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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2022
OR
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number: 000-51999
FEDERAL HOME LOAN BANK OF DES MOINES
(Exact name of registrant as specified in its charter)
Federally chartered corporation of the United States
42-6000149
(State or other jurisdiction of incorporation or organization)(I.R.S. employer identification number)
909 Locust Street
Des Moines, IA
(Address of principal executive offices)
50309
(Zip code)
Registrant’s telephone number, including area code: (515) 412-2100
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading 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 ☐ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
☒ Yes ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of large accelerated filer, accelerated filer, smaller reporting company, and emerging growth company in Rule 12b-2 of the Exchange Act.
Large accelerated filer☐Accelerated filer☐
Non-accelerated filer☒Smaller reporting company☐
Emerging growth company☐

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
☐ Yes ☒ No
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Shares outstanding as of July 31, 2022
Class B Stock, par value $10042,749,407


Table of Contents
Part I - Financial Information
Item 1.
Item 2.
Item 3.
Item 4.
Part II - Other Information
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.

Table of Contents
PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

FEDERAL HOME LOAN BANK OF DES MOINES
STATEMENTS OF CONDITION
(dollars and shares in millions, except capital stock par value)
(Unaudited)
June 30,
2022		December 31,
2021
ASSETS
Cash and due from banks $50 $295 
Interest-bearing deposits (Note 3)1,011 416 
Securities purchased under agreements to resell (Note 3)7,250 12,450 
Federal funds sold (Note 3)8,180 4,690 
Investment securities (Note 3)
Trading securities2,213 1,169 
Available-for-sale securities (amortized cost of $13,077 and $13,301)
13,054 13,389 
Held-to-maturity securities (fair value of $1,068 and $1,405)
1,045 1,328 
Total investment securities16,312 15,886 
Advances (Note 4)52,731 44,111 
Mortgage loans held for portfolio, net of allowance for credit losses of $4 and $1 (Note 5)
7,940 7,578 
Accrued interest receivable118 84 
Derivative assets, net (Note 6)250 221 
Other assets, net126 121 
TOTAL ASSETS$93,968 $85,852 
LIABILITIES
Deposits
Interest-bearing$1,440 $1,718 
Non-interest-bearing88 129 
Total deposits1,528 1,847 
Consolidated obligations (Note 7)
Discount notes (includes $31,707 and $22,348 at fair value held under fair value option)
50,185 22,348 
Bonds 35,130 55,205 
Total consolidated obligations85,315 77,553 
Mandatorily redeemable capital stock (Note 8)17 29 
Accrued interest payable107 97 
Affordable Housing Program payable 126 131 
Derivative liabilities, net (Note 6)11 3 
Other liabilities559 354 
TOTAL LIABILITIES87,663 80,014 
Commitments and contingencies (Note 10)
CAPITAL (Note 8)
Capital stock - Class B putable ($100 par value); 39 and 34 issued and outstanding shares
3,876 3,364 
Retained earnings
Unrestricted1,810 1,773 
Restricted648 617 
Total retained earnings2,458 2,390 
Accumulated other comprehensive income (loss)(29)84 
TOTAL CAPITAL6,305 5,838 
TOTAL LIABILITIES AND CAPITAL$93,968 $85,852 
The accompanying notes are an integral part of these financial statements.
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FEDERAL HOME LOAN BANK OF DES MOINES
STATEMENTS OF INCOME
(dollars in millions)
(Unaudited)
For the Three Months Ended
For the Six Months Ended
June 30,June 30,
2022202120222021
INTEREST INCOME
Advances$184 $121 $295 $252 
Interest-bearing deposits2 1 3 1 
Securities purchased under agreements to resell8 — 9 1 
Federal funds sold23 2 26 3 
Trading securities9 10 16 22 
Available-for-sale securities55 22 85 58 
Held-to-maturity securities8 6 14 13 
Mortgage loans held for portfolio56 50 109 103 
Total interest income345 212 557 453 
INTEREST EXPENSE
Consolidated obligations - Discount notes94 3 108 8 
Consolidated obligations - Bonds124 117 223 243 
Deposits1 — 1 — 
Mandatorily redeemable capital stock1 1 1 1 
Total interest expense220 121 333 252 
NET INTEREST INCOME125 91 224 201 
Provision (reversal) for credit losses on mortgage loans1 1 3 — 
NET INTEREST INCOME AFTER PROVISION (REVERSAL) FOR CREDIT LOSSES124 90 221 201 
OTHER INCOME (LOSS)
Net gains (losses) on trading securities(23)(2)(64)(24)
Net gains (losses) on financial instruments held under fair value option77 — 99 — 
Net gains (losses) on derivatives (30)(8)(14)9 
Standby letter of credit fees3 2 5 5 
Other, net(2)7 (1)11 
Total other income (loss)25 (1)25 1 
OTHER EXPENSE
Compensation and benefits18 18 36 39 
Contractual services5 5 10 9 
Professional fees3 3 6 7 
Other operating expenses5 5 9 10 
Federal Housing Finance Agency2 2 5 4 
Office of Finance2 2 4 4 
Other, net4 1 6 3 
Total other expense39 36 76 76 
NET INCOME BEFORE ASSESSMENTS110 53 170 126 
Affordable Housing Program assessments11 6 17 13 
NET INCOME$99 $47 $153 $113 
The accompanying notes are an integral part of these financial statements.
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FEDERAL HOME LOAN BANK OF DES MOINES
STATEMENTS OF COMPREHENSIVE INCOME
(dollars in millions)
(Unaudited)
For the Three Months Ended
For the Six Months Ended
June 30,June 30,
2022202120222021
Net income $99 $47 $153 $113 
Other comprehensive income (loss)
Net unrealized gains (losses) on available-for-sale securities(50)(2)(111)50 
Pension and postretirement benefits— — (2)— 
Total other comprehensive income (loss)(50)(2)(113)50 
TOTAL COMPREHENSIVE INCOME (LOSS)$49 $45 $40 $163 
The accompanying notes are an integral part of these financial statements.



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FEDERAL HOME LOAN BANK OF DES MOINES
STATEMENTS OF CAPITAL
(dollars and shares in millions)
(Unaudited)
Capital Stock Class B (putable)Retained EarningsAccumulated Other Comprehensive Income (Loss)Total
Capital
SharesPar ValueUnrestrictedRestrictedTotal
BALANCE, MARCH 31, 202135 $3,535 $1,788 $589 $2,377 $100 $6,012 
Comprehensive income (loss)— — 38 9 47 (2)45 
Proceeds from issuance of capital stock8 782 — — — — 782 
Repurchases/redemptions of capital stock(7)(808)— — — — (808)
Net shares reclassified (to) from mandatorily redeemable capital stock(1)(80)— — — — (80)
Cash dividends on capital stock— — (41)— (41)— (41)
BALANCE, JUNE 30, 202135 $3,429 $1,785 $598 $2,383 $98 $5,910 
BALANCE, MARCH 31, 202236 $3,523 $1,773 $628 $2,401 $21 $5,945 
Comprehensive income (loss)— — 79 20 99 (50)49 
Proceeds from issuance of capital stock17 1,725 — — — — 1,725 
Repurchases/redemptions of capital stock(14)(1,370)— — — — (1,370)
Net shares reclassified (to) from mandatorily redeemable capital stock— (2)— — — — (2)
Cash dividends on capital stock— — (42)— (42)— (42)
BALANCE, JUNE 30, 202239 $3,876 $1,810 $648 $2,458 $(29)$6,305 
BALANCE, DECEMBER 31, 202034 $3,341 $1,775 $576 $2,351 $48 $5,740 
Comprehensive income (loss)— — 91 22 113 50 163 
Proceeds from issuance of capital stock15 1,501 — — — — 1,501 
Repurchases/redemptions of capital stock(13)(1,333)— — — — (1,333)
Net shares reclassified (to) from mandatorily redeemable capital stock(1)(80)— — — — (80)
Cash dividends on capital stock— — (81)— (81)— (81)
BALANCE, JUNE 30, 202135 $3,429 $1,785 $598 $2,383 $98 $5,910 
BALANCE, DECEMBER 31, 202134 $3,364 $1,773 $617 $2,390 $84 $5,838 
Comprehensive income (loss)— — 122 31 153 (113)40 
Proceeds from issuance of capital stock27 2,712 — — — — 2,712 
Repurchases/redemptions of capital stock(22)(2,197)— — — — (2,197)
Net shares reclassified (to) from mandatorily redeemable capital stock— (3)— — — — (3)
Cash dividends on capital stock— — (85)— (85)— (85)
BALANCE, JUNE 30, 202239 $3,876 $1,810 $648 $2,458 $(29)$6,305 
The accompanying notes are an integral part of these financial statements.

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FEDERAL HOME LOAN BANK OF DES MOINES
STATEMENTS OF CASH FLOWS
(dollars in millions)
(Unaudited)
For the Six Months Ended
June 30,
20222021
OPERATING ACTIVITIES
Net income$153 $113 
Adjustments to reconcile net income to net cash provided by (used in) operating activities
Depreciation and amortization/(accretion)67 22 
Net (gains) losses on trading securities64 24 
Net (gains) losses on financial instruments held under fair value option(99)— 
Net change in derivatives and hedging activities1,078 204 
Other adjustments, net3 15 
Net change in:
Accrued interest receivable(44)(2)
Other assets7 (4)
Accrued interest payable11 (11)
Other liabilities(16)(13)
Total adjustments1,071 235 
Net cash provided by (used in) operating activities1,224 348 
INVESTING ACTIVITIES
Net change in:
Interest-bearing deposits(690)85 
Securities purchased under agreements to resell5,200 300 
Federal funds sold(3,490)(3,390)
Trading securities
Proceeds from maturities and paydowns190 4,546 
Purchases(1,298)(1,098)
Available-for-sale securities
Proceeds from maturities and paydowns1,471 1,049 
Purchases(1,485)(18)
Held-to-maturity securities
Proceeds from maturities and paydowns272 270 
Advances
Repaid102,609 69,511 
Originated(112,016)(68,787)
Mortgage loans held for portfolio
Principal collected599 1,510 
Purchased(984)(839)
Other investing activities, net(5)— 
Net cash provided by (used in) investing activities(9,627)3,139 
The accompanying notes are an integral part of these financial statements.
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FEDERAL HOME LOAN BANK OF DES MOINES
STATEMENTS OF CASH FLOWS (continued from previous page)
(dollars in millions)
(Unaudited)
For the Six Months Ended
June 30,
20222021
FINANCING ACTIVITIES
Net change in deposits(242)(90)
Net proceeds from issuance of consolidated obligations
Discount notes276,308 134,226 
Bonds13,157 29,738 
Payments for maturing and retiring consolidated obligations
Discount notes(248,457)(138,468)
Bonds(33,023)(29,809)
Proceeds from issuance of capital stock2,712 1,501 
Payments for repurchases/redemptions of capital stock(2,197)(1,333)
Net payments for repurchases/redemptions of mandatorily redeemable capital stock(15)(97)
Cash dividends paid(85)(81)
Net cash provided by (used in) financing activities8,158 (4,413)
Net increase (decrease) in cash and due from banks(245)(926)
Cash and due from banks at beginning of the period295 978 
Cash and due from banks at end of the period$50 $52 
SUPPLEMENTAL DISCLOSURES
Cash Transactions:
Interest paid$258 $285 
Affordable Housing Program payments22 23 
Non-Cash Transactions:
Capitalized interest on reverse mortgage investment securities10 11 
Traded but not settled investment security purchases504 — 
Traded but not settled investment security payments/calls8 — 
Capital stock reclassified to (from) mandatorily redeemable capital stock, net3 80 
The accompanying notes are an integral part of these financial statements.
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FEDERAL HOME LOAN BANK OF DES MOINES
CONDENSED NOTES TO THE UNAUDITED FINANCIAL STATEMENTS

Background Information

The Federal Home Loan Bank of Des Moines (the Bank) is a federally chartered corporation that is exempt from all federal, state, and local taxation (except real property taxes and certain employer payroll taxes) and is one of 11 district Federal Home Loan Banks (FHLBanks). The FHLBanks are government-sponsored enterprises (GSEs) and were created under the authority of the Federal Home Loan Bank Act of 1932 (FHLBank Act) in order to serve the public by enhancing the availability of funds for residential mortgages and targeted community development. The Bank is regulated by the Federal Housing Finance Agency (Finance Agency).

The Bank is a cooperative, meaning it is owned by its customers, whom the Bank calls members. As a condition of membership in the Bank, all members must purchase and maintain capital stock to support business activities with the Bank. In return, the Bank provides a readily available source of funding and liquidity to its member institutions and eligible housing associates in Alaska, Hawaii, Idaho, Iowa, Minnesota, Missouri, Montana, North Dakota, Oregon, South Dakota, Utah, Washington, Wyoming, and the U.S. Pacific territories of American Samoa, Guam, and the Commonwealth of the Northern Mariana Islands. Commercial banks, savings institutions, credit unions, insurance companies, and community development financial institutions (CDFIs) may apply for membership. State and local housing associates that meet certain statutory criteria may also borrow from the Bank; while eligible to borrow, housing associates are not members of the Bank and, as such, are not permitted to hold capital stock. All stockholders, including current and former members, may receive dividends on their capital stock investment to the extent declared by the Bank’s Board of Directors.

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. Accordingly, they do not include all of the disclosures required by GAAP for annual financial statements and should be read in conjunction with the audited financial statements for the year ended December 31, 2021, which are contained in the Bank’s 2021 Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC) on March 9, 2022 (2021 Form 10-K).

In the opinion of management, the unaudited financial information is complete and reflects all adjustments, consisting of normal recurring adjustments, necessary for a fair statement of results for the interim periods. The preparation of financial statements in accordance with GAAP requires management to make assumptions and estimates that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from these estimates. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year ending December 31, 2022.

Reclassifications

Certain amounts in the Bank’s 2021 financial statements have been reclassified to conform to the presentation for the three and six months ended June 30, 2022. These amounts were not deemed to be material.

SIGNIFICANT ACCOUNTING POLICIES

There have been no material changes to the Bank’s significant accounting policies during the six months ended June 30, 2022. Descriptions of all significant accounting policies are included in “Note 1 — Summary of Significant Accounting Policies” in the 2021 Form 10-K.

Note 2 — Recently Adopted and Issued Accounting Guidance

Troubled Debt Restructurings and Vintage Disclosures (ASU 2022-02)

On March 31, 2022, the Financial Accounting Standards Board (FASB) issued guidance eliminating the accounting requirements for troubled debt restructurings (TDRs) by creditors that have adopted the current expected credit losses methodology, while enhancing the disclosure requirements for certain loan refinancings and restructurings by creditors made to borrowers experiencing financial difficulty. Additionally, this guidance requires disclosure of current-period gross write-offs by year of origination for financing receivables and net investment in leases. This guidance becomes effective for the Bank for the interim and annual periods beginning on January 1, 2023. Early adoption is permitted. The Bank is in the process of evaluating this guidance and its effect on the Bank’s financial condition, results of operations, or cash flows has not yet been determined.
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Fair Value Hedging – Portfolio Layer Method (ASU 2022-01)

On March 28, 2022, the FASB issued guidance expanding the current last-of-layer method to apply fair value hedging by allowing multiple hedged layers of a single closed portfolio under the method. To reflect that expansion, the last-of-layer method is renamed “the portfolio layer method”. Among other things, this guidance (i) expands the scope of the portfolio layer method to include non-prepayable assets, (ii) specifies eligible hedging instruments in a single-layer hedge, (iii) provides additional guidance on the accounting for and disclosure of hedge basis adjustments under the portfolio layer method, and (iv) specifies how hedge basis adjustments should be considered when determining credit losses for the assets included in the closed portfolio. This guidance becomes effective for the interim and annual periods beginning on January 1, 2023. Early adoption is permitted. The Bank does not currently utilize the last-of-layer hedging method and therefore this guidance is not expected to have any impact on the Bank’s financial condition, results of operations, or cash flows.

Reference Rate Reform (ASU 2020-04)

On March 12, 2020, the FASB issued temporary guidance to ease the potential burden in accounting for reference rate reform related to the transition from LIBOR. The guidance provides optional expedients and exceptions for applying GAAP to transactions affected by reference rate reform, if certain criteria are met. These transactions include contract modifications, hedging relationships, and the sale/transfer of held-to-maturity (HTM) debt securities. This guidance became effective immediately and remains in effect until December 31, 2022. The Bank continues to evaluate the impact of the guidance and anticipates electing the applicable optional expedients as reference rate activities occur. The effect, if any, of this guidance and these activities on the Bank’s financial condition, results of operations, or cash flows depends on the nature of the transactions and market conditions at the time any election is made.

Note 3 — Investments

The Bank makes short-term investments in interest-bearing deposits, securities purchased under agreements to resell, and federal funds sold, and makes other investments in debt securities, which are classified as either trading, available-for-sale (AFS), or HTM.

INTEREST-BEARING DEPOSITS, SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL, AND FEDERAL FUNDS SOLD

The Bank invests in interest-bearing deposits, securities purchased under agreements to resell, and federal funds sold to provide short-term liquidity. These investments are generally transacted with counterparties that have received a credit rating of triple-B or greater (investment grade) by a nationally recognized statistical rating organization (NRSRO). At June 30, 2022 and December 31, 2021, none of these investments were with counterparties rated below triple-B; however, as of June 30, 2022, approximately one percent were secured securities purchased under agreements to resell with unrated counterparties. At December 31, 2021, the Bank held no unrated investments. These NRSRO ratings may differ from any internal ratings of the investments by the Bank.

Federal funds sold are unsecured loans that are generally transacted on an overnight term. Finance Agency regulations include a limit on the amount of unsecured credit the Bank may extend to a counterparty. At June 30, 2022 and December 31, 2021, no allowance for credit losses was recorded for interest-bearing deposits and federal funds sold, as all assets were repaid or expected to be repaid according to their contractual terms. The carrying values of interest-bearing deposits and federal funds sold exclude accrued interest receivable of $1 million at June 30, 2022 and less than $1 million at December 31, 2021.

Securities purchased under agreements to resell are secured, short-term, and are structured such that they are evaluated regularly to determine if the market value of the underlying securities decreases below the market value required as collateral (i.e. subject to collateral maintenance provisions). If so, the counterparty must place an equivalent amount of additional securities as collateral or remit an equivalent amount of cash, generally by the next business day. Based upon the collateral held as security and collateral maintenance provisions with its counterparties, the Bank determined that no allowance for credit losses was needed for its securities purchased under agreements to resell at June 30, 2022 and December 31, 2021. The carrying value of securities purchased under agreements to resell excludes accrued interest receivable of less than $1 million at both June 30, 2022 and December 31, 2021.


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DEBT SECURITIES

The Bank invests in debt securities, which are classified as either trading, AFS, or HTM. The Bank is prohibited by Finance Agency regulations from purchasing certain higher-risk securities, such as equity securities and debt instruments that are not investment quality. A security is considered to be investment quality if it has adequate financial backing so that full and timely payment of principal and interest is expected and there is minimal risk that the timely payment of principal and interest would not occur because of adverse changes in economic and financial conditions during the projected life of the security. Exceptions are allowed for certain investments targeted at low-income persons or communities, and instruments that experience credit deterioration after their purchase by the Bank.

Trading Securities

Trading securities by major security type were as follows (dollars in millions):
June 30,
2022		December 31, 2021
Non-mortgage-backed securities
U.S. Treasury obligations1
$1,770 $496 
Other U.S. obligations1
87 102 
GSE and Tennessee Valley Authority obligations53 60 
Other2
167 201 
     Total non-mortgage-backed securities2,077 859 
Mortgage-backed securities
GSE multifamily136 310 
Total fair value$2,213 $1,169 

1    Represents investment securities backed by the full faith and credit of the U.S. Government.

2    Consists of taxable municipal bonds.


Net Gains (Losses) on Trading Securities

The following table summarizes the components of “Net gains (losses) on trading securities” as presented on the Statements of Income (dollars in millions):
For the Three Months Ended
For the Six Months Ended
June 30,June 30,
2022202120222021
Net unrealized gains (losses) on trading securities held at period-end$(23)$1 $(62)$(18)
Net gains (losses) on trading securities no longer held at period-end— (3)(2)(6)
Net gains (losses) on trading securities$(23)$(2)$(64)$(24)


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AFS Securities

AFS securities by major security type were as follows (dollars in millions):
June 30, 2022
Amortized
Cost1
Gross
Unrealized
Gains		Gross
Unrealized
Losses
Fair
Value
Non-mortgage-backed securities
Other U.S. obligations2
$953 $3 $(3)$953 
GSE and Tennessee Valley Authority obligations487 15 — 502 
State or local housing agency obligations473 — (2)471 
Other3
260 8 — 268 
Total non-mortgage-backed securities2,173 26 (5)2,194 
Mortgage-backed securities
U.S. obligations single-family2
2,758 1 (7)2,752 
GSE single-family232 2 — 234 
GSE multifamily7,914 10 (50)7,874 
Total mortgage-backed securities10,904 13 (57)10,860 
Total$13,077 $39 $(62)$13,054 


December 31, 2021
Amortized
Cost1
Gross
Unrealized
Gains		Gross
Unrealized
Losses
Fair
Value
Non-mortgage-backed securities
Other U.S. obligations2
$1,152 $5 $(1)$1,156 
GSE and Tennessee Valley Authority obligations953 30 — 983 
State or local housing agency obligations492 — (4)488 
Other3
277 11 — 288 
Total non-mortgage-backed securities2,874 46 (5)2,915 
Mortgage-backed securities
U.S. obligations single-family2
2,890 19 — 2,909 
GSE single-family273 4 — 277 
GSE multifamily7,264 42 (18)7,288 
Total mortgage-backed securities10,427 65 (18)10,474 
Total$13,301 $111 $(23)$13,389 

1    Amortized cost includes adjustments made to the cost basis of an investment for accretion, amortization, and/or fair value hedge accounting adjustments, and excludes accrued interest receivable of $29 million and $28 million at June 30, 2022 and December 31, 2021.

2    Represents investment securities backed by the full faith and credit of the U.S. Government.

3    Consists primarily of taxable municipal bonds.



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Unrealized Losses

The following tables summarize AFS securities with unrealized losses by major security type and length of time that individual securities have been in a continuous unrealized loss position (dollars in millions). In cases where the gross unrealized losses for an investment category are less than $1 million, the losses are not reported.
June 30, 2022
Less than 12 Months12 Months or MoreTotal
Fair
Value		Unrealized
Losses		Fair
Value		Unrealized
Losses		Fair
Value		Unrealized
Losses
Non-mortgage-backed securities
Other U.S. obligations1
$469 $(1)$83 $(2)$552 $(3)
State or local housing agency obligations6 — 413 (2)419 (2)
Total non-mortgage-backed securities475 (1)496 (4)971 (5)
Mortgage-backed securities
U.S. obligations single-family1
2,005 (7)73 — 2,078 (7)
GSE single-family85 — — — 85 — 
GSE multifamily2,292 (36)3,015 (14)5,307 (50)
Total mortgage-backed securities4,382 (43)3,088 (14)7,470 (57)
Total$4,857 $(44)$3,584 $(18)$8,441 $(62)


December 31, 2021
Less than 12 Months12 Months or MoreTotal
Fair
Value		Unrealized
Losses		Fair
Value		Unrealized
Losses		Fair
Value		Unrealized
Losses
Non-mortgage-backed securities
Other U.S. obligations1
$80 $— $115 $(1)$195 $(1)
GSE and Tennessee Valley Authority obligations355 — — — 355 — 
State or local housing agency obligations— — 451 (4)451 (4)
Total non-mortgage-backed securities435 — 566 (5)1,001 (5)
Mortgage-backed securities
U.S. obligations single-family1
89 — 87 — 176 — 
GSE single-family2 — — — 2 — 
GSE multifamily1,831 (3)2,917 (15)4,748 (18)
Total mortgage-backed securities1,922 (3)3,004 (15)4,926 (18)
Total$2,357 $(3)$3,570 $(20)$5,927 $(23)

1    Represents investment securities backed by the full faith and credit of the U.S. Government.



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Contractual Maturity

The following table summarizes AFS securities by contractual maturity. Expected maturities of some securities may differ from contractual maturities as borrowers may have the right to call or prepay obligations with or without call or prepayment fees (dollars in millions):
June 30, 2022December 31, 2021
Year of Contractual MaturityAmortized
Cost		Fair
Value		Amortized
Cost		Fair
Value
Non-mortgage-backed securities
Due in one year or less$106 $106 $422 $422 
Due after one year through five years1,252 1,258 1,538 1,548 
Due after five years through ten years339 343 348 356 
Due after ten years476 487 566 589 
Total non-mortgage-backed securities2,173 2,194 2,874 2,915 
Mortgage-backed securities10,904 10,860 10,427 10,474 
Total$13,077 $13,054 $13,301 $13,389 

HTM Securities

HTM securities by major security type were as follows (dollars in millions):
June 30, 2022
Amortized
Cost1
Gross
Unrealized
Gains		Gross
Unrealized
Losses		Fair
Value
Non-mortgage-backed securities
GSE and Tennessee Valley Authority obligations$372 $28 $(1)$399 
State or local housing agency obligations34 — — 34 
Total non-mortgage-backed securities406 28 (1)433 
Mortgage-backed securities
U.S. obligations single-family2
2 — — 2 
GSE single-family633 1 (5)629 
Private-label4 — — 4 
Total mortgage-backed securities639 1 (5)635 
Total$1,045 $29 $(6)$1,068 

December 31, 2021
Amortized
Cost1
Gross
Unrealized
Gains		Gross
Unrealized
Losses		Fair
Value
Non-mortgage-backed securities
GSE and Tennessee Valley Authority obligations$374 $71 $— $445 
State or local housing agency obligations187 1 (1)187 
Total non-mortgage-backed securities561 72 (1)632 
Mortgage-backed securities
U.S. obligations single-family2
2 — — 2 
GSE single-family760 6 — 766 
Private-label5 — — 5 
Total mortgage-backed securities767 6 — 773 
Total$1,328 $78 $(1)$1,405 

1    Amortized cost includes adjustments made to the cost basis of an investment for accretion or amortization and excludes accrued interest receivable of $5 million at both June 30, 2022 and December 31, 2021.

2    Represents investment securities backed by the full faith and credit of the U.S. Government.


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Contractual Maturity

The following table summarizes HTM securities by contractual maturity. Expected maturities of some securities may differ from contractual maturities as borrowers may have the right to call or prepay obligations with or without call or prepayment fees (dollars in millions):
June 30, 2022December 31, 2021
Year of Contractual MaturityAmortized
Cost		Fair
Value		Amortized
Cost		Fair
Value
Non-mortgage-backed securities
Due after one year through five years$255 $265 $257 $287 
Due after five years through ten years73 80 196 204 
Due after ten years78 88 108 141 
Total non-mortgage-backed securities406 433 561 632 
Mortgage-backed securities639 635 767 773 
Total$1,045 $1,068 $1,328 $1,405 

ALLOWANCE FOR CREDIT LOSSES ON AFS AND HTM SECURITIES

The Bank evaluates AFS and HTM investment securities for credit losses on a quarterly basis. The Bank’s AFS and HTM securities may include, but are not limited to, certificates of deposit, commercial paper, U.S. obligations, GSE and Tennessee Valley Authority (TVA) obligations, state or local housing agency obligations, taxable municipal bonds, and mortgage-backed securities (MBS). The Bank only purchases securities considered investment quality. At both June 30, 2022 and December 31, 2021, over 99 percent of the Bank’s AFS and HTM 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. These NRSRO ratings may differ from any internal ratings of the securities by the Bank.

The Bank evaluates its individual AFS 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, 2022 and December 31, 2021, certain AFS securities held by the Bank were in an unrealized loss position. These losses are considered temporary as the Bank expects to recover the entire amortized cost basis on these AFS investment securities and neither intends to sell these securities nor considers it more likely than not that it will be required to sell these securities before its anticipated recovery of each security’s remaining amortized cost basis. In addition, substantially all of these securities are high-quality GSE securities or carry an explicit government guarantee. As a result, no allowance for credit losses was recorded on these AFS securities at June 30, 2022 and December 31, 2021.

The Bank evaluates its HTM 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. At June 30, 2022 and December 31, 2021, the Bank had no allowance for credit losses recorded on its HTM securities because the securities: (i) were all highly-rated, (ii) had not experienced, nor did the Bank expect, any payment default on the instruments, and (iii) in the case of U.S. obligations and GSE and TVA obligations, are high-quality and may carry an explicit government guarantee such that the Bank considers the risk of nonpayment to be zero.
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Note 4 — Advances

REDEMPTION TERM

The following table summarizes the Bank’s advances outstanding by redemption term (dollars in millions):
June 30, 2022December 31, 2021
Redemption Term
Amount1
Weighted
Average
Interest
Rate
Amount1
Weighted
Average
Interest
Rate
Overdrawn demand deposit accounts2
$— 2.73 %$— — %
Due in one year or less22,301 1.76 12,441 1.18 
Due after one year through two years6,267 2.00 7,415 1.72 
Due after two years through three years11,071 1.65 9,956 1.04 
Due after three years through four years4,217 1.73 4,939 0.94 
Due after four years through five years6,343 1.75 6,275 0.95 
Thereafter3,347 2.14 3,113 2.07 
Total par value53,546 1.78 %44,139 1.24 %
Premiums12 14 
Discounts(1)(2)
Fair value hedging adjustments(826)(40)
Total$52,731 $44,111 

1    Excludes accrued interest receivable of $42 million and $13 million at June 30, 2022 and December 31, 2021.

2    The Bank’s overdrawn demand deposit accounts were less than $1 million at June 30, 2022.


The following table summarizes advances by year of redemption term or next call date for callable advances, and by year of redemption term or next put date for putable advances (dollars in millions):
Redemption Term
or Next Call Date		Redemption Term
or Next Put Date
June 30,
2022		December 31, 2021June 30,
2022		December 31, 2021
Overdrawn demand deposit accounts1
$— $— $— $— 
Due in one year or less34,891 24,690 22,954 13,270 
Due after one year through two years4,730 6,253 6,065 7,429 
Due after two years through three years5,337 4,429 10,631 9,173 
Due after three years through four years1,611 2,357 4,217 4,889 
Due after four years through five years3,607 3,273 6,343 6,276 
Thereafter3,370 3,137 3,336 3,102 
Total par value$53,546 $44,139 $53,546 $44,139 
1    The Bank’s overdrawn demand deposit accounts were less than $1 million at June 30, 2022.

The Bank offers advances to members and eligible housing associates that may be prepaid on predetermined dates (call dates) prior to maturity without incurring prepayment fees (callable advances). Other advances may require a prepayment fee or credit that makes the Bank financially indifferent to the prepayment of the advance. At June 30, 2022 and December 31, 2021, the Bank had callable advances outstanding totaling $13.5 billion and $13.4 billion.

The Bank also holds putable advances. With a putable advance, the Bank has the right to terminate the advance from the borrower on predetermined exercise dates. Generally, these put options are exercised when interest rates increase relative to contractual rates. At June 30, 2022 and December 31, 2021, the Bank had putable advances outstanding totaling $0.7 billion and $1.1 billion.


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PREPAYMENT FEES

The Bank generally charges a prepayment fee for advances that a borrower elects to terminate prior to the stated maturity or outside of a predetermined call or put date. The fees charged are priced to make the Bank financially indifferent to the prepayment of the advance. For certain advances with symmetrical prepayment features, the Bank may charge the borrower a prepayment fee or pay the borrower a prepayment credit, depending on certain circumstances, such as movements in interest rates, when the advance is prepaid. Prepayment fees and credits are recorded net of the hedged item fair value hedging adjustments, if applicable, in advance interest income on the Statements of Income. During the three and six months ended June 30, 2022, the Bank recorded net prepayment fees on advances of $3 million and $9 million compared to $13 million and $30 million for the same periods in 2021.

ADVANCE CONCENTRATIONS

The Bank’s advances are primarily concentrated in commercial banks and insurance companies. At June 30, 2022 and December 31, 2021, the Bank did not have any members who individually held 10 percent or more of the Bank’s advances.

ALLOWANCE FOR CREDIT LOSSES

The Bank evaluates advances for credit losses on a quarterly basis and manages its credit exposure to advances through an approach that includes establishing a credit limit for each borrower. This approach includes an ongoing review of each borrower’s financial condition in conjunction with the Bank’s collateral and lending policies to limit risk of loss while balancing borrowers’ needs for a reliable source of funding. In addition, the Bank lends to eligible borrowers in accordance with the FHLBank Act, Finance Agency regulations, and other applicable laws.

The Bank is required by regulation to obtain sufficient collateral to fully secure its advances. The estimated value of the collateral required to secure each borrower’s advances is calculated by applying collateral discounts, or haircuts, to the unpaid principal balance or market value, as applicable, of the collateral. The Bank also has policies and procedures for validating the reasonableness of the Bank’s collateral valuations. In addition, collateral verifications and on-site reviews are performed by the Bank based on the risk profile of the borrower. Management believes that these policies effectively manage the Bank’s credit risk from advances.

Eligible collateral includes:

•fully disbursed whole first mortgages on improved residential real property or securities representing a whole interest in such mortgages;

•loans and securities issued, insured, or guaranteed by the U.S. Government or any agency thereof, including MBS issued or guaranteed by Federal National Mortgage Association, Federal Home Loan Mortgage Corporation, or Government National Mortgage Association;

•cash deposited with the Bank; and

•other real estate-related collateral acceptable to the Bank, such as second lien mortgages, home equity lines of credit, tax-exempt municipal securities, and commercial real estate mortgages, provided such collateral has a readily ascertainable value and the Bank can perfect a security interest in it.

Community financial institutions may also pledge collateral consisting of secured small business, small agri-business, or small farm loans. As additional security, the FHLBank Act provides that the Bank has a lien on each member’s capital stock investment; however, capital stock cannot be pledged as collateral to secure advances.

Collateral arrangements may vary depending upon borrower credit quality, financial condition and performance, borrowing capacity, and overall credit exposure to the borrower. The Bank can also require additional or substitute collateral to protect its security interest. The Bank periodically evaluates and makes changes to its collateral guidelines and collateral haircuts.


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Borrowers may pledge collateral to the Bank by executing a blanket pledge agreement, specifically assigning collateral, or placing physical possession of collateral with the Bank or its custodians. The Bank perfects its security interest in all pledged collateral by filing Uniform Commercial Code financing statements or by taking possession or control of the collateral. Under the FHLBank Act, any security interest granted to the Bank by its members, or any affiliates of its members, has priority over the claims and rights of any party (including any receiver, conservator, trustee, or similar party having rights of a lien creditor), unless those claims and rights would be entitled to priority under otherwise applicable law and are held by actual purchasers or by parties that have perfected security interests.
Under a blanket pledge agreement, the Bank is granted a security interest in all financial assets of the borrower to fully secure the borrower’s obligation. Other than securities and cash deposits, the Bank does not initially take delivery of collateral from blanket pledge agreement borrowers. In the event of a default or a deterioration in the financial condition of a blanket pledge agreement borrower, the Bank has the ability to require delivery of pledged collateral sufficient to secure the borrower’s obligation. With respect to non-blanket pledge agreement borrowers that are federally insured, the Bank generally requires collateral to be specifically assigned. With respect to non-blanket pledge agreement borrowers that are not federally insured (typically insurance companies, CDFIs, and housing associates), the Bank generally takes control of collateral through the delivery of cash, securities, or loans to the Bank or its custodians.

Using a risk-based approach and taking into consideration each borrower’s financial strength, the Bank considers the types and level of collateral to be the primary indicators of credit quality on its advances. At June 30, 2022 and December 31, 2021, the Bank had rights to collateral on a borrower-by-borrower basis with an unpaid principal balance or market value, as applicable, in excess of its outstanding advances.

At June 30, 2022 and December 31, 2021, none of the Bank’s advances were past due, on non-accrual status, or considered impaired. The Bank considers an advance past due for financial reporting purposes if a default of contractual principal or interest exists for a period of 30 days or more. In addition, there were no TDRs related to advances during the six months ended June 30, 2022 and 2021.

The Bank has never experienced a credit loss on its advances. Based upon the Bank’s collateral and lending policies, the collateral held as security, and the repayment history on advances, management has determined that there were no expected credit losses on its advances as of June 30, 2022 and December 31, 2021.

Note 5 — Mortgage Loans Held for Portfolio

Mortgage loans held for portfolio includes conventional mortgage loans and government-guaranteed or -insured mortgage loans obtained primarily through the Mortgage Partnership Finance (MPF) program (Mortgage Partnership Finance and MPF are registered trademarks of the FHLBank of Chicago). The Bank’s mortgage loan program involves investment by the Bank in single-family mortgage loans held for portfolio that are purchased from participating financial institutions (PFIs). Mortgage loans may also be acquired through participations in pools of eligible mortgage loans purchased from other FHLBanks. The Bank’s PFIs generally originate, service, and credit enhance mortgage loans that are sold to the Bank. PFIs participating in the servicing release program do not service the loans owned by the Bank. The servicing on these loans is sold concurrently by the PFI to a designated mortgage service provider.

The following table presents information on the Bank’s mortgage loans held for portfolio (dollars in millions):
June 30,
2022		December 31, 2021
Fixed rate, long-term single-family mortgage loans$6,766 $6,307 
Fixed rate, medium-term1 single-family mortgage loans
1,094 1,172 
Total unpaid principal balance7,860 7,479 
Premiums95 96 
Discounts(6)(2)
Basis adjustments from mortgage loan purchase commitments(5)6 
Total mortgage loans held for portfolio2
7,944 7,579 
Allowance for credit losses(4)(1)
Total mortgage loans held for portfolio, net$7,940 $7,578 

1    Medium-term is defined as an original term of 15 years or less.

2    Excludes accrued interest receivable of $36 million and $34 million at June 30, 2022 and December 31, 2021.

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The following table presents the Bank’s mortgage loans held for portfolio by collateral or guarantee type (dollars in millions):
June 30,
2022		December 31, 2021
Conventional mortgage loans$7,463 $7,063 
Government-insured mortgage loans397 416 
Total unpaid principal balance$7,860 $7,479 

PAYMENT STATUS OF MORTGAGE LOANS

Payment status is the key credit quality indicator for conventional mortgage loans and allows the Bank to monitor borrower performance. Past due loans are those where the borrower has failed to make contractual principal and/or interest payments for a period of 30 days or more. Other delinquency statistics include non-accrual loans and loans in process of foreclosure.

The following tables present the payment status for conventional mortgage loans (dollars in millions):
June 30, 2022
Origination Year
Prior to 20182018 to 2022Total
Past due 30 - 59 days$19 $17 $36 
Past due 60 - 89 days4 4 8 
Past due 90 - 179 days6 2 8 
Past due 180 days or more11 2 13 
Total past due mortgage loans40 25 65 
Total current mortgage loans1,921 5,553 7,474 
Total amortized cost of mortgage loans1
$1,961 $5,578 $7,539 
December 31, 2021
Origination Year
Prior to 20172017 to 2021Total
Past due 30 - 59 days$19 $17 $36 
Past due 60 - 89 days5 3 8 
Past due 90 - 179 days7 2 9 
Past due 180 days or more16 3 19 
Total past due mortgage loans47 25 72 
Total current mortgage loans1,826 5,257 7,083 
Total amortized cost of mortgage loans1
$1,873 $5,282 $7,155 

1    Amortized cost represents the unpaid principal balance adjusted for unamortized premiums, discounts, price adjustment fees, basis adjustments, and direct write-downs. Amortized cost excludes accrued interest receivable.



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The following tables present other delinquency statistics for mortgage loans (dollars in millions):
June 30, 2022
Amortized CostConventionalGovernment-InsuredTotal
In process of foreclosure1
$6 $1 $7 
Serious delinquency rate2
— %1 %— %
Past due 90 days or more and still accruing interest3
$— $6 $6 
Non-accrual mortgage loans4
$52 $— $52 

December 31, 2021
Amortized CostConventionalGovernment- InsuredTotal
In process of foreclosure1
$4 $1 $5 
Serious delinquency rate2
— %3 %1 %
Past due 90 days or more and still accruing interest3
$— $11 $11 
Non-accrual mortgage loans4
$86 $— $86 

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

2    Represents mortgage loans that are 90 days or more past due or in the process of foreclosure expressed as a percentage of total mortgage loans. Serious delinquency rate on conventional loans was less than one percent at both June 30, 2022 and December 31, 2021.

3    Represents government-insured mortgage loans that are 90 days or more past due.

4    Represents conventional mortgage loans that are 90 days or more past due or for which the collection of interest or principal is doubtful. At June 30, 2022 and December 31, 2021, $40 million and $74 million of conventional mortgage loans on non-accrual status were evaluated individually and did not have a related allowance for credit losses because these loans were either previously charged off to the expected recoverable value and/or the fair value of the underlying collateral was greater than the amortized cost of the loans.

ALLOWANCE FOR CREDIT LOSSES

The Bank evaluates mortgage loans for credit losses on a quarterly basis.

Conventional Mortgage Loans

Conventional mortgage loans are evaluated collectively when similar risk characteristics exist. Conventional loans that do not share risk characteristics with other pools are evaluated for expected credit losses on an individual basis. The Bank determines its allowances 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.

For collectively evaluated loans, the Bank uses a projected cash flow model to estimate expected credit losses over the life of the loans. This model relies on a number of inputs, such as current and projected property values and interest rates, as well as historical borrower behavior experience. The Bank also incorporates associated credit enhancements when determining its estimate of expected credit losses. The Bank may incorporate a management adjustment in the allowance for credit losses for conventional mortgage loans due to changes in economic and business conditions or other factors that may not be fully captured in its model.

For individually evaluated loans, the Bank uses the practical expedient for collateral dependent assets. A mortgage loan is considered collateral dependent when repayment is expected to be provided solely by the sale of the underlying collateral. The Bank estimates the fair value of this collateral using a property valuation model. The expected credit loss of a collateral dependent mortgage loan is equal to the difference between the amortized cost of the loan and the estimated fair value of the collateral, less estimated selling costs and expected proceeds from primary mortgage insurance (PMI). The Bank records a direct charge-off of the loan balance if certain triggering criteria are met. Expected recoveries of prior charge-offs are included in the allowance for credit losses.

At June 30, 2022 and December 31, 2021, the Bank’s allowance for credit losses on conventional mortgage loans was $4 million and $1 million. During the six months ended June 30, 2022, the Bank projected an increase in expected credit losses on collectively evaluated loans due primarily to an upward revision in forecasted mortgage rates, a deceleration in forecasted regional home price appreciation, and increased loan volumes. The increase in loan volumes was due to new purchases as well as certain individually evaluated loans returning to accrual status during the period. As a result of loans returning to accrual status, the Bank also saw a decline in expected property value recoveries on individually evaluated loans during the period.
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Government-Insured Mortgage Loans

The Bank invests in government-insured fixed rate mortgage loans portfolios that are insured or guaranteed by the Federal Housing Administration, the Department of Veterans Affairs, and/or the Rural Housing Service of the Department of Agriculture. The servicer or PFI obtains and maintains insurance or a guaranty from the applicable government agency. The servicer or PFI is responsible for compliance with all government agency requirements and for obtaining the benefit of the applicable guarantee or insurance with respect to defaulted government-insured mortgage loans. Any losses incurred on these loans that are not recovered from the insurer/guarantor are absorbed by the servicers. As such, the Bank only has credit risk for these loans if the servicer or PFI fails to pay for losses not covered by the guarantee or insurance, but in such instance, the Bank would have recourse against the servicer for such failure.

The Bank has never experienced a credit loss on its government-insured mortgage loans. At June 30, 2022 and December 31, 2021, the Bank assessed its servicers and determined there was no expectation that a servicer would fail to remit payments due until paid in full. As a result, the Bank did not establish an allowance for credit losses for its government-insured mortgage loans at June 30, 2022 and December 31, 2021. Furthermore, none of these mortgage loans have been placed on non-accrual status because of the U.S. Government guarantee or insurance on these loans and the contractual obligation of the loan servicer to repurchase the loans when certain criteria are met.

Note 6 — Derivatives and Hedging Activities

NATURE OF BUSINESS ACTIVITY

The Bank is exposed to interest rate risk primarily from the effect of interest rate changes on its interest-earning assets and its related funding sources. The goal of the Bank’s interest rate risk management strategy is not to eliminate interest rate risk, but to manage it within appropriate limits. To mitigate the risk of loss, the Bank has established policies and procedures, which include guidelines on the amount of exposure to interest rate changes it is willing to accept.

The Bank enters into derivative contracts to manage the interest rate risk exposures inherent in its otherwise unhedged assets and funding positions. Finance Agency regulations and the Bank’s risk management policies establish guidelines for derivatives, prohibit trading in or the speculative use of derivatives, and limit credit risk arising from derivatives.

Derivative financial instruments are used by the Bank to achieve its financial and risk management objectives. The Bank reevaluates its hedging strategies periodically and may change the hedging techniques it uses or may adopt new strategies. The most common ways in which the Bank uses derivatives are to:

•reduce the interest rate sensitivity and repricing gaps of assets and liabilities;

•preserve an interest rate spread between the yield of an asset and the cost of the related liability. Without the use of derivatives, this interest rate spread could be reduced or eliminated when a change in the interest rate on the asset does not match a change in the interest rate on the liability;

•mitigate the adverse earnings effects of the shortening or extension of certain assets and liabilities;

•manage embedded options in assets and liabilities; and

•reduce funding costs by combining a derivative with a consolidated obligation, as the cost of a combined funding structure can be lower than the cost of a comparable consolidated obligation.


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TYPES OF DERIVATIVES AND HEDGED ITEMS

The Bank may use the following derivative instruments:

•interest rate swaps;

•options;

•swaptions;

•interest rate caps and floors; and

•futures/forwards contracts.

The Bank may have the following types of hedged items:

•investment securities;

•advances;
•mortgage loans;
•consolidated obligations; and
•firm commitments.

For additional information on the Bank’s derivative and hedging accounting policies, see “Note 1 — Summary of Significant Accounting Policies” in the 2021 Form 10-K.

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FINANCIAL STATEMENT EFFECT AND ADDITIONAL FINANCIAL INFORMATION

The notional amount of derivatives serves as a factor in determining periodic interest payments and cash flows received and paid. However, the notional amount of derivatives represents neither the actual amounts exchanged nor the overall exposure of the Bank to credit and market risk. The risks of derivatives can be measured meaningfully on a portfolio basis that takes into account the counterparties, the types of derivatives, the items being hedged, and any offsets between the derivatives and the items being hedged.

The following table summarizes the Bank’s notional amount and fair value of derivative instruments and total derivative assets and liabilities. Total derivative assets and liabilities include the effect of netting adjustments and cash collateral. For purposes of this disclosure, the derivative values include the fair value of derivatives and the related accrued interest (dollars in millions):
June 30, 2022December 31, 2021
Notional
Amount		Derivative
Assets		Derivative
 Liabilities		Notional
Amount 		Derivative
Assets		Derivative
 Liabilities
Derivatives designated as hedging instruments (fair value hedges)
Interest rate swaps$33,617 $154 $253 $57,502 $68 $136 
Derivatives not designated as hedging instruments (economic hedges)
Interest rate swaps34,415 10 13 23,664 7 43 
Forward settlement agreements (TBAs)143 — 1 115 — — 
Mortgage loan purchase commitments147 1 1 115 — — 
Total derivatives not designated as hedging instruments34,705 11 15 23,894 7 43 
Total derivatives before netting and collateral adjustments$68,322 165 268 $81,396 75 179 
Netting adjustments and cash collateral1
85 (257)146 (176)
Total derivative assets and derivative liabilities$250 $11 $221 $3 

1     Amounts represent the application of the netting requirements that allow the Bank to net settle positive and negative positions and also cash collateral, including accrued interest, held or placed with the same clearing agent and/or counterparty. At June 30, 2022 and December 31, 2021, cash collateral, including accrued interest, posted by the Bank was $438 million and $342 million. At June 30, 2022 and December 31, 2021, the Bank held cash collateral, including accrued interest, from clearing agents or counterparties of $96 million and $20 million.

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The following tables summarize the net gains (losses) on qualifying and discontinued fair value hedging relationships recorded in net interest income, including the net interest settlements on derivatives, as well as total income (expense) by hedged product recorded on the Statements of Income (dollars in millions):
For the Three Months Ended June 30, 2022
Interest Income (Expense)
AdvancesAFS SecuritiesConsolidated Obligation Bonds
Total interest income (expense) recorded on the Statements of Income1
$184 $55 $(124)
Gains (losses) on fair value hedging relationships
Interest rate contracts
   Derivatives2
$229 $177 $(55)
   Hedged items3
(241)(185)57 
Net gains (losses) on fair value hedging relationships$(12)$(8)$2 
For the Three Months Ended June 30, 2021
Interest Income (Expense)
AdvancesAFS SecuritiesConsolidated Obligation Bonds
Total interest income (expense) recorded on the Statements of Income1
$121 $22 $(117)
Gains (losses) on fair value hedging relationships
Interest rate contracts
Derivatives2
$(66)$(78)$1 
Hedged items3
9 43 35 
Net gains (losses) on fair value hedging relationships$(57)$(35)$36 

1     Amounts shown to give context to the disclosure and include total interest income (expense) of the products indicated, including coupon, prepayment fees, amortization, and derivative net interest settlements. Interest income (expense) amounts also include gains and losses on derivatives and hedged items in fair value hedging relationships.
2     Includes changes in fair value and net interest settlements on derivatives.    
3    Includes changes in fair value and amortization/accretion of basis adjustments on closed hedge relationships.
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The following tables summarize the net gains (losses) on qualifying and discontinued fair value hedging relationships recorded in net interest income, including the net interest settlements on derivatives, as well as total income (expense) by hedged product recorded on the Statements of Income (dollars in millions):

For the Six Months Ended June 30, 2022
Interest Income (Expense)
AdvancesAFS SecuritiesConsolidated Obligation Bonds
Total interest income (expense) recorded on the Statements of Income1
$295 $85 $(223)
Gains (losses) on fair value hedging relationships
Interest rate contracts
   Derivatives2
$735 $427 $(173)
   Hedged items3
(786)(456)184 
Net gains (losses) on fair value hedging relationships$(51)$(29)$11 
For the Six Months Ended June 30, 2021
Interest Income (Expense)
AdvancesAFS SecuritiesConsolidated Obligation Bonds
Total interest income (expense) recorded on the Statements of Income1
$252 $58 $(243)
Gains (losses) on fair value hedging relationships
Interest rate contracts
Derivatives2
$133 $95 $(6)
Hedged items3
(244)(160)78 
Net gains (losses) on fair value hedging relationships$(111)$(65)$72 

1     Amounts shown to give context to the disclosure and include total interest income (expense) of the products indicated, including coupon, prepayment fees, amortization, and derivative net interest settlements. Interest income (expense) amounts also include gains and losses on derivatives and hedged items in fair value hedging relationships.
2    Includes changes in fair value and net interest settlements on derivatives.    
3    Includes changes in fair value and amortization/accretion of basis adjustments on closed hedge relationships.



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The following tables summarize cumulative fair value hedging adjustments and the related amortized cost of the hedged items (dollars in millions):
June 30, 2022
AdvancesAFS SecuritiesConsolidated Obligation Bonds
Amortized cost of hedged asset/ liability1
$17,333 $6,788 $10,009 
Fair value hedging adjustments
Changes in fair value for active hedging relationships included in amortized cost $(768)$(383)$(176)
Basis adjustments for discontinued hedging relationships included in amortized cost(58)— (3)
Total amount of fair value hedging adjustments $(826)$(383)$(179)

December 31, 2021
AdvancesAFS Securities Consolidated Obligation Bonds
Amortized cost of hedged asset/ liability1
$17,598 $6,547 $34,271 
Fair value hedging adjustments
Changes in fair value for active hedging relationships included in amortized cost$(54)$73 $11 
Basis adjustments for discontinued hedging relationships included in amortized cost14 — (5)
Total amount of fair value hedging adjustments $(40)$73 $6 

1    Represents the portion of amortized cost designated as a hedged item in an active or discontinued fair value hedging relationship.

The following table summarizes the components of “Net gains (losses) on derivatives” as presented on the Statements of Income (dollars in millions):
For the Three Months Ended
For the Six Months Ended
June 30,June 30,
2022202120222021
Derivatives not designated as hedging instruments (economic hedges)
Interest rate swaps$(40)$(3)$(23)$18 
Forward settlement agreements (TBAs)4 — 11 3 
Mortgage loan purchase commitments(4)— (11)(3)
Net interest settlements11 (5)10 (9)
Total net gains (losses) related to derivatives not designated as hedging instruments(29)(8)(13)9 
  Price alignment amount1
(1)— (1)— 
Net gains (losses) on derivatives$(30)$(8)$(14)$9 

1    This amount represents interest on variation margin, which is a component of the derivative fair value for cleared transactions, and reflects the price alignment amount on variation margin for daily settled derivative contracts not designated as hedging instruments. The price alignment amount on variation margin for daily settled derivative contracts designated as hedging instruments are recorded in the same line item as the earnings effect of the hedged item.

MANAGING CREDIT RISK ON DERIVATIVES

The Bank is subject to credit risk due to the risk of nonperformance by counterparties to its derivative contracts. The Bank manages credit risk through credit analyses, collateral requirements, and adherence to the requirements set forth in the Bank’s policies, U.S. Commodity Futures Trading Commission regulations, and Finance Agency regulations.


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The Bank transacts most of its derivative transactions with large banks and major broker-dealers. Over-the-counter derivative transactions may be either executed directly with a counterparty, referred to as uncleared derivatives, or cleared through a clearing agent with a Clearinghouse, referred to as cleared derivatives. Once a derivative transaction has been accepted for clearing by a Clearinghouse, the derivative transaction is novated and the executing counterparty is replaced with the Clearinghouse. The Bank is not a derivative dealer and does not trade derivatives for short-term profit.

For uncleared derivatives, the degree of credit risk is impacted by the extent to which master netting arrangements are included in the derivative contracts to mitigate the risk. The Bank requires collateral agreements on its uncleared derivatives.

Certain of the Bank’s uncleared derivative instruments contain provisions that require the Bank to post additional collateral with its counterparties if there is deterioration in the Bank’s credit rating. If the Bank’s credit rating is lowered by an NRSRO, the Bank may be required to deliver additional collateral on uncleared derivative instruments in net liability positions, unless the collateral delivery threshold is set to zero. The aggregate fair value of all uncleared derivative instruments with credit-risk related contingent features that were in a net liability position (before cash collateral and related accrued interest) at June 30, 2022 was less than $1 million, for which the Bank was not required to post collateral in the normal course of business. If the Bank’s credit rating had been lowered from its current rating to the next lower rating, the Bank would not have been required to deliver additional collateral to its uncleared derivative counterparties at June 30, 2022.
For cleared derivatives, the Clearinghouse is the Bank’s counterparty. The Bank utilizes one Clearinghouse, CME Clearing, for all cleared derivative transactions. CME Clearing notifies the clearing agent of the required initial margin and daily variation margin requirements, and the clearing agent in turn notifies the Bank.

The Clearinghouse determines initial margin requirements which are considered cash collateral. Generally credit ratings are not factored into the initial margin. However, clearing agents may require additional initial margin to be posted based on credit considerations, including, but not limited to, credit rating downgrades. The Bank was not required to post additional initial margin by its clearing agent, based on credit considerations, at June 30, 2022. Variation margin requirements with CME Clearing are based on changes in the fair value of cleared derivatives and are legally characterized as daily settlement payments, rather than cash collateral.

The requirement that the Bank post initial and variation margin through the clearing agent, to the Clearinghouse, exposes the Bank to institutional credit risk if the clearing agent or the Clearinghouse fails to meet its obligations. The use of cleared derivatives is intended to mitigate credit risk exposure because a central counterparty is substituted for individual counterparties and collateral/payments for changes in the fair value of cleared derivatives is posted daily through a clearing agent.

OFFSETTING OF DERIVATIVE ASSETS AND DERIVATIVE LIABILITIES

The Bank presents derivative instruments, related cash collateral received or pledged, and associated accrued interest on a net basis by clearing agent and/or by counterparty when it has met the netting requirements. Additional information regarding these agreements is provided in “Note 1 — Summary of Significant Accounting Policies” in the 2021 Form 10-K.

The Bank has analyzed the enforceability of offsetting rights incorporated in its cleared derivative transactions and has determined that the exercise of those offsetting rights by a non-defaulting party under these transactions should be upheld under applicable law upon an event of default, including a bankruptcy, insolvency, or similar proceeding involving the Clearinghouse or the clearing agent, or both. Based on this analysis, the Bank presents a net derivative receivable or payable for all of its transactions through a particular clearing agent with a particular Clearinghouse.
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The following tables present the fair value of derivative instruments meeting or not meeting the netting requirements and the related collateral received from or pledged to counterparties (dollars in millions):
June 30, 2022
Derivative Instruments Meeting Netting Requirements
Gross Amount Recognized1
Gross Amount of Netting Adjustments and Cash Collateral
Derivative Instruments Not Meeting Netting Requirements2
Total Derivative Assets and Total Derivative Liabilities
Derivative Assets
   Uncleared derivatives$153 $(146)$1 $8 
   Cleared derivatives11 231 — 242 
Total$164 $85 $1 $250 
Derivative Liabilities
   Uncleared derivatives$159 $(149)$1 $11 
   Cleared derivatives108 (108)— — 
Total$267 $(257)$1 $11 

December 31, 2021
Derivative Instruments Meeting Netting Requirements
Gross Amount Recognized1
Gross Amount of Netting Adjustments and Cash Collateral
Derivative Instruments Not Meeting Netting Requirements2
Total Derivative Assets and Total Derivative Liabilities
Derivative Assets
   Uncleared derivatives$74 $(73)$— $1 
   Cleared derivatives1 219 — 220 
Total$75 $146 $— $221 
Derivative Liabilities
   Uncleared derivatives$172 $(170)$— $2 
   Cleared derivatives7 (6)— 1 
Total$179 $(176)$— $3 

1    Represents derivative assets and derivative liabilities prior to netting adjustments and cash collateral, including accrued interest.

2    Represents mortgage loan purchase commitments not subject to enforceable master netting requirements.


Note 7 — Consolidated Obligations

    Consolidated obligations consist of bonds and discount notes. The FHLBanks issue consolidated obligations through the Office of Finance as their agent. Bonds are issued primarily to raise intermediate- and long-term funds for the Bank and are not subject to any statutory or regulatory limits on their maturity. Discount notes are issued primarily to raise short-term funds for the Bank and have original maturities of up to one year. Discount notes sell at or below their face amount and are redeemed at par value when they mature.

    Although the Bank is primarily liable for the portion of consolidated obligations issued on its behalf, it is also jointly and severally liable with the other FHLBanks for the payment of principal and interest on all FHLBank System consolidated obligations. The Finance Agency, at its discretion, may require any FHLBank to make principal and/or interest payments due on any consolidated obligation, whether or not the primary obligor FHLBank has defaulted on the payment of that consolidated obligation. The Finance Agency has never exercised this discretionary authority. At June 30, 2022 and December 31, 2021, the total par value of outstanding consolidated obligations of the FHLBanks was $882.5 billion and $652.9 billion.

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DISCOUNT NOTES

The following table summarizes the Bank’s discount notes (dollars in millions):
June 30, 2022December 31, 2021
AmountWeighted
Average
Interest
Rate 		AmountWeighted
Average
Interest
Rate
Par value$50,497 1.23 %$22,355 0.08 %
Discounts and concessions1
(212)(6)
Fair value option adjustments(100)(1)
Total$50,185 $22,348 

1    Concessions represent fees paid to dealers in connections with the issuance of certain consolidated obligation discount notes.


BONDS

The following table summarizes the Bank’s bonds outstanding by contractual maturity (dollars in millions):
June 30, 2022December 31, 2021
Year of Contractual MaturityAmountWeighted
Average
Interest
Rate 		AmountWeighted
Average
Interest
Rate
Due in one year or less$19,604 1.74 %$38,778 0.30 %
Due after one year through two years4,233 2.17 3,928 2.06 
Due after two years through three years4,059 2.44 5,073 2.41 
Due after three years through four years911 2.19 1,010 2.11 
Due after four years through five years1,207 2.08 1,185 1.97 
Thereafter5,201 2.38 5,105 2.27 
Total par value35,215 1.99 %55,079 0.87 %
Premiums110 138 
Discounts and concessions1
(16)(17)
Fair value hedging adjustments(179)5 
Total$35,130 $55,205 

1    Concessions represent fees paid to dealers in connections with the issuance of certain consolidated obligation bonds.


The following table summarizes the Bank’s bonds outstanding by call features (dollars in millions):
June 30,
2022		December 31,
2021
Non-callable or non-putable$25,596 $49,422 
Callable9,619 5,657 
Total par value$35,215 $55,079 

The following table summarizes the Bank’s bonds outstanding by year of contractual maturity or next call date (dollars in millions):
Year of Contractual Maturity or Next Call DateJune 30,
2022		December 31,
2021
Due in one year or less$25,876 $44,071 
Due after one year through two years3,459 3,908 
Due after two years through three years3,078 3,831 
Due after three years through four years681 805 
Due after four years through five years576 753 
Thereafter1,545 1,711 
Total par value$35,215 $55,079 


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Note 8 — Capital

CAPITAL STOCK

The Bank’s capital stock has a par value of $100 per share, and all shares are issued, redeemed, and repurchased only at the stated par value. The Bank issues a single class of capital stock (Class B capital stock) and has two subclasses of Class B capital stock: membership and activity-based. Each member must purchase and hold membership capital stock in an amount equal to 0.12 percent of its total assets as of the preceding December 31st, subject to a cap of $10 million and a floor of $10,000. Each member is also required to purchase activity-based capital stock equal to 4.00 percent of its advances and mortgage loans outstanding on the Bank’s Statements of Condition and 0.10 percent of its standby letters of credit. All capital stock issued is subject to a notice of redemption period of five years.

The capital stock requirements established in the Bank’s Capital Plan are designed so that the Bank can remain adequately capitalized as member activity changes. The Bank’s Board of Directors may make adjustments to the capital stock requirements within ranges established in the Capital Plan.

EXCESS STOCK

Capital stock owned by members in excess of their investment requirement is deemed excess capital stock. Under its Capital Plan, the Bank, at its discretion and upon 15 days written notice, may repurchase excess membership capital stock. The Bank, at its discretion, may also repurchase excess activity-based capital stock to the extent that (i) the excess capital stock balance exceeds an operational threshold set forth in the Capital Plan, which is currently set at zero, or (ii) a member submits a notice to redeem all or a portion of the excess activity-based capital stock. At June 30, 2022, the Bank had no excess capital stock outstanding. At December 31, 2021, the Bank’s excess capital stock outstanding was less than $1 million.

MANDATORILY REDEEMABLE CAPITAL STOCK

The Bank reclassifies capital stock subject to redemption from equity to a liability (mandatorily redeemable capital stock or MRCS) at the time shares meet the definition of a mandatorily redeemable financial instrument. This occurs after a member provides written notice of intention to withdraw from membership, becomes ineligible for continuing membership, or attains non-member status by merger or consolidation, charter termination, or other involuntary termination from membership. Dividends on MRCS are classified as interest expense on the Statements of Income.

The following tables summarize changes in MRCS (dollars in millions):
For the Three Months Ended June 30,
20222021
Balance, beginning of period$18 $36 
Capital stock reclassified to (from) MRCS, net2 80 
Net payments for repurchases/redemptions of MRCS(3)(81)
Balance, end of period$17 $35 

For the Six Months Ended
June 30,
20222021
Balance, beginning of period$29 $52 
Capital stock reclassified to (from) MRCS, net3 80 
Net payments for repurchases/redemptions of MRCS(15)(97)
Balance, end of period$17 $35 

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The following table summarizes the Bank’s MRCS by year of contractual redemption (dollars in millions):
Year of Contractual Redemption1
June 30,
2022		December 31, 2021
Due in one year or less$1 $10 
Due after one year through two years1 1 
Due after three years through four years8 1 
Due after four years through five years— 9 
Past contractual redemption date due to outstanding activity with the Bank7 8 
Total$17 $29 

1    At the Bank’s election, MRCS may be redeemed prior to the expiration of the five year redemption period that commences on the date of the notice of redemption.

RESTRICTED RETAINED EARNINGS

The Bank entered into a Joint Capital Enhancement Agreement (JCE Agreement) with all of the other FHLBanks in 2011. The JCE Agreement, as amended, is intended to enhance the capital position of the Bank over time. Under the JCE Agreement, each FHLBank is required to allocate 20 percent of its quarterly net income to a separate restricted retained earnings account until the balance of that account, calculated as of the last day of each calendar quarter, equals at least one percent of its average balance of outstanding consolidated obligations for the calendar quarter. The restricted retained earnings are not available to pay dividends. At June 30, 2022 and December 31, 2021, the Bank’s restricted retained earnings account totaled $648 million and $617 million.

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following table summarizes changes in accumulated other comprehensive income (loss) (AOCI) (dollars in millions):
Net unrealized gains (losses) on AFS securities (Note 3)Pension and postretirement benefitsTotal AOCI
Balance, March 31, 2021$104 $(4)$100 
Other comprehensive income (loss) before reclassifications
Net unrealized gains (losses) on AFS securities(2)— (2)
Net current period other comprehensive income (loss)(2)— (2)
Balance, June 30, 2021$102 $(4)$98 
Balance, March 31, 2022$27 $(6)$21 
Other comprehensive income (loss) before reclassifications
Net unrealized gains (losses) on AFS securities(50)— (50)
Net current period other comprehensive income (loss)(50)— (50)
Balance, June 30, 2022$(23)$(6)$(29)
Balance, December 31, 2020$52 $(4)$48 
Other comprehensive income (loss) before reclassifications
Net unrealized gains (losses) on AFS securities50 — 50 
Net current period other comprehensive income (loss)50 — 50 
Balance, June 30, 2021$102 $(4)$98 
Balance, December 31, 2021$88 $(4)$84 
Other comprehensive income (loss) before reclassifications
Net unrealized gains (losses) on AFS securities(111)— (111)
Reclassifications from AOCI to net income
Amortization - pension and postretirement— (2)(2)
Net current period other comprehensive income (loss)(111)(2)(113)
Balance, June 30, 2022$(23)$(6)$(29)

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REGULATORY CAPITAL REQUIREMENTS

The Bank is subject to three regulatory capital requirements:

•Risk-based capital. The Bank must maintain at all times permanent capital greater than or equal to the sum of its credit, market, and operational risk capital requirements, all calculated in accordance with Finance Agency regulations. Only permanent capital, defined as Class B capital stock (including MRCS), and retained earnings can satisfy this risk-based capital requirement.

•Regulatory capital. The Bank is required to maintain a minimum four percent capital-to-asset ratio, which is defined as total regulatory capital divided by total assets. Total regulatory capital includes Class B stock (including MRCS) and retained earnings.

•Leverage capital. The Bank is required to maintain a minimum five percent leverage ratio, which is defined as the sum of permanent capital weighted 1.5 times and nonpermanent capital weighted 1.0 times, divided by total assets. The Bank did not hold any nonpermanent capital at June 30, 2022 and December 31, 2021.

In addition to the requirements previously discussed, the Finance Agency Advisory Bulletin on capital stock (the Capital Stock AB) requires each FHLBank to maintain at all times a ratio of at least two percent of capital stock to total assets. For purposes of the Capital Stock AB, capital stock includes MRCS. The capital stock to total assets ratio is measured on a daily average basis at month end.

If the Bank’s capital falls below the required levels, the Finance Agency has authority to take actions necessary to return it to levels that it deems to be consistent with safe and sound business operations.

The following table shows the Bank’s compliance with the Finance Agency’s regulatory capital requirements (dollars in millions):
June 30, 2022December 31, 2021
RequiredActualRequiredActual
Regulatory capital requirements
Risk-based capital$541 $6,351 $585 $5,783 
Regulatory capital$3,759 $6,351 $3,434 $5,783 
Leverage capital$4,698 $9,526 $4,293 $8,675 
Capital-to-assets ratio4.00 %6.76 %4.00 %6.74 %
Capital stock-to-assets ratio2.00 %4.07 %2.00 %4.08 %
Leverage ratio5.00 %10.14 %5.00 %10.10 %

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Note 9 — Fair Value

Fair value amounts are determined by the Bank using available market information and reflect the Bank’s best judgment of appropriate valuation methods. GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., exit price). The fair value hierarchy requires an entity to maximize the use of significant observable inputs and minimize the use of significant unobservable inputs when measuring fair value. The inputs are evaluated and an overall level for the fair value measurement is determined. This overall level is an indication of market observability of the fair value measurement for the asset or liability.

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

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

•Level 2 Inputs. Inputs other than quoted prices within Level 1 that are observable inputs for the asset or liability, either directly or indirectly. If the asset or liability has a specified (contractual) term, a Level 2 input must be observable for substantially the full term of the asset or liability. Level 2 inputs include the following: (i) quoted prices for similar assets or liabilities in active markets, (ii) quoted prices for identical or similar assets or liabilities in markets that are not active, (iii) inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates and yield curves that are observable at commonly quoted intervals and implied volatilities), and (iv) market-corroborated inputs.

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

The Bank reviews its fair value hierarchy classifications on a quarterly basis. Changes in the observability of the valuation inputs may result in a reclassification of certain assets or liabilities. The Bank had no transfers of assets or liabilities into or out of Level 3 of the fair value hierarchy during the six months ended June 30, 2022 and 2021.

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The following table summarizes the carrying value, fair value, and fair value hierarchy of the Bank’s financial instruments (dollars in millions). The Bank records trading securities, AFS securities, derivative assets, derivative liabilities, financial instruments held under the fair value option, and certain other assets at fair value on a recurring basis, and on occasion certain impaired mortgage loans held for portfolio on a non-recurring basis. The Bank records all other financial assets and liabilities at amortized cost. The fair values do not represent an estimate of the overall market value of the Bank as a going concern, which would take into account future business opportunities and the net profitability of assets and liabilities.
June 30, 2022
Fair Value
Financial InstrumentsCarrying ValueLevel 1Level 2Level 3
Netting Adjustments and Cash Collateral1
Total
Assets
Cash and due from banks$50 $50 $— $— $— $50 
Interest-bearing deposits1,011 — 1,011 — — 1,011 
Securities purchased under agreements to resell7,250 — 7,250 — — 7,250 
Federal funds sold8,180 — 8,180 — — 8,180 
Trading securities2,213 — 2,213 — — 2,213 
Available-for-sale securities13,054 — 13,054 — — 13,054 
Held-to-maturity securities1,045 — 1,064 4 — 1,068 
Advances52,731 — 52,592 — — 52,592 
Mortgage loans held for portfolio, net7,940 — 7,466 43 — 7,509 
Accrued interest receivable118 — 118 — — 118 
Derivative assets, net250 — 165 — 85 250 
Other assets35 35 — — — 35 
Liabilities
Deposits(1,528)— (1,528)— — (1,528)
Consolidated obligations
Discount notes(50,185)— (50,178)— — (50,178)
Bonds(35,130)— (34,462)— — (34,462)
Total consolidated obligations(85,315)— (84,640)— — (84,640)
MRCS(17)(17)— — — (17)
Accrued interest payable(107)— (107)— — (107)
Derivative liabilities, net(11)— (268)— 257 (11)

1    Amounts represent the application of the netting requirements that allow the Bank to net settle positive and negative positions and also cash collateral and the related accrued interest held or placed with the same clearing agent and/or counterparty.
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The following table summarizes the carrying value, fair value, and fair value hierarchy of the Bank’s financial instruments (dollars in millions):
December 31, 2021
Fair Value
Financial InstrumentsCarrying ValueLevel 1Level 2Level 3
Netting Adjustments and Cash Collateral1
Total
Assets
Cash and due from banks$295 $295 $— $— $— $295 
Interest-bearing deposits416 — 416 — — 416 
Securities purchased under agreements to resell12,450 — 12,450 — — 12,450 
Federal funds sold4,690 — 4,690 — — 4,690 
Trading securities1,169 — 1,169 — — 1,169 
Available-for-sale securities13,389 — 13,389 — — 13,389 
Held-to-maturity securities1,328 — 1,400 5 — 1,405 
Advances44,111 — 44,397 — — 44,397 
Mortgage loans held for portfolio, net7,578 — 7,694 81 — 7,775 
Accrued interest receivable84 — 84 — — 84 
Derivative assets, net221 — 75 — 146 221 
Other assets44 44 — — — 44 
Liabilities
Deposits(1,847)— (1,847)— — (1,847)
Consolidated obligations
Discount notes(22,348)— (22,348)— — (22,348)
Bonds(55,205)— (55,581)— — (55,581)
Total consolidated obligations(77,553)— (77,929)— — (77,929)
MRCS(29)(29)— — — (29)
Accrued interest payable(97)— (97)— — (97)
Derivative liabilities, net(3)— (179)— 176 (3)

1    Amounts represent the application of the netting requirements that allow the Bank to net settle positive and negative positions and also cash collateral and the related accrued interest held or placed with the same clearing agent and/or counterparty.


SUMMARY OF VALUATION TECHNIQUES AND PRIMARY INPUTS
The valuation techniques and primary inputs used to develop the measurement of fair value for assets and liabilities that are measured at fair value on a recurring or non-recurring basis on the Statements of Condition are outlined below.

Trading and AFS Investment Securities. The Bank’s valuation technique incorporates prices from multiple designated third-party pricing vendors, when available. The pricing vendors generally use various proprietary models to price investment securities. The inputs to those models are derived from various sources including, but not limited to, benchmark securities and yields, reported trades, dealer estimates, issuer spreads, bids, offers, and other market-related data. Since many investment securities do not trade on a daily basis, the pricing vendors use available information, as applicable, such as benchmark curves, benchmarking of like securities, sector groupings, and matrix pricing to determine the prices for individual securities. Each pricing vendor has an established process in place to challenge investment valuations, which facilitates resolution of questionable prices identified by the Bank. Annually, the Bank conducts reviews of its pricing vendors to confirm and further augment its understanding of the vendors’ pricing processes, methodologies, and control procedures for investment securities.

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The Bank’s valuation technique for estimating the fair values of its investment securities first requires the establishment of a median price for each security. All prices that are within a specified tolerance threshold of the median price are included in the cluster of prices that are averaged to compute a default price. All prices that are outside the threshold (outliers) are subject to further analysis (including, but not limited to, comparison to prices provided by an additional third-party valuation service, prices for similar securities, and/or non-binding dealer estimates) to determine if an outlier is a better estimate of fair value. If an outlier (or some other price identified in the analysis) is determined to be a better estimate of fair value, then the outlier (or the other price as appropriate) is used as the final price rather than the default price. Alternatively, if the analysis confirms that an outlier (or outliers) is (are) in fact not representative of fair value and the default price is the best estimate, then the default price is used as the final price. In all cases, the final price is used to determine the fair value of the security. In limited instances, when no prices are available from one of the designated pricing services, the Bank obtains prices from dealers.

As of June 30, 2022 and December 31, 2021, multiple prices were received for the majority of the Bank’s trading and AFS investment securities. Based on the Bank’s review of the pricing methods and controls employed by the third-party pricing vendors and the relative lack of dispersion among the vendor prices, the Bank believes its final prices are representative of the prices that would have been received if the assets had been sold at the measurement date (i.e., exit prices) and further, that the fair value measurements are classified appropriately in the fair value hierarchy.

Impaired Mortgage Loans Held for Portfolio. The fair value of impaired mortgage loans held for portfolio is estimated by obtaining property values from an external pricing vendor. This vendor utilizes multiple pricing models that generally factor in market observable inputs, including actual sales transactions and home price indices. The Bank applies an adjustment to these values to capture certain limitations in the estimation process and takes into consideration estimated selling costs and expected PMI proceeds.  

Derivative Assets and Liabilities and the Related Hedged Items. The fair value of derivatives is generally estimated using standard valuation techniques such as discounted cash flow analyses and comparisons to similar instruments, and includes variation margin payments for daily settled contracts. In limited instances, fair value estimates for interest-rate related derivatives may be obtained using an external pricing model that utilizes observable market data. The Bank is subject to credit risk in derivatives transactions due to the potential nonperformance of its derivatives counterparties. The use of cleared derivatives is intended to mitigate credit risk exposure because a central counterparty is substituted for individual counterparties and collateral/payments is posted daily, through a clearing agent, for changes in the fair value of cleared derivatives. To mitigate credit risk on uncleared derivatives, the Bank enters into master netting agreements with its counterparties as well as collateral agreements that have collateral delivery thresholds. The Bank has evaluated the potential for the fair value of its derivatives to be affected by counterparty credit risk and its own credit risk and has determined that no adjustments were significant to the overall fair value measurements.

The fair values of the Bank’s derivative assets and derivative liabilities include accrued interest receivable/payable and related cash collateral. The estimated fair values of the accrued interest receivable/payable and cash collateral approximate their carrying values due to their short-term nature. The fair values of derivatives are netted by clearing agent and/or counterparty if the netting requirements are met. If these netted amounts result in a receivable to the Bank, they are classified as an asset and, if classified as a payable to the clearing agent or counterparty, they are classified as a liability.

The Bank’s discounted cash flow model utilizes market-observable inputs (inputs that are actively quoted and can be validated to external sources). The Bank uses the following inputs for measuring the fair value of interest-related derivatives:

•Discount rate assumption. The Bank utilizes the federal funds overnight index swap (OIS) or Secured Overnight Financing Rate (SOFR) swap curve depending on the terms of the derivative agreement. 

•Forward interest rate assumption. The Bank utilizes the swap curve of the instrument’s index rate.

•Volatility assumption. Market-based expectations of future interest rate volatility implied from current market prices for similar options.

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For forward settlement agreements (TBAs), the Bank utilizes TBA securities prices that are determined by coupon class and expected term until settlement. For mortgage loan purchase commitments, the Bank utilizes TBA securities prices adjusted for factors such as credit risk and servicing spreads.
For the related hedged items, the fair value is estimated using a discounted cash flow analysis which typically considers the following inputs:

•Discount rate assumption. The Bank utilizes the designated benchmark interest rate curve. 

•Volatility assumption. Market-based expectations of future interest rate volatility implied from current market prices for similar options.

Other Assets. These represent grantor trust assets, which are carried at estimated fair value based on quoted market prices as of the last business day of the reporting period.

Consolidated Obligation Discount Notes Recorded under the Fair Value Option. The fair value of consolidated obligation discount notes recorded under the fair value option is determined by calculating the present value of the expected future cash flows. The discount rates used in the present value calculations are for consolidated obligations with similar terms. The Bank uses the consolidated obligation curve for measuring the fair value of these consolidated obligations, which is a market-observable curve constructed by the Office of Finance. This curve is constructed using the U.S. Treasury curve as a base curve which is then adjusted by adding indicative spreads obtained largely from market-observable sources.

Subjectivity of Estimates. Estimates of the fair value of financial assets and liabilities using the methods previously described are highly subjective and require judgments regarding significant matters, such as the amount and timing of future cash flows, prepayment speed assumptions, expected interest rate volatility, possible distributions of future interest rates used to value options, and the selection of discount rates that appropriately reflect market and credit risks. The use of different assumptions could have a material effect on the fair value estimates.

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FAIR VALUE ON A RECURRING BASIS

The following table summarizes, for each hierarchy level, the Bank’s assets and liabilities that are measured at fair value on the Statements of Condition (dollars in millions):
June 30, 2022
Recurring Fair Value MeasurementsLevel 1Level 2Level 3
Netting Adjustments and Cash Collateral1
Total
Assets
Trading securities
U.S. Treasury obligations$— $1,770 $— $— $1,770 
Other U.S. obligations— 87 — — 87 
GSE and TVA obligations— 53 — — 53 
Other non-MBS
— 167 — — 167 
GSE multifamily MBS— 136 — — 136 
Total trading securities— 2,213 — — 2,213 
Available-for-sale securities
Other U.S. obligations— 953 — — 953 
GSE and TVA obligations— 502 — — 502 
State or local housing agency obligations— 471 — — 471 
Other non-MBS— 268 — — 268 
U.S. obligations single-family MBS— 2,752 — — 2,752 
GSE single-family MBS— 234 — — 234 
GSE multifamily MBS— 7,874 — — 7,874 
Total available-for-sale securities— 13,054 — — 13,054 
Derivative assets, net
Interest-rate related— 164 — 85 249 
Mortgage loan purchase commitments— 1 — — 1 
Total derivative assets, net— 165 — 85 250 
Other assets35 — — — 35 
Total recurring assets at fair value$35 $15,432 $— $85 $15,552 
Liabilities
Discount notes2
$— $(31,707)$— $— $(31,707)
Derivative liabilities, net
Interest-rate related— (266)— 257 (9)
Mortgage loan purchase commitments — (1)— — (1)
  Forward settlement agreements (TBAs)— (1)— — (1)
Total derivative liabilities, net— (268)— 257 (11)
Total recurring liabilities at fair value$— $(31,975)$— $257 $(31,718)

1    Amounts represent the application of the netting requirements that allow the Bank to net settle positive and negative positions and also cash collateral and the related accrued interest held or placed with the same clearing agent and/or counterparty.

2    Represents financial instruments recorded under the fair value option.

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The following table summarizes, for each hierarchy level, the Bank’s assets and liabilities that are measured at fair value on the Statements of Condition (dollars in millions):
December 31, 2021
Recurring Fair Value MeasurementsLevel 1Level 2Level 3
Netting Adjustments and Cash Collateral1
Total
Assets
Trading securities
U.S. Treasury obligations$— $496 $— $— $496 
Other U.S. obligations— 102 — — 102 
GSE and TVA obligations— 60 — — 60 
Other non-MBS
— 201 — — 201 
GSE multifamily MBS— 310 — — 310 
Total trading securities— 1,169 — — 1,169 
Available-for-sale securities
Other U.S. obligations— 1,156 — — 1,156 
GSE and TVA obligations— 983 — — 983 
State or local housing agency obligations— 488 — — 488 
Other non-MBS— 288 — — 288 
U.S. obligations single-family MBS— 2,909 — — 2,909 
GSE single-family MBS— 277 — — 277 
GSE multifamily MBS— 7,288 — — 7,288 
Total available-for-sale securities— 13,389 — — 13,389 
Derivative assets, net
Interest-rate related— 75 — 146 221 
Other assets44 — — — 44 
Total recurring assets at fair value$44 $14,633 $— $146 $14,823 
Liabilities
Discount notes2
$— $(22,348)$— $— $(22,348)
Derivative liabilities, net
Interest-rate related— (179)— 176 (3)
Total recurring liabilities at fair value$— $(22,527)$— $176 $(22,351)

1    Amounts represent the application of the netting requirements that allow the Bank to net settle positive and negative positions and also cash collateral and the related accrued interest held or placed with the same clearing agent and/or counterparty.

2    Represents financial instruments recorded under the fair value option.

FAIR VALUE ON A NON-RECURRING BASIS

    The Bank measures certain impaired mortgage loans held for portfolio at Level 3 fair value on a non-recurring basis. These assets are subject to fair value adjustments in certain circumstances. At June 30, 2022 and December 31, 2021, impaired mortgage loans held for portfolio recorded at fair value as a result of a non-recurring change in fair value were $1 million and $4 million. These fair values were as of the date the fair value adjustment was recorded during the six months ended June 30, 2022 and year ended December 31, 2021.


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FAIR VALUE OPTION

The fair value option provides an irrevocable option to elect fair value as an alternative measurement for selected financial assets, financial liabilities, unrecognized firm commitments, and written loan commitments not previously carried at fair value. It requires entities to display the fair value of those assets and liabilities for which it has chosen to use fair value on the face of the Statements of Condition. Fair value is used for both the initial and subsequent measurement of the designated assets, liabilities, and commitments, with the changes in fair value recognized in net income.

The Bank elects the fair value option for certain financial instruments when a hedge relationship does not qualify for hedge accounting. These fair value elections are made primarily in an effort to mitigate the potential income statement volatility that can arise when an economic derivative is adjusted for changes in fair value but the related hedged item is not.

For financial instruments recorded under the fair value option, the related contractual interest income, interest expense, and the discount amortization on fair value option discount notes are recorded as part of net interest income on the Statements of Income. The remaining changes are recorded as “Net gains (losses) on financial instruments held under fair value option” on the Statements of Income.

For the three and six months ended June 30, 2022, net gains on financial instruments held under fair value option (i.e., discount notes) were $77 million and $99 million compared to less than $1 million for the same periods in 2021, and the Bank determined no credit risk adjustments for nonperformance were necessary. In determining that no credit risk adjustments were necessary, the Bank considered the following factors:

•The Bank is a federally chartered GSE, and as a result of this status, the Bank’s consolidated obligations have historically received the same credit rating as the government bond credit rating of the United States, even though they are not obligations of the United States and are not guaranteed by the United States.

•The Bank is jointly and severally liable with the other FHLBanks for the payment of principal and interest on all consolidated obligations of the FHLBanks.

The following tables summarize the difference between the unpaid principal balance and fair value of outstanding instruments for which the fair value option has been elected (dollars in millions):

June 30, 2022
Unpaid Principal BalanceFair ValueFair Value Over (Under) Unpaid Principal
Discount Notes$31,996 $31,707 $(289)

December 31, 2021
Unpaid Principal BalanceFair ValueFair Value Over (Under) Unpaid Principal
Discount Notes$22,355 $22,348 $(7)



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Note 10 — Commitments and Contingencies

Joint and Several Liability. The FHLBanks have joint and several liability for all consolidated obligations issued. Accordingly, if an FHLBank were unable to repay any consolidated obligation for which it is the primary obligor, each of the other FHLBanks could be called upon by the Finance Agency to repay all or part of such obligations. No FHLBank has ever been asked or required to repay the principal or interest on any consolidated obligation on behalf of another FHLBank. At June 30, 2022 and December 31, 2021, the total par value of outstanding consolidated obligations issued on behalf of other FHLBanks for which the Bank is jointly and severally liable was $796.8 billion and $575.5 billion.

The following table summarizes additional off-balance sheet commitments for the Bank (dollars in millions):
June 30, 2022December 31, 2021
Expire
within one year		Expire
after one year		TotalTotal
Standby letters of credit1,2
$5,994 $74 $6,068 $8,159 
Standby bond purchase agreements2
21 424 445 497 
Commitments to purchase mortgage loans147 — 147 115 
Commitments to issue bonds241 — 241 — 
Commitments to issue discount notes942 — 942 — 
Commitments to fund advances2
356 4 360 1,728 

1    Excludes commitments to issue standby letters of credit, when applicable. At both June 30, 2022 and December 31, 2021, the Bank had no commitments to issue standby letters of credit.

2    The Bank has deemed it unnecessary to record any liability for credit losses on these agreements at June 30, 2022 and December 31, 2021.


Standby Letters of Credit. The Bank issues standby letters of credit on behalf of its members to support certain obligations of the members to third-party beneficiaries. Standby letters of credit may be offered to assist members and non-member housing associates in facilitating residential housing finance, community lending, and asset-liability management, and to provide liquidity. In particular, members often use standby letters of credit as collateral for deposits from federal and state government agencies. Standby letters of credit are executed with members for a fee. If the Bank is required to make payment for a beneficiary’s draw, the member either reimburses the Bank for the amount drawn or, subject to the Bank’s discretion, the amount drawn may be converted into a collateralized advance to the member. The original terms of standby letters of credit outstanding at June 30, 2022 range from less than one month to seven years, currently no later than 2028. The carrying value of guarantees related to standby letters of credit are recorded in “Other liabilities” on the Statements of Condition and amounted to $2 million at both June 30, 2022 and December 31, 2021.

The Bank monitors the creditworthiness of its standby letters of credit based on an evaluation of its borrowers. The Bank has established parameters for the measurement, review, classification, and monitoring of credit risk related to these standby letters of credit. All standby letters of credit, similar to advances, are fully collateralized at the time of issuance and subject to member borrowing limits as established by the Bank.

Standby Bond Purchase Agreements. The Bank has entered into standby bond purchase agreements with state housing associates within its district pursuant to which, for a fee, it agrees to serve as a standby liquidity provider if required, to purchase and hold the housing associate’s bonds until the designated marketing agent can find a suitable investor or the housing associate repurchases the bonds according to a schedule established by the agreement. Each standby bond purchase agreement includes the provisions under which the Bank would be required to purchase the bonds and typically allows the Bank to terminate the agreement upon the occurrence of a default event of the issuer. At June 30, 2022, the Bank had standby bond purchase agreements with seven housing associates. The standby bond purchase commitments entered into by the Bank have original expiration periods of up to seven years, currently no later than 2027. During both the six months ended June 30, 2022 and 2021, the Bank was not required to purchase any bonds under these agreements.

Commitments to Purchase Mortgage Loans. The Bank enters into commitments that unconditionally obligate it to purchase mortgage loans from its members. These commitments are considered derivatives and their estimated fair value at June 30, 2022 and December 31, 2021 is reported in “Note 6 — Derivatives and Hedging Activities” as mortgage loan purchase commitments.


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Commitments to Issue Consolidated Obligations. The Bank enters into commitments to issue consolidated obligations in the normal course of its business, generally that settle within 30 calendar days. At June 30, 2022, the Bank had commitments to issue $241 million and $942 million of consolidated obligation bonds and discount notes. At December 31, 2021, the Bank had no commitments to issue consolidated obligation bonds and discount notes.

Commitments to Fund Advances. The Bank enters into commitments to fund additional advances up to 24 months in the future. At June 30, 2022 and December 31, 2021, the Bank had commitments to fund advances of $360 million and $1.7 billion.

Other Commitments. For each MPF master commitment, the Bank’s potential loss exposure prior to the PFI’s credit enhancement obligation is estimated and tracked in a first loss account (FLA). For absorbing certain losses in excess of the FLA, PFIs are paid a credit enhancement fee, a portion of which may be performance-based. To the extent the Bank experiences losses under the FLA, it may be able to recapture performance-based credit enhancement fees paid to the PFI to offset these losses. The FLA balance for all MPF master commitments with a PFI credit enhancement obligation was $170 million and $163 million at June 30, 2022 and December 31, 2021.
Legal Proceedings. The Bank is subject to various pending legal proceedings arising in the normal course of business. As previously noted in the Bank’s 2021 Form 10-K, certain of these legal proceedings involved pending litigation with a current member of the Bank stemming from alleged breaches by the member under the Bank’s MPF program. After consultation with legal counsel, management does not anticipate that the ultimate liability, if any, arising out of the MPF litigation with this member bank will have a material adverse effect on the Bank’s financial condition or results of operations. The Bank is not currently aware of any pending or threatened legal proceedings to which it is a party that it believes could have a material impact on its financial condition, results of operations, or cash flows.
Note 11 — Activities with Stockholders

The Bank is a cooperative. This means the Bank is owned by its customers, whom the Bank calls members. As a condition of membership in the Bank, all members must purchase and maintain membership capital stock based on a percentage of their total assets, subject to a minimum and maximum amount, as of the preceding December 31st. Each member is also required to purchase and maintain activity-based capital stock to support certain business activities with the Bank. All transactions with stockholders are entered into in the ordinary course of business.

TRANSACTIONS WITH DIRECTORS’ FINANCIAL INSTITUTIONS

In the normal course of business, the Bank extends credit to its members whose directors and officers serve as Bank directors (Directors’ Financial Institutions). Finance Agency regulations require that transactions with Directors’ Financial Institutions be made on the same terms and conditions as those with any other member.

The following table summarizes the Bank’s outstanding transactions with Directors’ Financial Institutions (dollars in millions):
June 30, 2022December 31, 2021
Amount% of TotalAmount% of Total
Advances$70 — $17 — 
Mortgage loans136 2 119 2 
Deposits39 3 15 1 
Capital stock29 1 43 1 

BUSINESS CONCENTRATIONS

The Bank considers itself to have business concentrations with stockholders owning 10 percent or more of its total capital stock outstanding (including MRCS). At June 30, 2022 and December 31, 2021, the Bank did not have any stockholders owning 10 percent or more of its total capital stock outstanding.
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Note 12 — Activities with Other FHLBanks

    Overnight Funds. The Bank may lend or borrow unsecured overnight funds to or from other FHLBanks. All such transactions are at current market rates. The following table summarizes loan activity to other FHLBanks during the six months ended June 30, 2022 and 2021 (dollars in millions):
Other FHLBankBeginning
Balance		LoansPrincipal
Repayment		Ending
Balance
2022
Chicago$— $1 $(1)$— 
2021
Chicago$— $301 $(301)$— 
    
The following table summarizes borrowing activity from other FHLBanks during the six months ended June 30, 2022 (dollars in millions):

Other FHLBankBeginning
Balance		BorrowingPrincipal
Payment		Ending
Balance
2022
Chicago$— $250 $(250)$— 
San Francisco— 500 (500)— 
$— $750 $(750)$— 

During the six months ended June 30, 2021, the Bank did not borrow funds from other FHLBanks.

Note 13 — Subsequent Events

Subsequent events have been evaluated from July 1, 2022, through the time of the Form 10-Q filing with the SEC. No material subsequent events requiring disclosure were identified.


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

Our Management’s Discussion and Analysis (MD&A) of Financial Condition and Results of Operations should be read in conjunction with our financial statements and condensed notes at the beginning of this Form 10-Q and in conjunction with our MD&A and Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the Securities and Exchange Commission (SEC) on March 9, 2022 (2021 Form 10-K). Our MD&A is designed to provide information that will help the reader develop a better understanding of our financial statements, key financial statement changes from quarter to quarter, and the primary factors driving those changes. Our MD&A is organized as follows:
CONTENTS
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FORWARD-LOOKING INFORMATION

Statements contained in this report, including statements describing the objectives, projections, estimates, or future predictions in our operations, may be forward-looking statements. These statements may be identified by the use of forward-looking terminology, such as believes, projects, expects, anticipates, estimates, intends, strategy, plan, could, should, may, and will or their negatives or other variations on these terms. By their nature, forward-looking statements involve risk or uncertainty, and actual results could differ materially from those expressed or implied 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 risks and uncertainties include, but are not limited to, the following:
•political or economic events, including legislative, regulatory, monetary, judicial, or other developments that affect us, our members, our counterparties, and/or our investors in the consolidated obligations of the 11 Federal Home Loan Banks (FHLBanks);

•the ability to meet capital and other regulatory requirements;

•competitive forces, including without limitation, other sources of funding available to our borrowers that could impact the demand for our advances, other entities purchasing mortgage loans in the secondary mortgage market, and other entities borrowing funds in the capital markets;

•reliance on a relatively small number of member institutions for a large portion of our advance business;

•replacement of the London Interbank Offered Rate (LIBOR) benchmark interest rate and transition to the Secured Overnight Financing Rate (SOFR);

•member consolidations and failures;

•disruptions in the credit and debt markets and the effect on future funding costs, sources, and availability;

•general economic and market conditions that could impact the business we do with our members, including, but not limited to, the timing and volatility of market activity, negative interest rates, inflation/deflation, employment rates, geopolitical instability or conflicts, housing market activity and housing prices, including the effect of mortgage forbearance, the level of mortgage prepayments, the valuation of pledged collateral, and the condition of the capital markets on our consolidated obligations;

•ineffective use of hedging strategies or the availability of derivative instruments in the types and quantities needed for risk management purposes from acceptable counterparties;

•the volatility of reported results due to changes in the fair value of certain assets, liabilities, and derivative instruments;

•risks related to the other FHLBanks that could trigger our joint and several liability for debt issued by the other FHLBanks;

•changes in the relative attractiveness of consolidated obligations due to actual or perceived changes in the FHLBanks’ credit ratings as well as the U.S. Government’s long-term credit rating;

•increases in delinquency or loss estimates on mortgage loans;

•the ability to develop and support internal controls, business processes, information systems, and other operating technologies that effectively manage the risks we face, including but not limited to, cyber-attacks, widespread health emergencies, and other business interruptions;

•significant business interruptions resulting from third party failures;

•the volatility of credit quality, market prices, interest rates, and other factors that could affect the value of collateral held by us as security for borrower and counterparty obligations; and

•the ability to attract and retain key personnel.
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For additional information regarding these and other risks and uncertainties that could cause our actual results to differ materially from the expectations reflected in our forward-looking statements, see “Item 1A. Risk Factors” in this quarterly report and in our 2021 Form 10-K. Forward-looking statements apply only as of the date they are made, and we undertake no obligation to update or revise any forward-looking statement.

EXECUTIVE OVERVIEW

Our Bank is a member-owned cooperative serving shareholder members in our district. Our mission is to be a reliable provider of funding, liquidity, and services for our members so that they can meet the housing, business, and economic development needs of the communities they serve. Our operating model balances the trade-off between attractively priced products, reasonable returns on capital stock, maintaining an adequate level of capital to meet regulatory capital requirements, and maintaining adequate retained earnings to preserve the par value of member-owned capital stock. Our members include commercial banks, savings institutions, credit unions, insurance companies, and community development financial institutions (CDFIs).

Our financial condition and results of operations are influenced by global and national economies, local economies within our district, and the conditions in the financial, housing and credit markets, all of which impact the interest rate environment. The interest rate environment significantly impacts our profitability. During the first half of 2022, in response to higher inflation, the Federal Open Markets Committee (FOMC or Committee) raised the target range for the federal funds rate by 1.50 percent, which led to higher interest rates that bolstered our net interest income. Refer to “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Conditions in the Financial Markets” for additional discussion on economic conditions impacting our financial results.

Financial Results
For the three and six months ended June 30, 2022, we reported net income of $99 million and $153 million compared to $47 million and $113 million for the same periods in 2021. The increase in our net income, calculated in accordance with accounting principles generally accepted in the United States of America (GAAP), was driven by increases in net interest income and other income during the three and six months ended June 30, 2022.

Net interest income increased $34 million and $23 million during the three and six months ended June 30, 2022 when compared to the same periods last year due primarily to higher interest rates and attractive funding costs, offset in part by a decrease in advance prepayment fee income of $10 million and $21 million.

Other income increased $26 million and $24 million during the three and six months ended June 30, 2022 when compared to the same periods last year. The increase for both periods was due primarily to net combined gains of $24 million and $21 million on our trading securities, fair value option instruments, and economic derivatives compared to net losses of $10 million and $15 million for the same periods in 2021. These changes in fair value were primarily driven by market volatility and the impact it had on interest rates, as well as credit spreads on our fixed rate trading securities.

Refer to “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations” for additional discussion on our results of operations.

    Our total assets increased to $94.0 billion at June 30, 2022, compared to $85.9 billion at December 31, 2021, driven primarily by an increase in advances. Advances increased $8.6 billion due mainly to an increase in borrowings by large depository institution members and insurance company members. This increase was partially offset by a $0.7 billion decline in investments driven by decreased money market investments and the maturity and/or paydown of long-term securities.

Total capital increased to $6.3 billion at June 30, 2022 from $5.8 billion at December 31, 2021, primarily due to an increase in activity-based capital stock resulting from an increase in advance balances. Our regulatory capital ratio increased to 6.76 percent at June 30, 2022, from 6.74 percent at December 31, 2021, and was above the required regulatory limit at each period end. Regulatory capital includes all capital stock, MRCS, and retained earnings.

Refer to “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Statements of Condition” for additional discussion on our financial condition.
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Adjusted Earnings

As part of evaluating our financial performance, we adjust GAAP net interest income and GAAP net income before assessments for the impact of (i) unpredictable items, including, but not limited to, market adjustments relating to derivative and hedging activities and instruments held at fair value, net asset prepayment fee income, mandatorily redeemable capital stock interest expense, and net gains on litigation settlements, and (ii) other non-routine items, if applicable. The resulting non-GAAP measure, referred to as our adjusted earnings, reflects both adjusted net interest income and adjusted net income.
Because our business model is primarily one of holding assets and liabilities to maturity, management believes that the adjusted earnings measure is helpful in understanding our operating results and provides a meaningful period-to-period comparison of our economic performance in contrast to GAAP results, which can be impacted by fair value changes driven by market volatility on financial instruments recorded at fair value or transactions that are considered to be unpredictable or not routine. As a result, management uses the adjusted earnings measure to assess performance under our incentive compensation plans. Non-GAAP financial measures have inherent limitations, are not required to be uniformly applied, and are not audited. While these non-GAAP measures can be used to assist in understanding the components of our earnings, they should not be considered a substitute for results reported under GAAP.

The adjusted net income methodology is calculated on a post-Affordable Housing Program (AHP) assessment basis. Management believes AHP assessments are a fundamental component of our business and believes this assessment should be included in our adjusted net income calculation.

As indicated in the tables that follow, our adjusted net interest income and adjusted net income increased during the three and six months ended June 30, 2022 when compared to the same periods in 2021. Our increase in adjusted net interest income was driven mainly by higher interest rates and attractive funding costs.

The following table summarizes the reconciliation between GAAP and adjusted net interest income (dollars in millions):
For the Three Months Ended
For the Six Months Ended
June 30,June 30,
2022202120222021
GAAP net interest income$125 $91 $224 $201 
Exclude:
Prepayment fees on advances, net1
3 13 9 30 
Prepayment fees on investments, net2
7 1 10 1 
Mandatorily redeemable capital stock interest expense(1)(1)(1)(1)
Market value adjustments on fair value hedges3
5 (5)8 7 
Total adjustments14 8 26 37 
Include items reclassified from other income (loss):
Net interest income (expense) on economic hedges10 (5)9 (9)
Adjusted net interest income$121 $78 $207 $155 
Adjusted net interest margin0.52 %0.35 %0.46 %0.35 %

1    Prepayment fees on advances, net includes basis adjustment amortization and premium and/or discount amortization.

2    Prepayment fees on investments, net includes basis adjustment amortization, as well as premium and/or discount amortization on non-mortgage-backed securities (MBS).

3     Represents market value gains (losses) on derivatives and hedged items in qualifying hedging relationships.


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The following table summarizes the reconciliation between GAAP net income before assessments and adjusted net income (dollars in millions):
For the Three Months Ended
For the Six Months Ended
June 30,June 30,
2022202120222021
GAAP net income before assessments$110 $53 $170 $126 
Exclude:
Prepayment fees on advances, net1
3 13 9 30 
Prepayment fees on investments, net2
7 1 10 1 
Mandatorily redeemable capital stock interest expense(1)(1)(1)(1)
Market value adjustments on fair value hedges3
5 (5)8 7 
Net gains (losses) on financial instruments held under fair value option77 — 99 — 
Net gains (losses) on trading securities(23)(2)(64)(24)
Net gains (losses) on derivatives4
(30)(8)(14)9 
Include:
Net interest income (expense) on economic hedges10 (5)9 (9)
Adjusted net income before assessments82 50 132 95 
Adjusted AHP assessments5
8 6 13 10 
Adjusted net income$74 $44 $119 $85 

1    Prepayment fees on advances, net includes basis adjustment amortization and premium and/or discount amortization.

2    Prepayment fees on investments, net includes basis adjustment amortization, as well as premium and/or discount amortization on non-MBS.

3    Represents market value gains (losses) on derivatives and hedged items in qualifying hedging relationships.

4    Represents net gains (losses) on economic derivatives and the related interest settlements.

5    Adjusted AHP assessments for this non-GAAP measure are calculated as 10 percent of adjusted net income before assessments. For additional discussion on AHP assessments, refer to “Item 8. Financial Statements and Supplementary Data — Note 10 — Affordable Housing Program” in our 2021 Form 10-K.

For additional discussion on items impacting our GAAP earnings, refer to “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations.”

Replacement of the LIBOR Benchmark Interest Rate

In March 2021, the Financial Conduct Authority announced that LIBOR will either cease to be provided by any administrator or no longer be representative immediately after December 31, 2021 (or, in the case of some more frequently used LIBOR settings, immediately after June 30, 2023). Although the Financial Conduct Authority does not expect LIBOR to become unrepresentative before the applicable cessation date and intends to consult on requiring the administrator of LIBOR to continue publishing LIBOR of certain currencies and tenors on a non-representative, synthetic basis for 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 constituted an index cessation event under the 2006 International Swaps and Derivatives Association, Inc. (ISDA) Definitions (Supplement) and the ISDA 2020 IBOR Fallbacks Protocol (Protocol), which we adhered to in October 2020. As a result, the fallback spread adjustment for each tenor is fixed as of the date of the announcement.

As noted throughout this report, certain of our advances, investments, derivatives, and related collateral are indexed to LIBOR. As of June 30, 2020, we ceased all LIBOR indexed transactions with maturities beyond December 31, 2021. We are preparing for a transition away from LIBOR and have developed a transition plan that addresses considerations such as LIBOR exposure, member products, fallback language, operational readiness, and balance sheet management. We are in the process of ensuring we are operationally ready for fallback activities, including updating our processes and IT systems to support the transition away from LIBOR.

As market activity in SOFR-indexed financial instruments continues to increase, we continue to offer SOFR-indexed advances and issue SOFR-indexed debt. We are also utilizing interest rate swaps based on the federal funds overnight index swap (OIS) or SOFR rates as an alternative to using LIBOR when entering into new derivative transactions.

For additional information on regulatory action related to LIBOR, refer to “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Legislative and Regulatory Developments.”
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The following tables summarize our variable rate advances, investments, consolidated obligation bonds, and derivatives by interest-rate index (in millions):
June 30, 2022
LIBORSOFRFederal Funds OIS
Other1
Total
Advances, principal amount$348 $438 $— $13,860 $14,646 
Investment securities
Non-MBS, principal amount981 — — — 981 
MBS, principal amount5,364 221 — — 5,585 
Total investment securities6,345 221 — — 6,566 
Consolidated obligation bonds, principal amount— 12,525 — — 12,525 
Total variable rate financial instruments amount$6,693 $13,184 $— $13,860 $33,737 
Derivatives
Pay leg, notional amount$1,285 $39,612 $432 $— $41,329 
Receive leg, notional amount8,262 539 17,901 — 26,702 
December 31, 2021
LIBORSOFRFederal Funds OIS
Other1
Total
Advances, principal amount$564 $430 $— $13,537 $14,531 
Investment securities
Non-MBS, principal amount1,253 — — — 1,253 
MBS, principal amount6,084 — — — 6,084 
Total investment securities7,337 — — — 7,337 
Consolidated obligation bonds, principal amount— 7,786 — — 7,786 
Total variable rate financial instruments amount$7,901 $8,216 $— $13,537 $29,654 
Derivatives
Pay leg, notional amount$1,407 $53,602 $432 $— $55,441 
Receive leg, notional amount11,334 5 14,386 — 25,725 
1     Consists primarily of advances indexed in part to consolidated obligation yields.
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The following tables present our exposure to LIBOR-indexed advances, investments, consolidated obligation bonds, and derivatives (in millions):
June 30, 2022
LIBOR Tenors That Cease or Will no Longer be Representative Immediately After June 30, 2023
Due/Terminates in 2022Due/Terminates through June 30, 2023Due/Terminates ThereafterTotal
Assets Indexed to LIBOR
Advances, principal amount by redemption term$81 $50 $217 $348 
Investment securities, by contractual maturity1
Non-MBS, principal amount— 56 925 981 
MBS, principal amount— 75 5,289 5,364 
Derivatives, receive leg
Cleared, notional amount619 1,773 3,452 5,844 
Uncleared, notional amount253 783 1,382 2,418 
Total principal/notional amount$953 $2,737 $11,265 $14,955 
Liabilities Indexed to LIBOR
Derivatives, pay leg
Cleared, notional amount$55 $264 $660 $979 
Uncleared, notional amount6 50 250 306 
Total principal/notional amount$61 $314 $910 $1,285 
December 31, 2021
LIBOR Tenors That Cease or Will no Longer be Representative Immediately After June 30, 2023
Due/Terminates in 2022Due/Terminates through June 30, 2023Due/Terminates ThereafterTotal
Assets Indexed to LIBOR
Advances, principal amount by redemption term$206 $50 $308 $564 
Investment securities, by contractual maturity1
Non-MBS, principal amount— 84 1,169 1,253 
MBS, principal amount69 80 5,935 6,084 
Derivatives, receive leg
Cleared, notional amount1,800 1,786 3,851 7,437 
Uncleared, notional amount962 934 2,001 3,897 
Total principal/notional amount$3,037 $2,934 $13,264 $19,235 
Liabilities Indexed to LIBOR
Derivatives, pay leg
Cleared, notional amount$80 $264 $660 $1,004 
Uncleared, notional amount103 50 250 403 
Total principal/notional amount$183 $314 $910 $1,407 
1    MBS are presented by contractual maturity, however, their expected maturities will likely differ from contractual maturities as borrowers may have the right to call or prepay obligations with or without call or prepayment fees.
For a summary of our risks on the replacement of the LIBOR benchmark interest rate, refer to “Item 1A. Risk Factors” in our 2021 Form 10-K.
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CONDITIONS IN THE FINANCIAL MARKETS

Economy and Financial Markets

Overall economic activity appears to have picked up after edging down in the first quarter. Job gains have been robust in recent months, and the unemployment rate has remained low. Inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher energy prices, and broader price pressures.

The invasion of Ukraine by Russia and the related events are causing economic hardship, creating additional upward pressure on inflation, and are weighing on economic activity. In addition, COVID-19-related lockdowns in China are likely to exacerbate supply chain disruptions.

In its June 15, 2022 statement, the FOMC stated that it decided to raise the target range for the federal funds rate to 1.50 and 1.75 percent compared to zero and 0.25 percent for the same period in 2021. Further, in its July 27, 2022 statement, the Committee decided to increase the target range for the federal funds rate an additional 0.75 percent, to 2.25 percent to 2.50 percent. The Committee emphasized its strong commitment to return inflation to its two percent objective and anticipates that ongoing increases in the target range will be appropriate. The Committee will continue reducing its holdings of Treasury securities and agency debt and agency MBS. The Committee also stated that its assessment will take into account a wide range of information, including readings on public health, labor market conditions, indicators of inflation pressures, inflation expectations, and financial and international developments.

Mortgage Markets

During the first half of 2022, mortgage rates increased, on average, compared to the same periods last year and from the prior year-end. In the first half of 2022, new and existing home sales slowed, while home prices continued to rise due to low housing inventories. The primary driver of mortgage activity shifted from refinance activity to purchase activity in the second quarter of 2022.

Interest Rates

    The following table shows information on key market interest rates1:
Second Quarter 2022
3-Month Average
Second Quarter 2021
3-Month Average
Second Quarter 2022
6-Month Average
Second Quarter 2021
6-Month Average
June 30, 2022
Ending Rate
December 31, 2021
Ending Rate
Federal funds0.77 %0.07 %0.45 %0.07 %1.58 %0.07 %
Three-month LIBOR1.52 0.16 1.03 0.18 2.29 0.21 
SOFR0.71 0.02 0.41 0.03 1.50 0.05 
2-year U.S. Treasury2.72 0.17 2.10 0.15 2.96 0.73 
10-year U.S. Treasury2.93 1.58 2.45 1.46 3.02 1.51 
30-year residential mortgage note5.20 3.00 4.48 2.94 5.70 3.11 

1    Source: Bloomberg.

In response to higher inflation, the FOMC raised the target range for the federal funds rate, which led to higher interest rates during the first half of 2022 when compared to the same period last year.


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Funding Spreads

The following table reflects our funding spreads to SOFR (basis points)1:
Second Quarter 2022
3-Month Average		Second Quarter 2021
3-Month Average		Second Quarter 2022
6-Month Average		Second Quarter 2021
6-Month Average
June 30, 2022
Ending Spread
December 31, 2021
Ending Spread
3-month(12.0)0.5 (6.1)1.3 (17.5)(1.3)
2-year1.0 6.4 4.0 6.4 5.0 2.7 
5-year27.6 15.3 25.4 14.4 31.5 19.6 
10-year61.0 34.1 54.9 32.3 59.2 41.0 

1    Source: The Office of Finance.

The following table reflects our funding spreads to U.S. Treasuries (basis points)1:
Second Quarter 2022
3-Month Average		Second Quarter 2021
3-Month Average		Second Quarter 2022
6-Month Average		Second Quarter 2021
6-Month Average		June 30, 2022
Ending Spread		December 31, 2021
Ending Spread
3-month12.8 1.5 8.1 1.7 26.1 1.5 
2-year5.0 1.5 4.4 1.4 11.0 1.5 
5-year7.2 2.4 7.3 2.8 9.0 7.0 
10-year42.3 9.2 37.1 10.5 41.0 24.0 

1    Source: The Office of Finance.

As a result of our credit quality and government-sponsored enterprise (GSE) status, we generally have ready access to funding at relatively competitive interest rates. During the first half of 2022, our short-term funding spreads to SOFR generally improved when compared to the prior year-end and the same period last year, while longer-term spreads deteriorated. During the first half of 2022, our funding spreads to U.S. Treasuries deteriorated when compared to the prior year-end and the same period last year. During the six months ended June 30, 2022, we utilized discount notes and shorter-term consolidated obligation bonds in an effort to capture attractive funding, match the repricing structures on assets, and/or meet our liquidity requirements.

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SELECTED FINANCIAL DATA

    The following tables present selected financial data for the periods indicated (dollars in millions):
Statements of ConditionJune 30,
2022		December 31,
2021
Cash and due from banks$50 $295 
Investments1
32,753 33,442 
Advances52,731 44,111 
Mortgage loans held for portfolio, net2
7,940 7,578 
Total assets93,968 85,852 
Consolidated obligations
Discount notes50,185 22,348 
Bonds35,130 55,205 
Total consolidated obligations3
85,315 77,553 
Mandatorily redeemable capital stock17 29 
Total liabilities87,663 80,014 
Capital stock — Class B putable3,876 3,364 
Retained earnings2,458 2,390 
Accumulated other comprehensive income (loss)(29)84 
Total capital6,305 5,838 
Regulatory capital ratio4
6.76 6.74 
For the Three Months Ended
June 30,
For the Six Months Ended
June 30,
Statements of Income2022202120222021
Net interest income$125 $91 $224 $201 
Provision (reversal) for credit losses on mortgage loans1 1 3 — 
Other income (loss)5
25 (1)25 1 
Other expense6
39 36 76 76 
AHP assessments11 6 17 13 
Net income99 47 153 113 
Selected Financial Ratios7
Net interest spread8
0.47 %0.36 %0.45 %0.41 %
Net interest margin9
0.54 0.41 0.50 0.46 
Return on average equity (annualized)6.43 3.14 5.11 3.85 
Return on average capital stock (annualized)10.44 5.32 8.45 6.55 
Return on average assets (annualized)0.42 0.21 0.34 0.25 
Average equity to average assets6.56 6.73 6.61 6.60 

1    Investments include interest-bearing deposits, securities purchased under agreements to resell, federal funds sold, trading securities, available-for-sale (AFS) securities, and held-to-maturity (HTM) securities.

2    Includes an allowance for credit losses of $4 million and $1 million at June 30, 2022 and December 31, 2021.

3    The total par value of outstanding consolidated obligations of the 11 FHLBanks was $882.5 billion and $652.9 billion at June 30, 2022 and December 31, 2021.

4    Represents period-end regulatory capital expressed as a percentage of period-end total assets. Regulatory capital includes Class B capital stock (including mandatorily redeemable capital stock or MRCS) and retained earnings.

5    Other income (loss) includes, among other things, net gains (losses) on investment securities, net gains (losses) on derivatives, and net gains (losses) on fair value option instruments.

6    Other expense includes, among other things, compensation and benefits, professional fees, and contractual services.

7    Amounts used to calculate selected financial ratios are based on numbers in actuals. Accordingly, recalculations using numbers in millions may not produce the same results.

8    Represents annualized yield on total interest-earning assets minus annualized cost of total interest-bearing liabilities.

9    Represents net interest income expressed as a percentage of average interest-earning assets.


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RESULTS OF OPERATIONS

Net Interest Income

Our net interest income is impacted by changes in average interest-earning asset and interest-bearing liability balances, and the related yields and costs. The following table presents average balances and annualized yields/costs of major asset and liability categories (dollars in millions):    
For the Three Months Ended June 30,
20222021
Average
Balance1
Yield/Cost
Interest
Income/
Expense2
Average
Balance1
Yield/Cost
Interest
Income/
Expense2
Interest-earning assets
Interest-bearing deposits$1,423 0.76 %$2 $803 0.10 %$1 
Securities purchased under agreements to resell4,229 0.76 8 3,502 0.07 — 
Federal funds sold11,397 0.79 23 9,671 0.06 2 
MBS3,4
11,522 1.66 48 12,801 0.71 23 
    Other investments3,4,5
4,826 1.95 24 5,629 1.09 15 
Advances4
51,542 1.43 184 49,202 0.99 121 
Mortgage loans6
7,805 2.89 56 7,677 2.65 50 
Total interest-earning assets92,744 1.49 345 89,285 0.95 212 
Non-interest-earning assets1,657 — — 910 — — 
Total assets$94,401 1.46 %$345 $90,195 0.94 %$212 
Interest-bearing liabilities   
Deposits$1,702 0.12 %$1 $1,722 0.01 %$— 
Consolidated obligations   
Discount notes4
48,158 0.79 94 24,986 0.05 3 
Bonds4
36,161 1.38 124 56,197 0.84 117 
Other interest-bearing liabilities7
26 4.66 1 39 5.52 1 
Total interest-bearing liabilities86,047 1.02 220 82,944 0.59 121 
Non-interest-bearing liabilities2,159 — — 1,180 — — 
Total liabilities88,206 1.00 220 84,124 0.58 121 
Capital6,195 — — 6,071 — — 
Total liabilities and capital$94,401 0.93 %$220 $90,195 0.54 %$121 
Net interest income and spread8
0.47 %$125  0.36 %$91 
Net interest margin9
0.54 % 0.41 % 
Average interest-earning assets to interest-bearing liabilities107.78 % 107.64 % 

1    Average balances are calculated on a daily weighted average basis and do not reflect the effect of derivative master netting arrangements with counterparties and/or clearing agents.

2    Interest income and expense amounts reported for advances, MBS, other investments, and consolidated obligation bonds include gains (losses) on hedged items and derivatives in qualifying fair value hedge relationships.

3    The average balance of AFS securities is reflected at amortized cost; therefore the resulting yields do not give effect to changes in fair value.

4    Average balances reflect the impact of fair value hedging adjustments and/or fair value option adjustments.

5    Other investments primarily include U.S. Treasury obligations, other U.S. obligations, GSE obligations and Tennessee Valley Authority (TVA) obligations, state or local housing agency obligations, and taxable municipal bonds.

6    Non-accrual loans are included in the average balance used to determine the average yield.

7    Other interest-bearing liabilities consists primarily of MRCS.

8    Represents annualized yield on total interest-earning assets minus annualized yield on total interest-bearing liabilities.

9    Represents net interest income expressed as a percentage of average interest-earning assets.







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The following table presents average balances and annualized yields/costs of major asset and liability categories (dollars in millions):
For the Six Months Ended June 30,
20222021
Average
Balance1
Yield/Cost
Interest
Income/
Expense2
Average
Balance1
Yield/Cost
Interest
Income/
Expense2
Interest-earning assets
Interest-bearing deposits$1,310 0.49 %$3 $832 0.10 %$1 
Securities purchased under agreements to resell4,386 0.42 9 3,193 0.07 1 
Federal funds sold11,350 0.46 26 8,658 0.07 3 
Mortgage-backed securities3,4
11,490 1.30 74 13,085 0.80 52 
    Other investments3,4,5
4,609 1.77 41 6,819 1.21 41 
Advances4
49,165 1.21 295 48,250 1.05 252 
Mortgage loans6
7,722 2.85 109 7,872 2.65 103 
     Loans to other FHLBanks— — — 2 0.12 — 
Total interest-earning assets90,032 1.25 557 88,711 1.03 453 
Non-interest-earning assets1,234 — — 956 — — 
Total assets$91,266 1.23 %$557 $89,667 1.02 %$453 
Interest-bearing liabilities   
Deposits$1,830 0.06 %$1 $1,796 0.01 %$— 
Consolidated obligations   
Discount notes4
38,714 0.56 108 24,306 0.07 8 
Bonds4
42,834 1.05 223 56,248 0.87 243 
Other interest-bearing liabilities7
27 4.74 1 42 4.96 1 
Total interest-bearing liabilities83,405 0.80 333 82,392 0.62 252 
Non-interest-bearing liabilities1,826 — — 1,353 — — 
Total liabilities85,231 0.79 333 83,745 0.61 252 
Capital6,035 — — 5,922 — — 
Total liabilities and capital$91,266 0.73 %$333 $89,667 0.57 %$252 
Net interest income and spread8
0.45 %$224  0.41 %$201 
Net interest margin9
0.50 % 0.46 % 
Average interest-earning assets to interest-bearing liabilities107.95 % 107.67 % 
1    Average balances are calculated on a daily weighted average basis and do not reflect the effect of derivative master netting arrangements with counterparties and/or clearing agents.

2    Interest income and expense amounts reported for advances, MBS, other investments, and consolidated obligation bonds include gains (losses) on hedged items and derivatives in qualifying fair value hedge relationships.

3    The average balance of AFS securities is reflected at amortized cost; therefore the resulting yields do not give effect to changes in fair value.

4    Average balances reflect the impact of fair value hedging adjustments and/or fair value option adjustments.

5    Other investments primarily include U.S. Treasury obligations, other U.S. obligations, GSE obligations and Tennessee Valley Authority (TVA) obligations, state or local housing agency obligations, and taxable municipal bonds.

6    Non-accrual loans are included in the average balance used to determine the average yield.

7    Other interest-bearing liabilities consists primarily of MRCS.

8    Represents annualized yield on total interest-earning assets minus annualized yield on total interest-bearing liabilities.

9    Represents net interest income expressed as a percentage of average interest-earning assets.



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The following table presents changes in interest income and interest expense. Changes in interest income and interest expense that are not identifiable as either volume-related or rate-related, but rather attributable to both volume and rate changes, are allocated to the volume and rate categories based on the proportion of the absolute value of the volume and rate changes (dollars in millions).
Three Months EndedSix Months Ended
June 30, 2022 vs. June 30, 2021
June 30, 2022 vs. June 30, 2021
Total Increase
(Decrease) Due to		Total Increase
(Decrease)		Total Increase
(Decrease) Due to		Total Increase
(Decrease)
VolumeRateVolumeRate
Interest income
Interest-bearing deposits$— $1 $1 $— $2 $2 
Securities purchased under agreements to resell— 8 8 1 7 8 
Federal funds sold— 21 21 1 22 23 
MBS(2)27 25 (7)29 22 
Other investments(2)11 9 (16)16 — 
Advances6 57 63 5 38 43 
Mortgage loans1 5 6 (2)8 6 
Total interest income3 130 133 (18)122 104 
Interest expense
Deposits— 1 1 — 1 1 
Consolidated obligations
Discount notes5 86 91 8 92 100 
Bonds(51)58 7 (64)44 (20)
Total interest expense(46)145 99 (56)137 81 
Net interest income$49 $(15)$34 $38 $(15)$23 
    
NET INTEREST SPREAD

Net interest spread represents the annualized yield on total interest-earning assets minus the annualized cost of total interest-bearing liabilities. Our net interest spread was 0.47 percent and 0.45 percent for the three and six months ended June 30, 2022 compared to 0.36 percent and 0.41 percent for the same periods in 2021. Net interest income increased during the three and six months ended June 30, 2022 due primarily to higher interest rates, amortization/accretion activity on advances and mortgage loans, and attractive funding costs. The increase for each period was partially offset by a decrease in advance prepayment fee income of $10 million and $21 million when compared to the same periods last year.

NET INTEREST MARGIN

Net interest margin equals net interest income expressed as a percentage of average interest-earning assets. Our net interest margin was 0.54 percent and 0.50 percent for the three and six months ended June 30, 2022 compared to 0.41 percent and 0.46 percent for the same periods in 2021 due primarily to higher net interest spread, as discussed above.

The primary components of our interest income and interest expense are discussed further below.

Advances

Interest income on advances increased during the three and six months ended June 30, 2022 when compared to the same periods in 2021 due primarily to the higher interest rate environment. In addition, during the three and six months ended June 30, 2022, we recorded increased amortization/accretion of basis adjustments on closed hedge relationships of $16 million and $24 million when compared to the same periods in 2021 driven by the termination of certain advance fair value hedge relationships. The increase for each period was partially offset by a decline in advance prepayment fee income of $10 million and $21 million.


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Investments

Interest income on investments increased during the three and six months ended June 30, 2022 when compared to the same periods in 2021 due primarily to the higher interest rate environment, an increase in investment prepayment fee income of $6 million and $9 million, and an increase in net gains on investment fair value hedge relationships of $9 million and $5 million. These increases were partially offset by lower average other investment and MBS balances resulting from maturities and/or paydowns.

Mortgage Loans

Interest income on mortgage loans increased slightly during the three and six months ended June 30, 2022 when compared to the same periods in 2021 due to the higher interest rate environment coupled with decreased net premium amortization on mortgage loans resulting from a slowdown in prepayment activity.

Consolidated Obligations

Interest expense on bonds increased during the three months ended June 30, 2022 when compared to the same period in 2021 due primarily to the higher interest rate environment, offset in part by lower average balances. Interest expense on bonds decreased during the six months ended June 30, 2022 compared to the same period in 2021 as a result of lower average balances, partially offset by the higher interest rate environment. Average bond balances declined due mainly to our increased utilization of discount notes and the call or maturity of higher costing debt.

Interest expense on discount notes increased during the three and six months ended June 30, 2022 when compared to the same periods in 2021 due to the higher interest rate environment and our increased utilization of discount notes during 2022 in an effort to capture attractive funding, match the repricing structures on assets, and/or meet our liquidity requirements.

Other Income (Loss)

    The following table summarizes the components of other income (loss) (dollars in millions):
For the Three Months Ended
For the Six Months Ended
June 30,June 30,
2022202120222021
Net gains (losses) on trading securities$(23)$(2)$(64)$(24)
Net gains (losses) on financial instruments held under fair value option77 — 99 — 
Net gains (losses) on derivatives(30)(8)(14)9 
Standby letter of credit fees 3 2 5 5 
Other, net(2)7 (1)11 
Total other income (loss)$25 $(1)$25 $1 
    
Other income (loss) increased during the three and six months ended June 30, 2022 when compared to the same periods in 2021. During the three and six months ended June 30, 2022, we recorded net combined gains of $24 million and $21 million on our trading securities, fair value option instruments, and economic derivatives compared to net losses of $10 million and $15 million for the same periods in 2021. These changes in fair value were primarily driven by market volatility and the impact it had on interest rates, as well as credit spreads on our fixed rate trading securities. Refer to “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations — Hedging Activities” for additional discussion on our economic derivatives. These increases were offset in part by a decline in other, net driven primarily by a decrease in the market value of our Benefit Equalization defined benefit plan assets during 2022.

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Hedging Activities

We use derivatives to manage interest rate risk. Accounting rules affect the timing and recognition of income and expense on derivatives and therefore we may be subject to income statement volatility. If a hedging activity qualifies for hedge accounting treatment (fair value hedge), the net interest settlements of interest receivables or payables related to the derivative are recognized as interest income or expense in the relevant income statement caption consistent with the hedged asset or liability. The net fair value gains and losses of derivatives and hedged items designated in fair value hedge relationships are also recognized as interest income or expense. Amortization of basis adjustments from terminated hedges is also recorded in interest income or expense.

If a hedging activity does not qualify for hedge accounting treatment (economic hedge), the net interest settlements of interest receivables or payables related to the derivative as well as the fair value gains and losses on the derivative are recorded as a component of other income (loss) in “Net gains (losses) on derivatives;” however, there is no fair value adjustment for the corresponding asset or liability being hedged unless changes in the fair value of the asset or liability are normally marked to fair value through earnings (i.e., trading securities and fair value option instruments).

The following table categorizes the net effect of hedging activities on net income by product (dollars in millions):
For the Three Months Ended June 30, 2022
Net Effect of Hedging ActivitiesAdvancesInvestmentsDiscount NotesBondsOtherTotal
Net interest income:
Net amortization/accretion1
$6 $5 $— $(1)$— $10 
Net gains (losses) on derivatives and hedged items— 8 — (1)— 7 
Net interest settlements on derivatives2
(19)(20)— 5 — (34)
Total impact to net interest income(13)(7)— 3 — (17)
Other income (loss):
Net gains (losses) on derivatives3
— 21 (50)(1)— (30)
Net gains (losses) on trading securities4
— (23)— — — (23)
Net gains (losses) on financial instruments held under fair value option4
— — 77 — — 77 
Price alignment amount on derivatives5
— — — — (1)(1)
Total impact to other income (loss)— (2)27 (1)(1)23 
Total net effect of hedging activities6
$(13)$(9)$27 $2 $(1)$6 

1    Represents the amortization/accretion of basis adjustments on closed hedge relationships.

2    Represents the interest component on derivatives that qualify for fair value hedge accounting.

3    Represents net gains (losses) on economic derivatives and the related interest settlements.

4    Represents the net gains (losses) on those trading securities and fair value option instruments for which we have entered into a corresponding economic derivative to hedge the risk of changes in fair value.

5    Includes the price alignment amount on derivatives for which variation margin is characterized as a daily settled contract.

6    The hedging activity tables do not include the interest component on the related hedged items or the gross prepayment fee income on terminated advance or investment hedge relationships.
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The following table categorizes the net effect of hedging activities on net income by product (dollars in millions):
For the Three Months Ended June 30, 2021
Net Effect of Hedging ActivitiesAdvancesInvestmentsMortgage
Loans		BondsTotal
Net interest income:
Net amortization/accretion1
$(10)$(1)$(1)$(1)$(13)
Net gains (losses) on derivatives and hedged items— (1)— (1)(2)
Net interest settlements on derivatives2
(47)(33)— 38 (42)
Total impact to net interest income(57)(35)(1)36 (57)
Other income (loss):
Net gains (losses) on derivatives3
— (8)— — (8)
Net gains (losses) on trading securities4
— (2)— — (2)
Total impact to other income (loss)— (10)— — (10)
Total net effect of hedging activities5
$(57)$(45)$(1)$36 $(67)

1    Represents the amortization/accretion of basis adjustments on closed hedge relationships.

2    Represents the interest component on derivatives that qualify for fair value hedge accounting.

3    Represents net gains (losses) on economic derivatives and the related interest settlements.

4    Represents the net gains (losses) on those trading securities and fair value option instruments for which we have entered into a corresponding economic derivative to hedge the risk of changes in fair value.

5    The hedging activity tables do not include the interest component on the related hedged items or the gross prepayment fee income on terminated advance or investment hedge relationships.

The following table categorizes the net effect of hedging activities on net income by product (dollars in millions):
For the Six Months Ended June 30, 2022
Net Effect of Hedging ActivitiesAdvancesInvestmentsMortgage
Loans		Discount NotesBondsOtherTotal
Net interest income:
Net amortization/accretion1
$6 $5 $(1)$— $(2)$— $8 
Net gains (losses) on derivatives and hedged items— 15 — — (4)— 11 
Net interest settlements on derivatives2
(58)(48)— — 18 — (88)
Total impact to net interest income(52)(28)(1)— 12 — (69)
Other income (loss):
Net gains (losses) on derivatives3
— 53 — (66)(1)— (14)
Net gains (losses) on trading securities4
— (64)— — — — (64)
 Net gains (losses) on financial
 instruments held under fair value option4
— — — 99 — — 99 
Price alignment amount on derivatives5
— — — — — (1)(1)
Total impact to other income (loss)— (11)— 33 (1)(1)20 
Total net effect of hedging activities6
$(52)$(39)$(1)$33 $11 $(1)$(49)
1    Represents the amortization/accretion of basis adjustments on closed hedge relationships.

2    Represents the interest component on derivatives that qualify for fair value hedge accounting.

3    Represents net gains (losses) on economic derivatives and the related interest settlements.

4    Represents the net gains (losses) on those trading securities and fair value option instruments for which we have entered into a corresponding economic derivative to hedge the risk of changes in fair value.

5    Includes the price alignment amount on derivatives for which variation margin is characterized as a daily settled contract.

6    The hedging activity tables do not include the interest component on the related hedged items or the gross prepayment fee income on terminated advance or investment hedge relationships.

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The following table categorizes the net effect of hedging activities on net income by product (dollars in millions):
For the Six Months Ended June 30, 2021
Net Effect of Hedging ActivitiesAdvancesInvestmentsMortgage
Loans		BondsTotal
Net interest income:
Net amortization/accretion1
$(18)$(10)$(2)$(2)$(32)
Net gains (losses) on derivatives and hedged items2 10 — (2)10 
Net interest settlements on derivatives2
(95)(65)— 76 (84)
Total impact to net interest income(111)(65)(2)72 (106)
Other income (loss):
Net gains (losses) on derivatives3
— 9 — — 9 
Net gains (losses) on trading securities4
— (24)— — (24)
Total impact to other income (loss)— (15)— — (15)
Total net effect of hedging activities5
$(111)$(80)$(2)$72 $(121)
1    Represents the amortization/accretion of basis adjustments on closed hedge relationships.

2    Represents the interest component on derivatives that qualify for fair value hedge accounting.

3    Represents net gains (losses) on economic derivatives and the related interest settlements.

4    Represents the net gains (losses) on those trading securities and fair value option instruments for which we have entered into a corresponding economic derivative to hedge the risk of changes in fair value.

5    The hedging activity tables do not include the interest component on the related hedged items or the gross prepayment fee income on terminated advance or investment hedge relationships.

NET AMORTIZATION/ACCRETION
Amortization/accretion varies from period to period depending on our hedge relationship termination activities and the maturity, call, or prepayment of assets or liabilities previously in hedge relationships. During the three and six months ended June 30, 2022, our change in amortization activity when compared to the same periods last year was driven primarily by the prepayment of advances and investments that were previously in a hedge relationship, as well as the termination of certain advance fair value hedge relationships.

NET GAINS (LOSSES) ON DERIVATIVES AND HEDGED ITEMS

The net gains and losses on derivatives and hedged items designated in fair value hedge relationships are recorded in net interest income. During the three and six months ended June 30, 2022, we recorded net gains of $7 million and $11 million on our fair value hedge relationships compared to net losses of $2 million and net gains of $10 million in the same periods last year, which primarily stemmed from market volatility and the impact it had on interest rates.

NET INTEREST SETTLEMENTS ON DERIVATIVES

Net interest settlements represent the interest component on derivatives that qualify for fair value hedge accounting. These amounts vary from period to period depending on our hedging activities and interest rates and are partially offset by the interest component on the related hedged item within net interest income. The hedging activity tables do not include the impact of the interest component on the related hedged item.

NET GAINS (LOSSES) ON DERIVATIVES

We utilize economic derivatives to manage certain risks on our Statements of Condition. Gains and losses on economic derivatives are driven by changes in interest rates and volatility and include interest settlements. Interest settlements represent the interest component on economic derivatives. These amounts vary from period to period depending on our hedging activities and interest rates. During the three and six months ended June 30, 2022, we recorded net losses of $30 million and $14 million on our economic derivatives, compared to net losses of $8 million and net gains of $9 million during the same periods last year. The changes were primarily driven by changes in the fair value of interest rate swaps used to economically hedge our discount notes held under fair value option and investment securities portfolio. These fair value changes were primarily driven by market volatility resulting from changes in interest rates.



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Other Expense
The following table shows the components of other expense (dollars in millions):
For the Three Months Ended June 30,
For the Six Months Ended June 30,
 2022202120222021
Compensation and benefits$18 $18 $36 $39 
Contractual services5 5 10 9 
Professional fees3 3 6 7 
Other operating expenses5 5 9 10 
Total operating expenses31 31 61 65 
Federal Housing Finance Agency2 2 5 4 
Office of Finance2 2 4 4 
Other, net4 1 6 3 
Total other expense$39 $36 $76 $76 

Other expense increased for the three months ended June 30, 2022 compared to the same period last year, primarily driven by an increase in other, net due to concession amortization on discount notes recorded under the fair value option. Other expense remained relatively stable for the six months ended June 30, 2022 compared to the same period last year.

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STATEMENTS OF CONDITION

Financial Highlights

    Our total assets increased to $94.0 billion at June 30, 2022 from $85.9 billion at December 31, 2021. Our total liabilities increased to $87.7 billion at June 30, 2022 from $80.0 billion at December 31, 2021. Total capital increased to $6.3 billion at June 30, 2022 from $5.8 billion at December 31, 2021. See further discussion of changes in our financial condition in the appropriate sections that follow.

Cash and Due from Banks

At June 30, 2022, our total cash balance was $50 million compared to $295 million at December 31, 2021, a decrease of $245 million. Our cash balance is influenced by our liquidity needs, member advance activity, market conditions, and the availability of attractive investment opportunities.

Advances

The following table summarizes our advances by type of institution (dollars in millions):
 June 30,
2022		December 31,
2021
Commercial banks$13,360 $9,095 
Savings institutions935 671 
Credit unions8,020 4,054 
Insurance companies30,992 29,681 
CDFIs13 16 
Total member advances53,320 43,517 
Housing associates129 515 
Non-member borrowers97 107 
Total par value$53,546 $44,139 

Our total advance par value increased $9.4 billion or 21 percent at June 30, 2022 when compared to December 31, 2021, primarily due to an increase in borrowings by large depository institution members and insurance companies. In July, we continued to see further advance borrowings from our large depository institution members as their deposit levels declined and/or liquidity needs shifted.

The following table summarizes our advances by interest rate payment terms (dollars in millions):
June 30, 2022December 31, 2021
Amount% of TotalAmount% of Total
Fixed rate$36,872 69 $27,053 61 
Fixed rate, putable710 1 1,139 2 
Variable rate1,248 2 1,212 3 
Variable rate, callable1
13,398 25 13,319 30 
Other2
1,318 3 1,416 4 
Overdrawn demand deposit accounts3
— — — — 
Total advance par value53,546 100 44,139 100 
Premiums12 14 
Discounts(1)(2)
Fair value hedging adjustments(826)(40)
Total $52,731 $44,111 

1    Callable advances are those advances that may be contractually prepaid by the borrower on predetermined dates without incurring prepayment or termination fees. Interest rates    on our variable rate callable advances reset at each call date to be consistent with either the underlying index or our current offering rate in line with our underlying cost of funds.

2    Includes fixed rate amortizing and fixed rate callable advances.

3    Overdrawn demand deposit accounts were less than $1 million at June 30, 2022.

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Fair value hedging adjustments changed $786 million at June 30, 2022 when compared to December 31, 2021 due primarily to the impact of interest rates on our cumulative fair value adjustments on advances in active hedge relationships, coupled with the recognition of closed basis adjustments on terminated advance hedge relationships.

At June 30, 2022 and December 31, 2021, advances outstanding to our five largest member borrowers totaled $17.5 billion and $17.0 billion, which represented 33 percent and 39 percent of our total advances outstanding at each period end. The following table summarizes advances outstanding to our five largest member borrowers at June 30, 2022 (dollars in millions):
Amount% of Total Advances
EquiTrust Life Insurance Company$4,350 8 
Principal Life Insurance Company4,250 8 
Midland National Life Insurance Company1
3,213 6 
Transamerica Life Insurance Company2,995 6 
Athene Annuity and Life Company2
2,706 5 
Total par value$17,514 33 

1    Excludes $1.5 billion of advances with North American Company for Life and Health Insurance, an affiliate of Midland National Life Insurance Company.

2    Excludes $0.3 billion of advances with Athene Annuity & Life Assurance Company, an affiliate of Athene Annuity and Life Company.    

We evaluate advances for credit losses on a quarterly basis and have never experienced a credit loss on our advances. For additional discussion on our advance credit risk, refer to “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Risk Management — Credit Risk — Advances.”

Mortgage Loans

    The following table summarizes information on our mortgage loans held for portfolio (dollars in millions):
June 30,
2022		December 31, 2021
Fixed rate conventional loans$7,463 $7,063 
Fixed rate government-insured loans397 416 
Total unpaid principal balance7,860 7,479 
Premiums95 96 
Discounts(6)(2)
Basis adjustments from mortgage loan purchase commitments(5)6 
Total mortgage loans held for portfolio7,944 7,579 
Allowance for credit losses(4)(1)
Total mortgage loans held for portfolio, net$7,940 $7,578 

Our total mortgage loans increased $0.4 billion or five percent at June 30, 2022 when compared to December 31, 2021. The increase was primarily due to new loan purchases exceeding principal paydowns, driven in part by a decrease in prepayment activity resulting from an increase in mortgage rates.

We evaluate mortgage loans for credit losses on a quarterly basis. For additional discussion on our mortgage loan credit risk, refer to “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Risk Management — Credit Risk — Mortgage Assets.”

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Investments

The following table summarizes the carrying value of our investments (dollars in millions):
June 30, 2022December 31, 2021
Amount% of TotalAmount% of Total
Short-term investments1
Interest-bearing deposits$1,011 3 $416 1 
Securities purchased under agreements to resell7,250 22 12,450 37 
Federal funds sold8,180 25 4,690 14 
U.S. Treasury obligations2
549 2 — — 
Total short-term investments16,990 52 17,556 52 
Long-term investments3
MBS
GSE single-family867 3 1,037 3 
GSE multifamily8,010 24 7,598 23 
U.S. obligations single-family2
2,754 8 2,911 9 
Private-label residential4 — 5 — 
Total MBS11,635 35 11,551 35 
Non-MBS
U.S. Treasury obligations2
1,221 4 496 1 
Other U.S. obligations2
1,040 3 1,258 4 
GSE and TVA obligations927 3 1,417 4 
State or local housing agency obligations505 2 675 2 
Other4
435 1 489 2 
Total non-MBS4,128 13 4,335 13 
Total long-term investments15,763 48 15,886 48 
Total investments$32,753 100 $33,442 100 

1    Short-term investments have original maturities equal to or less than one year.

2    Represents investment securities backed by the full faith and credit of the U.S. Government.

3    Long-term investments have original maturities of greater than one year.

4    Consists primarily of taxable municipal bonds.


Our investments decreased $0.7 billion or two percent at June 30, 2022 when compared to December 31, 2021 due primarily to a decline in money market investments and the maturity and/or paydown of long-term securities. This decrease was offset in part by the purchase of U.S. Treasury obligations and MBS. At June 30, 2022 and December 31, 2021, we had GSE and/or other U.S. obligation MBS purchases with a total par value of $502 million and $289 million that were traded but not yet settled. These investments were recorded as “available-for-sale” on our Statements of Condition with a corresponding payable recorded in “other liabilities.”

The Finance Agency limits our investments in MBS by requiring that the balance of our MBS not exceed three times regulatory capital at the time of purchase. Our ratio of MBS to regulatory capital was 1.89 and 1.99 at June 30, 2022 and December 31, 2021.

We evaluate investments for credit losses on a quarterly basis. For additional discussion on our investment credit risk, refer to “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Risk Management — Credit Risk — Investments.”
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Consolidated Obligations

    Consolidated obligations, which include bonds and discount notes, are the primary source of funds to support our advances, mortgage loans, and investments. At June 30, 2022 and December 31, 2021, the carrying value of consolidated obligations for which we are primarily liable totaled $85.3 billion and $77.6 billion.

DISCOUNT NOTES

The following table summarizes our discount notes, all of which are due within one year (dollars in millions):
June 30,
2022		December 31,
2021
Par value$50,497 $22,355 
Discounts and concession fees1
(212)(6)
Fair value option valuation adjustments(100)(1)
Total$50,185 $22,348 

1    Concessions represent fees paid to dealers in connection with the issuance of certain consolidated obligation discount notes.
    
Our discount notes increased $27.8 billion or 125 percent at June 30, 2022 when compared to December 31, 2021. We increased our utilization of discount notes in an effort to capture attractive funding, match the repricing structures on assets, and/or meet our liquidity requirements.

BONDS

The following table summarizes information on our bonds (dollars in millions):
June 30,
2022		December 31,
2021
Par value$35,215 $55,079 
Premiums110 138 
Discounts and concession fees1
(16)(17)
Fair value hedging adjustments(179)5 
Total$35,130 $55,205 

1    Concessions represent fees paid to dealers in connection with the issuance of certain consolidated obligation bonds.

Our bonds decreased $20.1 billion or 36 percent at June 30, 2022 when compared to December 31, 2021. Although the balance declined from the prior year-end due primarily to the maturity of fixed rate bonds, during the six months ended June 30, 2022, we continued to utilize short-term bonds in an effort to capture attractive funding, match the repricing structures on assets, and/or meet our liquidity requirements. Fair value hedging adjustments also changed $184 million at June 30, 2022 when compared to December 31, 2021 due primarily to the impact of interest rates on our cumulative fair value adjustments on bonds in active hedge relationships.

For additional information on our consolidated obligations, refer to “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Liquidity — Sources of Liquidity.”

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Capital

The following table summarizes information on our capital (dollars in millions):
June 30,
2022		December 31,
2021
Capital stock$3,876 $3,364 
Retained earnings2,458 2,390 
Accumulated other comprehensive income (loss)(29)84 
Total capital$6,305 $5,838 

Our capital increased at June 30, 2022 when compared to December 31, 2021, primarily due to an increase in activity-based capital stock resulting from an increase in advance balances. Refer to “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Capital” for additional information on our capital.

Derivatives

    We use derivatives to manage interest rate risk. The notional amount of derivatives serves as a factor in determining periodic interest payments and cash flows received and paid. However, the notional amount of derivatives represents neither the actual amounts exchanged nor our overall exposure to credit and market risk.

The following table categorizes the notional amount of our derivatives by type (dollars in millions):
June 30,
2022		December 31,
2021
Interest rate swaps
Non-callable$61,874 $77,770 
Callable by counterparty6,158 3,396 
Total interest rate swaps68,032 81,166 
Forward settlement agreements (TBAs)143 115 
Mortgage loan purchase commitments147 115 
Total notional amount$68,322 $81,396 
    
The notional amount of our derivative contracts decreased $13.1 billion or 16 percent at June 30, 2022 when compared to December 31, 2021. This was primarily due to a decrease in non-callable swaps resulting from the maturity of fixed rate bonds. This decrease was partially offset by our increased utilization of non-callable swaps to hedge our discount notes in light of attractive funding opportunities. In addition, we also began utilizing callable swaps to hedge our shorter-term bonds during the second quarter of 2022. For additional discussion regarding our use of derivatives, see “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Risk Management — Credit Risk — Derivatives.”
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LIQUIDITY AND CAPITAL RESOURCES

Our liquidity and capital positions are actively managed in an effort to preserve stable, reliable, and cost-effective sources of funds to meet current and projected future operating financial commitments, as well as regulatory, liquidity, and capital requirements.

Liquidity

SOURCES OF LIQUIDITY

We utilize several sources of liquidity to carry out our business activities. These include, but are not limited to, proceeds from the issuance of consolidated obligations, payments collected on advances and mortgage loans, proceeds from investment securities, member deposits, proceeds from the issuance of capital stock, and current period earnings.

Our primary source of liquidity is proceeds from the issuance of consolidated obligations (bonds and discount notes) in the capital markets. During the six months ended June 30, 2022, proceeds from the issuance of bonds and discount notes were $13.2 billion and $276.3 billion compared to $29.7 billion and $134.2 billion for the same period in 2021. During the six months ended June 30, 2022, we continued to utilize discount notes and shorter-term consolidated obligation bonds in an effort to capture attractive funding, match the repricing structures on assets, and/or meet our liquidity requirements.

Access to debt markets has been reliable because investors, driven by increased liquidity preference and our GSE status, have sought the FHLBanks’ debt as an asset of choice. However, due to the short-term maturity of the debt, we may be exposed to additional risks associated with refinancing and our ability to access the capital markets.

We are focused on maintaining an adequate liquidity balance and a funding balance between our financial assets and financial liabilities and work collectively with the other FHLBanks to manage the system-wide liquidity and funding needs. We monitor our debt refinancing risk and liquidity position primarily by tracking the maturities of financial assets and financial liabilities. In managing and monitoring the amounts of assets that require refunding, we consider contractual maturities of our financial assets and liabilities, as well as certain assumptions regarding expected cash flows (i.e., estimated prepayments). External factors, including member borrowing needs, supply and demand in the debt markets, and other factors may affect liquidity balances and the funding balances between financial assets and financial liabilities. Refer to “Item 1. Financial Statements” for additional information regarding the contractual maturities of certain of our financial assets and liabilities.

Our ability to raise funds in the capital markets as well as our cost of borrowing may be affected by our credit ratings. As of July 31, 2022, our consolidated obligations were rated AA+/A-1+ by Standard and Poor’s and Aaa/P-1 by Moody’s and both ratings had a stable outlook. For further discussion of how credit rating changes and our ability to access the capital markets may impact us in the future, refer to “Item 1A. Risk Factors” in our 2021 Form 10-K.

Although we are primarily liable for the portion of consolidated obligations that are issued on our behalf, we are also jointly and severally liable with the other FHLBanks for the payment of principal and interest on all consolidated obligations issued by the FHLBank System. At June 30, 2022 and December 31, 2021, the total par value of outstanding consolidated obligations for which we are primarily liable was $85.7 billion and $77.4 billion. At June 30, 2022 and December 31, 2021, the total par value of outstanding consolidated obligations issued on behalf of other FHLBanks for which we are jointly and severally liable was $796.8 billion and $575.5 billion.

The Office of Finance and FHLBanks have contingency plans in place that prioritize the allocation of proceeds from the issuance of consolidated obligations during periods of financial distress if consolidated obligations cannot be issued in sufficient amounts to satisfy all FHLBank demand. In the event of significant market disruptions or local disasters, our President or designee is authorized to establish interim borrowing relationships with other FHLBanks. To provide further access to funding, the FHLBank Act also authorizes the U.S. Treasury to directly purchase new issue consolidated obligations of the GSEs, including FHLBanks, up to an aggregate principal amount of $4.0 billion. As of July 31, 2022, no purchases had been made by the U.S. Treasury under this authorization.

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USES OF LIQUIDITY

    We use our available liquidity, including proceeds from the issuance of consolidated obligations, primarily to repay consolidated obligations, fund advances, and purchase investments. During the six months ended June 30, 2022, repayments of consolidated obligations totaled $281.5 billion compared to $168.3 billion for the same period in 2021.

During the six months ended June 30, 2022, advance disbursements totaled $112.0 billion compared to $68.8 billion for the same period in 2021. Advance disbursements will vary from period to period depending on member needs. During the six months ended June 30, 2022, investment purchases (excluding overnight investments) totaled $2.8 billion compared to $5.5 billion for the same period in 2021. During the six months ended June 30, 2022, we purchased money market investments and U.S. Treasury securities in an effort to manage our liquidity position, and also purchased MBS.

We also use liquidity to purchase mortgage loans, redeem member deposits, pledge collateral to derivative counterparties, redeem or repurchase capital stock, pay expenses, and pay dividends.

LIQUIDITY REQUIREMENTS
We are subject to certain liquidity requirements set forth by the Finance Agency and maintain a liquidity contingency funding plan designed to enable us to meet our obligations and the liquidity needs of our members in the event of short-term capital market disruptions, or operational disruptions at our Bank and/or the Office of Finance. For additional details on these liquidity requirements, refer to our 2021 Form 10-K. Our primary liquidity requirement is discussed further below.
Finance Agency Advisory Bulletin on FHLBank Liquidity (the Liquidity Guidance AB) – This guidance requires us to maintain sufficient liquidity for a period of 10 to 30 calendar days. The base case scenario requires 20 days of positive daily cash balances and assumes that we cannot access the capital markets to issue debt, and during that time we will automatically renew maturing and called advances for all members, including large, highly-rated members, and we hold additional liquid assets equal to one percent of our letters of credit balances. At June 30, 2022 and December 31, 2021, we were in compliance with this base case liquidity guidance.
The Liquidity Guidance AB also specifies appropriate funding gap limits to address the risks associated with an FHLBank having too large a mismatch between the contractual maturities of its assets and liabilities. A funding gap measures the difference between assets and liabilities that are scheduled to mature during a specified period and is expressed as a percentage of total assets. The guidance provides funding gap limits within the range of negative 10 percent to negative 20 percent for a three-month horizon and negative 25 percent to negative 35 percent for a one-year horizon. At June 30, 2022 and December 31, 2021, we adhered to these funding gap requirements.
Capital

CAPITAL REQUIREMENTS

    We are subject to certain regulatory capital requirements. First, the FHLBank Act requires that we maintain at all times permanent capital greater than or equal to the sum of our credit, market, and operational risk capital requirements, all calculated in accordance with Finance Agency regulations. Only permanent capital, defined as Class B capital stock (including MRCS) and retained earnings, can satisfy this risk-based capital requirement. Second, the FHLBank Act requires a minimum four percent capital-to-asset ratio, which is defined as total regulatory capital divided by total assets. Total regulatory capital includes Class B capital stock (including MRCS) and retained earnings. Third, the FHLBank Act imposes a five percent minimum leverage ratio, which is defined as the sum of permanent capital weighted 1.5 times and nonpermanent capital weighted 1.0 times, divided by total assets. At June 30, 2022 and December 31, 2021, we did not hold any nonpermanent capital. At June 30, 2022 and December 31, 2021, we were in compliance with all three of the Finance Agency’s regulatory capital requirements.

    In addition to the requirements previously discussed, the Finance Agency Advisory Bulletin on capital stock (the Capital Stock AB) requires each FHLBank to maintain at all times a ratio of at least two percent of capital stock to total assets. For purposes of the Capital Stock AB, capital stock includes MRCS. The capital stock to total assets ratio is measured on a daily average basis at month end. At June 30, 2022 and December 31, 2021, we were in compliance with the Capital Stock AB.

Refer to “Item 1. Financial Statements — Note 8 — Capital” for additional information on our regulatory capital requirements.
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CAPITAL STOCK
Our capital stock has a par value of $100 per share, and all shares are issued, redeemed, and repurchased only at the stated par value. We issue a single class of capital stock (Class B capital stock) and have two subclasses of Class B capital stock: membership and activity-based. Each member must purchase and hold membership capital stock in an amount equal to 0.12 percent of its total assets as of the preceding December 31st, subject to a cap of $10.0 million and a floor of $10,000. Each member is also required to purchase activity-based capital stock equal to 4.00 percent of its advances and mortgage loans outstanding and 0.10 percent of its standby letters of credit. All capital stock issued is subject to a notice of redemption period of five years.

The capital stock requirements established in our Capital Plan are designed so that we can remain adequately capitalized as member activity changes. Our Board of Directors may make adjustments to the capital stock requirements within ranges established in our Capital Plan.

The following table summarizes our regulatory capital stock by type of member (dollars in millions):
June 30,
2022		December 31,
2021
Commercial banks$1,527 $1,305 
Savings institutions101 86 
Credit unions720 519 
Insurance companies1,527 1,453 
CDFIs1 1 
Total GAAP capital stock3,876 3,364 
Mandatorily redeemable capital stock17 29 
Total regulatory capital stock$3,893 $3,393 

The increase in regulatory capital stock held at June 30, 2022 when compared to December 31, 2021 was primarily due to an increase in activity-based capital stock resulting from an increase in advance balances. For additional information on our capital stock, refer to Item 1. Financial Statements — Note 8 — Capital.”

Retained Earnings
Our risk management policies require a minimum level of retained earnings based on the amount we believe necessary to help protect the redemption value of capital stock, facilitate safe and sound operations, maintain regulatory capital ratios, and support our ability to pay a relatively stable dividend. We monitor our achievement of this minimum level and may utilize tools such as restructuring our balance sheet, generating additional income, reducing our risk exposures, increasing capital stock requirements, or reducing our dividends to achieve this level of retained earnings. At June 30, 2022 and December 31, 2021, our actual retained earnings exceeded our required minimum level of retained earnings.
We entered into a Joint Capital Enhancement Agreement (JCE Agreement) with all of the other Federal Home Loan Banks in 2011. Under the JCE Agreement, we are required to allocate 20 percent of our quarterly net income to a separate restricted retained earnings account until the balance of that account, calculated as of the last day of each calendar quarter, equals at least one percent of our average balance of outstanding consolidated obligations for the calendar quarter. The restricted retained earnings are not available to pay dividends and are presented separately on our Statements of Condition. At June 30, 2022 and December 31, 2021, our restricted retained earnings balance totaled $648 million and $617 million. One percent of our average balance of outstanding consolidated obligations for the three months ended June 30, 2022 was $845 million.

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Dividends

Our current dividend philosophy is to pay a membership capital stock dividend equal to or greater than a reference rate of interest, such as SOFR, and an activity-based capital stock dividend, when possible, at a level above the membership capital stock dividend. Our dividend rates seek to strike a balance between providing reasonable and consistent returns to members while preserving our financial position, flexibility, and ability to serve as a long-term liquidity provider. Our actual dividend is determined quarterly by our Board of Directors, based on policies, regulatory requirements, actual performance, and other considerations that the Board determines to be appropriate.

The following table summarizes dividend-related information (dollars in millions):
For the Three Months Ended
For the Six Months Ended
June 30,June 30,
2022202120222021
Aggregate cash dividends paid1
$42 $41 $85 $81 
Effective combined annualized dividend rate paid on capital stock2
5.00 %4.93 %4.93 %4.77 %
Annualized dividend rate paid on membership capital stock3.00 %3.00 %3.00 %3.00 %
Annualized dividend rate paid on activity-based capital stock6.25 %6.00 %6.13 %5.75 %
Average SOFR0.71 %0.02 %0.41 %0.03 %

1    Includes aggregate cash dividends paid during the period. Amount excludes cash dividends paid on MRCS. For financial reporting purposes, these dividends were recorded as interest expense on our Statements of Income.

2    Effective combined annualized dividend rate is paid on total capital stock, including MRCS.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

For a discussion of our critical accounting policies and estimates, refer to our 2021 Form 10-K. There have been no material changes to our critical accounting policies and estimates during the six months ended June 30, 2022.

LEGISLATIVE AND REGULATORY DEVELOPMENTS

FHFA Director’s Testimony to the House Financial Services Committee on a Planned Review of the FHLBank System

On July 20, 2022, Finance Agency Director Sandra Thompson gave testimony to the House Financial Services Committee indicating that the Finance Agency intends to review the FHLBank System. Director Thompson’s testimony indicated that the Finance Agency 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 their mission, purpose, and organization. At this time, it is not possible to determine when these events will occur, whether any actions will result from these events, and how these events will ultimately impact us or the System as a whole.

Proposed Rule Implementing the Adjustable Interest Rate LIBOR Act (LIBOR Act)

On July 28, 2022, the Board of Governors of the Federal Reserve System (Board) published a proposed rule with a comment deadline of August 29, 2022 that would implement the LIBOR 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, and lack adequate provisions to identify a replacement rate for LIBOR. The LIBOR replacement date is currently July 3, 2023. The proposed rule identifies separate Board-selected replacement rates for derivatives transactions, covered GSE contracts, and all other covered contracts. The proposed rule defines covered GSE contracts to include FHLBank advances. We are reviewing the proposed rule, however it is not possible to determine the extent to which the rule will be adopted as proposed and, as a result, the impact the final rule may have on us.

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RISK MANAGEMENT
    
We have risk management policies, established by our Board of Directors, that allow us to monitor and control our exposure to interest rate, liquidity, credit, operational, model, information security, legal, regulatory and compliance, diversity, equity, and inclusion (DEI), strategic, and reputational risks, as well as capital adequacy. Our primary risk management objective is to manage our assets and liabilities in ways that ensure liquidity is available to our members and protect the par redemption value of our capital stock. We periodically evaluate our risk management policies in order to respond to changes in our financial position and general market conditions. The following sections outline our interest rate, credit, and information security risks. For additional details on all other risks noted above, please refer to our 2021 Form 10-K.
Interest Rate Risk

We define interest rate risk as the risk that changes in interest rates or spreads will adversely affect our financial condition (market value) and performance (income). Interest rate risk is the principal type of risk to which we are exposed, as our cash flows, and therefore earnings and equity value, can change significantly as interest rates change. Our general approach toward managing interest rate risk is to acquire and maintain a portfolio of assets, liabilities, and derivatives which, taken together, limit our expected exposure to interest rate risk. Our key interest rate risk measures are Market Value of Equity (MVE) and Projected 24-Month Income. Management regularly monitors these key measures, as discussed further in the sections below.

MARKET VALUE OF EQUITY

    MVE measures the net present value of the Bank by either marking positions to market or discounting all future cash flows using market discount rates. MVE is measured as the market value of our assets minus the market value of our liabilities (excluding MRCS). MVE is an estimate of the Bank’s value and takes into account short-term market price fluctuations.

We monitor and manage to MVE policy limits in an effort to ensure the stability of the Bank’s value. Our policy limits are based on declines from the base case in parallel and non-parallel interest rate change scenarios. Any policy limit breach must be reported to the Enterprise Risk Committee of the Bank and the Risk and Compliance Committee of the Board of Directors and be remediated in a timely manner.

Effective May 1, 2022, our MVE policy limits were revised to reflect new base case decline limits on our 100 and 200 basis point parallel and non-parallel interest rate change scenarios. Specifically, the limit on our up and down 100 basis point parallel and non-parallel interest rate change scenarios is a 4.0 percent decline from base case MVE, and the limit on our up and down 200 basis point parallel and non-parallel interest rate change scenarios is a 7.5 percent decline from base case MVE. At June 30, 2022 and December 31, 2021, our base case MVE was $6.4 billion and $6.0 billion and we were in compliance with all MVE policy limits in effect at each period end.

Market Value of Capital Stock (MVCS) represents our MVE divided by the total outstanding shares of our capital stock (including MRCS). To ensure we remain adequately capitalized, we must ensure our MVCS remains at or above our $100 par value. Our base case MVCS was $165.3 at June 30, 2022 compared to $177.5 at December 31, 2021.

For more information on this risk measure, including policy limits previously in effect, refer to “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Risk Management — Interest Rate Risk — Market Value of Equity” in our 2021 Form 10-K.

PROJECTED 24-MONTH INCOME

The projected 24-month income simulation measures our short-term earnings forecast over a two-year horizon based on forward interest rates and business assumptions. The spread between our projected adjusted return on capital stock (AROCS) and average SOFR is used as the primary measure of our profitability. For additional information on our adjusted earnings measure, refer to “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Executive Overview — Adjusted Earnings.”

We monitor and manage to policy limits, which are based on the spread between our projected AROCS and average SOFR in parallel and non-parallel interest rate change scenarios. Additionally, there is a limit on the decline in projected AROCS from base case AROCS for certain basis shock scenarios to limit basis risk exposure. Any policy limit breach must be reported to the Enterprise Risk Committee of the Bank and the Risk and Compliance Committee of the Board of Directors and be remediated in a timely manner.
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Effective May 1, 2022, our policy limits for the up and down 100 and 200 basis point parallel interest rate change scenarios, as well as the up and down 100 basis point non-parallel interest rate change scenarios, were updated to SOFR plus 175 basis points over a 24-month horizon. We were in compliance with all projected 24-month income policy limits at June 30, 2022.
In October 2021, our Board of Directors approved an exception to all projected income policy limits effective September 30, 2021 through February 28, 2022, due primarily to the low probability of our modeled changes in mortgage rates occurring. As such, there were no projected 24-month income policy limits in effect at December 31, 2021.
For more information on this risk measure, including policy limits previously in effect, refer to “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Risk Management — Interest Rate Risk — Projected 24-Month Income” in our 2021 Form 10-K.

CAPITAL ADEQUACY

An adequate capital position is necessary for facilitating safe and sound business operations, protecting the redemption value of our capital stock, maintaining regulatory capital ratios, and supporting our ability to pay dividends and redeem excess capital stock. To ensure capital adequacy, we maintain a minimum level of retained earnings to accomplish business imperatives and cover unexpected losses. Our key capital adequacy measures are regulatory capital and minimum retained earnings in order to maintain capital levels in accordance with Finance Agency regulations. In addition, our risk management policies require that we maintain MVCS at or above our $100 par value.

For additional information on our compliance with regulatory capital requirements as well as our minimum retained earnings, refer to “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Capital.”

For additional information on MVCS, refer to “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Risk Management — Interest Rate Risk — Market Value of Equity.”

Credit Risk

    We define credit risk as the risk that a member or counterparty will fail to meet its financial obligations. Our primary credit risks arise from our ongoing lending, investing, and hedging activities. Our overall objective in managing credit risk is to operate a sound credit granting process and to maintain appropriate credit administration, measurement, and monitoring practices.

ADVANCES

    We manage our credit exposure to advances through an approach that provides for an established credit limit for each borrower, ongoing reviews of each borrower’s financial condition, and detailed collateral and lending policies to limit risk of loss while balancing borrowers’ needs for a reliable source of funding. In addition, we lend to our borrowers in accordance with the FHLBank Act, Finance Agency regulations, and other applicable laws.

We are required by regulation to obtain sufficient collateral to fully secure our advances, standby letters of credit, and other extensions of credit to borrowers (collectively, credit products). The estimated value of the collateral required to secure each borrower’s credit products is calculated by applying collateral discounts, or haircuts, to the unpaid principal or market value, as applicable, of the collateral. We also have policies and procedures for validating the reasonableness of our collateral valuations. In addition, we perform collateral verifications and on-site reviews based on the risk profile of the borrower. Management believes that these policies effectively manage our credit risk from advances.

At June 30, 2022 and December 31, 2021, borrowers pledged $311.6 billion and $294.3 billion of collateral (net of applicable discounts) to support activity with us, including advances. At June 30, 2022 and December 31, 2021, all of our advances met the requirement to be collateralized at a minimum of 100 percent, net of applicable discounts. Borrowers pledge collateral in excess of their collateral requirement mainly to demonstrate available liquidity and to borrow additional amounts in the future.
    

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We evaluate advances for credit losses on a quarterly basis. We have never experienced a credit loss on our advances. Based upon our collateral and lending policies, the collateral held as security, and the repayment history on advances, management has determined that there were no expected credit losses on our advances as of June 30, 2022 and December 31, 2021. Refer to “Item 1. Financial Statements — Note 4 — Advances” for additional information on our collateral practices and allowance for credit losses.

MORTGAGE LOANS

Mortgage loan credit risk is the risk that we will not receive timely payments of principal and interest due from mortgage borrowers because of borrower defaults. Credit risk on mortgage loans is affected by a number of factors, including loan type, borrower’s credit history, and other factors such as home price fluctuations, unemployment levels, and other economic factors in the local market or nationwide.

The following table presents the unpaid principal balance of our mortgage loans by product type (dollars in millions):
Product TypeJune 30,
2022		December 31,
2021
Conventional$7,463 $7,063 
Government397 416 
Total unpaid principal balance$7,860 $7,479 

We manage the credit risk on mortgage loans by (i) adhering to our underwriting standards, (ii) using agreements to establish credit risk sharing responsibilities with our PFIs, and (iii) monitoring the performance of the mortgage loan portfolio and creditworthiness of PFIs.

We evaluate mortgage loans for credit losses on a quarterly basis and establish an allowance for credit losses to reflect management’s estimate of expected credit losses inherent in the portfolio. At June 30, 2022 and December 31, 2021, we had an allowance for credit losses of $4 million and $1 million on our conventional mortgage loans. At June 30, 2022, over 99 percent of our conventional loan portfolio was performing (i.e. current payment status) and charge-offs recorded during the six months ended June 30, 2022 were less than one percent of the total conventional portfolio.

We have never experienced a credit loss on our government-insured mortgage loans. At June 30, 2022 and December 31, 2021, we determined no allowance for credit losses was necessary on our government-insured mortgage loans.

Refer to “Item 1. Financial Statements — Note 5 — Mortgage Loans Held for Portfolio” for additional information on our allowance for credit losses and the payment status of our conventional mortgage loans.

INVESTMENTS

    We maintain an investment portfolio primarily to provide investment income and liquidity. Our primary credit risk on investments is the counterparties’ ability to meet repayment terms. We mitigate this credit risk by purchasing investment quality securities. We define investment quality as a security with adequate financial backing so that full and timely payment of principal and interest on such security is expected and there is minimal risk that the timely payment of principal and interest would not occur because of adverse changes in economic and financial conditions during the projected life of the security. We consider a variety of credit quality factors when analyzing potential investments, including collateral performance, marketability, asset class or sector considerations, local and regional economic conditions, nationally recognized statistical rating organization (NRSRO) credit ratings, and/or the financial health of the underlying issuer. We limit our purchases of MBS to those guaranteed by the U.S. Government or issued by a GSE. We perform ongoing analysis on these investments to determine potential credit issues.

Finance Agency regulations also limit the type of investments we may purchase. We are prohibited from investing in financial instruments issued by non-U.S. entities other than those issued by U.S. branches and agency offices of foreign commercial banks, unless otherwise approved by the Finance Agency. At June 30, 2022, we were in compliance with the regulation and did not own any financial instruments issued by non-U.S. entities, other than those issued by U.S. branches and agency offices of foreign commercial banks, and those approved by the Finance Agency.


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In addition, Finance Agency regulations include limits on the amount of unsecured credit we may extend to a counterparty or to a group of affiliated counterparties. These limits are based on a percentage of regulatory capital and the counterparty’s overall credit rating. At June 30, 2022, we were in compliance with the regulatory limits established for unsecured credit.

Refer to“Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Risk Management — Credit Risk” in our 2021 Form 10-K for additional information on these regulatory limits.

Our short-term portfolio may include, but is not limited to, interest-bearing deposits, federal funds sold, securities purchased under agreements to resell, certificates of deposit, commercial paper, and U.S. Treasury obligations. Our long-term portfolio may include, but is not limited to, U.S. Treasury obligations, other U.S. obligations, GSE and TVA obligations, state or local housing agency obligations, taxable municipal bonds, and agency MBS. We consider our long-term investments issued or guaranteed by the U.S. Government, an agency or instrumentality of the U.S. Government, or the Federal Deposit Insurance Corporation (FDIC) to be of the highest credit quality and therefore those exposures are not monitored with other unsecured investments. Given the credit quality of our unsecured long-term investments, our unsecured credit risk is primarily in the short-term portfolio.

We limit short-term unsecured credit exposure primarily to the following overnight investment types:

•Interest-bearing deposits. Primarily consists of unsecured deposits that earn interest.

•Federal funds sold. Unsecured loans of reserve balances at the Federal Reserve Banks between financial institutions.

•Commercial paper. Unsecured debt issued by corporations, typically for the financing of accounts receivable, inventories, and meeting short-term liabilities.

At June 30, 2022, our unsecured short-term investment exposure consisted of overnight interest-bearing deposits and federal funds sold. The following table presents our unsecured short-term investment exposure by counterparty credit rating and domicile (excluding accrued interest receivable) (dollars in millions):
June 30, 2022
Credit Rating1,2
Domicile of CounterpartyAAATotal
Domestic$— $1,630 $1,630 
U.S subsidiaries of foreign commercial banks— 500 500 
Total domestic and U.S. subsidiaries of foreign commercial banks— 2,130 2,130 
U.S. branches and agency offices of foreign commercial banks
Australia930 — 930 
Belgium— 200 200 
Canada— 2,420 2,420 
Finland750 — 750 
France— 100 100 
Germany900 — 900 
Netherlands— 520 520 
Sweden— 620 620 
United Kingdom— 620 620 
Total U.S. branches and agency offices of foreign commercial banks2,580 4,480 7,060 
Total unsecured short-term investment exposure$2,580 $6,610 $9,190 

1    Represents either the lowest credit rating available for each counterparty based on an NRSRO, or the guarantor credit rating, if applicable. In instances where an NRSRO rating or guarantor rating is not available for the investment, the investment is classified as unrated.

2    Table excludes investments issued or guaranteed by the U.S. Government, an agency or instrumentality of the U.S. Government, or the FDIC.



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Investment Ratings

The following table summarizes the carrying value of our investments by credit rating (dollars in millions):
June 30, 2022
Credit Rating1
AAAAAABBBUnratedTotal
Interest-bearing deposits$— $1 $1,010 $— $— $1,011 
Securities purchased under agreements to resell— 5,900 1,250 — 100 7,250 
Federal funds sold— 2,580 5,600 — — 8,180 
Investment securities:
MBS
GSE single-family— 867 — — — 867 
GSE multifamily— 8,010 — — — 8,010 
U.S. obligations single-family2
— 2,754 — — — 2,754 
Private-label residential— 1 1 2 — 4 
Total MBS— 11,632 1 2 — 11,635 
Non-MBS
U.S. Treasury obligations2
— 1,770 — — — 1,770 
Other U.S. obligations2
— 1,040 — — — 1,040 
GSE and TVA obligations— 927 — — — 927 
State or local housing agency obligations474 31 — — — 505 
Other3
390 45 — — — 435 
Total non-MBS864 3,813 — — — 4,677 
Total investments$864 $23,926 $7,861 $2 $100 $32,753 

1    Represents either the lowest credit rating available for each investment based on an NRSRO, or the guarantor credit rating, if applicable. In instances where an NRSRO rating or guarantor rating is not available for the investment, the investment is classified as unrated.

2    Represents investment securities backed by the full faith and credit of the U.S. Government.

3    Consists primarily of taxable municipal bonds.


We evaluate investments for credit losses on a quarterly basis. At June 30, 2022 and December 31, 2021, we determined no allowance for credit losses was necessary on our investments. Refer to “Item 1. Financial Statements — Note 3 — Investments” for additional information on our allowance for credit losses.

DERIVATIVES

    We execute most of our derivative transactions with large banks and major broker-dealers. Over-the-counter derivative transactions may be either executed directly with a counterparty, referred to as uncleared derivatives, or cleared through a clearing agent with a Clearinghouse, referred to as cleared derivatives.

We are subject to credit risk due to the risk of nonperformance by counterparties to our derivative agreements. The amount of credit risk on derivatives depends on the extent to which netting procedures and collateral requirements are used and are effective in mitigating the risk. We manage credit risk through credit analyses, collateral requirements, and adherence to the requirements set forth in our policies and Finance Agency regulations.

The contractual or notional amount of derivatives reflects our involvement in the various classes of financial instruments. Our maximum credit risk is the estimated cost of replacing derivatives if there is a default, minus the value of any related collateral. In determining maximum credit risk, we consider accrued interest receivables and payables as well as our ability to net settle positive and negative positions with the same counterparty and/or clearing agent when netting requirements are met.


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The following table shows our derivative counterparty credit exposure (dollars in millions):
June 30, 2022
Credit Rating1
Notional AmountNet Derivatives
Fair Value Before Collateral		Cash Collateral Pledged
To (From) Counterparty		Net Credit Exposure
 to Counterparties
Non-member counterparties:
Asset positions with credit exposure
Uncleared derivatives
A2
$111 $— $— $— 
Liability positions with credit exposure
Uncleared derivatives
A1,192 (22)24 2 
BBB1,822 (62)68 6 
Cleared derivatives3
58,672 (97)339 242 
Total derivative positions with credit exposure to non-member counterparties61,797 (181)431 250 
Member institutions2,4
84 — — — 
Total61,881 $(181)$431 $250 
Derivative positions without credit exposure6,441 
Total notional$68,322 

1    Represents either the lowest credit rating available for each counterparty based on an NRSRO, or the guarantor credit rating, if applicable.

2    Net credit exposure is less than $1 million.

3    Represents derivative transactions cleared with CME Clearing, our clearinghouse, who is not rated. CME Clearing's parent, CME Group Inc. was rated Aa3 by Moody's and AA- by Standard and Poor's at June 30, 2022.

4    Represents mortgage loan purchase commitments with our member institutions.

Refer to “Item 1. Financial Statements — Note 6 — Derivatives and Hedging Activities” for additional information on our derivatives and hedging activities.

Information Security Risk

We define information security risk as the risk arising from unauthorized access, use, disclosure, disruption, modification, or destruction of information or information systems. Importantly, this definition includes the confidentiality, integrity, and availability of both digital and non-digital information managed within information systems and processes.

Information security risk includes the risk that cyber incidents could result in a failure or interruption of our business operations. We have not experienced any such disruption with a material adverse impact. However, we do rely heavily on internal and third-party information systems and other technology to conduct and manage our business and any disruptions to those items could have a material adverse impact on our business operations.

In an effort to mitigate cybersecurity risk, we utilize a widely adopted industry framework to guide and benchmark the activities of our information security program in alignment with our risk appetite statement. Administrative, physical, and logical controls are in place for identifying, monitoring, and controlling system access, sensitive data, and system changes. An independent assessment of our environment relating to the framework guidance is performed periodically and presented to our Board of Directors. To further mitigate our risk, we also maintain cyber insurance coverage in an effort to reduce financial losses stemming from a security incident.

Our Board of Directors is responsible for the oversight of our information security program, establishing our information security risk appetite, and approving our information security policy. The Technology Committee of our Board delegates or directly approves Bank-wide governing policies, standards, guidelines, and procedures for IT and information security, and the Risk and Compliance Committee of our Board has oversight responsibility for information security risk. Our Chief Information Officer establishes our strategic direction and provides executive support for our information security program, and the Director of Information Security is responsible for our information security program.


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In addition, we employ an information security training program that includes security training lessons and phishing exercises for all employees, mandatory staff training on cyber risks, and security testing that includes regular third-party facilitated penetration testing. Our Board of Directors is also required to complete cybersecurity training and participate in a cloud computing education session annually.

Given the importance of cybersecurity and ever-increasing sophistication of potential cyber-attacks, we will continue to invest in and strengthen our cyber-defenses.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

See “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Risk Management — Interest Rate Risk” and the sections referenced therein for quantitative and qualitative disclosures about market risk.

ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Management is responsible for establishing and maintaining disclosure controls and procedures designed to ensure that information required to be disclosed in reports we file or submit under the Securities Exchange Act of 1934, as amended (the Exchange Act) is (i) recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms; and (ii) accumulated and communicated to our management, including our President and chief executive officer (CEO), and chief financial officer (CFO), as appropriate, to allow timely decisions regarding required disclosure.
Management, with the participation of our President and CEO, and CFO, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the quarterly period covered by this report. Based on that evaluation, our President and CEO, and CFO have concluded that our disclosure controls and procedures were effective as of June 30, 2022.
Changes in Internal Control over Financial Reporting

During the quarter ended June 30, 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.

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PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS
    
Refer to “Item 1. Financial Statements — Note 10 — Commitments and Contingencies” for information regarding legal proceedings.

ITEM 1A. RISK FACTORS

For a discussion of our risk factors, refer to our 2021 Form 10-K. There have been no material changes to our risk factors during the six months ended June 30, 2022.

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

Not applicable.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.



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ITEM 6. EXHIBITS
3.1
3.2
4.1
10.1
31.1
31.2
32.1
32.2
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1    Incorporated by reference from our Form 8-K filed with the SEC on June 1, 2015 (Commission File No. 000-51999).

2    Incorporated by reference from our Form 8-K filed with the SEC on December 14, 2021 (Commission File No. 000-51999).

3    Incorporated by reference from our Form 8-K filed with the SEC on May 10, 2022 (Commission File No. 000-51999).








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SIGNATURES

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

FEDERAL HOME LOAN BANK OF DES MOINES
(Registrant)
Date:August 10, 2022
By:/s/ Kristina K. Williams
Kristina K. Williams
President and Chief Executive Officer
By:/s/ Joelyn R. Jensen-Marren
Joelyn R. Jensen-Marren
Chief Financial Officer
(Principal Financial and Accounting Officer)

80
exhibit41capitalplan
FHLB Des Moines Capital Plan Amended and Revised September 5, 2011 (Approved by the Federal Housing Finance Agency on August 5, 2011) Further Amended on May 31, 2015 (Approved by the Federal Housing Finance Agency on May 31, 2015)

 
TABLE OF CONTENTS Page -i- 1. Definitions................................................................................................................................................................. 1 2. Capital Structure ....................................................................................................................................................... 2 2.1 Authorized Capital Stock ............................................................................................................................. 2 2.2 Stock Issuance and Retirement Procedures ................................................................................................. 2 2.3 Minimum Investment Requirements ............................................................................................................ 3 2.4 Membership Stock Requirements ................................................................................................................ 3 2.5 Activity Based Stock Requirements ............................................................................................................ 4 3. Rights and Preferences .............................................................................................................................................. 4 3.1 Par Value ...................................................................................................................................................... 4 3.2 Ownership of Retained Earnings ................................................................................................................. 4 3.3 Voting Rights ............................................................................................................................................... 4 3.4 Dividends and Capital Distributions ............................................................................................................ 4 3.5 Liquidation ................................................................................................................................................... 5 3.6 Merger or Consolidation .............................................................................................................................. 5 4. Redemption, Repurchase and Transfer ..................................................................................................................... 5 4.1 Capital Stock Redemption ........................................................................................................................... 5 4.2 Capital Stock Repurchases ........................................................................................................................... 7 4.3 Limitations on Capital Stock Redemption or Repurchase ........................................................................... 8 4.4 Transfer of Excess Stock ............................................................................................................................. 9 5. Termination of Membership ..................................................................................................................................... 9 5.1 Voluntary Withdrawal from Membership.................................................................................................... 9 5.2 Involuntary Termination of Membership ................................................................................................... 10 5.3 Liquidation of Claims ................................................................................................................................ 10 6. Treatment of Capital Stock in the Merger .............................................................................................................. 10 7. Retained Earnings Enhancement Implementation and Definitions......................................................................... 11 7.1 Implementation .......................................................................................................................................... 11 7.2 Definitions applicable to Sections 7 through 10 of this Capital Plan ........................................................ 11 8. Establishment of Restricted Retained Earnings ...................................................................................................... 13 8.1 Segregation of Account.............................................................................................................................. 13 8.2 Funding of Account ................................................................................................................................... 13 9. Limitation on Dividends, Stock Purchase and Stock Redemption.......................................................................... 15 9.1 General Rule on Dividends ....................................................................................................................... 15

 
TABLE OF CONTENTS (continued) Page -ii- 9.2 Limitations on Repurchase and Redemption ............................................................................................. 15 10. Termination of Retained Earnings Capital Plan Amendment Obligations ............................................................. 15 10.1 Notice of Automatic Termination Event .................................................................................................... 15 10.2 Notice of Voluntary Termination ............................................................................................................... 17 10.3 Consequences of an Automatic Termination Event or Vote to Terminate the Agreement ........................ 17 Appendix I

 
1 1. Definitions For purposes of this Capital Plan, all capitalized terms used but not defined elsewhere have the following meanings: “Acquired Member Assets” means assets sold to the Bank pursuant to 12 C.F.R. Part 955 (as such regulation may be amended) and held on the Bank’s balance sheet. “Activity Based Stock” means a subclass of Class B Stock that is required to be purchased and held in order to obtain an advance and to engage in other transactions with the Bank. “Activity Based Stock Requirement” means the level of Activity Based Stock that must be purchased and held in order to obtain advances and engage in other transactions with the Bank. “Additional Capital” means the loss absorbing, distributable capital component created in the Merger equal to the difference between the fair value of the net assets acquired and the fair value of the Capital Stock issued in the Merger. “Bank” means the Federal Home Loan Bank of Des Moines. “Board of Directors” means the Board of Directors of the Bank. “Cancellation Fee” means the fee the Bank will impose upon a Member that cancels or revokes a Notice of Redemption or Notice of Withdrawal. “Capital Plan” means the Bank’s plan for a capital structure as required by 12 U.S.C. 1426(b) (as such may be amended), as approved by the Finance Agency. “Capital Stock” means, collectively, the Class A Stock and Class B Stock authorized under this Capital Plan. “Class A Stock” means the class A stock authorized for issuance under this Capital Plan. “Class B Stock” means the class B stock authorized for issuance under this Capital Plan. “Commitment” means any legally binding agreement that requires the Bank to make an advance, acquire Acquired Member Assets, or otherwise transact business with a Member. “Excess Shares” or “Excess Stock” means the amount or shares of each class or subclass of the Bank’s Capital Stock held by a Member that exceeds or does not count towards that Member’s Minimum Investment. “Finance Agency” means the Federal Housing Finance Agency, the regulator of the Federal Home Loan Bank System, or any successor thereto. “Member” means any institution that has been approved for membership in the Bank and has purchased the required amount of Membership Stock. “Membership Stock” means a subclass of Class B Stock that is required to be purchased and held as a condition of membership in the Bank. “Merger” means the merger of the Bank and the Federal Home Loan Bank of Seattle. “Merger Effective Time” means the effective time of the Merger.

 
2 “Membership Stock Requirement” means the level of Membership Stock that must be purchased and maintained as a condition of membership. “Minimum Investment” means the amount of Membership Stock necessary for a stockholder to satisfy its Membership Stock Requirement and the amount of Activity Based Stock necessary for a stockholder to satisfy its Activity Based Stock Requirement. “Notice of Redemption” means any written request by a Member to the Bank to redeem Capital Stock. “Notice of Withdrawal” means the written notice by a Member to the Bank of that Member’s intention to withdraw from membership in the Bank. “Total Assets” means a Member’s total assets as reported to the Member’s primary regulator or on its audited financial statement. 2. Capital Structure 2.1 Authorized Capital Stock The Bank issues Capital Stock only in accordance with 12 C.F.R. Section 931.2 (as such regulation may be amended) and in accordance with this Capital Plan. Capital Stock is composed of the following classes: • Class A Stock; and • Class B Stock. The Class B Stock is composed of the following sub-classes: • Membership Stock; and • Activity Based Stock. 2.2 Stock Issuance and Retirement Procedures The Bank acts as its own transfer agent and issues all stock in book-entry form. The Bank does not issue fractional shares of Capital Stock. A Minimum Investment shall be rounded up to the next $100. Any dividend declared in the form of Capital Stock shall be rounded down to the next $100 and any fractional shares shall be distributed in the form of a cash dividend. Capital Stock may be purchased and held only by Members, former Members that are required to hold Capital Stock after their membership has terminated in order to support outstanding advances and other transactions with the Bank, and entities that acquire Members, such as through mergers or consolidations, but which themselves are not Members.

 
3 The Bank issues Capital Stock in a stockholder’s name, credits the stockholder’s Class A Stock, Membership Stock or Activity Based Stock balance, as appropriate, and debits the stockholder’s demand deposit account for any payment due. Upon redemption or repurchase of Capital Stock, the Bank retires the stock, debits the stockholder’s Class A Stock, Membership Stock or Activity Based Stock balance, as appropriate, and credits the stockholder’s demand deposit account with any proceeds. The Bank shall not permit a stockholder to convert any Excess Shares of Capital Stock between classes or sub- classes of Capital Stock. 2.3 Minimum Investment Requirements The Board of Directors has a continuing obligation to review and adjust the Minimum Investment as necessary to ensure that the Bank remains in compliance with its capital requirements. The Bank shall provide notice to each stockholder of any adjustment to the Minimum Investment and the effective date of any such adjustment at least 15 days prior to the effective date of any such adjustment. Upon the effective date of any such adjustment, the Bank shall, as applicable, issue any Capital Stock in accordance with section 2.2 or repurchase any Capital Stock in accordance with section 4. A stockholder must comply promptly with any adjustments the Board of Directors makes to the Minimum Investment. 2.4 Membership Stock Requirements The Board of Directors has established a Membership Stock Requirement identified in Appendix I. The Board of Directors may adjust the Membership Stock Requirement within the ranges specified in Appendix I. Each Member is required to purchase and maintain Membership Stock in an amount equal to its Membership Stock Requirement, as calculated by the Bank. At least annually, the Bank calculates each Member’s Membership Stock Requirement as a percentage of Total Assets as of the preceding December 31st. The Bank will notify each Member of its Membership Stock Requirement at least 15 days prior to the effective date of any adjustments that the Bank shall make to the Member’s Membership Stock balance as a result of such annual calculation. If a Member’s Membership Stock Requirement has increased since the last time the Bank calculated the Member’s Membership Stock Requirement, the Bank shall issue Membership Stock in accordance with section 2.2. The Bank, in its discretion, may recalculate any Member’s Membership Stock Requirements more often than annually if the Bank deems it appropriate. The Bank may recalculate a Member’s Membership Stock Requirement if requested by the Member, or in the Bank’s discretion. In each of these cases, the Bank will calculate the Membership Stock Requirement based on the Member’s Total Assets as of the end of the most recent calendar quarter for which financial information is available. Notwithstanding any other provision of this Capital Plan, in the event that (a) a Member becomes insolvent or otherwise subject to the appointment of a conservator, receiver or other legal custodian under federal or state law, and (b) the Bank has terminated the Member’s membership, then that Member’s Membership Stock Requirement shall be zero.

 
4 2.5 Activity Based Stock Requirements The Board of Directors has established an Activity Based Stock Requirement identified in Appendix I. The Board of Directors may adjust the Activity Based Stock Requirement within the ranges specified in Appendix I. The Board of Directors may apply changes in the Activity Based Stock Requirement to any advances, whether new or existing, and other transactions. Each stockholder is required to purchase and maintain Activity Based Stock in an amount equal to its Activity Based Stock Requirement, as calculated by the Bank, as long as the advance or other transaction remains recorded on the Bank’s books and records. The Bank calculates each stockholder’s Activity Based Stock Requirement daily. The Bank shall notify each stockholder of any increase in its Activity Based Stock Requirement and issue Activity Based Stock to the stockholder in accordance with section 2.2. 2.6 Class A Stock No shares of Class A Stock shall be issued by the Bank except upon the automatic conversion, at the Merger Effective Time, of any shares of Class A Stock of the Federal Home Loan Bank of Seattle issued and outstanding immediately prior to the Merger Effective Time into the shares of Class A Stock. Shares of Class A Stock cannot be used to satisfy the Minimum Investment of any stockholder. All issued and outstanding shares of Class A Stock shall constitute Excess Stock, subject to repurchase by the Bank as provided in section 4.2.3. 3. Rights and Preferences 3.1 Par Value Capital Stock shall be issued, transferred, redeemed, and repurchased at a par value of $100. 3.2 Ownership of Retained Earnings The retained earnings, paid-in surplus, Additional Capital, undivided profits and equity reserves, if any, of the Bank are owned by the stockholders of Class B Stock in an amount proportional to the stockholder’s share of the total shares of issued and outstanding Class B Stock. Such stockholders have no right to receive any portion of these items except through the declaration of a dividend or capital distribution approved by the Board of Directors or upon liquidation of the Bank. 3.3 Voting Rights The voting rights associated with Capital Stock are defined in and governed by the Finance Agency’s regulations. No share of Capital Stock shall have any voting preference. 3.4 Dividends and Capital Distributions Except as otherwise provided herein or by regulation or statute, the Board of Directors has sole discretion to determine the amount, form, frequency and timing of dividend payments and capital distributions for each class

 
5 and subclass of Capital Stock. The Board of Directors may declare different dividends or capital distributions for any class or subclass of Capital Stock. Dividend payments may be made in the form of cash, additional shares of Capital Stock, or a combination thereof as determined by the Board of Directors. Capital distributions may only be made in the form of cash. Unless the Board of Directors declares otherwise, dividends and capital distributions are non-cumulative. Dividends may only be paid from current earnings, previously retained earnings or, subject to the approval of the Finance Agency, Additional Capital. Capital distributions may only be paid from Additional Capital. The Board of Directors may not declare or pay any dividends or make any capital distributions if the Bank is not in compliance with its capital requirements or, if after paying the dividend or making the capital distribution, the Bank would not be in compliance with its capital requirements. Each stockholder will be entitled to receive applicable dividends and capital distributions on Capital Stock held during the applicable dividend or capital distribution period for the period of time the stockholder owned the Capital Stock. The Bank pays dividends and capital distributions on Capital Stock as long as it is issued and outstanding, regardless of whether a Member has provided a Notice of Redemption or Notice of Withdrawal or a stockholder has terminated membership for any reason. 3.5 Liquidation If the Bank is liquidated, after payment in full to the Bank’s creditors, the Bank’s stockholders shall be entitled to receive the par value of their Class B Stock, as well as any retained earnings, paid-in surplus and Additional Capital, in an amount proportional to the stockholder’s share of the total shares of Class B Stock. If any shares of Class A Stock remain outstanding at the time of liquidation, the Class A stockholders will be entitled to receive the par value of their stock (but no additional amounts), prior to the distribution of any retained earnings, paid-in surplus or Additional Capital to the Class B stockholders. A liquidation of the Bank shall also be subject to any terms and conditions imposed by the Finance Agency. 3.6 Merger or Consolidation The Board of Directors shall determine the rights and preferences of the Bank’s stockholders in connection with any merger or consolidation, subject to any terms and conditions imposed by the Finance Agency. 4. Redemption, Repurchase and Transfer 4.1 Capital Stock Redemption Class B Stock is redeemable on five years’ written notice to the Bank. Class A Stock is redeemable on six months’ written notice to the Bank. The Bank shall not be obligated to redeem a Member’s Capital Stock other than in accordance with the Capital Plan, and is not permitted to redeem Capital Stock if such redemption would cause the Member to fail to meet its Minimum Investment or is otherwise prohibited pursuant to section 4.3. 4.1.1 Notice of Redemption A Member may redeem Capital Stock by providing a Notice of Redemption to the Bank specifying the class or sub-class and the number of shares of Capital Stock to be redeemed. A Member shall not have more than one Notice of Redemption outstanding at any one time for the same shares of Capital Stock.

 
6 The redemption period commences upon the Bank’s receipt of the Notice of Redemption. The Bank honors Notices of Redemption in the order in which the Bank receives them. The Bank shall redeem the Capital Stock identified in a Notice of Redemption following the expiration of the redemption period and pay the stated par value of that Capital Stock to the Member in cash in accordance with section 2.2 and subject to the limitations set forth in section 4.3, unless the Bank exercises its discretionary authority to repurchase Excess Stock in accordance with section 4.2 prior to that time. 4.1.2 Cancellation of Notice of Redemption A Member may cancel a Notice of Redemption prior to the end of the redemption period by providing written notice to the Bank of its intent to cancel its Notice of Redemption. The Bank will charge the Member a Cancellation Fee equal to the following: • one percent of the par value of the shares of Capital Stock subject to the Notice of Redemption if the Bank receives the cancellation of Notice of Redemption within one year of the day the Bank received the Notice of Redemption; • two percent of the par value of the shares of Capital Stock subject to the Notice of Redemption if the Bank receives the cancellation of Notice of Redemption within two years of the day the Bank received the Notice of Redemption; • three percent of the par value of the shares of Capital Stock subject to the Notice of Redemption if the Bank receives the cancellation of Notice of Redemption within three years of the day the Bank received the Notice of Redemption; • four percent of the par value of the shares of Capital Stock subject to the Notice of Redemption if the Bank receives the cancellation of Notice of Redemption within four years of the day the Bank received the Notice of Redemption; or • five percent of the par value of the shares of Capital Stock subject to the Notice of Redemption if the Bank receives the cancellation of Notice of Redemption within five years of the day the Bank received the Notice of Redemption. The Board of Directors may change the Cancellation Fee to any percentage of the par value of the shares of Capital Stock subject to the cancelled Notice of Redemption that is not less than 0.0 percent and not more than the percentages specified in the preceding paragraph. If the Board of Directors changes the Cancellation Fee, the Board of Directors will also determine whether the changed Cancellation Fee will apply to the cancellation of any previously submitted Notice of Redemption as well as those submitted in the future. Otherwise, the Cancellation Fee in effect at the time the Bank received the Notice of Redemption will apply to the cancellation of that Notice of Redemption. The Bank will notify Members in writing at least 15 days in advance of any changes in the Cancellation Fee. A Notice of Redemption by a Member (whose membership has not been terminated) shall be automatically cancelled if, within five business days after the end of the applicable redemption notice period, the Bank is prevented from redeeming the Member’s Capital Stock because the Member would fail to maintain its Minimum Investment after such redemption. The automatic cancellation (in full or to the extent required) shall have the same effect as a voluntary cancellation and the Bank shall impose the Cancellation Fee described in the preceding paragraph.

 
7 4.1.3 Notice of Withdrawal The Bank’s receipt of a Notice of Withdrawal commences the five-year redemption period for all Class B Stock or the six-month redemption for all Class A Stock held by that Member, in each case, that is not already subject to a pending Notice of Redemption. The redemption period for Membership Stock purchased subsequent to the Bank’s receipt of a Member’s Notice of Withdrawal shall be deemed to have commenced when the Bank issued such Membership Stock. Following the expiration of the redemption period, the Bank shall pay the stated par value of the Capital Stock to the Member in cash, in accordance with section 2.2 and subject to the limitations set forth in sections 4.3 and 5.3. 4.1.4 Cancellation of Notice of Withdrawal A Member may cancel a Notice of Withdrawal prior to the end of the redemption period by providing written notice to the Bank of its intent to cancel its Notice of Withdrawal. The Bank will charge the Member a Cancellation Fee on the par value of the Member’s Capital Stock balance as described in section 4.1.2. 4.1.5 Termination of Membership If an institution’s membership has been terminated as a result of a merger or consolidation into a nonmember or into a member of another Federal Home Loan Bank, the redemption period for any Capital Stock that is not subject to a pending Notice of Redemption shall be deemed to commence on the date on which the charter of the former member is terminated. If an institution’s membership is involuntarily terminated, the redemption period for all Capital Stock owned by the former member and not already subject to a pending Notice of Redemption shall commence on the date that the Board of Directors terminates the institution’s membership. 4.2 Capital Stock Repurchases The Bank, in its discretion, may repurchase any Excess Shares without regard to any redemption period. 4.2.1 Membership Stock Upon 15 days written notice to Members, the Bank may, in its sole discretion, repurchase Membership Stock which the Bank determines is Excess Stock without regard to the five-year redemption notice period. The Bank shall repurchase any such Excess Stock in accordance with section 2.2 and subject to the limitations set forth in section 4.3. Any repurchase of Membership Stock automatically reduces the amount of Membership Stock that is the subject of any outstanding Notice of Redemption by the amount of Membership Stock repurchased. If a Member has Membership Stock that is subject to more than one Notice of Redemption, the Bank will automatically reduce the amount of Membership Stock that is subject to such outstanding Notices of Redemption in the same order in which the Bank received such Notices of Redemption. A Member’s submission of a Notice of Withdrawal in accordance with section 5.1, or its termination of membership in any other manner, will not, in and of itself, cause any Membership Stock to be deemed Excess Stock for purposes of this section.

 
8 4.2.2 Activity Based Stock Each Member may hold Excess Shares of Activity Based Stock up to the operational threshold established in Appendix I. The Board of Directors may, from time to time, increase or decrease the operational threshold within ranges specified in Appendix I. The Bank will notify each Member of a change in the operational threshold at least 15 days prior to implementing the change. The Bank will repurchase any Excess Shares of Activity Based Stock that exceed the operational threshold established in Appendix I, on at least a scheduled, monthly basis in accordance with section 2.2 and subject to the limitations set forth in section 4.3. The Bank will notify Members at least 15 days in advance of the scheduled date(s) for repurchasing Activity Based Stock and prior to implementing any changes in the scheduled date(s) for repurchasing Activity Based Stock. 4.2.3 Class A Stock The Bank may repurchase any shares of Class A Stock at any time; provided, that the Bank will notify Members at least 15 days in advance of the scheduled date(s) for repurchasing Class A Stock and prior to implementing any changes in the scheduled date(s) for repurchasing Class A Stock. 4.3 Limitations on Capital Stock Redemption or Repurchase The Bank will not redeem or repurchase Capital Stock: • without the prior written approval of the Finance Agency, if the Finance Agency or the Board of Directors has determined that the Bank has incurred, or is likely to incur, losses that result in or are likely to result in charges against the capital of the Bank. This prohibition shall apply even if the Bank is in compliance with its capital requirements, and shall remain in effect for however long the Bank continues to incur such charges or until the Finance Agency determines that such charges are not expected to continue; or • if the redemption or repurchase would cause the Bank to be out of compliance with its capital requirements; or • if the redemption or repurchase would cause a stockholder to be out of compliance with its Minimum Investment; or • if the sum of all requested Capital Stock redemptions that the Bank is scheduled to make on any date equals or exceeds the amount that would cause the Bank to fall below its capital requirements, in which case the Bank will process redemptions in the order in which notification was received, but in no case will the Bank redeem Capital Stock to the point that it would fail to meet its capital requirements. The Bank, upon the approval of its Board of Directors, or of a subcommittee thereof, may suspend redemption of Capital Stock if the Bank reasonably believes that continued redemption of Capital Stock would cause the Bank to fail to meet its capital requirements, would prevent the Bank from maintaining adequate capital against a potential risk that may not be adequately reflected in its capital requirements, or would otherwise prevent the Bank from operating in a safe and sound manner. The Bank will notify the Finance Agency in writing within two business days of the date of the decision to suspend the redemption of Capital Stock, informing the Finance Agency of the reasons for the suspension and of the Bank’s strategies and time frames for addressing the conditions that led to the suspension. The Finance Agency may require the Bank to re-institute the redemption of Capital Stock. The

 
9 Bank will not repurchase any Capital Stock without the written permission of the Finance Agency during any period in which the Bank has suspended redemption of Capital Stock under this paragraph. 4.4 Transfer of Excess Stock With the prior approval of the Bank, a Member may transfer Excess Stock to another Member that controls, is controlled by, or is under common control with the Member. If a Member that has filed a Notice of Redemption transfers Excess Stock that is subject to that notice to another Member, the transfer shall be deemed to be a cancellation of the Notice of Redemption on the Excess Stock transferred upon the effective date of the transfer. The transferring Member shall be responsible for paying any applicable Cancellation Fees in accordance with section 4.1.2. If a Member that has filed a Notice of Withdrawal transfers Excess Stock to another Member, the transfer shall be deemed to be a cancellation of the five-year redemption period on the Excess Stock transferred. The transferring Member shall be responsible for paying any applicable Cancellation Fees in accordance with section 4.1.2. The Bank shall transfer Capital Stock only in accordance with 12 C.F.R. Section 931.6 (as such regulation may be amended). The Bank will not approve a Capital Stock transfer if the transfer would result in the transferring Member being out of compliance with its Minimum Investment. Capital Stock may be traded only between the Bank and its Members. All Capital Stock transfers are to be at par value and are effective upon being recorded on the appropriate books and records of the Bank. 5. Termination of Membership A Member’s submission of a Notice of Withdrawal, or its termination of membership in any other manner, shall not, in and of itself, cause any Capital Stock to be deemed Excess Stock. If a former Member’s membership has been withdrawn, terminated involuntarily, or terminated as a result of a merger or consolidation, the Bank shall redeem or repurchase such former Member’s Capital Stock in accordance with section 4 and subject to the limitations in sections 4.1, 4.2, 4.3 and 5.3. 5.1 Voluntary Withdrawal from Membership Any institution may withdraw from membership by providing a Notice of Withdrawal. A Member that has submitted its Notice of Withdrawal continues to have access to the benefits of membership until the effective date of its withdrawal, but the Bank does not have to provide any further services, including advances, that would mature or otherwise terminate subsequent to the effective date of the withdrawal. The membership of an institution that has submitted a Notice of Withdrawal shall terminate five years from the date of the Bank’s receipt of the Member’s Notice of Withdrawal, unless the institution has cancelled its Notice of Withdrawal prior to that date. 5.2 Involuntary Termination of Membership The Board of Directors may terminate a Member’s membership pursuant to the Finance Agency’s regulations. A Member whose membership is terminated involuntarily shall cease being a Member as of the date on which the

 
10 Board of Directors acts to terminate the membership, and the institution shall have no right to obtain any of the benefits of membership after that date, but shall be entitled to receive any dividends declared on its Capital Stock until the Capital Stock is redeemed or repurchased by the Bank. 5.3 Liquidation of Claims If an institution withdraws from membership or has its membership terminated, the Bank will determine an orderly manner for: • liquidating all outstanding indebtedness (including prepayment fees) owed by that Member to the Bank, and • settling all other claims against the Member. If an institution that withdraws from membership or has its membership terminated remains indebted to the Bank or has outstanding any transactions with the Bank after the effective date of its termination of membership, the Bank shall not redeem or repurchase any Activity Based Stock or Class A Stock if such redemption or repurchase is subject to any of the limitations in section 4.3. The Bank shall redeem or repurchase any Activity Based Stock and Class A Stock in accordance with section 4. 6. Treatment of Capital Stock in the Merger Each share of Capital Stock of the Bank issued and outstanding immediately prior to the Merger Effective Time will, at the Merger Effective Time, automatically and without any further action by the holder of such share, be designated as Class B Stock, of the same subclass as it was immediately prior to the Merger Effective Time. Each former stockholder of the Federal Home Loan Bank of Seattle will be required to satisfy the Minimum Investment requirements set forth in section 2 and Appendix I of this Capital Plan as of the Merger Effective Time. The Class B Stock of the Bank issued in the Merger to each former stockholder of the Federal Home Loan Bank of Seattle at the Merger Effective Time will, first, be allocated to satisfy such stockholder’s Membership Stock Requirement, and any remaining Class B Stock issued in the Merger to such former Federal Home Loan Bank of Seattle stockholders will be allocated as Activity Based Stock. If a former stockholder of the Federal Home Loan Bank of Seattle does not own sufficient Class B Stock to satisfy the Minimum Investment requirements as of the Merger Effective Time, then the Bank will issue additional shares of Class B Stock and debit such stockholder’s demand deposit account at the Bank in accordance with section 2.2. 7. Retained Earnings Enhancement Implementation and Definitions 7.1 Implementation The provisions of sections 7 through 10 shall become effective upon, and only upon, the occurrence of the Interim Capital Plan Amendment Implementation Date. Until the Restriction Termination Date, in the event of any

 
11 conflict between sections 7 through 10 and the remainder of this Capital Plan, the applicable terms of sections 7 through 10 shall govern, and shall be interpreted in a manner such that the restrictions set forth therein are supplementary to, and not in lieu of, the requirements of the remainder of this Capital Plan. 7.2 Definitions applicable to Sections 7 through 10 of this Capital Plan As used in these sections 7 through 10, the following capitalized terms shall have the following meanings. Other capitalized terms used but not defined in these sections 7 through 10, shall have the meanings set forth in section 1 of this Capital Plan. “Act” means the Federal Home Loan Bank Act, as amended as of the Effective Date. “Adjustment to Prior Net Income” means either an increase, or a decrease, to a prior calendar quarter’s Quarterly Net Income subsequent to the date on which any allocation to Restricted Retained Earnings for such calendar quarter was made. “Agreement” means the Joint Capital Enhancement Agreement adopted by the FHLBanks on the Effective Date and amended on the date on which the FHFA has approved the Retained Earnings Capital Plan Amendments for all of the FHLBanks that have issued capital stock pursuant to a capital plan as of the Effective Date. “Allocation Termination Date” means the date the Bank’s obligation to make allocations to the Restricted Retained Earnings account is terminated permanently. That date is determined pursuant to section 10 of this Capital Plan. “Automatic Termination Event” means (i) a change in the Act, or another applicable statute, occurring subsequent to the Effective Date, that will have the effect of creating a new, or higher, assessment or taxation on net income or capital of the FHLBanks, or (ii) a change in the Act, another applicable statute, or the Regulations, occurring subsequent to the Effective Date, that will result in a higher mandatory allocation of an FHLBank’s Quarterly Net Income to any Retained Earnings account than the annual amount, or total amount, specified in an FHLBank’s capital plan as in effect immediately prior to the Automatic Termination Event. “Automatic Termination Event Declaration Date” means the date specified in section 10.1.1 or 10.1.2 of this Capital Plan. “Bank’s Total Consolidated Obligations” means the daily average carrying value for the calendar quarter, excluding the impact of fair value adjustments (i.e., fair value option and hedging adjustments), of the Bank’s portion of outstanding System Consolidated Obligations for which it is the primary obligor. “Declaration of Automatic Termination” means a signed statement, executed by officers authorized to sign on behalf of each FHLBank that is a signatory to the statement, in which at least 2/3 of the then existing FHLBanks declare their concurrence that a specific statutory or regulatory change meets the definition of an Automatic Termination Event. “Dividend” means a distribution of cash, other property, or stock to a Stockholder with respect to its holdings of Capital Stock. “Dividend Restriction Period” means any calendar quarter: (i) that includes the REFCORP Termination Date, or occurs subsequent to the REFCORP Termination Date; (ii) that occurs prior to an Allocation Termination Date; and (iii) during which the amount of the Bank’s Restricted Retained Earnings is less than the amount of the Bank’s RREM. If the amount of the Bank’s Restricted Retained Earnings is at least equal to the amount of the

 
12 Bank’s RREM, and subsequently the Bank’s Restricted Retained Earnings becomes less than its RREM, the Bank shall be deemed to be in a Dividend Restriction Period (unless an Allocation Termination Date has occurred). “Effective Date” means February 28, 2011. “GAAP” means accounting principles generally accepted in the United States as in effect from time to time. “FHFA” means the Federal Housing Finance Agency, or any successor thereto. “FHLBank” means a Federal Home Loan Bank chartered under the Act. “Interim Capital Plan Amendment Implementation Date” means 31 days after the date by which the FHFA has approved a capital plan amendment substantially the same as the Retained Earnings Capital Plan Amendment for all of the FHLBanks that have issued capital stock pursuant to a capital plan as of the Effective Date. “Net Loss” means that the Quarterly Net Income of the Bank is negative, or that the annual net income of the Bank calculated on the same basis is negative. “Quarterly Net Income” means the amount of net income of an FHLBank for a calendar quarter calculated in accordance with GAAP, after deducting the FHLBank’s required contributions for that quarter to the Affordable Housing Program under section 10(j) of the Act, as reported in the FHLBank’s quarterly and annual financial statements filed with the Securities and Exchange Commission. “REFCORP Termination Date” means the last day of the calendar quarter in which the FHLBanks” final regular payments are made on obligations to REFCORP in accordance with Section 997.5 of the Regulations and Section 21B(f) of the Act. “Regular Contribution Amount” means the result of (i) 20 percent of Quarterly Net Income; plus (ii) 20 percent of a positive Adjustment to Prior Net Income for any prior calendar quarter that includes the REFCORP Termination Date, or occurred subsequent to the REFCORP Termination Date, to the extent such adjustment has not yet been made in the current calendar quarter; minus (iii) 20 percent of the absolute value of a negative Adjustment to Prior Net Income for any prior calendar quarter that includes the REFCORP Termination Date, or occurred subsequent to the REFCORP Termination Date, to the extent such adjustment has not yet been made in the current calendar quarter. “Regulations” mean: (i) the rules and regulations of the Federal Housing Finance Agency (except to the extent that they may be modified, terminated, set aside or superseded by the Director of the FHFA) in effect on the Effective Date; (ii) the rules and regulations of the FHFA, as amended from time to time. “Restricted Retained Earnings” means the cumulative amount of Quarterly Net Income and Adjustments to Prior Net Income allocated to the Bank’s Retained Earnings account restricted pursuant to the Retained Earnings Capital Plan Amendment, and does not include amounts retained in: (i) any accounts in existence at the Bank on the Effective Date; or (ii) any other Retained Earnings accounts subject to restrictions that are not part of the terms of the Retained Earnings Capital Plan Amendment. “Restricted Retained Earnings Minimum” (“RREM”) means a level of Restricted Retained Earnings calculated as of the last day of each calendar quarter equal to one percent of the Bank’s Total Consolidated Obligations.

 
13 “Restriction Termination Date” means the date the restriction on the Bank paying Dividends out of the Restricted Retained Earnings account, or otherwise reallocating funds from the Restricted Retained Earnings account, is terminated permanently. That date is determined pursuant to section 10 of this Capital Plan. “Retained Earnings” means the retained earnings of an FHLBank calculated pursuant to GAAP. “Retained Earnings Capital Plan Amendment” means the amendment to this Capital Plan, made a part thereof, adopted effective on the Interim Capital Plan Amendment Implementation Date adding sections 7 through 10 to this Capital Plan. “Special Contribution Amount” means the result of: (i) 50 percent of Quarterly Net Income; plus (ii) 50 percent of a positive Adjustment to Prior Net Income for any prior calendar quarter that includes the REFCORP Termination Date, or occurred subsequent to the REFCORP Termination Date, to the extent such adjustment has not yet been made in the current calendar quarter; minus (iii) 50 percent of the absolute value of a negative Adjustment to Prior Net Income for any prior calendar quarter that includes the REFCORP Termination Date, or occurred subsequent to the REFCORP Termination Date, to the extent such adjustment has not yet been made by the current calendar quarter. “Stockholder” means: (i) a Member; (ii) a former Member that continues to own Capital Stock; or (iii) a successor to an entity that was a Member that continues to own Capital Stock. “System Consolidated Obligation” means any bond, debenture, or note authorized under the Regulations to be issued jointly by the FHLBanks pursuant to Section 11(a) of the Act, as amended, or any bond or note previously issued by the Federal Housing Finance Agency on behalf of all FHLBanks pursuant to Section 11(c) of the Act, on which the FHLBanks are jointly and severally liable, or any other instrument issued through the Office of Finance, or any successor thereto, under the Act, that is a joint and several liability of all the FHLBanks. “Total Capital” means Retained Earnings, the amount paid-in for Capital Stock, the amount of any Additional Capital, the amount of any general allowance for losses, and the amount of other instruments that the FHFA has determined to be available to absorb losses incurred by the Bank. 8. Establishment of Restricted Retained Earnings 8.1 Segregation of Account No later than the REFCORP Termination Date, the Bank shall establish an account in its official books and records in which to allocate its Restricted Retained Earnings, with such account being segregated on its books and records from the Bank’s Retained Earnings that are not Restricted Retained Earnings for purposes of tracking the accumulation of Restricted Retained Earnings and enforcing the restrictions on the use of the Restricted Retained Earnings imposed in the Retained Earnings Capital Plan Amendment. 8.2 Funding of Account 8.2.1 Date on which Allocation Begins The Bank shall allocate to its Restricted Retained Earnings account an amount at least equal to the Regular Contribution Amount beginning on the REFCORP Termination Date. The Bank shall allocate amounts to the Restricted Retained Earnings account only through contributions from its Quarterly Net Income or Adjustments to Prior Net Income occurring on or after the REFCORP Termination Date, but nothing in the Retained Earnings Capital Plan Amendment shall prevent the Bank from allocating a

 
14 greater percentage of its Quarterly Net Income or positive Adjustment to Prior Net Income to its Restricted Retained Earnings account than the percentages set forth in the Retained Earning Capital Plan Amendment. 8.2.2 Ongoing Allocation During any Dividend Restriction Period that occurs before the Allocation Termination Date, the Bank shall continue to allocate its Regular Contribution Amount (or when and if required under subsection 8.2.4 below, its Special Contribution Amount) to its Restricted Retained Earnings account. 8.2.3 Treatment of Quarterly Net Losses and Annual Net Losses In the event the Bank sustains a Net Loss for a calendar quarter, the following shall apply: (i) to the extent that its cumulative calendar year-to-date net income is positive at the end of such quarter, the Bank may decrease the amount of its Restricted Retained Earnings such that the cumulative addition to the Restricted Retained Earnings account calendar year-to-date at the end of such quarter is equal to 20 percent of the amount of such cumulative calendar year-to-date net income; (ii) to the extent that its cumulative calendar year-to-date net income is negative at the end of such quarter (a) the Bank may decrease the amount of its Restricted Retained Earnings account such that the cumulative addition calendar year-to-date to the Restricted Retained Earnings at the end of such quarter is zero, and (b) the Bank shall apply any remaining portion of the Net Loss for the calendar quarter first to reduce Retained Earnings that are not Restricted Retained Earnings until such Retained Earnings are reduced to zero, and thereafter may apply any remaining portion of the Net Loss for the calendar quarter to reduce Restricted Retained Earnings; and (iii) for any subsequent calendar quarter in the same calendar year, the Bank may decrease the amount of its quarterly allocation to its Restricted Retained Earnings account in that subsequent calendar quarter such that the cumulative addition to the Restricted Retained Earnings account calendar year-to-date is equal to 20 percent of the amount of such cumulative calendar year-to-date net income. In the event the Bank sustains a Net Loss for a calendar year, any such Net Loss first shall be applied to reduce Retained Earnings that are not Restricted Retained Earnings until such Retained Earnings are reduced to zero, and thereafter any remaining portion of the Net Loss for the calendar year may be applied to reduce Restricted Retained Earnings. 8.2.4 Funding at the Special Contribution Amount If during a Dividend Restriction Period, the amount of the Bank’s Restricted Retained Earnings decreases in any calendar quarter, except as provided in subsections 8.2.3(i) and (ii)(a) above, the Bank shall allocate the Special Contribution Amount to its Restricted Retained Earnings account beginning at the following calendar quarter-end (except as provided in the last sentence of this subsection). Thereafter, the Bank shall continue to allocate the Special Contribution Amount to its Restricted Retained Earnings account until the cumulative difference between: (i) the allocations made using the Special Contribution Amount; and (ii) the allocations that would have been made if the Regular Contribution Amount applied, is equal to the amount of the prior decrease in the amount of its Restricted Retained Earnings account arising from the application of subsection 8.2.3(ii)(b). If at any calendar quarter-end the allocation of the Special Contribution Amount would result in a cumulative allocation in excess of such prior decrease in the amount of Restricted Retained Earnings: (i) the Bank may allocate such percentage of Quarterly Net Income to the Restricted Retained Earnings account that shall exactly restore the amount of the prior decrease, plus the amount of the Regular Contribution Amount for that quarter; and (ii) the Bank in subsequent quarters shall revert to paying at least the Regular Contribution Amount.

 
15 8.2.5 Release of Restricted Retained Earnings If the Bank’s RREM decreases from time to time due to fluctuations in the Bank’s Total Consolidated Obligations, amounts in the Restricted Retained Earnings account in excess of 150 percent of the RREM may be released by the Bank from the restrictions otherwise imposed on such amounts pursuant to the provisions of the Retained Earnings Capital Plan Amendment, and reallocated to its Retained Earnings that are not Restricted Retained Earnings. Until the Restriction Termination Date, the Bank may not otherwise reallocate amounts in its Restricted Retained Earnings account (provided that a reduction in the Restricted Retained Earnings account following a Net Loss pursuant to subsection 8.2.3 is not a reallocation). 8.2.6 No Effect on Rights of Shareholders as Owners of Retained Earnings In the event of the liquidation of the Bank, or a taking of the Bank’s Retained Earnings by any future federal action, nothing in the Retained Earnings Capital Plan Amendment shall change the rights of the holders of the Bank’s Class B stock that confer ownership of Retained Earnings, including Restricted Retained Earnings, as granted under Section 6(h) of the Act. 9. Limitation on Dividends, Stock Purchase and Stock Redemption 9.1 General Rule on Dividends From the REFCORP Termination Date through the Restriction Termination Date, the Bank may not pay Dividends, or otherwise reallocate funds (except as expressly provided in subsection 8.2.5, and further provided that a reduction in the Restricted Retained Earnings account following a Net Loss pursuant to subsection 8.2.3 is not a reallocation), out of Restricted Retained Earnings. During a Dividend Restriction Period, the Bank may not pay Dividends out of the amount of Quarterly Net Income required to be allocated to Restricted Retained Earnings. 9.2 Limitations on Repurchase and Redemption From the REFCORP Termination Date through the Restriction Termination Date, the Bank shall not engage in a repurchase or redemption transaction if following such transaction the Bank’s Total Capital as reported to the FHFA falls below the Bank’s aggregate paid-in amount of Capital Stock. 10. Termination of Retained Earnings Capital Plan Amendment Obligations 10.1 Notice of Automatic Termination Event 10.1.1 Action by FHLBanks If the Bank desires to assert that an Automatic Termination Event has occurred (or will occur on the effective date of a change in a statute or the Regulations), the Bank shall provide prompt written notice to all of the other FHLBanks (and provide a copy to the FHFA) identifying the specific statutory or regulatory change that is the basis for the assertion. For the purposes of this section, “prompt written notice” means notice delivered no later than 90 calendar days subsequent to: (1) the date the specific statutory change takes effect; or (2) the date an interim final rule or final rule effecting the specific regulatory change is published in the Federal Register.

 
16 If within 60 calendar days of transmission of such written notice to all of the other FHLBanks, at least 2/3 of the then existing FHLBanks (including the Bank)execute a Declaration of Automatic Termination concurring that the specific statutory or regulatory change identified in the written notice constitutes an Automatic Termination Event, then the Declaration of Automatic Termination shall be delivered by the Bank to the FHFA within 10 calendar days of the date that the Declaration of Automatic Termination is executed. After the expiration of a 60 calendar day period that begins when the Declaration of Automatic Termination is delivered to the FHFA, or is delivered to the FHFA by another FHLBank pursuant to the terms of its capital plan, an Automatic Termination Event Declaration Date shall be deemed to occur (except as provided in subsection 10.1.3). If a Declaration of Automatic Termination concurring that the specific statutory or regulatory change identified in the written notice constitutes an Automatic Termination Event has not been executed by at least the required 2/3 of the then existing FHLBanks within 60 calendar days of transmission of such notice to all of the other FHLBanks, the Bank may request a determination from the FHFA that the specific statutory or regulatory change constitutes an Automatic Termination Event. Such request must be filed with the FHFA within 10 calendar days after the expiration of the 60 calendar day period that begins upon transmission of the written notice of the basis of the assertion to all of the other FHLBanks. 10.1.2 Action by FHFA The Bank may request a determination from the FHFA that a specific statutory or regulatory change constitutes an Automatic Termination Event, and may claim that an Automatic Termination Event has occurred, or will occur, with respect to a specific statutory or regulatory change only if the Bank has complied with the time limitations and procedures of subsection 10.1.1. If within 60 calendar days after the Bank delivers such a request to the FHFA, or another FHLBank delivers such a request pursuant to its capital plan, the FHFA provides the requesting FHLBank with a written determination that a specific statutory or regulatory change is an Automatic Termination Event, then an Automatic Termination Event Declaration Date shall be deemed to occur as of the expiration of such 60 calendar day period (except as provided in subsection 10.1.3). The date of the Automatic Termination Event Declaration Date shall be as of the expiration of such 60 calendar day period (except as provided in subsection 10.1.3) no matter on which day prior to the expiration of the 60 calendar day period the FHFA has provided its written determination. If the FHFA fails to make a determination within 60 calendar days after an FHLBank delivers such a request to the FHFA, then an Automatic Termination Event Declaration Date shall be deemed to occur as of the date of the expiration of such 60 calendar day period (except as provided in subsection 10.1.3); provided, however, that the FHFA may make a written request for information from the requesting FHLBank, and toll such 60 calendar day period from the date that the FHFA transmits its request until that FHLBank delivers to the FHFA information responsive to its request. If within 60 calendar days after an FHLBank delivers to the FHFA a request for determination that a specific statutory or regulatory change constitutes an Automatic Termination Event (or such longer period if the 60 calendar day period is tolled pursuant to the preceding sentence), the FHFA provides that FHLBank with a written determination that a specific statutory or regulatory change is not an Automatic Termination Event, then an Automatic Termination Event shall not have occurred with respect to such change. 10.1.3 Proviso as to Occurrence of Automatic Termination Event Declaration Date

 
17 In no case under this subsection 10.1 may an Automatic Termination Event Declaration Date be deemed to occur prior to: (1) the date the specific statutory change takes effect; or (2) the date an interim final rule or final rule effecting the specific regulatory change is published in the Federal Register. 10.2 Notice of Voluntary Termination If the FHLBanks terminate the Agreement, then the FHLBanks shall provide written notice to the FHFA that the FHLBanks have voted to terminate the Agreement. 10.3 Consequences of an Automatic Termination Event or Vote to Terminate the Agreement 10.3.1 Consequences of Voluntary Termination In the event the FHLBanks deliver written notice to the FHFA that the FHLBanks have voted to terminate the Agreement, then without any further action by the Bank or the FHFA: (i) the date of delivery of such notice shall be an Allocation Termination Date; and (ii) one year from the date of delivery of such notice shall be a Restriction Termination Date. 10.3.2 Consequences of an Automatic Termination Event Declaration Date If an Automatic Termination Event Declaration Date has occurred, then without further action by the Bank or the FHFA: (i) the date of the Automatic Termination Event Declaration Date shall be an Allocation Termination Date; and (ii) one year from the date of the Automatic Termination Event Declaration Date shall be a Restriction Termination Date. 10.3.3 Deletion of Operative Provisions of Retained Earnings Capital Plan Amendment Without any further action by the Bank or the FHFA, on the Restriction Termination Date, sections 7 through 10 of this Capital Plan shall be deleted.

 
Appendix I Membership Stock Requirement Each Member is required to purchase and maintain Membership Stock equal to the following: Membership Stock Requirement2 Minimum Investment Range1 Minimum Maximum % of Total Assets 0.12% 0.05% 0.25% Membership Stock Cap $10 million $1 million $30 million Membership Stock Floor $10,000 $10,000 $30,000 Activity Based Stock Requirement Each Member is required to purchase and maintain Activity Based Stock issued in accordance with section 2.5 of this Capital Plan equal to the percentage of the book value on the Bank’s books and records of the following transactions as shown in the table below. Transaction Activity Based Stock Requirement2 Minimum Investment Range1 Minimum Maximum Outstanding Advances 4.00% 2.00% 5.00% Outstanding Acquired Member Assets3 4.00% 0.00% 5.00% Outstanding Letters of Credit4 0.10% 0.00% 0.175% Advance Commitments 0.00% 0.00% 0.35% Acquired Member Asset Commitments 0.00% 0.00% 0.60% Operational Threshold Each Member is permitted to retain Excess Shares of Activity Based Stock in an amount not to exceed the following operational threshold, designed to minimize the number of repurchase transactions for the Bank and its Members. Current Operational Threshold2 Operational Threshold Range1 Minimum Maximum Operational Threshold $05 $0 $250,000 1 Changes to the Minimum Investment and operational threshold ranges constitute amendments to the Capital Plan and requires approval by the Finance Agency. 2 The Board of Directors reviews and adjusts the Membership Stock Requirement, Activity Based Stock Requirement and the Current Operational Threshold within the established ranges, subject to the Member notification requirements in section 2.3. 3 Board of Directors approved change to Activity Based Stock Requirement for Acquired Member Assets from 4.45% to 4.00% effective August 1, 2013. 4 Board of Directors approved change to Activity Based Stock Requirement for Letters of Credit from 0.00% to 0.10% effective October 1, 2020. 5 Board of Directors approved change to current Operational Threshold for Excess Shares of Activity Based Stock effective January 4, 2012.

 
Document

EXHIBIT 31.1
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
for the President and Chief Executive Officer

    I, Kristina K. Williams, certify that:
1I have reviewed this quarterly report on Form 10-Q of the Federal Home Loan Bank of Des Moines;
2Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) for the registrant and have:
a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: August 10, 2022
/s/ Kristina K. Williams
Kristina K. Williams
President and Chief Executive Officer




Document

EXHIBIT 31.2

Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
for the Chief Financial Officer

    I, Joelyn R. Jensen-Marren, certify that:
1I have reviewed this quarterly report on Form 10-Q of the Federal Home Loan Bank of Des Moines;
2Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) for the registrant and have:
a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: August 10, 2022
/s/ Joelyn R. Jensen-Marren
Joelyn R. Jensen-Marren
Chief Financial Officer



Document

EXHIBIT 32.1

Certification by 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

I, Kristina K. Williams, President and Chief Executive Officer of the Federal Home Loan Bank of Des Moines (“Registrant”) certify that, to the best of my knowledge:
1
The Registrant's Quarterly Report on Form 10-Q for the period ended June 30, 2022 (“Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.
Date: August 10, 2022
/s/ Kristina K. Williams
Kristina K. Williams
President and Chief Executive Officer




Document

EXHIBIT 32.2

Certification by 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

I, Joelyn R. Jensen-Marren, Chief Financial Officer of the Federal Home Loan Bank of Des Moines (“Registrant”) certify that, to the best of my knowledge:
1
The Registrant's Quarterly Report on Form 10-Q for the period ended June 30, 2022 (“Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.
Date: August 10, 2022
/s/ Joelyn R. Jensen-Marren
Joelyn R. Jensen-Marren
Chief Financial Officer




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