		Interest Income / Expense		Average Yield(1)		Average Balance		Interest Income / Expense		Average Yield(1)
Assets														Assets
Advances														Advances	$	17,029,474	$	106,548	1.26	%	$	16,755,115	$	104,747	1.26	%
Interest-bearing deposits														Interest-bearing deposits	760,103		2,529		0.67		612,285		94		0.03
Securities purchased under agreements to resell														Securities purchased under agreements to resell	1,937,580		9,280		0.97		819,072		292		0.07
Federal funds sold														Federal funds sold	2,677,276		7,572		0.57		2,993,519		1,096		0.07
Investment securities(2)														Investment securities(2)	13,730,852		108,968		1.60		11,229,805		67,684		1.22
Mortgage loans														Mortgage loans	2,997,353		42,947		2.89		3,707,510		48,144		2.62

Total interest-earning assets														Total interest-earning assets	39,132,638		277,844		1.43		36,117,306		222,057		1.24
Other non-interest-earning assets														Other non-interest-earning assets	759,297						246,026
Fair-value adjustments on investment securities														Fair-value adjustments on investment securities	(333,424)						420,492
Total assets														Total assets	$	39,558,511	$	277,844	1.42	%	$	36,783,824	$	222,057	1.22	%
Liabilities and capital														Liabilities and capital
Consolidated obligations														Consolidated obligations
Discount notes														Discount notes	$	7,430,874	$	26,716	0.73	%	$	10,892,499	$	3,085	0.06	%
Bonds														Bonds	27,673,026		122,142		0.89		21,936,539		115,285		1.06
Other interest-bearing liabilities														Other interest-bearing liabilities	844,392		827		0.20		1,001,800		108		0.02
Total interest-bearing liabilities														Total interest-bearing liabilities	35,948,292		149,685		0.84		33,830,838		118,478		0.71
Other non-interest-bearing liabilities														Other non-interest-bearing liabilities	1,014,557						240,431
Total capital														Total capital	2,595,662						2,712,555
Total liabilities and capital														Total liabilities and capital	$	39,558,511	$	149,685	0.76	%	$	36,783,824	$	118,478	0.65	%
Net interest income														Net interest income			$	128,159					$	103,579
Net interest spread														Net interest spread					0.59	%					0.53	%
Net interest margin														Net interest margin					0.66	%					0.58	%

_________________________

(1) Yields are annualized.

(2) ~~The average~~Average balances are reflected at amortized cost.

Table of Contents

(3) ~~Non-accrual~~Nonaccrual loans are included in the average balances used to determine average yield.

Rate and Volume Analysis

Changes in both average balances (volume) and interest rates influence changes in net interest income and net interest margin. Table 4 summarizes changes in interest income and interest expense for the three and six months ended June 30, ~~2021~~2022 and ~~2020.~~2021. Changes in interest income and interest expense that are not identifiable as either volume-related or rate-related, but 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.

~~Table of Contents~~

Table 4 - Rate and Volume Analysis

(dollars in thousands)


		For the Three Months Ended June 30, 2021 vs. 2020						For the Six Months Ended June 30, 2021 vs. 2020							For the Three Months Ended June 30, 2022 vs. 2021						For the Six Months Ended June 30, 2022 vs. 2021
		Increase (Decrease) due to						Increase (Decrease) due to							Increase (Decrease) due to						Increase (Decrease) due to
		Volume		Rate		Total		Volume		Rate		Total			Volume		Rate		Total		Volume		Rate		Total
Interest income	Interest income													Interest income
Advances	Advances	$	(49,823)	$	(7,697)	$	(57,520)	$	(115,898)	$	(53,833)	$	(169,731)	Advances	$	18,541	$	5,638	$	24,179	$	1,718	$	83	$	1,801
Interest-bearing deposits	Interest-bearing deposits	(128)		(247)		(375)		(1,941)		(3,319)		(5,260)		Interest-bearing deposits	11		2,348		2,359		28		2,407		2,435
Securities purchased under agreements to resell	Securities purchased under agreements to resell	(103)		58		(45)		(6,225)		(8,057)		(14,282)		Securities purchased under agreements to resell	1,378		7,563		8,941		889		8,099		8,988
Federal funds sold	Federal funds sold	(29)		87		58		(3,525)		(12,520)		(16,045)		Federal funds sold	80		6,196		6,276		(128)		6,604		6,476
Investment securities	Investment securities	2,235		(20,565)		(18,330)		(1,209)		(16,130)		(17,339)		Investment securities	3,750		32,741		36,491		17,045		24,239		41,284
Mortgage loans	Mortgage loans	(6,277)		(4,049)		(10,326)		(11,448)		(10,587)		(22,035)		Mortgage loans	(4,391)		2,803		(1,588)		(9,841)		4,644		(5,197)
Other earning assets		—		—		—		(24)		(24)		(48)

Total interest income	Total interest income	(54,125)		(32,413)		(86,538)		(140,270)		(104,470)		(244,740)		Total interest income	19,369		57,289		76,658		9,711		46,076		55,787
Interest expense	Interest expense													Interest expense
Consolidated obligations	Consolidated obligations													Consolidated obligations
Discount notes	Discount notes	(17,682)		(29,217)		(46,899)		(68,271)		(103,708)		(171,979)		Discount notes	156		25,270		25,426		(1,283)		24,914		23,631
Bonds	Bonds	(10,962)		(29,610)		(40,572)		(24,287)		(78,231)		(102,518)		Bonds	16,542		8,016		24,558		27,153		(20,296)		6,857

Other interest-bearing liabilities	Other interest-bearing liabilities	8		(49)		(41)		191		(1,315)		(1,124)		Other interest-bearing liabilities	(7)		685		678		(20)		739		719
Total interest expense	Total interest expense	(28,636)		(58,876)		(87,512)		(92,367)		(183,254)		(275,621)		Total interest expense	16,691		33,971		50,662		25,850		5,357		31,207
Change in net interest income	Change in net interest income	$	(25,489)	$	26,463	$	974	$	(47,903)	$	78,784	$	30,881	Change in net interest income	$	2,678	$	23,318	$	25,996	$	(16,139)	$	40,719	$	24,580

Average Balance of Advances Outstanding

The average balance of total advances ~~decreased $16.9 billion,~~increased $274.4 million, or ~~50.2~~1.6 percent, for the six months ended June 30, ~~2021,~~2022 compared with the same period in ~~2020.~~2021. We ~~believe it is likely that advances balances will remain~~cannot predict future member demand for some time at a level that is significantly lower than that of the past several years, and could decline further, due to high levels deposits relative to loans among our members as well as acquisitions of borrowing members by institutions ineligible for membership with the Bank.advances.

For the six months ended June 30, ~~2021~~2022 and ~~2020,~~2021, net prepayment fees on advances were ~~$12.0~~$3.3 million and ~~$5.0~~$12.0 million, respectively. Prepayment-fee income is unpredictable and inconsistent from period to period, occurring only when advances and investments are prepaid prior to the scheduled maturity or repricing dates, and generally when prevailing reinvestment yields are lower than those of the prepaid advances. For additional information see Item 8 — Financial Statements and Supplementary Data — Notes to the Financial Statements — Note 2 — Summary of Significant Accounting Policies — Advances in the ~~2020~~2021 Annual Report.

Average Balance of Investments

Average short-term money-market investments, consisting of interest-bearing deposits, securities purchased under agreements to resell, and federal funds sold, ~~decreased $3.9 billion,~~increased $950.1 million, or ~~46.9~~21.5 percent, for the six months ended June 30, ~~2021,~~2022, compared with the same period in ~~2020,~~2021, as liquidity needs were ~~sharply lower~~greater in ~~the first six months of 2021 as~~2022 compared to ~~the first six months of 2020 amid much lower~~2021 due to increased advances borrowing activity. The yield earned on short-term money-market investments is highly correlated to short-term market interest rates. As a result of the ~~sharp decrease~~FOMC’s increase in the ~~FOMC’s~~ target range for the federal funds rate, average yields on overnight federal funds sold ~~decreased~~increased from ~~0.86 percent during the six months ended June 30, 2020, to~~ 0.07 percent during the six months ended June 30, 2021, to 0.57 percent during the six months ended June 30, 2022, while average yields on securities purchased under agreements to resell ~~decreased~~increased from ~~1.01 percent for the six months ended June 30, 2020, to~~ 0.07 percent for the six months ended June 30, ~~2021.~~

~~Average investment-securities balances decreased $164.2 million, or 1.4~~2021, to 0.97 percent for the six months ended June 30, ~~2021,~~2022. These investments are used for liquidity management.

Table of Contents

Average investment-securities balances increased $2.5 billion, or 22.3 percent for the six months ended June 30, 2022, compared with the same period in ~~2020.~~2021, an increase consisting primarily of $1.7 billion in MBS and $833.6 million in U.S. Treasury obligations.

Average Balance of COs

~~Table of Contents~~

Average CO balances ~~decreased $21.4~~increased $2.3 billion, or ~~39.5~~6.9 percent, for the six months ended June 30, ~~2021,~~2022, compared with the same period in ~~2020,~~2021, resulting from our ~~decreased~~increased funding needs principally due to the ~~decrease~~increase in our average advances balances. This overall ~~decrease~~increase consisted of ~~declines~~a $5.7 billion increase in CO bonds offset by a decline of ~~$18.3~~$3.5 billion in CO discount ~~notes and $3.1 billion in CO bonds.~~notes.

The average balance of CO discount notes represented approximately 21.2 percent of total average COs during the six months ended June 30, 2022, compared with 33.2 percent of total average COs during the six months ended June 30, ~~2021, compared with 53.9 percent of total average COs during the six months ended June 30, 2020.~~2021. The average balance of CO bonds represented ~~66.8~~78.8 percent and ~~46.1~~66.8 percent of total average COs outstanding during the six months ended June 30, ~~2021~~2022 and ~~2020,~~2021, respectively.

Impact of Derivatives and Hedging Activities

Net interest income includes interest accrued on interest-rate-exchange agreements that are associated with advances, investments, and debt instruments that qualify for hedge accounting. The fair value gains and losses of derivatives and hedged items designated in fair-value hedge relationships are also recognized as interest income or interest expense. We enter into derivatives to manage the interest-rate-risk exposures inherent in otherwise unhedged assets and liabilities and to achieve our risk-management objectives. We generally use derivative instruments that qualify for hedge accounting as interest-rate risk-management tools. These derivatives serve to stabilize net income when interest rates fluctuate. Accordingly, the impact of derivatives on net interest income and net interest margin, as well as other income, should be viewed in the overall context of our risk-management strategy.

Table 5 below provides a summary of the impact of derivatives and hedging activities on our earnings, excluding derivatives that are economically hedging trading securities and not designated in qualifying fair-value hedge relationships. Table 6 below provides a summary of the impact on our earnings from economically hedged trading securities and the associated derivatives.earnings.

Table 5 - Effect of Derivative and Hedging Activities

(dollars in thousands)


		For the Three Months Ended June 30, 2021												For the Three Months Ended June 30, 2022
Net Effect of Derivatives and Hedging Activities	Net Effect of Derivatives and Hedging Activities	Advances		Investments		Mortgage Loans		CO Bonds		Other		Total			Net Effect of Derivatives and Hedging Activities	Advances		Investments		Mortgage Loans		CO Bonds		Total
Net interest income	Net interest income														Net interest income
Amortization / accretion of hedging activities (1)	Amortization / accretion of hedging activities (1)	$	(705)	$	—	$	(347)	$	(757)	$	—	$	(1,809)		Amortization / accretion of hedging activities (1)	$	(273)	$	—	$	(144)	$	(945)	$	(1,362)
(Losses) gains on designated fair-value hedges		(245)		(4,098)		—		66		—		(4,277)
Gains on designated fair-value hedges															Gains on designated fair-value hedges	718		15,332		—		259		16,309
Net interest settlements on derivatives(2)	Net interest settlements on derivatives(2)	(16,042)		(29,847)		—		16,000		—		(29,889)			Net interest settlements on derivatives(2)	(5,205)		(21,256)		—		15,049		(11,412)
Total net interest income	Total net interest income	(16,992)		(33,945)		(347)		15,309		—		(35,975)			Total net interest income	(4,760)		(5,924)		(144)		14,363		3,535

Net gains on derivatives and hedging activities
Net gains (losses) on derivatives and hedging activities															Net gains (losses) on derivatives and hedging activities
Gains on derivatives not receiving hedge accounting	Gains on derivatives not receiving hedge accounting	30		—		—		—		—		30			Gains on derivatives not receiving hedge accounting	4		—		—		1		5
CO bond firm commitments															CO bond firm commitments	—		—		—		(1)		(1)
Mortgage delivery commitments															Mortgage delivery commitments	—		—		(118)		—		(118)

Mortgage delivery commitments		—		—		253		—		—		253
Net gains on derivatives and hedging activities		30		—		253		—		—		283
Net gains (losses) on derivatives and hedging activities															Net gains (losses) on derivatives and hedging activities	4		—		(118)		—		(114)

Net losses on trading securities															Net losses on trading securities	—		—		—		—		—
Total net effect of derivatives and hedging activities	Total net effect of derivatives and hedging activities	$	(16,962)	$	(33,945)	$	(94)	$	15,309	$	—	$	(35,692)		Total net effect of derivatives and hedging activities	$	(4,756)	$	(5,924)	$	(262)	$	14,363	$	3,421

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		For the Three Months Ended June 30, 2020												For the Three Months Ended June 30, 2021
Net Effect of Derivatives and Hedging Activities	Net Effect of Derivatives and Hedging Activities	Advances		Investments		Mortgage Loans		CO Bonds		Other		Total			Net Effect of Derivatives and Hedging Activities	Advances		Investments		Mortgage Loans		CO Bonds		Other		Total
Net interest income	Net interest income														Net interest income
Amortization / accretion of hedging activities in net interest income (1)	Amortization / accretion of hedging activities in net interest income (1)	$	(493)	$	—	$	(504)	$	(947)	$	—	$	(1,944)		Amortization / accretion of hedging activities in net interest income (1)	$	(705)	$	—	$	(347)	$	(757)	$	—	$	(1,809)
Gains (losses) on designated fair-value hedges		1,170		353		—		(877)		—		646
Net interest settlements on derivatives		(14,683)		(20,459)		—		7,040		—		(28,102)
(Losses) gains on designated fair-value hedges															(Losses) gains on designated fair-value hedges	(245)		(4,098)		—		66		—		(4,277)
Net interest settlements included in net interest income (2)															Net interest settlements included in net interest income (2)	(16,042)		(29,847)		—		16,000		—		(29,889)
Total net interest income	Total net interest income	(14,006)		(20,106)		(504)		5,216		—		(29,400)			Total net interest income	(16,992)		(33,945)		(347)		15,309		—		(35,975)

Net gains on derivatives and hedging activities	Net gains on derivatives and hedging activities														Net gains on derivatives and hedging activities

Losses on derivatives not receiving hedge accounting		140		—		—		—		—		140
Gains on derivatives not receiving hedge accounting															Gains on derivatives not receiving hedge accounting	30		163		—		—		—		193
CO bond firm commitments															CO bond firm commitments	—		—		—		—		—		—
Mortgage delivery commitments	Mortgage delivery commitments	—		—		632		—		—		632			Mortgage delivery commitments	—		—		253		—		—		253
Price alignment amount (3)															Price alignment amount (3)	—		—		—		—		1		1
Net gains on derivatives and hedging activities	Net gains on derivatives and hedging activities	140		—		632		—		—		772			Net gains on derivatives and hedging activities	30		163		253		—		1		447

Net losses on trading securities															Net losses on trading securities	—		(14,616)		—		—		—		(14,616)
Total net effect of derivatives and hedging activities	Total net effect of derivatives and hedging activities	$	(13,866)	$	(20,106)	$	128	$	5,216	$	—	$	(28,628)		Total net effect of derivatives and hedging activities	$	(16,962)	$	(48,398)	$	(94)	$	15,309	$	1	$	(50,144)


		For the Six Months Ended June 30, 2021												For the Six Months Ended June 30, 2022
Net Effect of Derivatives and Hedging Activities	Net Effect of Derivatives and Hedging Activities	Advances		Investments		Mortgage Loans		CO Bonds		Other		Total			Net Effect of Derivatives and Hedging Activities	Advances		Investments		Mortgage Loans		CO Bonds		Total
Net interest income	Net interest income														Net interest income
Amortization / accretion of hedging activities (1)	Amortization / accretion of hedging activities (1)	$	(1,404)	$	—	$	(828)	$	(1,402)	$	—	$	(3,634)		Amortization / accretion of hedging activities (1)	$	(536)	$	—	$	(300)	$	(1,881)	$	(2,717)
Gains on designated fair-value hedges	Gains on designated fair-value hedges	773		3,515		—		299		—		4,587			Gains on designated fair-value hedges	2,049		29,623		—		738		32,410
Net interest settlements on derivatives(2)	Net interest settlements on derivatives(2)	(31,867)		(51,784)		—		23,470		—		(60,181)			Net interest settlements on derivatives(2)	(15,131)		(58,647)		—		41,840		(31,938)
Total net interest income	Total net interest income	(32,498)		(48,269)		(828)		22,367		—		(59,228)			Total net interest income	(13,618)		(29,024)		(300)		40,697		(2,245)

Net gains (losses) on derivatives and hedging activities	Net gains (losses) on derivatives and hedging activities														Net gains (losses) on derivatives and hedging activities
Gains (losses) on derivatives not receiving hedge accounting	Gains (losses) on derivatives not receiving hedge accounting	36		—		—		(19)		(148)		(131)			Gains (losses) on derivatives not receiving hedge accounting	5		(1)		—		(520)		(516)
CO Bond firm commitment		—		—		—		19		—		19
CO bond firm commitments															CO bond firm commitments	—		—		—		520		520
Mortgage delivery commitments	Mortgage delivery commitments	—		—		(433)		—		—		(433)			Mortgage delivery commitments	—		—		(791)		—		(791)

Net gains (losses) on derivatives and hedging activities	Net gains (losses) on derivatives and hedging activities	36		—		(433)		—		(148)		(545)			Net gains (losses) on derivatives and hedging activities	5		(1)		(791)		—		(787)

Net losses on trading securities															Net losses on trading securities	—		(425)		—		—		(425)
Total net effect of derivatives and hedging activities	Total net effect of derivatives and hedging activities	$	(32,462)	$	(48,269)	$	(1,261)	$	22,367	$	(148)	$	(59,773)		Total net effect of derivatives and hedging activities	$	(13,613)	$	(29,450)	$	(1,091)	$	40,697	$	(3,457)

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		For the Six Months Ended June 30, 2020												For the Six Months Ended June 30, 2021
Net Effect of Derivatives and Hedging Activities	Net Effect of Derivatives and Hedging Activities	Advances		Investments		Mortgage Loans		CO Bonds		Other		Total			Net Effect of Derivatives and Hedging Activities	Advances		Investments		Mortgage Loans		CO Bonds		Other		Total
Net interest income	Net interest income														Net interest income
Amortization / accretion of hedging activities (1)	Amortization / accretion of hedging activities (1)	$	(830)	$	—	$	(780)	$	(1,835)	$	—	$	(3,445)		Amortization / accretion of hedging activities (1)	$	(1,404)	$	—	$	(828)	$	(1,402)	$	—	$	(3,634)
Losses on designated fair-value hedges		(1,317)		(8,588)		—		(1,377)		—		(11,282)
Gains on designated fair-value hedges															Gains on designated fair-value hedges	773		3,515		—		299		—		4,587
Net interest settlements on derivatives(2)	Net interest settlements on derivatives(2)	(17,308)		(29,557)		—		9,996		—		(36,869)			Net interest settlements on derivatives(2)	(31,867)		(51,784)		—		23,470		—		(60,181)
Total net interest income	Total net interest income	(19,455)		(38,145)		(780)		6,784		—		(51,596)			Total net interest income	(32,498)		(48,269)		(828)		22,367		—		(59,228)

Net (losses) gains on derivatives and hedging activities
Losses on derivatives not receiving hedge accounting		(64)		—		—		—		—		(64)
Net gains (losses) on derivatives and hedging activities															Net gains (losses) on derivatives and hedging activities
Gains (losses) on derivatives not receiving hedge accounting															Gains (losses) on derivatives not receiving hedge accounting	36		138		—		(19)		(148)		7
CO bond firm commitments															CO bond firm commitments	—		—		—		19		—		19
Mortgage delivery commitments															Mortgage delivery commitments	—		—		(433)		—		—		(433)
Price alignment amount (3)															Price alignment amount (3)	—		—		—		—		6		6
Net gains (losses) on derivatives and hedging activities															Net gains (losses) on derivatives and hedging activities	36		138		(433)		—		(142)		(401)

Mortgage delivery commitments		—		—		570		—		—		570
Net (losses) gains on derivatives and hedging activities		(64)		—		570		—		—		506

Net losses on trading securities															Net losses on trading securities	—		(29,477)		—		—		—		(29,477)
Total net effect of derivatives and hedging activities	Total net effect of derivatives and hedging activities	$	(19,519)	$	(38,145)	$	(210)	$	6,784	$	—	$	(51,090)		Total net effect of derivatives and hedging activities	$	(32,462)	$	(77,608)	$	(1,261)	$	22,367	$	(142)	$	(89,106)

~~_____________________~~________________________

(1) Represents the amortization/accretion of hedging fair-value adjustments and cash-flow hedge amortization reclassified from accumulated other comprehensive income.

(2) Represents interest income/expense on derivatives included in net interest income.

~~Economically Hedged Trading Securities~~

We maintain a portfolio of economically hedged trading securities consisting of U.S Treasury obligations, which totaled $2.5 billion at June 30, 2021. Because these securities are not designated in qualifying fair-value hedge relationships, the income statement impacts of the economic hedge relationships appear within multiple line items of our income statement. Table 6 presents the net impact to our earnings arising from these economically hedged trading securities.

~~Table 6 - Economically Hedged Trading Securities(1)~~

~~(dollars in thousands)~~

For the Three Months Ended June 30, For the Six Months Ended June 30,
2021 2020 2021 2020
Interest income
Net interest settlements on trading securities $ 15,052 $ 21,546 $ 32,268 $ 39,004
Net unrealized (losses) gains on trading securities (14,616) (18,861) (29,477) 27,612
Net gains (losses) on derivatives and hedging activities
Net interest settlements on derivatives (5,628) (11,964) (12,778) (14,242)
Change in fair value of derivatives 5,791 10,021 12,916 (40,066)
Price alignment interest (2)
1 10 6 83
Total net impact of economically hedged trading securities $ 600 $ 752 $ 2,935 $ 12,391

~~_____________________~~

~~(1) Includes only trading securities that are economically hedged with an associated derivative.~~

~~(2)~~(3) Represents the amount for derivatives for which variation margin, or payments made for the changes in the market value of the transaction, is characterized as a daily settlement amount.

FINANCIAL CONDITION

Advances

At June 30, 2022, the advances portfolio totaled $30.3 billion, an increase of $18.0 billion from $12.3 billion at December 31, 2021. The significant increase in advances was concentrated in variable-rate advances and short-term fixed-rate advances, reflecting rising demand for wholesale funding at member institutions.

Table of Contents

At June 30, 2021, the advances portfolio totaled $15.2 billion, a decrease of $3.6 billion compared with $18.8 billion at December 31, 2020. The demand for advances experienced further reduction during the quarter, as member deposit levels continued to be elevated.

Table 76 - Advances Outstanding by Product Type

(dollars in thousands)


		June 30, 2021				December 31, 2020					June 30, 2022				December 31, 2021
		Par Value		Percent of Total		Par Value		Percent of Total			Par Value		Percent of Total		Par Value		Percent of Total
Fixed-rate advances	Fixed-rate advances									Fixed-rate advances
Short-term										Short-term	$	7,344,326	24.1	%	$	1,531,550	12.4	%
Long-term	Long-term	$	8,697,804	57.5	%	$	9,839,714	52.6	%	Long-term	6,498,333		21.3		6,511,706		52.7
Short-term		1,892,365		12.5		4,180,412		22.3
Overnight										Overnight	1,945,147		6.4		225,922		1.8
Putable	Putable	1,788,425		11.8		1,874,925		10.0		Putable	587,500		1.9		1,178,425		9.6
Amortizing	Amortizing	574,703		3.8		667,506		3.6		Amortizing	550,031		1.8		551,163		4.5
Overnight		73,670		0.5		170,045		0.9
All other fixed-rate advances		10,000		0.1		10,000		0.1

		13,036,967		86.2		16,742,602		89.5			16,925,337		55.5		9,998,766		81.0

Variable-rate advances	Variable-rate advances									Variable-rate advances
Simple variable (1)	Simple variable (1)	2,066,675		13.7		1,906,575		10.2		Simple variable (1)	13,552,395		44.5		2,348,875		19.0

All other variable-rate indexed advances	All other variable-rate indexed advances	13,083		0.1		55,335		0.3		All other variable-rate indexed advances	126		—		64		—
		2,079,758		13.8		1,961,910		10.5			13,552,521		44.5		2,348,939		19.0
Total par value	Total par value	$	15,116,725	100.0	%	$	18,704,512	100.0	%	Total par value	$	30,477,858	100.0	%	$	12,347,705	100.0	%

~~_____________________~~________________________

(1) Includes floating-rate advances that may be contractually prepaid by the borrower on a floating-rate reset date without incurring prepayment or termination fees.

See Item 1 — Financial Statements — Notes to the Financial Statements — Note 4 — Advances for disclosures relating to redemption terms of the advances portfolio.

Advances Credit Risk

We endeavor to minimize credit risk on advances by monitoring the financial condition of our borrowers and by holding sufficient collateral to protect the Bank from credit losses. All pledged collateral is subject to collateral discounts, or haircuts, to the market value or ~~unpaid principal balance,~~par value, as applicable, based on our opinion of the risk that such collateral presents. We are prohibited by Section 10(a) of the FHLBank Act from making advances without sufficient collateral. We have never experienced a credit loss on an advance.

We assign each non-insurance company borrower to one of the following three credit status categories based on our assessment of the borrower's overall financial condition and other factors:

Category-1: Members that are generally in satisfactory financial condition;

Category-2: Members that show financial weakness or weakening financial trends in key financial indices and/or regulatory findings; and

Category-3: Members with financial weaknesses that present an elevated level of concern.

We monitor the financial condition of our insurance company members quarterly. We lend to them based on our assessment of their financial condition and their pledge of sufficient amounts of eligible collateral.

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Table 87 - Advances Outstanding by Borrower Credit Status Category

(dollars in thousands)


		As of June 30, 2021								As of June 30, 2022
		Number of Borrowers	Par Value of Advances Outstanding		Discounted Collateral		Ratio of Discounted Collateral to Advances			Number of Borrowers	Par Value of Advances Outstanding		Discounted Collateral		Ratio of Discounted Collateral to Advances
Category-1	Category-1	210	$	10,127,709	$	92,450,364	912.8	%	Category-1	204	$	25,558,562	$	96,672,411	378.2	%
Category-2	Category-2	13	326,655		812,934		248.9		Category-2	13	233,856		756,117		323.3
Category-3	Category-3	14	287,459		497,828		173.2		Category-3	15	217,420		412,166		189.6
Insurance companies	Insurance companies	23	4,374,902		5,969,597		136.5		Insurance companies	25	4,468,020		6,066,732		135.8
Total	Total	260	$	15,116,725	$	99,730,723	659.7	%	Total	257	$	30,477,858	$	103,907,426	340.9	%

The method by which a borrower pledges collateral depends upon the type of borrower (depository vs. non-depository), the category to which the borrower is assigned, and the type of collateral that the borrower pledges. Moreover, borrowers in Category-1 are eligible to specifically list and identify single-family owner-occupied residential mortgage loans at a lower discount than is allowed if the collateral is not specifically listed and identified.

The Bank may adjust the credit status category of a member from time to time based on the financial reviews and other circumstances of the member.

We have not recorded any allowance for credit losses on advances at June 30, ~~2021,~~2022, and December 31, ~~2020,~~2021, for the reasons discussed in Item 1 — Financial Statements — Notes to the Financial Statements — Note 4 — ~~Advances~~Advances..

Table 98 - Top Five Advance-Borrowing Institutions

(dollars in thousands)


		June 30, 2021							June 30, 2022
Name	Name	Par Value of Advances		Percent of Total Par Value of Advances		Weighted-Average Rate (1)		Name	Par Value of Advances		Percent of Total Par Value of Advances		Weighted-Average Rate (1)
Citizens Bank, N.A								Citizens Bank, N.A	$	12,019,143	39.4	%	1.60	%
Webster Bank, N.A.								Webster Bank, N.A.	2,510,810		8.2		1.60
Massachusetts Mutual Life Insurance Company	Massachusetts Mutual Life Insurance Company	$	2,100,000	13.9	%	1.81	%	Massachusetts Mutual Life Insurance Company	2,100,000		6.9		1.78
Hingham Institution for Savings								Hingham Institution for Savings	1,140,000		3.8		1.18
Voya Retirement Insurance and Annuity Company	Voya Retirement Insurance and Annuity Company	875,000		5.8		0.45		Voya Retirement Insurance and Annuity Company	925,000		3.0		1.74
Salem Five Cents Savings Bank		595,410		3.9		0.27
People's United Bank, National Association		569,874		3.8		0.38
East Boston Savings Bank		560,625		3.7		2.44
Total of top five advance-borrowing institutions	Total of top five advance-borrowing institutions	$	4,700,909	31.1	%			Total of top five advance-borrowing institutions	$	18,694,953	61.3	%


		December 31, 2020							December 31, 2021
Name	Name	Par Value of Advances		Percent of Total Par Value of Advances		Weighted-Average Rate (1)		Name	Par Value of Advances		Percent of Total Par Value of Advances		Weighted-Average Rate (1)
Massachusetts Mutual Life Insurance Company	Massachusetts Mutual Life Insurance Company	$	1,680,000	9.0	%	1.90	%	Massachusetts Mutual Life Insurance Company	$	1,500,000	12.1	%	1.62	%
Voya Retirement Insurance and Annuity Company	Voya Retirement Insurance and Annuity Company	795,000		4.3		0.53		Voya Retirement Insurance and Annuity Company	925,000		7.5		0.48
Metropolitan Property & Casualty Insurance Company		700,000		3.7		0.38
Hingham Institution for Savings								Hingham Institution for Savings	665,000		5.4		0.28
Salem Five Cents Savings Bank	Salem Five Cents Savings Bank	620,316		3.3		0.30		Salem Five Cents Savings Bank	580,392		4.7		0.27
East Boston Savings Bank		610,625		3.3		2.33
Peoples United Bank								Peoples United Bank	562,750		4.6		0.39
Total of top five advance-borrowing institutions	Total of top five advance-borrowing institutions	$	4,405,941	23.6	%			Total of top five advance-borrowing institutions	$	4,233,142	34.3	%

_______________________

(1) Weighted-average rates are based on the contract rate of each advance without taking into consideration the effects of interest-rate-exchange agreements that we may use as hedging instruments.

Investments

Table of Contents

At June 30, ~~2021,~~2022, investment securities and short-term money-market instruments totaled ~~$16.1~~$28.3 billion, an increase of $11.9 billion from ~~$13.3~~$16.4 billion at December 31, ~~2020.~~2021.

Short-term money-market investments ~~decreased $791.0 million~~increased $11.8 billion to ~~$2.5~~$14.6 billion at June 30, ~~2021,~~2022, compared with December 31, ~~2020.~~2021. The ~~decrease~~increase was attributable to ~~a $492.0 million decrease~~increases of $10.5 billion in securities purchased under agreements to resell, $1.1 billion in federal funds sold and ~~a $299.0~~$310.1 million ~~decrease~~ in interest bearing deposits.

Investment securities increased ~~$3.5 billion~~$68.0 million to ~~$13.5~~$13.6 billion at June 30, ~~2021,~~2022, compared with $13.5 billion at December 31, ~~2020. This was attributable to increases of $2.3 billion in U.S. Treasury obligations and $1.2 billion in MBS.~~2021.

Investments Credit Risk

We are subject to credit risk on unsecured investments consisting primarily of short-term (meaning one year and under to ~~maturity and currently only consisting of overnight risk)~~maturity) money-market instruments issued by high-quality financial institutions and long-term (original maturity in excess of one year) debentures issued or guaranteed by U.S. agencies, U.S government-owned corporations, GSEs, and supranational institutions.

We place short-term funds with large, high-quality financial institutions that must be ~~internally~~ rated in at least the third-highest internal rating category on a rating scale of FHFA1 through FHFA7, reflecting progressively lower credit quality. The internal rating categories of FHFA1 through FHFA4 are considered to be investment quality. ~~All~~As of June 30, 2022, all of these placements ~~currently~~ either ~~expire~~expired within one day or ~~are~~were payable upon demand. See Part 1 — Item 1 — Business — Business Lines — Investments in the ~~2020~~2021 Annual Report for additional information.

In addition to these unsecured investments, we also make secured investments in the form of securities purchased under agreements to resell secured by U.S. Treasury, ~~and~~U.S. government guaranteed, or agency obligations, with current terms to maturity up to 3595 days and in MBS and HFA securities that are directly or indirectly supported by underlying mortgage loans.

We actively monitor our investment credit exposures and the credit quality of our counterparties, including assessments of each counterparty's financial performance, capital adequacy, sovereign support, and collateral quality and performance, as well as related market signals such as securities prices and credit default swap spreads. We may reduce or suspend credit limits and/or seek to reduce existing exposures, as appropriate, as a result of these monitoring activities.

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Table 109 - Credit Ratings of Investments at Carrying Value

(dollars in thousands)


		As of June 30, 2021						As of June 30, 2022
		Long-Term Credit Rating						Long-Term Credit Rating
Investment Category	Investment Category	Triple-A		Double-A		Single-A			Unrated		Investment Category	Triple-A		Double-A		Single-A		Unrated
Money-market instruments: (1)	Money-market instruments: (1)										Money-market instruments: (1)
Interest-bearing deposits	Interest-bearing deposits	$	—	$	150	$	—		$	—	Interest-bearing deposits	$	—	$	150	$	395,080	$	—
Securities purchased under agreements to resell	Securities purchased under agreements to resell	—		500,000		250,000			—		Securities purchased under agreements to resell	—		10,750,000		500,000		—
Federal funds sold	Federal funds sold	—		100,000		1,668,000			—		Federal funds sold	—		295,000		2,703,000		—

Total money-market instruments	Total money-market instruments	—		600,150		1,918,000			—		Total money-market instruments	—		11,045,150		3,598,080		—

Investment securities:(2)	Investment securities:(2)										Investment securities:(2)

Non-MBS:	Non-MBS:										Non-MBS:
U.S. Treasury obligations	U.S. Treasury obligations	—		5,922,682		—			—		U.S. Treasury obligations	—		5,889,613		—		—
Corporate bonds	Corporate bonds	—		—		—			5,436		Corporate bonds	—		—		—		980
U.S. government-owned corporations	U.S. government-owned corporations	—		308,803		—			—		U.S. government-owned corporations	—		249,179		—		—
GSE	GSE	—		127,985		—			—		GSE	—		106,506		—		—
Supranational institutions	Supranational institutions	415,322		—		—			—		Supranational institutions	369,247		—		—		—
HFA securities	HFA securities	44,696		41,381		—			—		HFA securities	33,089		27,444		—		—
Total non-MBS	Total non-MBS	460,018		6,400,851		—			5,436		Total non-MBS	402,336		6,272,742		—		980

MBS:	MBS:										MBS:
U.S. government guaranteed - single-family	U.S. government guaranteed - single-family	—		32,145		—			—		U.S. government guaranteed - single-family	—		21,885		—		—
U.S. government guaranteed - multifamily	U.S. government guaranteed - multifamily	—		181,135		—			—		U.S. government guaranteed - multifamily	—		518,612		—		—
GSE – single-family	GSE – single-family	—		1,562,605		—			—		GSE – single-family	—		993,207		—		—
GSE – multifamily	GSE – multifamily	—		4,892,771		—			—		GSE – multifamily	—		5,401,542		—		—

Total MBS	Total MBS	—		6,668,656		—			—		Total MBS	—		6,935,246		—		—

Total investment securities	Total investment securities	460,018		13,069,507		—			5,436		Total investment securities	402,336		13,207,988		—		980

Total investments	Total investments	$	460,018	$	13,669,657	$	1,918,000		$	5,436	Total investments	$	402,336	$	24,253,138	$	3,598,080	$	980

_______________________

(1) The counterparty NRSRO rating is used for money-market instruments. Counterparty ratings are obtained from Moody's, Fitch, Inc. (Fitch), and S&P and are each as of June 30, ~~2021.~~2022. If there is a split rating, the lowest rating is used. In certain instances where a counterparty is unrated, wethe Bank may assign a deemed rating to the counterparty and that deemed rating is used.

(2) The issue rating is used for investment securities. Issue ratings are obtained from Moody’s, Fitch, and S&P. If there is a split rating, the lowest rating is used.

FHFA regulations include limits on the amount of unsecured credit we may extend to a counterparty or to a group of affiliated counterparties based on a percentage of regulatory capital and an internal credit rating determined by each FHLBank. See Part 1 — Item 1 — Business — Business Lines — Investments in the ~~2020~~2021 Annual Report for additional information. Under these regulations, the level of regulatory capital is determined as the lesser of our total regulatory capital or the regulatory capital of the counterparty. The applicable regulatory capital is then multiplied by a specified percentage for each counterparty, which product is the maximum amount of unsecured credit exposure we may extend to that counterparty. The percentage that we may offer for extensions of unsecured credit other than overnight sales of federal funds ranges from one to 15 percent based on the counterparty's credit rating. From time to time, we may establish internal credit limits lower than those permitted by regulation for individual counterparties.

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Table 1110 - Unsecured Credit Related to Money-Market Instruments and Debentures by Carrying Value

(dollars in thousands)


		Carrying Value					Carrying Value
		June 30, 2021		December 31, 2020			June 30, 2022		December 31, 2021
Interest bearing deposits	Interest bearing deposits	$	150	$	299,149	Interest bearing deposits	$	395,230	$	85,153
Federal funds sold	Federal funds sold	1,768,000		2,260,000		Federal funds sold	2,998,000		1,944,000
Supranational institutions	Supranational institutions	415,322		430,069		Supranational institutions	369,247		403,765
U.S. government-owned corporations	U.S. government-owned corporations	308,803		322,061		U.S. government-owned corporations	249,179		306,864
GSEs	GSEs	127,985		134,992		GSEs	106,506		126,472
Corporate bonds						Corporate bonds	980		1,442

Mortgage Loans

We invest in mortgages through the MPF program. The MPF program is further described under — Mortgage Loans Credit Risk and in Part I — Item 1 — Business — Business Lines — Mortgage Loan Finance in the ~~2020~~2021 Annual Report.

As of June 30, ~~2021,~~2022, our mortgage loan investment portfolio totaled ~~$3.5~~$2.9 billion, a decrease of ~~$459.7~~$222.8 million from December 31, ~~2020.~~2021. We ~~expect~~have experienced continued competition from Fannie Mae and Freddie Mac, as well as from private mortgage loan acquirers, for loan investment opportunities. In addition, prepayment activity in the ~~three~~six months ended June 30, ~~2021,~~2022, has been elevated and has outpaced our purchases of mortgage ~~loans, a trend we expect to continue through 2021. For additional information, see~~ ~~Legislative and Regulatory Developments~~.loans.

Mortgage Loans Credit Risk

We are subject to credit risk from the mortgage loans in which we invest due to our exposure to the credit risk of the underlying borrowers and the credit risk of the participating financial institutions when the participating financial institutions retain credit-enhancement and/or servicing obligations. For additional information on the credit risks arising from our participation in the MPF program, see Part II — Item 7 — Management's Discussion and Analysis of Financial Condition and Results of Operations — Financial Condition — Mortgage Loans — Mortgage Loans Credit Risk in the ~~2020~~2021 Annual Report. For information on the credit performance of our mortgage loan portfolio as of June 30, ~~2021,~~2022, see Item I — Financial Statements — Note 5 — Mortgage Loans Held for Portfolio in this report.

Although our mortgage loan portfolio includes loans throughout the U.S., concentrations of 5 percent or greater of the ~~outstanding principal balance~~par value of our conventional mortgage loan portfolio are shown in Table ~~12.~~11.

Table 1211 - State Concentrations by ~~Outstanding Principal Balance~~Par Value


		Percentage of Total Outstanding Principal Balance of Conventional Mortgage Loans					Percentage of Total Par Value of Conventional Mortgage Loans
		June 30, 2021		December 31, 2020			June 30, 2022		December 31, 2021
Massachusetts	Massachusetts	62	%	62	%	Massachusetts	62	%	63	%
Maine	Maine	10		10		Maine	10		10
Connecticut	Connecticut	8		8		Connecticut	9		8

Vermont						Vermont	5		5

All others	All others	20		20		All others	14		14
Total	Total	100	%	100	%	Total	100	%	100	%

We place conventional mortgage loans on nonaccrual status when the collection of interest or principal is doubtful or contractual principal or interest is 90 days or more past due. Accrued interest on nonaccrual loans is excluded from interest income. We monitor the delinquency levels of the mortgage loan portfolio on a monthly basis.

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Table 1312 - ~~Delinquent~~ Mortgage Loans - Risk Elements and Credit Losses

(dollars in thousands)

June 30, 2021 December 31, 2020
Total par value of government loans past due 90 days or more and still accruing interest $ 8,809 $ 5,472
Nonaccrual loans, par value 36,955 74,348
Troubled debt restructurings (not included above) 6,033 6,095


	For the Six Months Ended June 30,
	2022			2021
Average par value of mortgage loans outstanding during the period ending	$	2,951,330		$	3,647,949
Net (charge-offs) recoveries	(1)			52
Net charge-offs to average loans outstanding during the period ending	—		%	—		%

	As of June 30, 2022			As of December 31, 2021
Mortgage loans held for portfolio, par value	$	2,856,026		$	3,072,075
Nonaccrual loans, par value	16,696			21,384
Allowance for credit losses on mortgage loans	1,500			1,700
Allowance for credit losses to mortgage loans held for portfolio	0.05		%	0.06		%
Nonaccrual loans to mortgage loans held for portfolio	0.58			0.70
Allowance for credit losses to nonaccrual loans	8.98			7.95

Mortgage Insurance Companies. We are exposed to credit risk from primary mortgage insurance coverage (PMI) on individual loans. As of June 30, ~~2021,~~2022, we were the beneficiary of PMI coverage of ~~$85.6~~$65.1 million on ~~$327.4~~$248.1 million of conventional mortgage loans. These amounts relate to loans originated with PMI and for which current loan-to-value ratios exceed 78 percent (determined by recalculating the original loan-to-value ratio using the current ~~unpaid principal balance~~par value divided by the appraised home value at the time of loan origination).

We have analyzed our potential loss exposure to all of the mortgage insurance companies and do not expect incremental losses based on these exposures at this time.

Consolidated Obligations

See — Liquidity and Capital Resources for information regarding our COs.

Derivative Instruments

All derivatives are recorded on the statement of condition at fair value and classified as either derivative assets or derivative liabilities. Bilateral and cleared derivatives outstanding are classified as assets or liabilities according to the net fair value of derivatives aggregated by each counterparty. Derivative assets' net fair value, net of cash collateral and accrued interest, totaled ~~$328.2~~$389.2 million and ~~$161.2~~$378.5 million as of June 30, ~~2021,~~2022, and December 31, ~~2020,~~2021, respectively. Derivative liabilities' net fair value, net of cash collateral and accrued interest, totaled ~~$19.1~~$0.0 million and ~~$24.1~~$38.9 million as of June 30, ~~2021,~~2022, and December 31, ~~2020,~~2021, respectively.

The following table presents a summary of the notional amounts and estimated fair values of our outstanding derivatives, excluding accrued interest, and related hedged item by product and type of accounting treatment as of June 30, ~~2021,~~2022, and December 31, ~~2020.~~2021. The notional amount represents the hypothetical principal basis used to determine periodic interest payments received and paid. However, the notional amount does not represent an actual amount exchanged or our overall exposure to credit and market risk.

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Table 1413 - Hedged Item and Hedge-Accounting Treatment

(dollars in thousands)


				June 30, 2021				December 31, 2020							June 30, 2022				December 31, 2021
Hedged Item	Hedged Item	Derivative	Designation(2)	Notional Amount		Fair Value		Notional Amount		Fair Value		Hedged Item	Derivative	Designation(2)	Notional Amount		Fair Value		Notional Amount		Fair Value
Advances (1)	Advances (1)	Swaps	Fair value	$	4,076,210	$	(14,931)	$	4,532,123	$	(21,870)	Advances (1)	Swaps	Fair value	$	2,614,770	$	(6,781)	$	2,693,195	$	1,800
		Swaps	Economic	654,800		(33,906)		670,300		(44,466)			Swaps	Economic	329,800		(1,582)		345,425		(11,761)
Total associated with advances	Total associated with advances			4,731,010		(48,837)		5,202,423		(66,336)		Total associated with advances			2,944,570		(8,363)		3,038,620		(9,961)
Available-for-sale securities	Available-for-sale securities	Swaps	Fair value	8,543,867		39,238		3,735,362		33,751		Available-for-sale securities	Swaps	Fair value	12,577,160		(15,791)		10,795,541		56,831
Trading securities	Trading securities	Swaps	Economic	2,500,000		14,678		3,550,000		19,669		Trading securities	Swaps	Economic	—		—		500,000		3,087
COs	COs	Swaps	Fair value	9,879,665		(47,503)		1,692,990		(3,443)		COs	Swaps	Fair value	20,715,970		(963,971)		13,101,220		(173,243)
		Swaps	Economic	15,000		1		—		—			Swaps	Economic	—		—		55,000		(24)
		Forward starting swaps	Cash Flow	637,000		(1,243)		17,000		(14)			Forward starting swaps	Cash Flow	1,391,000		(3,923)		1,391,000		(380)
Total associated with COs	Total associated with COs			10,531,665		(48,745)		1,709,990		(3,457)		Total associated with COs			22,106,970		(967,894)		14,547,220		(173,647)
Balance Sheet		Swaps	Economic	—		—		1,316,522		29

Total	Total			26,306,542		(43,666)		15,514,297		(16,344)		Total			37,628,700		(992,048)		28,881,381		(123,690)
CO bond firm commitments	CO bond firm commitments			15,000		(1)		—		—		CO bond firm commitments			20,000		28		55,000		24
Mortgage delivery commitments	Mortgage delivery commitments			7,971		29		28,386		220		Mortgage delivery commitments			6,864		108		3,164		68
Total derivatives	Total derivatives			$	26,329,513	(43,638)		$	15,542,683	(16,124)		Total derivatives			$	37,655,564	(991,912)		$	28,939,545	(123,598)
Accrued interest	Accrued interest					(62,811)				(62,464)		Accrued interest					(51,321)				(50,008)
Cash collateral, including related accrued interest	Cash collateral, including related accrued interest					415,476				215,764		Cash collateral, including related accrued interest					1,432,472				513,194
Net derivatives	Net derivatives					$	309,027			$	137,176	Net derivatives					$	389,239			$	339,588

Derivative asset	Derivative asset					$	328,171			$	161,238	Derivative asset					$	389,239			$	378,532
Derivative liability	Derivative liability					(19,144)				(24,062)		Derivative liability					—				(38,944)
Net derivatives	Net derivatives					$	309,027			$	137,176	Net derivatives					$	389,239			$	339,588

_______________________

(1)As of June 30, ~~2021,~~2022 and December 31, ~~2020,~~2021, embedded derivatives separated from certain advance contracts with notional amounts of ~~$654.8~~$329.8 million and ~~$670.3~~$345.4 million, respectively, and fair values of ~~$33.9~~$1.6 million and ~~$44.5~~$11.9 million, respectively, are not included in the table.

(2) The hedge designation “fair value” represents the hedge classification for transactions that qualify for hedge-accounting treatment and hedge changes in fair value attributable to changes in the designated benchmark interest ~~rate, which is either LIBOR or the OIS rate based on the federal funds effective~~ rate. The hedge designation "cash flow" represents the hedge classification for transactions that qualify for hedge-accounting treatment and hedge the exposure to variability in expected future cash flows. The hedge designation “economic” represents derivatives hedging specific or nonspecific assets, liabilities, or firm commitments that do not qualify or were not ~~designated for~~documented as fair-value or cash-flow ~~hedge accounting~~hedges but are ~~acceptable~~documented as serving a non-speculative use and are hedging strategies under our risk-management policy.

Tables 15 and 16 provide a summary of our hedging relationships for fair-value hedges of advances and COs that qualify for hedge accounting by year of contractual maturity. Interest accruals on interest-rate-exchange agreements in qualifying hedge relationships are recorded as interest income on advances and interest expense on COs in the statement of operations. The notional amount of derivatives in qualifying fair-value hedge relationships of advances and COs totals $14.0 billion, representing 53.0 percent of all derivatives outstanding as of June 30, 2021. Economic hedges and cash-flow hedges are not included within the two tables below.

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~~Table 15 - Fair-Value Hedge Relationships of Advances By Year of Contractual Maturity~~

~~(dollars in thousands)~~

As of June 30, 2021

Weighted-Average Yield (4)
Derivatives
Advances(2)
Derivatives
Maturity Notional
Fair Value(1)
Hedged Amount
Benchmark Fair-Value Adjustment(3)
Advances Receive Floating Rate Pay Fixed Rate Net Receive Result
Due in one year or less $ 1,221,515 $ (7,946) $ 1,221,515 $ 7,894 1.89 % 0.12 % 1.43 % 0.58 %
Due after one year through two years 622,260 (13,119) 622,260 13,040 2.00 0.14 1.59 0.55
Due after two years through three years 317,400 (11,259) 317,400 11,121 2.20 0.11 1.66 0.65
Due after three years through four years 971,425 (9,950) 971,425 9,893 1.38 0.10 0.65 0.83
Due after four years through five years 215,360 (866) 215,360 855 1.25 0.13 0.70 0.68
Thereafter 728,250 (8,069) 728,250 7,920 1.68 0.10 1.07 0.71
Total $ 4,076,210 $ (51,209) $ 4,076,210 $ 50,723 1.74 % 0.11 % 1.18 % 0.67 %

~~_______________________~~

(1) Not included in the fair value is $36.3 million of variation margin, or payments made for changes in the market value of the derivatives position, paid or received for daily settled contracts.

(2) Included in the advances hedged amount are $1.1 billion of putable advances, which would accelerate the termination date of the derivative and the hedged item if the put option is exercised.

(3) The benchmark fair-value adjustment of hedged advances represents the amounts recorded for changes in the fair value attributable to changes in the designated benchmark interest rate, which is either LIBOR or OIS based on the federal funds effective rate.

~~(4) The yield for floating-rate instruments and the floating-rate leg of interest-rate swaps is the coupon rate in effect as of June 30, 2021.~~

~~Table 16 - Fair-Value Hedge Relationships of Consolidated Obligations By Year of Contractual Maturity~~

~~(dollars in thousands)~~

As of June 30, 2021

Weighted-Average Yield (4)
Derivatives
CO Bonds (2)
Derivatives
Year of Maturity Notional
Fair Value(1)
Hedged Amount
Benchmark Fair-Value Adjustment(3)
CO Bonds Receive Fixed Rate Pay Floating Rate Net Pay Result
Due in one year or less $ 457,445 $ 2,206 $ 457,445 $ (2,214) 1.93 % 1.89 % 0.05 % 0.09 %
Due after one year through two years 361,220 3,968 361,220 (3,964) 1.02 1.08 0.11 0.05
Due after two years through three years 415,000 (809) 415,000 811 0.38 0.38 0.02 0.02
Due after three years through four years 1,795,000 (3,109) 1,795,000 3,115 0.59 0.59 0.02 0.02
Due after four years through five years 3,948,000 (17,759) 3,948,000 17,765 0.72 0.71 0.03 0.04
Thereafter 2,903,000 (30,730) 2,903,000 29,971 1.24 1.09 0.04 0.19
Total $ 9,879,665 $ (46,233) $ 9,879,665 $ 45,484 0.90 % 0.85 % 0.04 % 0.09 %

~~_______________________~~

(1) Not included in the fair value is $1.3 million of variation margin, or payments made for changes in the market value of the derivatives position, paid or received for daily settled contracts.

(2) Included in the CO bonds hedged amount are $8.7 billion of callable CO bonds, which would accelerate the termination date of the derivative and the hedged item if the call option is exercised.

(3) The benchmark fair-value adjustment of hedged CO bonds represents the amounts recorded for changes in the fair value attributable to changes in the designated benchmark interest rate, which is either LIBOR or OIS based on the federal funds effective rate, plus remaining unamortized premiums or discounts on hedged CO bonds where applicable.

~~(4) The yield for floating-rate instruments and the floating-rate leg of interest-rate swaps is the coupon rate in effect as of June 30, 2021.~~

Derivative Instruments Credit Risk. We are subject to credit risk on derivatives. This risk arises from the risk of counterparty default on the derivative contract. The amount of unsecured credit exposure to derivative counterparty default is the amount by which the replacement cost of the defaulted derivative contract exceeds the value of any collateral held by us (if the counterparty is the net obligor on the derivative contract) or is exceeded by the value of collateral pledged by us to

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counterparties (if we are the net obligor on the derivative contract). We accept cash and securities collateral in accordance with the terms of the applicable master netting agreement for uncleared derivatives (principal-to-principal derivatives that are not centrally cleared) from counterparties with whom we are in a current positive fair-value position by an amount that exceeds an exposure threshold (if any) defined in our master netting agreement with the counterparty. The resulting net exposure at fair value is reflected in Table 17 below.position. We pledge cash and securities collateral in accordance with the terms of the applicable master netting agreement for uncleared derivatives to counterparties with whom we are in a current negative fair-value ~~position by an amount that exceeds an exposure threshold (if any) defined in our master netting agreement with the counterparty.~~position.

From time to time, due to timing differences or derivatives valuation differences between our calculated derivatives values and those of our counterparties, and to the contractual haircuts applied to securities, we pledge to counterparties cash or securities collateral whose fair value is greater than the current net negative fair-value of derivative positions outstanding with ~~them adjusted for any applicable exposure threshold.~~ them.

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Similarly, from time to time, due to timing differences or derivatives valuation differences, we receive from counterparties cash or securities collateral whose fair value is less than the current net positive fair-value of derivatives positions outstanding with ~~them adjusted for any applicable exposure threshold.~~them. We currently pledge only cash collateral, including initial and variation margin, for cleared derivatives, but may also pledge securities for initial margin as allowed by the applicable DCO and clearing member.

Table 1714 - Credit Exposure to Derivatives Counterparties

(dollars in thousands)


		As of June 30, 2021											As of June 30, 2022
Credit Rating (1)	Credit Rating (1)	Notional Amount		Net Derivatives Fair Value Before Collateral		Cash Collateral Pledged to Counterparty		Non-cash Collateral Pledged to Counterparty		Net Credit Exposure to Counterparties		Credit Rating (1)	Notional Amount		Net Derivatives Fair Value Before Collateral		Cash Collateral Pledged to Counterparty		Non-cash Collateral Pledged to Counterparty		Net Credit Exposure to Counterparties

Liability positions with credit exposure:	Liability positions with credit exposure:											Liability positions with credit exposure:
Interest-rate swaps
Uncleared derivatives - Single-A		$	9,599,650	$	(80,893)	$	64,942	$	19,833	$	3,882
Uncleared derivatives												Uncleared derivatives
Single-A												Single-A	$	21,041,250	$	(941,514)	$	1,003,094	$	—	$	61,580

Cleared derivatives	Cleared derivatives	15,523,517		(15,617)		340,803		—		325,186		Cleared derivatives	16,587,450		(101,856)		429,378		—		327,522
Total interest-rate swap positions with nonmember counterparties to which we had credit exposure	Total interest-rate swap positions with nonmember counterparties to which we had credit exposure	25,123,167		(96,510)		405,745		19,833		329,068		Total interest-rate swap positions with nonmember counterparties to which we had credit exposure	37,628,700		(1,043,370)		1,432,472		—		389,102

CO Bond firm commitments												CO Bond firm commitments	20,000		28		—		—		28
Mortgage delivery commitments (2)	Mortgage delivery commitments (2)	7,971		34		—		—		34		Mortgage delivery commitments (2)	6,864		108		—		—		108
Total	Total	$	25,131,138	$	(96,476)	$	405,745	$	19,833	$	329,102	Total	$	37,655,564	$	(1,043,234)	$	1,432,472	$	—	$	389,238

Derivative positions without credit exposure: (3)

CO bond firm commitments		$	15,000
Single-A		1,173,375
Triple-B		10,000
Total derivative positions without credit exposure		$	1,198,375

_______________________

(1) Uncleared derivatives counterparty ratings are obtained from Moody's, Fitch, and S&P. Each rating classification includes all rating levels within that category. If there is a split rating, the lowest rating is used. In the case where the obligations are unconditionally and irrevocably guaranteed, the rating of the guarantor or the counterparty is used.

(2) Total fair-value exposures related to commitments to invest in mortgage loans are offset by certain pair-off fees. Commitments to invest in mortgage loans are reflected as derivatives. We do not collateralize these commitments. However, should the participating financial institution fail to deliver the mortgage loans as agreed, the participating financial institution is charged a fee to compensate us for the nonperformance.

(3) Represents derivatives positions with counterparties for which we are in a net liability position and for which we have delivered collateral to the counterparty in an amount equal to or less than the net derivative liability, or derivative positions with counterparties for which we are in a net asset position and for which the counterparty has delivered collateral to us in an amount that exceeds our net derivative asset.

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For information on our approach to the credit risks arising from our use of derivatives, see Part II — Item 7 — Management’s Discussion and Analysis and Results of Operations — Financial Condition — Derivative Instruments — Derivative Instruments Credit Risk in the ~~2020~~2021 Annual Report.

Transition from LIBOR to Alternative Reference Rates

~~In July 2017, the United Kingdom's FCA, the regulator for LIBOR, announced that after 2021 it will no longer persuade or compel the major banks that sustain LIBOR~~We have exposures to ~~submit~~investment securities and derivatives with interest rates for the calculation of LIBOR. The Alternative Reference Rates Committee (ARRC), which was established in 2014 by the Federal Reserve and the Federal Reserve Bank of New York to help ensure a successful transition in the U.S. from LIBOR, recommended SOFR as the alternative reference rateindexed to U.S. dollar LIBOR.

We recognize that the discontinuance of LIBOR as an interest rate benchmark and the transition to alternative reference rates, including SOFR, present significant risks and challenges that could affect our business. Certain All of our investment securities and derivatives, and certain collateral pledged to us, are indexed to LIBOR with exposure extending beyond December 31, 2021. Under a steering committee comprised of members of senior management and a working group of representatives from departments across the Bank, we have developed and continue to implement a multi-year plan and initiative to transition from LIBOR. We are planning for the eventual replacement of the LIBOR benchmark interest rate, with SOFR as the dominant replacement benchmark. As a result, we have developedLIBOR-indexed financial instruments utilize a LIBOR transition plan, which addresses considerations such as LIBOR exposure, contract “fallback” language (which provides for contractual alternatives to the use of LIBOR when LIBOR cannot be determined based on the method provided in the agreement), operational preparedness, and balance sheet management, as well as contingencies for the potential unavailability of the index prior to December 31, 2021.

~~In assessing our current exposure to LIBOR, we have developed an inventory of financial instruments impacted and identified contracts~~tenor that may require adding or adjusting the fallback language, the provisions in the financial instrument or contract that specify how LIBOR is to be replaced with an alternative reference rate and related provisions, which may identify the replacement rate. We have added or adjusted fallback language to our advances agreements with members, and the FHLBank System has added fallback language to consolidated obligations. We monitor market-wide efforts to address fallbacks related to LIBOR-based derivatives and investment securities as well as fallback language for other financial instruments. We continue to assess our operational readiness, including updating processes and information technology systems to support the transition from LIBOR to an alternative reference rate.

We worked with the other FHLBanks and the Office of Finance to transition our floating-rate note issuance from LIBOR. The Bank has participated in the FHLBank System’s issuances of SOFR-indexed COs as our funding needs require since the FHLBank System began issuing such COs in November 2018. Market activity in SOFR-indexed financial instruments continues to increase. During the six months ended June 30, 2021, we issued $1.0 billion in SOFR-indexed COs. In October 2019, the Bank began to offer a SOFR-based advance. During the six months ended June 30, 2021, we issued $3.4 billion in SOFR-indexed advances.

In March 2019, the Bank began to implement OIS based on the federal funds effective rate as an alternative interest rate hedging strategy for certain financial instruments, rather than using LIBOR when entering into new derivative transactions. In addition, a SOFR-based derivative market has begun to emerge.

On September 27, 2019, the FHFA issued a Supervisory Letter that limits certain activities of the FHLBanks with respect to new LIBOR referenced financial assets, liabilities, and derivatives with maturities beyond December 31, 2021. Early in 2019, before the issuance of the Supervisory Letter, we limited the maturities of certain advances that are linked to LIBOR to December 31, 2021. In addition, prior to the issuance of the Supervisory Letter, we had ceased purchasing investments that reference LIBOR and mature after December 31, 2021, and we had suspended entering into LIBOR-indexed derivatives that terminate after December 31, 2021.

On October 16, 2020, the clearing houses CME and LCH transitioned the rate for discounting all U.S. Dollar interest rate cleared swaps from the Effective Fed Funds Rate to SOFR. On October 21, 2020, we adhered to the ISDA 2020 IBOR Fallbacks Protocol, a multilateral mechanism that, effective January 25, 2021, through a Supplement to the ISDA 2006 Definitions (the Supplement), amended our legacy bilateral, over-the-counter LIBOR-based interest rate swaps to substitute SOFR for LIBOR as the benchmark rate following the cessation of LIBOR or if LIBOR is declared by the FCA to be no longer representative of the underlying market and economic reality that it is intended to measure.

On November 30, 2020, the Federal Reserve, the Office of the Comptroller of the Currency (OCC), and the Federal Deposit Insurance Corporation (FDIC) issued a joint statement encouraging banks to cease entering into new contracts that use U.S.

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~~dollar LIBOR as a reference rate as soon as practicable and no later than December 31, 2021. On March 5, 2021, the FCA announced that LIBOR~~ will either cease to be ~~provided by any administrator~~published or will no longer be representative ~~immediately after December 31, 2021, in the case of 1-week and 2-month U.S. dollar LIBOR, and immediately~~ after June 30, ~~2023, in the case of the remaining U.S. dollar LIBOR settings. Although the FCA does not expect LIBOR~~2023. Table 15 presents our exposure to ~~become unrepresentative before the applicable cessation dates~~LIBOR-indexed investment securities and intends to consult on requiring the administrator of LIBOR to continue publishing LIBOR of certain currencies and tenors on a non-representative, synthetic basis for a period after the 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 Financial Conduct Authority’s announcement on March 5, 2021 constitutes an index cessation event under the ISDA 2020 IBOR Fallbacks Protocol and the Supplement, and as a result, the fallbacks spread adjustment for each tenor is fixed as of the date of the announcement. See Legislative and Regulatory Developments for information on the 2021 ISDA Interest Rate Derivatives Definitions published by ISDA onLIBOR-indexed derivatives, at June ~~11, 2021.~~

On July 1, 2021, the FHFA issued a Supervisory Letter regarding its expectations for an FHLBank’s use of alternative rates other than SOFR. The Supervisory Letter provides guidance on considerations, such as volume of underlying transactions, credit sensitivity, modeling risk and others, that an FHLBank should take into account prior to employing an alternative reference rate.30, 2022.

For further details see the following Risk Factors in our ~~2020~~2021 Annual Report: Part I — Item 1A — Risk Factors — Market and Liquidity Risks — Changes to and replacement of the LIBOR benchmark interest rate could adversely affect our business, financial condition, and results of operations; and — We use derivatives to manage interest-rate risk, however, we could be unable to enter into effective derivative instruments on acceptable terms.

~~We have exposures to advances, investment securities and derivatives with interest rates indexed to U.S. dollar LIBOR. All~~

Table of our LIBOR-indexed financial instruments utilize a LIBOR tenor that will either cease to be published or will no longer be representative after June 30, 2023. Table 18 presents our exposure to LIBOR-indexed advances, investment securities, and LIBOR-indexed derivatives, at June 30, 2021.Contents

Table 1815 - Financial Instruments with LIBOR Exposure at June 30, ~~2021~~2022

(dollars in thousands)


		LIBOR Tenors That Cease or Will no Longer be Representative Immediately After June 30, 2023
		Due/Terminates in 2021		Due/Terminates in 2022		Due/Terminates in 2023, through June 30		Due/Terminates after June 30, 2023		Total			Terminates in 2022		Due/Terminates in 2023, through June 30		Due/Terminates after June 30, 2023		Total
Assets with LIBOR exposure	Assets with LIBOR exposure											Assets with LIBOR exposure
Advances, par amount by redemption term(1)		$	12,600	$	—	$	—	$	—	$	12,600

Investment securities, par amount by contractual maturity	Investment securities, par amount by contractual maturity											Investment securities, par amount by contractual maturity
Non-MBS	Non-MBS	—		—		3,914		25,405		29,319		Non-MBS	$	—	$	—	$	11,350	$	11,350
MBS(2)		—		9		—		851,048		851,057
MBS(1)												MBS(1)	—		—		430,851		430,851
Total investment securities	Total investment securities	—		9		3,914		876,453		880,376		Total investment securities	$	—	$	—	$	442,201	$	442,201
Total financial instruments		$	12,600	$	9	$	3,914	$	876,453	$	892,976

LIBOR-indexed interest-rate swaps, notional amount	LIBOR-indexed interest-rate swaps, notional amount											LIBOR-indexed interest-rate swaps, notional amount
Receive leg	Receive leg											Receive leg
Cleared	Cleared	$	511,790	$	70,625	$	15,000	$	42,750	$	640,165	Cleared	$	5,500	$	12,000	$	25,750	$	43,250
Uncleared		71,100		221,000		546,600		435,900		1,274,600
Uncleared(1)												Uncleared(1)	62,500		231,600		241,900		536,000
Total interest-rate swaps, receive leg	Total interest-rate swaps, receive leg	$	582,890	$	291,625	$	561,600	$	478,650	$	1,914,765	Total interest-rate swaps, receive leg	$	68,000	$	243,600	$	267,650	$	579,250

Pay leg	Pay leg											Pay leg
Cleared	Cleared	$	177,445	$	137,220	$	—	$	—	$	314,665	Cleared	$	137,220	$	—	$	—	$	137,220
Uncleared		175,000		—		—		—		175,000
Total interest-rate swaps, pay leg		$	352,445	$	137,220	$	—	$	—	$	489,665

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(1)~~For advances that have a conversion from a floating rate indexed~~Balances are presented according to ~~LIBOR to a fixed rate, the LIBOR exposure is considered to be due by the~~contractual maturity date ~~which the financial instrument converts to a fixed rate.~~

~~(2)Contractual maturity will likely differ from the expected maturity because borrowers~~and do not reflect scheduled or unscheduled principal repayments of ~~the~~ underlying mortgage loans ~~or securities are subject to a call right or prepayment right, with or without call or prepayment fees.~~

~~The following table presents our variable rate advances, investment securities,~~for MBS and ~~CO bonds by~~do not reflect potential early termination option exercises for uncleared interest-rate ~~index at June 30, 2021.~~swaps.

Table 1916 - Variable Rate Financial Instruments by Interest-Rate Index

(dollars in thousands)


		Par Value of Advances		Par Value of Non-MBS		Par Value of MBS		Par Value of CO Bonds			Par Value of Advances		Par Value of Non-MBS Investments		Par Value of MBS		Par Value of CO Bonds
LIBOR	LIBOR	$	12,600	$	29,319	$	851,057	$	—	LIBOR	$	—	$	11,350	$	430,851	$	—
SOFR	SOFR	800,000		—		589,646		4,877,000		SOFR	3,906,500		—		1,380,509		5,507,000
FHLBank discount note auction rate	FHLBank discount note auction rate	1,267,158		—		—		—		FHLBank discount note auction rate	9,646,021		—		—		—
Constant Maturity Treasury	Constant Maturity Treasury	—		—		51,292		—		Constant Maturity Treasury	—		—		30,400		—
Other		—		—		112		—

Total	Total	$	2,079,758	$	29,319	$	1,492,107	$	4,877,000	Total	$	13,552,521	$	11,350	$	1,841,760	$	5,507,000

LIQUIDITY AND CAPITAL RESOURCES

Our financial structure is designed to enable us to expand and contract our assets, liabilities, and capital in response to changes in membership composition and member credit needs. Our primary source of liquidity is our access to the capital markets through CO issuance, which is described in Part I — Item 1 — Business — Consolidated Obligations of the ~~2020~~2021 Annual Report. Outstanding COs and the condition of the market for COs are discussed below under — Debt Financing — Consolidated Obligations. Our equity capital resources are governed by our capital plan, certain portions of which are described under — Capital below as well as by applicable legal and regulatory requirements.

Liquidity

We are required to maintain liquidity in accordance with the FHLBank Act, FHFA regulations and guidance, and policies established by our management and board of directors. We seek to be in a position to meet the credit and liquidity needs of our members and to meet all current and future financial commitments 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 our assets and liabilities.

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We may not be able to predict future trends in member credit needs because they are driven by complex interactions among a number of factors, including members' asset growth or reductions, deposit growth or reductions, and the attractiveness of advances compared to other wholesale borrowing alternatives. We regularly monitor current trends, ~~and~~ anticipate future debt issuance needs and maintain a portfolio of highly liquid assets in an effort to be prepared to fund our members' credit needs and our investment opportunities. We are generally able to expand our CO debt issuance in response to our members' increased credit needs for advances and to increase our acquisitions of mortgage loans. Alternatively, in response to reduced member credit needs, we may allow our COs to mature without replacement, transfer debt to another FHLBank, or repurchase and retire outstanding COs, or redeem callable COs on eligible redemption dates, allowing our balance sheet to shrink.

Sources and Uses of Liquidity. Our primary sources of liquidity are proceeds from the issuance of COs and advance repayments, and maturing short-term investments, as well as cash and investment holdings that are primarily high-quality, short-, and intermediate-term financial instruments.

During the six months ended June 30, ~~2021,~~2022, we maintained continual access to funding and adapted our debt issuance to meet the needs of our members. As we entered March 2020, markets were disrupted by uncertainty surrounding the COVID-19 pandemic, spurring two FOMC actions to reduce the federal funds target rate by a total of 150 basis points. At that time, our short-term funding was generally driven by increased member demand for advances and was achieved primarily through the issuance of discount notes and short-term CO bonds. We maintained liquidity through short-term investments and U.S. Treasury securities in compliance with guidance from the FHFA. Maintaining liquidity on our balance sheet, however, can expose us to additional interest-rate risk, which could reduce net interest income when interest rates decline, as was the case

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during the six months ended June 30, 2020, during which a substantial amount of short-term debt issued prior to the FOMC’s combined 150 basis point rate cuts in March 2020 remained outstanding through May 2020, resulting in sharp, temporary margin compression.

Our primary uses of liquidity are advance originations and consolidated obligation payments. Other uses of liquidity are mortgage loan and investment purchases, dividend payments, general operating expenses, and other contractual payments. We also maintain liquidity to redeem or repurchase excess capital stock, through our daily excess stock repurchases, upon the request of a member or as required under our capital plan.

Secondary sources of liquidity include payments collected on mortgage loans, proceeds from the issuance of capital stock, and deposits from members. In addition, under the FHLBank Act, the U.S. Treasury may purchase up to $4 billion of ~~COs of the FHLBanks.~~FHLBank COs. The terms, conditions, and interest rates in such a purchase would be determined by the U.S. Treasury. This authority may be exercised at the discretion of the U.S. Treasury with the agreement of the FHFA only if alternative means cannot be effectively employed to permit members of the FHLBanks to continue to supply reasonable amounts of funds to the mortgage market, and the ability to supply such funds is substantially impaired because of monetary stringency and a high level of interest rates. There were no such purchases by the U.S. Treasury during the six months ended June 30, ~~2021.~~2022.

For information and discussion of our guarantees and other commitments we may have, see below — Off-Balance-Sheet Arrangements and Aggregate Contractual ~~Obligations, and for~~Obligations. For further information and discussion of the joint and several liability for FHLBank COs, see below — Debt Financing — Consolidated Obligations.

Internal Liquidity Sources / Liquidity Management

We have developed a methodology and policies by which we measure and manage the Bank’s short-term liquidity needs based on projected net cash flow and contingent obligations.

Projected Net Cash Flow. We define projected net cash flow as projected sources of funds less projected uses of funds based on contractual maturities or expected option exercise periods, and settlement of committed assets and liabilities, as applicable. For mortgage-related cash flows and callable debt, we incorporate projected prepayments and call exercise.

Liquidity Management Action Trigger. We maintain a liquidity management action trigger pertaining to projected net cash flow: if projected net cash flow falls below zero on or before the 21st day following the measurement date, then management of the Bank is notified and determines whether any corrective action is necessary. We did not exceed this threshold at any time during the six months ended June 30, ~~2021.~~2022.

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Table 2017 - Projected Net Cash Flow

(dollars in thousands)


	As of June 30, ~~2021~~2022
	21 Days
Uses of funds
Interest payable	$	~~15,329~~19,592
Maturing liabilities	~~4,347,706~~17,314,643
Committed asset settlements	~~5,604~~174,000
Capital outflow	~~34,470~~26,921
MPF delivery commitments	~~7,971~~6,864
Other	~~28,535~~104,284
Gross uses of funds	~~4,439,615~~17,646,304

Sources of funds
Interest receivable	~~38,695~~55,062
Maturing or projected amortization of assets	~~4,168,355~~20,493,169
Committed liability settlements	~~834,908~~1,762,905
Cash and due from banks and interest bearing deposits	~~496,787~~460,803

Gross sources of funds	~~5,538,745~~22,771,939

Projected net cash flow	$	~~1,099,130~~5,125,635

Base Case Liquidity Requirement. The Bank is subject to FHFA guidance on liquidity, Advisory Bulletin 2018-07 (Liquidity Guidance AB), which communicates the FHFA’s expectations with respect to the maintenance of sufficient liquidity to enable us to provide advances and letters of credit for members for a specified time without access to the capital markets or other unsecured funding sources.

The Liquidity Guidance AB provides guidance on the level of on-balance sheet liquid assets related to base case liquidity. As part of the base case liquidity measure, the guidance also includes a separate provision covering off-balance sheet commitments from standby letters of credit. In addition, the Liquidity Guidance AB provides guidance related to asset/liability maturity funding gap limits.

Under the Liquidity Guidance AB, FHLBanks are required to hold positive cash flow while rolling over maturing advances to all members and assuming no access to capital markets for a period of time between 10 and 30 calendar days, with a specific measurement period set forth in a supervisory letter. The Liquidity Guidance AB also sets forth the initial cash flow assumptions and formula to calculate base case liquidity. With respect to standby letters of credit, the guidance states that FHLBanks should maintain a liquidity reserve of between 1one percent and 20 percent of its outstanding standby letters of credit commitments, as specified in a supervisory letter.

~~We were in compliance with these additional liquidity requirements at all times during~~During the six months ended June 30, ~~2021.~~2022, we were out of compliance with the Base Case Liquidity Requirement for one day and in compliance each other day.

Balance Sheet Funding Gap Policy. We may use a portion of the short-term COs issued to fund assets with longer terms, including longer-term floating-rate assets. Funding longer-term floating-rate assets with shorter-term liabilities generally does not expose us to significant interest-rate risk because the interest rates on both the floating-rate assets and liabilities typically reset similarly (either through rate resets or re-issuance of the obligations). However, deviations in the cost of our short-term liabilities relative to resetting assets can cause fluctuations in our net interest margin.

Additionally, the Bank is exposed to refinancing risk ~~due to the fact that,~~since, over certain time horizons, it has more liabilities than assets maturing. In order to manage the Bank’s refinancing risk, we maintain a policy that limits the potential difference between the amount of financial assets and the amount of financial liabilities expected to mature within three-month and one-year time horizons inclusive of projected mortgage-related prepayment activity. We measure this difference, or gap, as a percentage of total assets under two different measurement horizons - three months and one year. In conformity with the provisions of the

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~~provisions of the~~ Liquidity Guidance AB, the Bank has instituted a limit and management action trigger framework around these metrics as follows:

Table 2118 - Funding Gap Metric


Funding Gap Metric (1)	Funding Gap Metric (1)	Limit	Management Action Trigger	Three-Month Average June 30, 2021		Three-Month Average December 31, 2020		Funding Gap Metric (1)	Limit	Management Action Trigger	Three-Month Average June 30, 2022		Three-Month Average December 31, 2021
3-month Funding Gap	3-month Funding Gap	15%	13%	4.1	%	(0.9)	%	3-month Funding Gap	15%	13%	3.4	%	(8.2)	%
1-year Funding Gap	1-year Funding Gap	30%	25%	5.4	%	9.8	%	1-year Funding Gap	30%	25%	9.4	%	(0.5)	%

_______________________

(1) The funding gap metric is a positive value when maturing liabilities exceed maturing assets, as defined, within the given time period. Compliance with Limits and Management Action Triggers are evaluated against the rolling three-month average of the month-end funding gaps.

External Sources of Liquidity

Amended and Restated FHLBanks P&I Funding Contingency Plan Agreement. We have a source of emergency external liquidity through the Amended and Restated FHLBanks P&I Funding Contingency Plan Agreement. Under the terms of that agreement, in the event we do not fund principal and interest payments due with respect to any CO for which issuance proceeds were allocated to us within deadlines established in the agreement, the other FHLBanks will be obligated to fund any shortfall to the extent that any of the other FHLBanks has a net positive settlement balance (that is, the amount by which end-of-day proceeds received by such FHLBank from the sale of COs on that day exceeds payments by such FHLBank on COs on the same day) in its account with the Office of Finance on the day the shortfall occurs. We would then be required to repay the funding to the other FHLBanks. We have never drawn funding under this agreement, nor have we ever been required to provide funding to another FHLBank under this agreement.

Debt Financing — Consolidated Obligations

At June 30, ~~2021,~~2022, and December 31, ~~2020,~~2021, outstanding COs for which we are primarily liable, including both CO bonds and CO discount notes, totaled ~~$31.8~~$57.8 billion and ~~$34.3~~$28.9 billion, respectively. CO bonds outstanding for which we are primarily liable at June 30, ~~2021,~~2022, and December 31, ~~2020,~~2021, include issued callable bonds totaling ~~$9.3~~$20.7 billion and ~~$1.7~~$12.8 billion, respectively.

CO discount notes comprised ~~26.3~~43.4 percent and ~~37.5~~7.9 percent of the outstanding COs for which we are primarily liable at June 30, ~~2021,~~2022, and December 31, ~~2020,~~2021, respectively, but accounted for ~~93.9~~92.1 percent and ~~89.3~~93.9 percent of the proceeds from the issuance of such COs during the six months ended June 30, ~~2021~~2022 and ~~2020,~~2021, respectively.

Overall, we continued to experience strong demand for COs among investors. We have been able to issue debt in the amounts and structures required to meet our funding and risk-management needs. For most of the period covered by this report, COs were issued at yields that were historically competitive versus those of comparable-term U.S. Treasury securities. COs continue to be issued at yields that are at or lower than ~~LIBOR and~~ SOFR for comparable short-term ~~maturities, although~~maturities. However, periodic threats of Congressional failure to raise the ~~relevance~~U.S. Treasury debt ceiling raise the potential for defaults on U.S. Treasury debt, which could have impacts on demand for and pricing of ~~LIBOR in relation to COs is waning.~~CO debt.

The Federal Reserve’s recent signaling ~~that low interest rates would last for an extended period~~of inflation concerns and potential changes to its ~~continued~~ repurchase agreement offerings, purchases of U.S. Treasury securities and U.S. Agency mortgage-backed securities, as well as the previous establishment of liquidity facilities, are potentially important factors that could continue to shape investor demand for debt, including COs. Moreover, ~~expected~~ increases in U.S. Treasury security issuance in response to higher fiscal deficits following fiscal stimulus programs underlying the CARES Act, American Rescue Plan Act, and any similar future legislation or any change or roll back of regulations governing money market investors may also have an impact on our funding costs.

Capital

Total capital at June 30, ~~2021,~~2022, was ~~$2.6~~$2.9 billion compared with ~~$2.8~~$2.5 billion at year-end ~~2020.~~2021.

Capital stock ~~decreased~~increased by ~~$186.1~~$603.6 million during the six months ended June 30, ~~2021,~~2022, resulting from the issuance of $2.1 billion of capital stock offset by capital stock repurchases of ~~$282.7 million offset by the issuance of $98.2 million of capital stock.~~$1.4 billion.

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The FHLBank Act and FHFA regulations specify that each FHLBank is required to satisfy certain minimum regulatory capital requirements. We were in compliance with these requirements at June 30, ~~2021,~~2022, as discussed in Part 1— Item 1 — Notes to the Financial Statements — Note 10 — Capital.

Subject to applicable law, following the expiry of the stock redemption period (which is five years for Class B stock), we redeem capital stock for any member that requests redemption of its excess stock, gives notice of intent to withdraw from membership, or becomes a nonmember due to merger, acquisition, charter termination, or involuntary termination of membership, provided that in so doing, we remain in compliance with all regulatory minimum capital requirements and the member remains in compliance with all applicable minimum stock investment requirements. Capital stock subject to a stock redemption period is reclassified to mandatorily redeemable capital stock in the liability section of the statement of condition. For additional information on the redemption of our capital stock, see Part 1— Item 1 — Business — Capital Resources — Redemption of Excess Stock and Item 8 — Financial Statements and Supplementary Data —Notes to the Financial Statements — Note 2 — Summary of Significant Accounting Policies — Mandatorily Redeemable Capital Stock in the 2020 Annual Report.

Table 2219 - Mandatorily Redeemable Capital Stock by Expiry of Redemption Notice Period

(dollars in thousands)


		June 30, 2021		December 31, 2020			June 30, 2022		December 31, 2021
Past redemption date (1)	Past redemption date (1)	$	5,238	$	5,558	Past redemption date (1)	$	3,086	$	3,138
Due in one year or less	Due in one year or less	92		—		Due in one year or less	—		92
Due after one year through two years	Due after one year through two years	20		93		Due after one year through two years	59		30
Due after two years through three years	Due after two years through three years	10		40		Due after two years through three years	435		—
Due after three years through four years	Due after three years through four years	435		—		Due after three years through four years	689		581
Due after four years through five years	Due after four years through five years	1,637		581		Due after four years through five years	6,434		9,721
Thereafter (2)		—		10

Total	Total	$	7,432	$	6,282	Total	$	10,703	$	13,562

_______________________

(1)Amount represents mandatorily redeemable capital stock that has reached the end of the five-year redemption-notice period but the member-related activity (for example, advances) remains outstanding. Accordingly, these shares of stock will not be redeemed until the activity is no longer outstanding.

(2) The December 31, 2020 amount represents reclassifications to mandatorily redeemable capital stock resulting from an FHFA rule effective February 19, 2016, that makes captive insurance companies ineligible for membership. Captive insurance company members that were admitted as members prior to September 12, 2014, had their memberships terminated on February 19, 2021.

Capital Rule

The FHFA’s regulation on FHLBank capital classification and critical capital levels (the Capital Rule), among other things, establishes criteria for four capital classifications and corrective action requirements for FHLBanks that are classified in any classification other than adequately capitalized. The Capital Rule requires the Director of the FHFA to determine on no less than a quarterly basis the capital classification of each FHLBank. By letter dated ~~June 23, 2021,~~March 29, 2022, the Director of the FHFA notified us that, based on ~~March~~December 31, 2021 financial information, we met the definition of adequately capitalized under the Capital Rule.

Internal Capital Practices and Policies

We also take steps as we believe prudent beyond legal or regulatory requirements in an effort to ~~protect our~~ensure capital adequacy, reflected in our internal minimum capital requirement, ~~in excess of~~which exceeds regulatory requirements, our minimum retained earnings target, and limitations on our dividends.

Internal Minimum Capital Requirement in Excess of Regulatory Requirements

To provide protection for our capital base, we maintain an internal minimum capital requirement whereby the amount of paid-in capital stock and retained earnings (together, our actual regulatory capital) must be at least equal to the sum of 4 percent of our total assets plus an amount we measure as our risk exposure with 99 percent confidence using our economic capital model

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~~(together,~~ (together, our internal minimum capital requirement). As of June 30, ~~2021,~~2022, this internal minimum capital requirement equaled ~~$1.9~~$3.0 billion, which was satisfied by our actual regulatory capital of ~~$2.6~~$3.2 billion.

Minimum Retained Earnings Target

At June 30, ~~2021,~~2022, we had total retained earnings of ~~$1.5~~$1.6 billion compared with our minimum retained earnings target of $700.0 million. We generally view our minimum retained earnings target as a floor for retained earnings rather than as a retained earnings limit and expect to continue to grow our retained earnings modestly even though we exceed the target.

For information on limitations on dividends, including limitations when we are under our minimum retained earnings target, see Part II — Item 5 — Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities in the ~~2020~~2021 Annual Report.

Repurchases of Excess Stock

We have the authority, but are not obliged, to repurchase excess stock, as discussed under Part I — Item 1 — Business — Capital Resources — Repurchase of Excess Stock in the ~~2020~~2021 Annual Report.

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Table 2320 - Capital Stock Requirements and Excess Capital Stock

(dollars in thousands)

Membership Stock
Investment
Requirement Activity-Based
Stock Investment
Requirement
Total Stock
Investment
Requirement (1)

Outstanding Class B
Capital Stock (2)
Excess Class B
Capital Stock
June 30, 2021 $ 436,160 $ 617,839 $ 1,054,020 $ 1,088,490 $ 34,470
December 31, 2020 420,238 762,379 1,182,638 1,273,454 90,816


	Membership Stock Investment Requirement(1)		Activity-Based Stock Investment Requirement		Total Stock Investment Requirement (2)		Outstanding Class B Capital Stock (3)		Excess Class B Capital Stock
June 30, 2022	$	316,280	$	1,224,724	$	1,541,026	$	1,567,947	$	26,921
December 31, 2021	429,353		505,264		934,638		967,200		32,562

_______________________

(1)Pursuant to our Capital Plan of the Federal Home Loan Bank of Boston Amended and Restated as of December 31, 2021, the membership stock investment requirement changed from 0.20 percent of the Membership Stock Investment Base to 0.05 percent of total assets. The change was intended to reduce the aggregate membership stock investment requirement.

(2) Total stock investment requirement is rounded up to the nearest $100 on an individual member basis.

~~(2)~~(3) Class B capital stock outstanding includes mandatorily redeemable capital stock.

~~We initiated daily repurchases of excess capital stock in 2017, in order to~~To facilitate our ability to maintain a prudent level of capitalization and an efficient capital structure, while providing for an equitable allocation of excess stock ownership among ~~members. As discussed under Part I — Item 1 — Business — Capital Resources — Repurchase of Excess Stock in the 2020 Annual Report, until May 18, 2021,~~members, we conducted daily repurchases of excess stock held by any shareholder whose excess stock exceeds the lesser of $10.0 million or 10 percent of the shareholder’s total stock investment requirement, subject to a minimum repurchase of $100,000. Beginning with daily excess stock repurchases on May 18, 2021, the calculation of daily stock repurchases changed such that we currently conduct daily repurchases of excess stock from any shareholder whose excess stock exceeds the lesser of $3 million or 3 percent of the shareholder’s total stock investment requirement, subject to the minimum repurchase of $100,000. We plan to continue with this practice, subject to regulatory requirements and our anticipated liquidity or capital management needs, although continued repurchases remain at our sole discretion, and we retain authority to make adjustments to our excess stock repurchase practices subject to notice requirements defined in our Capital Plan, or to suspend repurchases of excess stock from any shareholder or all shareholders without prior notice.

Restricted Retained Earnings

At June 30, ~~2021,~~2022, our ~~restricted retained earnings amount was $368.4 million, which exceeds the~~total required contribution to the restricted retained earnings account was $421.4 million compared with our total contribution of ~~$329.8~~$376.6 million. ~~Accordingly, no~~Due to the increase in the average balance of consolidated obligations during the quarter ended June 30, 2022, we contributed $8.2 million of second quarter 2022 net income to restricted retained earnings. No allocation of net income was made to restricted retained earnings in the ~~second~~first quarter of ~~2021 and no further allocations of net income into restricted retained earnings are required until such time as the contribution requirement exceeds the balance of restricted retained earnings.~~2022.

Off-Balance-Sheet Arrangements ~~and Aggregate Contractual Obligations~~

Our significant off-balance-sheet arrangements consist of the following:

• commitments that obligate us for additional advances;

• standby letters of credit;

• commitments for unused lines-of-credit advances; and

• unsettled COs.

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Off-balance-sheet arrangements are more fully discussed in Item 81 — Financial Statements ~~and Supplementary Data~~ — Notes to the Financial Statements — Note 1613 — Commitments and Contingencies ~~in the 2020 Annual Report.~~.

CRITICAL ACCOUNTING ESTIMATES

The preparation of financial statements in accordance with GAAP requires management to make a number of judgments, estimates, and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities (if applicable), and the reported amounts of income and expenses during the reported periods. Although management believes these judgments, estimates, and assumptions to be reasonably accurate, actual results may differ.

We have identified three accounting estimates that we believe are critical because they require us to make subjective or complex judgments about matters that are inherently uncertain, and because of the likelihood that materially different amounts would be reported under different conditions or using different assumptions. These estimates include accounting for derivatives, the use of fair-value estimates, and accounting for deferred premiums and discounts on prepayable assets. The Audit Committee of our board of directors has reviewed these estimates. The assumptions involved in applying these policies are discussed in

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Part II — Item 7 — Management's Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Estimates in the ~~2020~~2021 Annual Report.

As of June 30, ~~2021,~~2022, we have not made any significant changes to the estimates and assumptions used in applying our critical accounting policies and estimates from those used to prepare our audited financial statements.

RECENT ACCOUNTING DEVELOPMENTS

See Item 1 — Financial Statements — Notes to the Financial Statements — Note 2 — Recently Issued and Adopted Accounting Guidance for a discussion of recent accounting developments impacting or that could impact us.

LEGISLATIVE AND REGULATORY DEVELOPMENTS

We summarize certain significant legislative and regulatory actions and related developments for the period covered by this

report below.

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

Amendments to FINRA Rule 4210: Margining of Covered Agency Transactions. On July 29, 2022, the Financial Industries Regulatory Authority (FINRA) filed a proposed rule with the SEC that would extend the implementation date of its amendments to FINRA Rule 4210 delaying the effectiveness of margining requirements for covered agency transactions from October 26, 2022 until at least April 24, 2023. Once the margining requirements are effective, we may be required to collateralize our transactions that are covered agency transactions, which include to be announced transactions (TBAs). These collateralization requirements could have the effect of reducing the overall profitability of engaging in covered agency transactions, including TBAs. We do not expect this rule to have a material effect on our financial condition or results of operations.

LIBOR Transition

~~2021 ISDA Definitions.~~Proposed Rule Implementing the Adjustable Interest Rate (LIBOR) Act. On ~~June 11, 2021, ISDA~~July 28, 2022, the Board of Governors of the Federal Reserve System (the Board) published a proposed rule with a comment deadline of August 29, 2022, that would implement the ~~2021 ISDA~~Adjustable Interest Rate ~~Derivatives Definitions (2021 ISDA Definitions), which will update~~(LIBOR) Act (the Act). The proposed rule would provide default rules for certain contracts (covered contracts) that: reference LIBOR, are governed by U.S. law, do not mature on or before the LIBOR replacement date of June 30, 2023, and ~~consolidate the frequently supplemented 2006 ISDA Definitions as the standard definitions~~lack adequate provisions to identify a replacement rate for ~~cleared~~LIBOR. The proposed rule identifies separate Board-selected replacement rates for derivatives transactions, covered GSE contracts, and ~~uncleared interest rate derivatives.~~all other covered contracts. The ~~2021 ISDA Definitions incorporate prior supplements~~proposed rule defines covered GSE contracts to the 2006 ISDA Definitions in addition to other changes made to conform to updates in market practice and regulation. Both the 2006 ISDA Definitions as supplemented effective January 25, 2021, and the 2021 ISDA Definitions contain ISDA-recommended fallbacks for interest rate derivatives referencing an Interbank Offered Rate, including U.S. Dollar LIBOR. ISDA has announced that implementation of the 2021 ISDA Definitions is expectedinclude FHLBank advances. Accordingly, we continue to take ~~place for clearing houses, trading venues and other market infrastructures between October 1-4, 2021. While~~steps to mitigate the ~~FHLBanks may continue~~risks that arise from the phase out of LIBOR, which includes reviewing the proposed rule, but are not yet able to ~~use~~predict the ~~current 2006 ISDA Definitions, ISDA will not incorporate any further supplements following implementation of~~extent to which the ~~2021 ISDA Definitions.~~

~~The Bank is considering using the 2021 ISDA Definitions for future derivatives transactions. The Bank does not expect the implementation of the 2021 ISDA Definitions to have a material effect on its~~proposed rule would impact our financial condition or results of operations. ~~For a discussion of the potential impact of the LIBOR transition, refer to~~ ~~Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations — Executive Summary~~ ~~and Item 1A — Risk Factors in the 2020 Annual Report.~~

~~Legislative and Regulatory Developments Related to COVID-19 Pandemic~~

~~Federal Reserve Board Extends Paycheck Protection Program Liquidity Facility.~~ On June 25, 2021, the Federal Reserve Board announced a final extension of its Paycheck Protection Program Liquidity Facility (PPPLF) by an additional month to July 30, 2021. The PPPLF provides collateralized PPP loan liquidity to eligible Federal Reserve member financial institutions in order to facilitate PPP loan originations at such financial institutions. The extension allowed additional processing time for banks, community development financial institutions, and other financial institutions to pledge to the facility any PPP loans approved by the SBA through the June 30, 2021 expiration of the PPP program.

~~Additional COVID-19 Presidential, Legislative and Regulatory Developments.~~ ~~In light of the COVID-19 pandemic, the executive branch, through executive orders, governmental agencies, including the SEC, OCC, Federal Reserve, FDIC, National~~

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Credit Union Administration, CFTC and the FHFA, as well as state governments and agencies, have taken, and may continue to take, actions to provide various forms of relief from, and guidance regarding, the financial, operational, credit, market, and other effects of the pandemic, and the U.S. Congress has enacted and may continue to enact pandemic relief legislation, some of which may have a direct or indirect impact on us or our members. Many of these actions are temporary in nature. We continue to monitor these actions and guidance as they evolve and to evaluate their potential impact on us.

~~Other Legislative Matters~~

~~Affordable Housing and Community Investment.~~ Legislation has been introduced in the U.S. Senate and House of Representatives that, if enacted in its proposed form, would require that the FHLBanks set aside higher percentages of their earnings for their affordable housing and community investment programs than is currently required under law. The FHLBanks are actively monitoring these proposals.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Sources and Types of Market and Interest-Rate Risk

Our balance sheet is comprised of different portfolios that require different types of market- and interest-rate-risk management strategies. The majority of our balance sheet is comprised of assets that can be funded individually or collectively without imposing significant residual interest-rate risk on ourselves. Sources and types of market and interest-rate risk are described in Part II — Item 7A — Quantitative and Qualitative Disclosures About Market Risk — Sources and Types of Market and Interest-Rate Risk in the ~~2020~~2021 Annual Report.

Strategies to Manage Market and Interest-Rate Risk

General

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We use various strategies and techniques in an effort to manage our market and interest-rate risk including the following and combinations of the following:

•the issuance of COs that can be used to match interest-rate-risk exposures of our assets (at June 30, ~~2021,~~2022, fixed-rate noncallable debt, not hedged by interest-rate swaps, amounted to ~~$8.1~~$6.9 billion, compared with ~~$10.0~~$8.4 billion at December 31, ~~2020)~~2021);

•the issuance of COs with embedded call options to mitigate interest-rate and prepayment risks of our mortgage loans and certain MBS (at June 30, ~~2021,~~2022, and December 31, ~~2020~~2021, fixed-rate callable debt not hedged by interest-rate swaps amounted to ~~$760.0~~$595.0 million and ~~$1.2 billion,~~$520.0 million, respectively);

•the issuance of CO bonds together with interest-rate swaps (either cleared if no optionality or uncleared if containing optionality) that receive a coupon rate that offsets the bond coupon rate and any optionality embedded in the bond, thereby effectively creating a floating-rate liability (total CO bond debt used in conjunction with interest-rate-exchange agreements was ~~$9.7~~$20.6 billion, or ~~41.5~~61.2 percent of our total outstanding CO bonds at June 30, ~~2021,~~2022, compared with ~~$1.7~~$13.0 billion, or ~~7.9~~48.6 percent of total outstanding CO bonds, at December 31, ~~2020)~~2021);

•the issuance of advances together with interest-rate swaps that pay a coupon rate that offsets the advance coupon rate and any optionality embedded in the advance, thereby effectively creating a floating-rate asset (total advances used in conjunction with interest-rate-exchange agreements, including both fair-value hedge relationships and economic hedge relationships, was ~~$4.7~~$2.9 billion, or ~~31.3~~9.7 percent of our total outstanding advances at June 30, ~~2021,~~2022, compared with ~~$5.2~~$3.0 billion, or ~~27.8~~24.6 percent of total outstanding advances, at December 31, ~~2020)~~2021);

•the purchase of available-for-sale securities together with interest-rate swaps that pay a coupon rate that offsets the security’s coupon rate, thereby effectively creating a floating-rate asset (total available-for-sale securities used in conjunction with interest-rate-exchange agreements was ~~$8.5~~$12.6 billion, or ~~82.0~~86.4 percent of our total outstanding available-for-sale securities at June 30, ~~2021,~~2022, compared with ~~$3.7~~$10.8 billion, or ~~66.9~~85.2 percent of total outstanding available-for-sale securities, at December 31, ~~2020)~~2021);

•contractual provisions for certain advances that require borrowers to pay us prepayment fees, to make us financially indifferent if the borrower prepays such advances prior to maturity; and

•the use of derivatives to hedge the interest-rate risk of anticipated future CO debt issuance (at both June 30, 2022 and December 31, 2021, forward starting interest-rate swaps hedging the anticipated future issuance of CO debt was ~~$637.0 million compared to $17.0 million at December 31, 2020)~~$1.4 billion).

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Our strategies and techniques are more fully discussed under Part II — Item 7A — Quantitative and Qualitative Disclosures About Market Risk — Strategies to Manage Market and Interest-Rate Risk in the ~~2020~~2021 Annual Report.

Measurement of Market and Interest-Rate Risk and Related Policy Constraints

We measure our exposure to market and interest-rate risk using several techniques applied to the balance sheet and to certain portfolios within the balance sheet. Principal among these measurements as applied to the balance sheet is the potential ~~future~~ change in market value of equity (MVE) and interest income due to potential changes in interest rates, interest-rate volatility, spreads, and market prices. We also measure VaR, duration of equity, MVE sensitivity, and the other metrics discussed below.

MVE is the net economic value of total assets and liabilities, including any ~~off-balance-sheet items.~~derivative transactions. In contrast to the GAAP-based shareholder's equity account, MVE represents the shareholder's equity account in present-value terms. Specifically, MVE equals the difference between the estimated market value of our assets and the estimated market value of our ~~liabilities.~~liabilities, net of derivative transactions.

MVE, and in particular, the ratio of MVE to the book value of equity (BVE), is a measure of the current value of shareholder investment based on market rates, spreads, prices, and volatility at the reporting date. However, these valuations may not be fully representative of future realized prices. Valuations are based on market ~~curves~~yields and prices of individual assets, liabilities, and derivatives, and therefore embed elements of option, credit, and liquidity risk which may not be representative of future net income to be earned from the spread between asset yields and funding costs. Further, MVE does not consider future new business activities, or income or expense derived from sources other than financial assets or liabilities. For purposes of measuring this ratio, the BVE is equal to the par value of capital stock including mandatorily redeemable capital stock, retained earnings, and accumulated other comprehensive income.

We measure our exposure to market and interest-rate risk using several metrics, including:

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•the ratio of MVE to BVE;

•the ratio of MVE to the par value of our Class B Stock (Par Stock), which we refer to as the MVE to Par Stock ratio;

•the ratio of MVE to the market value of assets, which we refer to as the economic capital ratio;

•VaR, which measures the potential change in our MVE, based on a set of stress scenarios (VaR Stress Scenarios) using historically based interest-rate, volatility and Option Adjusted Spread (OAS) movements starting at the most recent month-end and going back monthly to 1998. For risk-based capital purposes and compliance with our internal management action trigger, VaR is reported as the average of the 5 worst case scenarios.

•duration of equity, which is calculated as the estimated percentage change to MVE for a 100 basis point parallel shift in rates;

•MVE sensitivity, which is the estimated percent change in MVE in various shocked interest rate scenarios versus base case MVE;

•the duration gap of our assets and liabilities, which is the difference between the estimated durations (percentage change in market value for a 100 basis point shift in rates) of assets and liabilities (including the effect of related hedges) and reflects the extent to which estimated sensitivities to market changes, including, but not limited to, maturity and repricing cash flows for assets and liabilities are matched; and

•the use of an income-simulation model that projects net interest income over a range of potential interest-rate scenarios, including parallel interest-rate shocks, nonparallel interest-rate shocks, and basis changes.

We maintain limits and management action triggers in connection with some of the foregoing metrics. Those limits, management action triggers, and the foregoing market and interest-rate risk metrics are more fully discussed under Part II — Item 7A — Quantitative and Qualitative Disclosures About Market Risk — Measurement of Market and Interest-Rate Risk and Related Policy Constraints in the ~~2020~~2021 Annual Report.

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~~Table 24~~21 - Interest-Rate / Market-Rate Risk Metrics

June 30, 2021

December 31, 2020

Target, Limit or Management Action Trigger

June 30, 2022

December 31, 2021

Target, Limit or Management Action Trigger

MVE

$2.5 billion

$2.7 billion

None

MVE

$3.0 billion

$2.5 billion

None

MVE/BVE

96%

None

MVE/BVE

100%

96%

None

MVE/Par Stock

234%

210%

Maintain above 130% (management action trigger) with a floor of 125%

MVE/Par Stock

189%

253%

Maintain above 130% (management action trigger) and 125% (limit)

Economic Capital Ratio

7.0%

6.8%

Maintain above 4.5% (management action trigger) and 4.0% (limit)

Economic Capital Ratio

4.7%

7.4%

Maintain above 4.5% (management action trigger) and 4.0% (limit)

VaR~~(1)~~

N/A

$204.0 million

Maintain below $350.0 million (management action trigger)

VaR~~(1)~~

7.6% of MVE

8.7% of MVE

Maintain below 12 percent of MVE (management action trigger)

8.3% of MVE

N/A

Maintain below 12 percent of MVE (management action trigger)

Duration of Equity (2)(3)

+4.26 years

+5.47 years

Maintain between +/- 3.5 years (management action trigger) and +/- 4.0 years (limit)

MVE Sensitivity: (2)(4)

Duration of Equity (1)(2)

+1.90 years

+0.37 years

Maintain between +/- 3.5 years (management action trigger) and +/- 4.0 years (limit)

MVE Sensitivity: (1)(3)

Down 200 basis point parallel rate shock

12.9%

7.8%

Maintain above -10% (management action trigger) and -15% (limit)

Down 200 basis point parallel rate shock

1.8%

(0.9)%

Maintain above -10% (management action trigger) and -15% (limit)

Up 200 basis point parallel rate shock

(7.2)%

(6.1)%

Up 200 basis point parallel rate shock

(4.9)%

(4.2)%

Duration Gap (2)(5)

+3.60 months

+4.49 months

None

Duration Gap (1)(4)

+1.07 months

+0.33 months

None

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(1) InMetrics for measuring against the ~~second quarter of 2021, in order to make the management action trigger for VaR consistent with other~~ management action triggers and ~~align it with our capital levels, the board~~limits are calculated using a methodology which does not constrain interest rates to a minimum of directors approved a change in the management action trigger for VaR, at which time we eliminated the prior management action trigger of maintaining VaR below $350 million and replaced it with a new management action trigger of maintaining VaR below 12 percent of MVE.

~~(2) Metrics~~zero percent. Additional metrics are calculated in accordance with guidance from the FHFA, which requires that we constrain projected future interest rates and discounting yields to a minimum of zero percent. ~~For purposes of measuring against the management action triggers and limits, management considers an alternative methodology which does not constrain interest rates to a minimum of zero percent.~~

~~(3)~~(2) Using the methodology which ~~does not constrain~~constrains interest rates to a minimum of zero percent, duration of equity is ~~+2.47~~+1.90 years as of June 30, ~~2021,~~2022, and ~~+1.61~~+1.09 years as of December 31, ~~2020.~~2021.

~~(4)~~(3) Using the methodology which ~~does not constrain~~constrains interest rates to a minimum of zero ~~percent.~~percent, MVE sensitivity in a down 200 basis point parallel rate shock is ~~+3.7~~2.3 percent as of June 30, ~~2021,~~2022, and ~~+1.8~~+10.4 percent as of December 31, ~~2020,~~2021, and MVE sensitivity in an up 200 basis point parallel rate shock is ~~(7.2)~~(4.9) percent as of June 30, ~~2021,~~2022, and ~~(6.0)~~(4.2) percent as of December 31, ~~2020.~~2021.

~~(5)~~

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(4) Using the methodology which ~~does not constrain~~constrains interest rates to a minimum of zero percent, duration gap is ~~+2.09~~+1.07 months as of June 30, ~~2021,~~2022, and ~~+1.32~~+0.98 months as of December 31, ~~2020.~~2021.

Value at Risk. ~~On February 7, 2018,~~VaR, which measures the potential change in our MVE, is based on a set of stress scenarios (VaR Stress Scenarios) using historically based interest-rate, volatility and option-adjusted spread (OAS) movements starting at the most recent month-end and going back monthly to 1998. For risk-based capital purposes and compliance with our internal management action trigger, VaR is reported as the average of the five worst scenarios.

FHFA ~~issued guidance,~~ Advisory Bulletin 2018-01, which ~~discontinued the use of proportional shocks in VaR modeling in the calculation of market-risk capital requirements. AB 2018-01~~ was effective as of January 1, 2020, ~~with the implementation of the final rule on~~ ~~FHLBank Capital Requirements~~ ~~published February 20, 2019. AB 2018-01~~ provides guidance for our determination of market risk scenarios that are incorporated into our internal market risk models.

Under the guidance, the interest-rate and market price scenarios that we incorporate into our internal market risk model are satisfactory if they meet the following criteria: (1) the scenarios are based on historical absolute interest rate changes, as applied to current interest rates; (2) the historical shocks represent changes in interest rates and market conditions observed over 120 business-day periods, and the methodology to apply those shocks to current interest rates incorporates the constraints described in the guidance; (3) the scenarios encompass shocks to interest-rate volatility that reflect the historical relationship between interest rates and volatility; and (4) for assets backed by residential mortgage loans, the scenarios include shocks to OAS. Our VaR model results ~~reported as of June 30, 2021, satisfy all of these requirements by utilizing~~utilizes interest rate, volatility and OAS shocks provided by the FHFA.

The table below presents the VaR estimate as of June 30, ~~2021,~~2022, and December 31, ~~2020,~~2021, and represents the estimates of potential reduction to our MVE from potential future changes in ~~interest rates and other~~ market factors, as described above.

~~Table of Contents~~

Estimated potential market value loss exposures are expressed as a percentage of the current MVE. The table is intended to represent a statistically based range of VaR exposures.

Table 2522 - Value-at-Risk

(dollars in millions)


		Value-at-Risk (Gain) Loss Exposure									Value-at-Risk (Gain) Loss Exposure
		June 30, 2021				December 31, 2020					June 30, 2022				December 31, 2021
Confidence Level	Confidence Level	% of MVE (1)		Amount		% of MVE (1)		Amount		Confidence Level	% of MVE (1)		Amount		% of MVE (1)		Amount
50%	50%	2.88	%	$	73.2	1.52	%	$	40.5	50%	1.51	%	$	44.7	4.11	%	$	100.7
75%	75%	4.19		106.7		3.17		84.7		75%	3.16		93.5		5.52		135.3
95%	95%	6.09		155.0		5.31		141.6		95%	5.19		153.6		7.67		188.1
99%	99%	7.63		194.1		6.94		185.4		99%	6.75		199.5		8.14		199.5

Average of five worst scenarios - as of period end		8.31		211.5		7.64		204.0
Average of five worst scenarios, as of period end										Average of five worst scenarios, as of period end	7.60		224.7		8.71		213.5

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(1) Loss exposure is expressed as a percentage of base MVE.

Income Simulation and Repricing Gaps. To provide an additional perspective on market and interest-rate risks, we have an income-simulation model that projects adjusted net income over the ensuing 12-month period using a range of potential interest-rate scenarios, including parallel interest-rate shocks, nonparallel interest-rate shocks, and changes toin basis risk. The income simulation metric is based on projections of adjusted net income divided by capital stock (including mandatorily redeemable capital stock). Projections of adjusted net income exclude a) projected prepayment of advances and prepayment penalties; b) loss on early extinguishment of debt; ~~and~~ c) changes in fair values from hedging ~~activities. The~~activities and d) changes in fair values of trading ~~securities are included in the projections of adjusted net income.~~securities. The simulations are solely based on simulated movements in interest rates and do not reflect potential impacts of credit events, including, but not limited to, potential provision for credit losses.

Management has put in place management action triggers whereby senior management is explicitly informed of instances where our projected return on capital stock (ROCS) falls below the average yield on SOFR plus our dividend spread over a ~~12-month~~twelve-month horizon in a variety of interest-rate shock scenarios limited to +/ –- 200 basis points. The results of this analysis for June 30, ~~2021,~~2022, showed that in the base case our ROCS was ~~423~~548 basis points over SOFR, and in the worst case modeled, the down 200 basis points scenario, our ROCS fell ~~106~~57 basis points to ~~317~~491 basis points over SOFR. Our ROCS spread to SOFR has remained above the management action trigger minimum during ~~the second quarter of 2021.~~

Prior to the second quarter of 2021 the management action trigger was the projected return on regulatory capital (RORC) measured against the average yield on SOFR over a 12-month horizon in a variety of interest-rate shock scenarios. Prior to the first quarter of 2021, the management action trigger for RORC was measured against the average yield on three-month LIBOR over a 12-month horizon in a variety of interest-rate shock scenarios.2022. For December 31, ~~2020,~~2021, the results of this analysis showed in the base case our ~~RORC~~ROCS was ~~122~~396 basis points over ~~three-month LIBOR,~~SOFR, and in the worst case modeled, the ~~up 300~~down 200 basis point scenario, our ~~RORC~~ROCS fell ~~201~~163 basis points to 79233 basis points ~~below three-month LIBOR.~~over SOFR.

Certain Market and Interest-Rate Risk Metrics under Potential Interest-Rate Scenarios

We also monitor the sensitivities of MVE and the duration of equity to potential interest-rate scenarios. The following table presents certain market and interest-rate risk metrics under different interest-rate scenarios.

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Table 2623 - Market and Interest-Rate Risk Metrics

(dollars in millions)


		June 30, 2021								June 30, 2022
		Down 300(1)	Down 200(1)	Down 100(1)	Base	Up 100	Up 200	Up 300		Down 300(1)	Down 200(1)	Down 100(1)	Base	Up 100	Up 200	Up 300
MVE	MVE	$2,870	$2,873	$2,682	$2,545	$2,466	$2,362	$2,252	MVE	$3,157	$3,024	$3,000	$2,957	$2,891	$2,813	$2,730
Percent change in MVE from base	Percent change in MVE from base	12.8%	12.9%	5.4%	—%	(3.1)%	(7.2)%	(11.5)%	Percent change in MVE from base	6.8%	2.3%	1.5%	—%	(2.2)%	(4.9)%	(7.7)%
MVE/BVE	MVE/BVE	108%	108%	101%	96%	93%	89%	85%	MVE/BVE	107%	102%	101%	100%	98%	95%	92%
MVE/Par Stock	MVE/Par Stock	264%	264%	246%	234%	227%	217%	207%	MVE/Par Stock	201%	193%	191%	189%	184%	179%	174%
Duration of Equity	Duration of Equity	-0.19 years	+3.46 years	+5.87 years	+4.26 years	+3.78 years	+4.53 years	+4.86 years	Duration of Equity	+4.35 years	+0.53 years	+0.90 years	+1.90 years	+2.53 years	+2.87 years	+3.02 years
Return on Capital Stock less SOFR	Return on Capital Stock less SOFR	3.16%	3.17%	3.27%	4.23%	3.93%	3.51%	3.04%	Return on Capital Stock less SOFR	4.59%	4.91%	5.18%	5.48%	5.51%	5.39%	5.24%
Net income percent change from base	Net income percent change from base	(26.27)%	(26.25)%	(23.91)%	—%	16.26%	29.53%	41.93%	Net income percent change from base	(43.54)%	(29.95)%	(15.13)%	—%	11.91%	22.08%	31.70%


		December 31, 2020								December 31, 2021
		Down 300(1)	Down 200(1)	Down 100(1)	Base	Up 100	Up 200	Up 300		Down 300(1)	Down 200(1)	Down 100(1)	Base	Up 100	Up 200	Up 300
MVE	MVE	$2,868	$2,878	$2,860	$2,669	$2,603	$2,507	$2,387	MVE	$2,704	$2,706	$2,488	$2,452	$2,421	$2,349	$2,252
Percent change in MVE from base	Percent change in MVE from base	7.5%	7.8%	7.2%	—%	(2.5)%	(6.1)%	(10.6)%	Percent change in MVE from base	10.3%	10.4%	1.5%	—%	(1.3)%	(4.2)%	(8.2)%
MVE/BVE	MVE/BVE	103%	103%	103%	96%	93%	90%	86%	MVE/BVE	106%	106%	98%	96%	95%	92%	89%
MVE/Par Stock	MVE/Par Stock	225%	226%	225%	210%	204%	197%	187%	MVE/Par Stock	280%	280%	257%	253%	250%	243%	233%
Duration of Equity	Duration of Equity	-0.22 years	-0.49 years	+3.68 years	+5.47 years	+3.07 years	+4.32 years	+4.86 years	Duration of Equity	-0.07 years	+5.37 years	+ 3.78 years	+1.09 years	+2.21 years	+3.58 years	+4.49 years
Return on Regulatory Capital less 3-month LIBOR		1.22%	1.22%	1.23%	1.22%	0.58%	(0.09)%	(0.79)%
Return on Capital Stock less SOFR									Return on Capital Stock less SOFR	2.33%	2.33%	2.65%	3.96%	4.05%	3.97%	3.68%
Net income percent change from base	Net income percent change from base	(13.15)%	(13.04)%	(12.03)%	—%	24.29%	46.71%	67.07%	Net income percent change from base	(46.68)%	(46.70)%	(39.37)%	—%	24.45%	44.81%	60.66%

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(1) In an environment of low interest rates, downward rate shocks are ~~constrained to a minimum of zero~~floored as they approach zero, and therefore may not be fully representative of the indicated rate shock.

Item 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Our senior management is responsible for establishing and maintaining a system of disclosure controls and procedures designed to ensure that information required to be disclosed by us in the reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC. Our disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, we recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and our management necessarily is required to apply its judgment in evaluating the cost-benefit relationship of controls and procedures.

Our management has evaluated the effectiveness of the design and operation of our disclosure controls and procedures, with the participation of the president and chief executive officer and chief financial officer, as of June 30, ~~2021.~~2022. Based on that evaluation, our president and chief executive officer and chief financial officer have concluded that our disclosure controls and procedures were effective at a reasonable assurance level as of June 30, ~~2021.~~2022.

Changes in Internal Control over Financial Reporting

~~Table of Contents~~

During the quarter ended June 30, ~~2021,~~2022, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Table of Contents

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

~~We describe our private-label MBS litigation~~As noted in Part I – Item 3 – Legal Proceedings in the 2021 Annual Report, in November 2020, ~~Annual Report.~~we resolved our claims against the remaining defendants in our private-label MBS litigation that were pending in Massachusetts District Court. We continue to pursue related litigation against Moody’s Investors Service, Inc. and Moody’s Corporation in the New York Supreme Court.

From time to time, we are subject to various pending legal proceedings arising in the normal course of business. After consultation with legal counsel, we do not anticipate that the ultimate liability, if any, arising out of these matters will have a material adverse effect on our financial condition or results of operations.

ITEM 1A. RISK FACTORS

In addition to the information presented in this report, readers should carefully consider the risk factors set forth in the ~~2020~~2021 Annual Report, which could materially impact our business, financial condition, or future results. These risks are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem immaterial may also materially impact us.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

Table of Contents

ITEM 5. OTHER INFORMATION

None

~~Table of Contents~~

ITEM 6. EXHIBITS

Number

Exhibit Description

Reference

~~10.1~~3.2

~~2021 Executive Incentive Plan* ∞~~By-laws of the Federal Home Loan Bank of Boston, as amended and rested on June 24, 2022

~~Exhibit~~ Filed within this Form 10-Q

10.1 ~~to the 8-K filed April 21, 2021~~

2022 Director Compensation Policy, as amended and restated June 24, 2022

Filed within this Form 10-Q

31.1

Certification of the president and chief executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Filed within this Form 10-Q

31.2

Certification of the chief financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Filed within this Form 10-Q

32.1

Certification of the president and chief executive officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Filed within this Form 10-Q

32.2

Certification of the chief financial officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Filed within this Form 10-Q

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

Inline XBRL Taxonomy Extension Schema Document

Filed within this Form 10-Q

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document

Filed within this Form 10-Q

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document

Filed within this Form 10-Q

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document

Filed within this Form 10-Q

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document

Filed within this Form 10-Q

104

The cover page of the Bank’s Quarterly report on Form 10-Q, formatted in Inline XBRL

Included within the Exhibit 101 attachments

* Management contract or compensatory plan.

~~∞ Portions of this exhibit have been omitted~~

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.

Date

FEDERAL HOME LOAN BANK OF BOSTON (Registrant)

August ~~12, 2021~~11, 2022

By:

/s/

~~Edward A. Hjerpe III~~Timothy J. Barrett

President and Chief Executive Officer

August ~~12, 2021~~11, 2022

By:

/s/

Frank Nitkiewicz

Executive Vice President, Chief Operating Officer

and Chief Financial Officer

7569


		Shares outstanding as of July 31, 2021
Class A Stock, par value	$100	0
Class B Stock, par value	$100	10,689,989


	December 31, 2020
	Year of Origination
Payment Status at Amortized Cost	Prior to 2016		2016 to 2020		Total
Past due 30-59 days delinquent	$	11,743	$	25,058	$	36,801
Past due 60-89 days delinquent	5,263		11,178		16,441
Past due 90 days or more delinquent	20,894		43,529		64,423
Total past due	37,900		79,765		117,665
Total current loans	1,246,691		2,317,975		3,564,666
Total mortgage loans	$	1,284,591	$	2,397,740	$	3,682,331


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
Allowance for credit losses(1)	2021		2020		2021		2020
Balance, beginning of period	$	1,900	$	3,500	$	3,100	$	500
Adjustment for cumulative effect of change in accounting principle	0		0		0		2,221
Recoveries (charge-offs)	26		(3)		52		(80)

Provision for (reduction of) credit losses	199		1,105		(1,027)		1,961
Balance, end of period	$	2,125	$	4,602	$	2,125	$	4,602


	Capital Stock Outstanding		Percent of Total Capital Stock		Par Value of Advances		Percent of Total Par Value of Advances		Total Accrued Interest Receivable		Percent of Total Accrued Interest Receivable on Advances
June 30, 2021	$	52,027	4.8	%	$	491,358	3.3	%	$	546	2.4	%
December 31, 2020	60,624		4.8		582,765		3.1		651		2.5


	As of and for the Three Months Ended
	June 30, 2021			March 31, 2021			December 31, 2020			September 30, 2020			June 30, 2020
Statement of Condition
Total assets	$	35,683,602		$	36,676,723		$	38,461,035		$	45,025,341		$	46,161,388
Investments, net(1)	16,053,111			15,474,566			13,341,538			13,345,453			16,286,588
Advances	15,176,625			16,798,082			18,817,002			26,961,561			24,827,781
Mortgage loans held for portfolio, net(2)	3,470,505			3,726,343			3,930,252			4,160,091			4,411,053
Deposits and other borrowings	970,282			1,088,187			1,088,987			1,227,702			1,191,229
Consolidated obligations:
Bonds	23,475,165			22,704,460			21,471,590			23,970,889			24,563,087
Discount notes	8,365,460			9,927,167			12,878,310			16,511,187			17,308,802
Total consolidated obligations	31,840,625			32,631,627			34,349,900			40,482,076			41,871,889
Mandatorily redeemable capital stock	7,432			6,164			6,282			6,135			6,135
Class B capital stock outstanding-putable(3)	1,081,057			1,181,665			1,267,172			1,594,859			1,518,515
Unrestricted retained earnings	1,147,279			1,145,756			1,130,222			1,121,875			1,097,875
Restricted retained earnings	368,420			368,420			368,420			368,420			357,709
Total retained earnings	1,515,699			1,514,176			1,498,642			1,490,295			1,455,584
Accumulated other comprehensive income (loss)	47,645			21,223			16,139			(24,067)			(128,471)
Total capital	2,644,401			2,717,064			2,781,953			3,061,087			2,845,628
Results of Operations (for the period ended)
Net interest income after provision for credit losses	$	43,122		$	61,484		$	61,826		$	62,261		$	39,444
Litigation settlements	—			—			25,998			—			98
Other (loss) income, net	(13,104)			(15,763)			(24,601)			18,110			(16,275)
Other expense	23,177			22,513			38,512			20,858			20,146
AHP assessments	687			2,323			2,474			5,957			319
Net income	$	6,154		$	20,885		$	22,237		$	53,556		$	2,802
Other Information
Dividends declared	$	4,631		$	5,351		$	13,890		$	18,845		$	24,094
Dividend payout ratio	75.25		%	25.62		%	62.46		%	35.19		%	859.89		%
Weighted-average dividend rate(4)	1.54			1.59			3.76			4.12			5.06
Return on average equity(5)	0.92			3.09			3.14			7.39			0.36
Return on average assets	0.07			0.23			0.22			0.50			0.02
Net interest margin(6)	0.48			0.68			0.60			0.54			0.31
Average equity to average assets	7.29			7.46			7.09			6.72			5.59
Total regulatory capital ratio(7)	7.30			7.37			7.21			6.87			6.46


	June 30, 2021		December 31, 2020
Total par value of government loans past due 90 days or more and still accruing interest	$	8,809	$	5,472
Nonaccrual loans, par value	36,955		74,348
Troubled debt restructurings (not included above)	6,033		6,095


	As of June 30, 2021
									Weighted-Average Yield (4)
	Derivatives				Advances(2)						Derivatives
Maturity	Notional		Fair Value(1)		Hedged Amount		Benchmark Fair-Value Adjustment(3)		Advances		Receive Floating Rate		Pay Fixed Rate		Net Receive Result
Due in one year or less	$	1,221,515	$	(7,946)	$	1,221,515	$	7,894	1.89	%	0.12	%	1.43	%	0.58	%
Due after one year through two years	622,260		(13,119)		622,260		13,040		2.00		0.14		1.59		0.55
Due after two years through three years	317,400		(11,259)		317,400		11,121		2.20		0.11		1.66		0.65
Due after three years through four years	971,425		(9,950)		971,425		9,893		1.38		0.10		0.65		0.83
Due after four years through five years	215,360		(866)		215,360		855		1.25		0.13		0.70		0.68
Thereafter	728,250		(8,069)		728,250		7,920		1.68		0.10		1.07		0.71
Total	$	4,076,210	$	(51,209)	$	4,076,210	$	50,723	1.74	%	0.11	%	1.18	%	0.67	%


	Membership Stock Investment Requirement		Activity-Based Stock Investment Requirement		Total Stock Investment Requirement (1)		Outstanding Class B Capital Stock (2)		Excess Class B Capital Stock
June 30, 2021	$	436,160	$	617,839	$	1,054,020	$	1,088,490	$	34,470
December 31, 2020	420,238		762,379		1,182,638		1,273,454		90,816