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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 March 31, 2024
 
OR
 
  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
 
Commission File Number 000-52004
 
FEDERAL HOME LOAN BANK OF TOPEKA
(Exact name of registrant as specified in its charter)
 
Federally chartered corporation of the United States
48-0561319
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
500 SW Wanamaker Road,
 Topeka, KS
66606
(Address of principal executive offices)(Zip Code)
 
Registrant’s telephone number, including area code: 785.233.0507

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading symbol(s)Name of each exchange
on which registered
NoneN/AN/A

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes   No
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files)   Yes    No
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company

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

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
 Shares outstanding as of
April 30, 2024
Class A Stock, par value $100 per share4,030,181
Class B Stock, par value $100 per share22,741,019




.FEDERAL HOME LOAN BANK OF TOPEKA
TABLE OF CONTENTS
   
PART I 
Item 1. 
 
 
 
 
 
 
Item 2.
 
 
 
 
 
 
 
 
Item 3.
Item 4.
Part II 
Item 1.
Item 1A. 
Item 2. 
Item 3. 
Item 4. 
Item 5. 
Item 6. 

2


Important Notice about Information in this Quarterly Report

In this quarterly report, unless the context suggests otherwise, references to “FHLBank,” “FHLBank Topeka,” “we,” “us” and “our” mean Federal Home Loan Bank of Topeka, and “FHLBanks” mean all Federal Home Loan Banks, including FHLBank Topeka.

The information contained in this quarterly report is accurate only as of the date of this quarterly report and as of the dates specified herein.

The product and service names used in this quarterly report are the property of FHLBank, and in some cases, other FHLBanks. Where the context suggests otherwise, the products, services and company names mentioned in this quarterly report are the property of their respective owners.

Special Cautionary Notice Regarding Forward-looking Statements

The information in this Form 10-Q contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements include statements describing the objectives, projections, estimates or future predictions of FHLBank’s operations. These statements may be identified by the use of forward-looking terminology such as “anticipates,” “believes,” “may,” “is likely,” “could,” “estimate,” “expect,” “will,” “intend,” “probable,” “project,” “should,” or their negatives or other variations of these terms. FHLBank cautions that by their nature forward-looking statements involve risks or uncertainties and that actual results may differ materially from those expressed in any forward-looking statements as a result of such risks and uncertainties, including but not limited to:
Changes in the general economy and capital markets, the rate of inflation, employment rates, housing market activity and pricing, the size and volatility of the residential mortgage market, geopolitical events, and global economic uncertainty;
Political events, including legislative, regulatory, judicial, or other developments that affect FHLBank; its members, counterparties or investors in the consolidated obligations of the FHLBanks, such as any government-sponsored enterprise (GSE) reforms, any changes resulting from the Federal Housing Finance Agency’s (FHFA) review and analysis of the FHLBank System, including recommendations published in its “FHLBank System at 100: Focusing on the Future” report, changes in the Federal Home Loan Bank Act of 1932, as amended (Bank Act), changes in applicable sections of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992, or changes in other statutes or regulations applicable to the FHLBanks;
External events, such as economic, financial, or political disruptions, and/or wars, pandemics, and natural disasters, including disasters caused by climate change, which could damage our facilities or the facilities of our members, damage or destroy collateral pledged to secure advances, or mortgage-related assets, which could increase our risk exposure or loss experience;
Effects of derivative accounting treatment and other accounting rule requirements, or changes in such requirements;
Competitive forces, including competition for loan demand, purchases of mortgage loans and access to funding;
The ability of FHLBank to introduce new products and services to meet market demand and to manage successfully the risks associated with all products and services;
Changes in demand for FHLBank products and services or consolidated obligations of the FHLBank System;
Membership changes, including changes resulting from member creditworthiness, member failures or mergers, changes due to member eligibility or housing mission focus, or changes in the principal place of business of members;
Changes in the U.S. government’s long-term debt rating and the long-term credit rating of the senior unsecured debt issues of the FHLBank System;
Soundness of other financial institutions, including FHLBank members, non-member borrowers, counterparties, and the other FHLBanks and their members, non-member borrowers, and counterparties;
The ability of each of the other FHLBanks to repay the principal and interest on consolidated obligations for which it is the primary obligor and with respect to which FHLBank, along with the other FHLBanks, has joint and several liability;
The volume and quality of eligible mortgage loans originated and sold by participating members to FHLBank through its various mortgage finance products (Mortgage Partnership Finance® (MPF®) Program). “Mortgage Partnership Finance,” “MPF,” “MPF Xtra,” and “MPF Direct” are registered trademarks of FHLBank Chicago;
Changes in the fair value and economic value of, impairments of, and risks associated with, FHLBank’s investments in mortgage loans and mortgage-backed securities (MBS) or other assets and related credit enhancement protections;
Changes in the value or liquidity of collateral underlying advances to FHLBank members or non-member borrowers or collateral pledged by reverse repurchase and derivative counterparties;
Volatility of market prices, changes in interest rates and indices and the timing and volume of market activity, including the effects of these factors on amortization/accretion;
Gains/losses on derivatives or on trading investments and the ability to enter into effective derivative instruments on acceptable terms;
Changes in FHLBank’s capital structure;
FHLBank's ability to declare dividends or to pay dividends at rates consistent with past practices;
4


The ability of FHLBank to keep pace with technological changes and innovation such as artificial intelligence, and the ability to develop and support technology and information systems, including the ability to manage cybersecurity risks and securely access the internet and internet-based systems and services, sufficient to effectively manage the risks of FHLBank’s business; and
The ability of FHLBank to attract, onboard and retain skilled individuals, including qualified executive officers.

Readers of this quarterly report should not rely solely on the forward-looking statements and should consider all risks and uncertainties addressed throughout this quarterly report, as well as those discussed under Item 1A – “Risk Factors.”

All forward-looking statements contained in this Form 10-Q are expressly qualified in their entirety by reference to this cautionary notice. The reader should not place undue reliance on such forward-looking statements, since the statements speak only as of the date that they are made and FHLBank has no obligation and does not undertake publicly to update, revise or correct any forward-looking statement for any reason to reflect events or circumstances after the date of this quarterly report.

PART I

Item 1: Financial Statements


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FEDERAL HOME LOAN BANK OF TOPEKA  
STATEMENTS OF CONDITION - Unaudited  
(In thousands, except par value)  
 03/31/202412/31/2023
ASSETS  
Cash and due from banks $31,237 $26,062 
Interest-bearing deposits 2,016,198 1,604,989 
Securities purchased under agreements to resell (Note 9)3,925,000 3,875,000 
Federal funds sold 3,580,000 2,080,000 
Investment securities:  
Trading securities (Note 3)893,114 908,608 
Available-for-sale securities, amortized cost of $12,278,770 and $11,872,397 (Note 3)
12,184,017 11,753,453 
Held-to-maturity securities, fair value of $253,938 and $260,653 (Note 3)
257,236 264,796 
Total investment securities13,334,367 12,926,857 
Advances (Note 4)41,660,129 45,444,769 
Mortgage loans held for portfolio, net of allowance for credit losses of $5,202 and $5,531 (Note 5)
8,440,064 8,352,713 
Accrued interest receivable259,092 204,243 
Derivative assets, net (Notes 6, 9)336,802 350,367 
Other assets 81,414 81,985 
TOTAL ASSETS$73,664,303 $74,946,985 
LIABILITIES  
Deposits (Note 7)$846,628 $752,200 
Consolidated obligations, net:  
Discount notes (Note 8)17,005,256 20,743,249 
Bonds (Note 8)51,457,077 49,047,489 
Total consolidated obligations, net68,462,333 69,790,738 
Mandatorily redeemable capital stock (Note 10)205 247 
Accrued interest payable335,993 361,840 
Affordable Housing Program payable 88,071 77,794 
Derivative liabilities, net (Notes 6, 9)2,077 860 
Other liabilities 64,289 72,654 
TOTAL LIABILITIES69,799,596 71,056,333 
Commitments and contingencies (Note 13)
The accompanying notes are an integral part of these financial statements.
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FEDERAL HOME LOAN BANK OF TOPEKA  
STATEMENTS OF CONDITION - Unaudited  
(In thousands, except par value)  
 03/31/202412/31/2023
CAPITAL  
Capital stock outstanding - putable:  
Class A ($100 par value; 3,447 and 2,789 shares issued and outstanding) (Note 10)
$344,697 $278,887 
Class B ($100 par value; 21,530 and 23,288 shares issued and outstanding) (Note 10)
2,153,012 2,328,796 
Total capital stock2,497,709 2,607,683 
Retained earnings:  
Unrestricted1,026,464 989,457 
Restricted 435,313 412,483 
Total retained earnings1,461,777 1,401,940 
Accumulated other comprehensive income (loss) (Note 11)(94,779)(118,971)
TOTAL CAPITAL3,864,707 3,890,652 
TOTAL LIABILITIES AND CAPITAL$73,664,303 $74,946,985 

The accompanying notes are an integral part of these financial statements.
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FEDERAL HOME LOAN BANK OF TOPEKA
STATEMENTS OF INCOME - Unaudited
(In thousands)
Three Months Ended
03/31/202403/31/2023
INTEREST INCOME:
Interest-bearing deposits$36,001 $30,697 
Securities purchased under agreements to resell40,243 30,282 
Federal funds sold54,123 47,356 
Trading securities6,518 10,360 
Available-for-sale securities190,059 116,836 
Held-to-maturity securities3,708 4,106 
Advances591,987 536,594 
Mortgage loans held for portfolio74,476 60,808 
Other177 760 
Total interest income997,292 837,799 
INTEREST EXPENSE:
Deposits9,730 7,569 
Consolidated obligations:
Discount notes227,541 263,521 
Bonds623,540 461,882 
Mandatorily redeemable capital stock3 3 
Other337 421 
Total interest expense861,151 733,396 
NET INTEREST INCOME136,141 104,403 
Provision (reversal) for credit losses on mortgage loans(200)(402)
NET INTEREST INCOME AFTER LOAN LOSS PROVISION (REVERSAL)
136,341 104,805 
OTHER INCOME (LOSS):
Net gains (losses) on trading securities1,791 8,984 
Net gains (losses) on derivatives8,528 (525)
Standby bond purchase agreement commitment fees751 681 
Letters of credit fees2,367 1,910 
Other479 563 
Total other income (loss)13,916 11,613 
The accompanying notes are an integral part of these financial statements.
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FEDERAL HOME LOAN BANK OF TOPEKA
STATEMENTS OF INCOME - Unaudited
(In thousands)
Three Months Ended
03/31/202403/31/2023
OTHER EXPENSES:
Compensation and benefits$12,320 $11,707 
Other operating6,513 5,679 
Federal Housing Finance Agency1,369 1,531 
Office of Finance1,128 1,096 
Mortgage loans transaction service fees1,667 1,564 
Other426 568 
Total other expenses23,423 22,145 
INCOME BEFORE ASSESSMENTS126,834 94,273 
Affordable Housing Program12,684 9,428 
NET INCOME$114,150 $84,845 

The accompanying notes are an integral part of these financial statements.
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FEDERAL HOME LOAN BANK OF TOPEKA
STATEMENTS OF COMPREHENSIVE INCOME - Unaudited
(In thousands)
Three Months Ended
03/31/202403/31/2023
Net income$114,150 $84,845 
Other comprehensive income (loss):
Net unrealized gains (losses) on available-for-sale securities24,192 1,887 
Total other comprehensive income (loss)24,192 1,887 
TOTAL COMPREHENSIVE INCOME (LOSS)$138,342 $86,732 
 

The accompanying notes are an integral part of these financial statements.
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FEDERAL HOME LOAN BANK OF TOPEKA
STATEMENTS OF CAPITAL - Unaudited
(In thousands)
Capital Stock1
Retained EarningsAccumulatedTotal Capital
Other
Class AClass BTotalComprehensive
SharesPar ValueSharesPar ValueSharesPar ValueUnrestrictedRestrictedTotalIncome (Loss)
Balance at December 31, 20222,388 $238,777 22,689 $2,268,932 25,077 $2,507,709 $914,716 $338,389 $1,253,105 $(84,270)$3,676,544 
Comprehensive income67,876 16,969 84,845 1,887 86,732 
Proceeds from issuance of capital stock  10,230 1,023,010 10,230 1,023,010 1,023,010 
Repurchase/redemption of capital stock(6,448)(644,851)(647)(64,683)(7,095)(709,534)(709,534)
Net reclassification of shares to mandatorily redeemable capital stock
(779)(77,852)(1,334)(133,385)(2,113)(211,237)(211,237)
Net transfer of shares between Class A and Class B
7,763 776,350 (7,763)(776,350)   
Dividends on capital stock (Class A - 3.7%, Class B - 8.8%):
Cash payment(68)(68)(68)
Stock issued522 52,141 522 52,141 (52,141)(52,141) 
Balance at March 31, 20232,924 $292,424 23,697 $2,369,665 26,621 $2,662,089 $930,383 $355,358 $1,285,741 $(82,383)$3,865,447 
Capital Stock1
Retained EarningsAccumulatedTotal Capital
Other
Class AClass BTotalComprehensive
SharesPar ValueSharesPar ValueSharesPar ValueUnrestrictedRestrictedTotalIncome (Loss)
Balance at December 31, 20232,789 $278,887 23,288 $2,328,796 26,077 $2,607,683 $989,457 $412,483 $1,401,940 $(118,971)$3,890,652 
Comprehensive income91,320 22,830 114,150 24,192 138,342 
Proceeds from issuance of capital stock2 190 5,148 514,819 5,150 515,009 515,009 
Repurchase/redemption of capital stock(4,960)(496,052)(287)(28,671)(5,247)(524,723)(524,723)
Net reclassification of shares to mandatorily redeemable capital stock
(1,525)(152,478)(20)(2,015)(1,545)(154,493)(154,493)
Net transfer of shares between Class A and Class B
7,141 714,150 (7,141)(714,150)   
Dividends on capital stock (Class A - 4.7%, Class B - 9.5%):
Cash payment(80)(80)(80)
Stock issued542 54,233 542 54,233 (54,233)(54,233) 
Balance at March 31, 20243,447 $344,697 21,530 $2,153,012 24,977 $2,497,709 $1,026,464 $435,313 $1,461,777 $(94,779)$3,864,707 
                   
1    Putable
The accompanying notes are an integral part of these financial statements.
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FEDERAL HOME LOAN BANK OF TOPEKA
STATEMENTS OF CASH FLOWS - Unaudited
(In thousands)
Three Months Ended
03/31/202403/31/2023
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income$114,150 $84,845 
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization:
Premiums and discounts on consolidated obligations, net(114,057)37,341 
Concessions on consolidated obligations1,617 1,573 
Premiums and discounts on investments, net(10,702)(5,042)
Premiums, discounts and commitment fees on advances, net(677)(839)
Premiums, discounts and deferred loan costs on mortgage loans, net2,764 2,963 
Fair value adjustments on hedged assets or liabilities(1,059)343 
Premises, software and equipment945 711 
Provision (reversal) for credit losses on mortgage loans(200)(402)
Other adjustments, net39 31 
Net (gains) losses on trading securities(1,791)(8,984)
Net change in derivatives and hedging activities
172,249 (100,606)
(Increase) decrease in accrued interest receivable(54,400)(10,279)
Change in net accrued interest included in derivative assets(2,307)372 
(Increase) decrease in other assets315 238 
Increase (decrease) in accrued interest payable(25,917)68,780 
Change in net accrued interest included in derivative liabilities(32,682)580 
Increase (decrease) in Affordable Housing Program liability10,277 7,804 
Increase (decrease) in other liabilities(8,398)(6,979)
Total adjustments(63,984)(12,395)
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES50,166 72,450 
CASH FLOWS FROM INVESTING ACTIVITIES:
Net (increase) decrease in interest-bearing deposits$(366,076)$(88,565)
Net (increase) decrease in securities purchased under resale agreements(50,000)(1,250,000)
Net (increase) decrease in Federal funds sold(1,500,000)775,000 
Proceeds from maturities of and principal repayments on trading securities
17,285 3,435 
Proceeds from maturities of and principal repayments on available-for-sale securities
287,923 813,082 
Purchases of available-for-sale securities(771,704)(587,682)
Proceeds from maturities of and principal repayments on held-to-maturity securities
7,556 13,689 
Advances repaid89,811,425 216,804,077 
Advances originated(86,143,148)(218,878,795)
Principal collected on mortgage loans166,465 162,277 
Purchases of mortgage loans(256,438)(185,411)
Net proceeds from sale of foreclosed assets63 (43)
Purchases of premises, software and equipment(801)(2,241)
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES1,202,550 (2,421,177)
The accompanying notes are an integral part of these financial statements.
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FEDERAL HOME LOAN BANK OF TOPEKA
STATEMENTS OF CASH FLOWS - Unaudited
(In thousands)
Three Months Ended
03/31/202403/31/2023
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits118,782 224,016 
Net proceeds from issuance of consolidated obligations:
Discount notes109,361,756 100,994,078 
Bonds19,506,026 18,963,090 
Payments for maturing, retired and transferred consolidated obligations:
Discount notes(112,986,891)(104,863,347)
Bonds(17,089,100)(12,076,813)
Bonds transferred to other FHLBanks (999,987)
Net interest payments received (paid) for financing derivatives6,216 4,863 
Proceeds from issuance of capital stock515,009 1,023,010 
Payments for repurchase/redemption of capital stock(524,722)(709,534)
Payments for repurchase of mandatorily redeemable capital stock(154,537)(211,250)
Cash dividends paid(80)(68)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES(1,247,541)2,348,058 
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS5,175 (669)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD26,062 25,964 
CASH AND CASH EQUIVALENTS AT END OF PERIOD$31,237 $25,295 
Supplemental disclosures:
Interest paid$356,717 $196,661 
Affordable Housing Program payments$2,408 $1,644 
The accompanying notes are an integral part of these financial statements.
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FEDERAL HOME LOAN BANK OF TOPEKA
Notes to Financial Statements - Unaudited
March 31, 2024


NOTE 1 – BASIS OF PRESENTATION

Basis of Presentation: The accompanying interim financial statements of FHLBank are unaudited and have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information and with the instruction provided by Article 10, Rule 10-01 of Regulation S-X. The financial statements contain all adjustments which are, in the opinion of management, necessary for a fair statement of FHLBank’s financial position, results of operations and cash flows for the interim periods presented. All such adjustments were of a normal recurring nature. The results of operations for the periods presented are not necessarily indicative of the results to be expected for the full fiscal year or any other interim period.

FHLBank’s significant accounting policies and certain other disclosures are set forth in the notes to the audited financial statements for the year ended December 31, 2023. The interim financial statements presented herein should be read in conjunction with FHLBank’s audited financial statements and notes thereto, which are included in FHLBank’s annual report on Form 10-K filed with the Securities and Exchange Commission (SEC) on March 11, 2024 (annual report on Form 10-K). The notes to the interim financial statements highlight significant changes to the notes included in the annual report on Form 10-K.

Use of Estimates: The preparation of financial statements under GAAP requires management to make estimates and assumptions as of the date of the financial statements in determining the reported amounts of assets, liabilities and estimated fair values and in determining the disclosure of any contingent assets or liabilities. Estimates and assumptions by management also affect the reported amounts of income and expense during the reporting period. The most significant of these estimates include the fair value of derivatives. Many of the estimates and assumptions, including those used in financial models, are based on financial market conditions as of the date of the financial statements. Because of the volatility of the financial markets, as well as other factors that affect management estimates, actual results may vary from these estimates.


NOTE 2 – RECENTLY ISSUED ACCOUNTING STANDARDS AND INTERPRETATIONS AND CHANGES IN AND ADOPTIONS OF ACCOUNTING PRINCIPLES

Segment Reporting (ASU 2023-07). In July 2023, the FASB issued amendments to improve disclosures about a public entity’s reportable segments and addresses requests from investors and other allocations of capital for additional, more detailed information about a reportable segment’s expenses, including entities with a single reportable segment. The ASU is effective for FHLBank for the annual period ending December 31, 2024 and will be effective for interim periods beginning January 1, 2025. The adoption of this guidance is not expected to have a material effect on FHLBank’s disclosures.
NOTE 3 – INVESTMENTS

FHLBank's investment portfolio consists of interest-bearing deposits, securities purchased under agreements to resell, Federal funds sold, and debt securities.

Interest-Bearing Deposits, Securities Purchased under Agreements to Resell, and Federal Funds Sold: FHLBank invests in interest-bearing deposits, securities purchased under agreements to resell, and Federal funds sold to provide short-term liquidity. These investments are generally transacted with counterparties that have received a credit rating of triple-B or greater (investment grade) by a Nationally Recognized Statistical Rating Organization (NRSRO). These may differ from internal ratings of the investments, if applicable. As of March 31, 2024, approximately 23 percent of these overnight investments were with counterparties not rated by an NRSRO. All transactions with unrated counterparties are secured transactions.

Federal funds sold are unsecured loans that are generally transacted on an overnight term. FHFA regulations include a limit on the amount of unsecured credit FHLBank may extend to a counterparty. As of March 31, 2024 and December 31, 2023, all investments in interest-bearing deposits and Federal funds sold were repaid or expected to be repaid according to the contractual terms. No allowance for credit losses was recorded for these assets as of March 31, 2024 and December 31, 2023. Carrying values of interest-bearing deposits and Federal funds sold exclude accrued interest receivable of $3,122,000 and $1,594,000, respectively, as of March 31, 2024, and $3,271,000 and $927,000, respectively, as of December 31, 2023.

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Securities purchased under agreements to resell are short-term and are structured such that they are evaluated regularly to determine if the market value of the underlying securities decreases below the market value required as collateral (i.e., subject to collateral maintenance provisions). Based upon the collateral held as security and collateral maintenance provisions with its counterparties, FHLBank determined that no allowance for credit losses was needed for its securities purchased under agreements to resell as of March 31, 2024 and December 31, 2023. The carrying value of securities purchased under agreements to resell excludes accrued interest receivable of $2,334,000 and $1,749,000 as of March 31, 2024 and December 31, 2023, respectively.

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

FHLBank's debt securities include the following major security types, which are based on the issuer and the risk characteristics of the security:
U.S. Treasury obligations - sovereign debt of the United States;
GSE debentures - debentures issued by other FHLBanks, Federal National Mortgage Association (Fannie Mae), Federal Farm Credit Bank and Federal Agricultural Mortgage Corporation. GSE securities are not guaranteed by the U.S. government;
State or local housing agency obligations - municipal bonds issued by housing finance agencies;
U.S. obligation MBS - single-family MBS issued by Government National Mortgage Association (Ginnie Mae), which are guaranteed by the U.S. government; and
GSE MBS - single-family and multifamily MBS issued by Fannie Mae and Federal Home Loan Mortgage Corporation (Freddie Mac).

Trading Securities: Trading securities by major security type as of March 31, 2024 and December 31, 2023 are summarized in Table 3.1 (in thousands):

Table 3.1
Fair Value
03/31/202412/31/2023
Non-mortgage-backed securities:
GSE debentures
$289,740 $288,438 
Non-mortgage-backed securities289,740 288,438 
Mortgage-backed securities:
GSE MBS
603,374 620,170 
Mortgage-backed securities603,374 620,170 
TOTAL$893,114 $908,608 

Net gains (losses) on trading securities during the three months ended March 31, 2024 and 2023 are shown in Table 3.2 (in thousands):

Table 3.2
Three Months Ended
03/31/202403/31/2023
Net gains (losses) on trading securities held as of March 31, 2024$1,738 $8,984 
Net gains (losses) on trading securities sold or matured prior to March 31, 202453  
NET GAINS (LOSSES) ON TRADING SECURITIES$1,791 $8,984 

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Available-for-sale Securities: Available-for-sale securities by major security type as of March 31, 2024 are summarized in Table 3.3 (in thousands). Amortized cost includes adjustments made to the cost basis of an investment for accretion, amortization, and fair value hedge accounting adjustments, and excludes accrued interest receivable of $36,957,000 as of March 31, 2024.

Table 3.3
03/31/2024
Amortized
Cost
Gross
Unrecognized
Gains
Gross
Unrecognized
Losses
Fair
Value
Non-mortgage-backed securities:
U.S. Treasury obligations
$3,211,988 $37 $(48,002)$3,164,023 
Non-mortgage-backed securities3,211,988 37 (48,002)3,164,023 
Mortgage-backed securities:
U.S. obligation MBS96,212  (958)95,254 
GSE MBS
8,970,570 38,255 (84,085)8,924,740 
Mortgage-backed securities9,066,782 38,255 (85,043)9,019,994 
TOTAL$12,278,770 $38,292 $(133,045)$12,184,017 

Available-for-sale securities by major security type as of December 31, 2023 are summarized in Table 3.4 (in thousands). Amortized cost includes adjustments made to the cost basis of an investment for accretion, amortization, and fair value hedge accounting adjustments, and excludes accrued interest receivable of $29,768,000 as of December 31, 2023.

Table 3.4
12/31/2023
Amortized
Cost
Gross
Unrecognized
Gains
Gross
Unrecognized
Losses
Fair
Value
Non-mortgage-backed securities:
U.S. Treasury obligations
$2,983,880 $ $(46,012)$2,937,868 
Non-mortgage-backed securities2,983,880  (46,012)2,937,868 
Mortgage-backed securities:
U.S. obligation MBS109,083  (1,548)107,535 
GSE MBS
8,779,434 32,178 (103,562)8,708,050 
Mortgage-backed securities8,888,517 32,178 (105,110)8,815,585 
TOTAL$11,872,397 $32,178 $(151,122)$11,753,453 

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Table 3.5 summarizes the available-for-sale securities with gross unrealized losses as of March 31, 2024 (in thousands). The gross unrealized losses are aggregated by major security type and length of time that individual securities have been in a continuous unrealized loss position.

Table 3.5
03/31/2024
Less Than 12 Months12 Months or MoreTotal
Fair
Value
Gross Unrealized LossesFair
Value
Gross Unrealized LossesFair
Value
Gross Unrealized Losses
Non-mortgage-backed securities:
U.S. Treasury obligations
$497,783 $(5,534)$2,423,497 $(42,468)$2,921,280 $(48,002)
Non-mortgage-backed securities497,783 (5,534)2,423,497 (42,468)2,921,280 (48,002)
Mortgage-backed securities:
U.S. obligation MBS60,049 (207)35,205 (751)95,254 (958)
GSE MBS
1,536,052 (12,966)3,208,673 (71,119)4,744,725 (84,085)
Mortgage-backed securities
1,596,101 (13,173)3,243,878 (71,870)4,839,979 (85,043)
TOTAL$2,093,884 $(18,707)$5,667,375 $(114,338)$7,761,259 $(133,045)

Table 3.6 summarizes the available-for-sale securities with gross unrealized losses as of December 31, 2023 (in thousands). The gross unrealized losses are aggregated by major security type and length of time that individual securities have been in a continuous unrealized loss position.

Table 3.6
12/31/2023
Less Than 12 Months12 Months or MoreTotal
Fair
Value
Gross Unrealized LossesFair
Value
Gross Unrealized LossesFair
Value
Gross Unrealized Losses
Non-mortgage-backed securities:
U.S. Treasury obligations
$1,280,546 $(10,036)$1,657,322 $(35,976)$2,937,868 $(46,012)
Non-mortgage-backed securities1,280,546 (10,036)1,657,322 (35,976)2,937,868 (46,012)
Mortgage-backed securities:
U.S. obligation MBS71,883 (366)35,652 (1,182)107,535 (1,548)
GSE MBS
2,863,223 (23,525)3,164,674 (80,037)6,027,897 (103,562)
Mortgage-backed securities
2,935,106 (23,891)3,200,326 (81,219)6,135,432 (105,110)
TOTAL$4,215,652 $(33,927)$4,857,648 $(117,195)$9,073,300 $(151,122)

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The amortized cost and fair values of available-for-sale securities by contractual maturity as of March 31, 2024 and December 31, 2023 are shown in Table 3.7 (in thousands). Expected maturities of MBS will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment fees.

Table 3.7
03/31/202412/31/2023
Amortized
Cost
Fair
Value
Amortized
Cost
Fair
Value
Non-mortgage-backed securities:
Due in one year or less$ $ $ $ 
Due after one year through five years
3,211,988 3,164,023 2,983,880 2,937,868 
Due after five years through ten years
    
Due after ten years    
Non-mortgage-backed securities3,211,988 3,164,023 2,983,880 2,937,868 
Mortgage-backed securities9,066,782 9,019,994 8,888,517 8,815,585 
TOTAL$12,278,770 $12,184,017 $11,872,397 $11,753,453 

Held-to-maturity Securities: Held-to-maturity securities by major security type as of March 31, 2024 are summarized in Table 3.8 (in thousands). Carrying value equals amortized cost, which includes adjustments made to the cost basis of an investment for accretion and amortization, and excludes accrued interest receivable of $598,000 as of March 31, 2024.

Table 3.8
03/31/2024
Amortized
Cost
Gross
Unrecognized
Gains
Gross
Unrecognized
Losses
Fair
Value
Non-mortgage-backed securities:
State or local housing agency obligations
$35,855 $ $(615)$35,240 
Non-mortgage-backed securities35,855  (615)35,240 
Mortgage-backed securities:
GSE MBS
221,381 372 (3,055)218,698 
Mortgage-backed securities221,381 372 (3,055)218,698 
TOTAL$257,236 $372 $(3,670)$253,938 

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Held-to-maturity securities by major security type as of December 31, 2023 are summarized in Table 3.9 (in thousands). Carrying value equals amortized cost, which includes adjustments made to the cost basis of an investment for accretion and amortization, and excludes accrued interest receivable of $612,000 as of December 31, 2023.

Table 3.9
12/31/2023
Amortized
Cost
Gross
Unrecognized
Gains
Gross
Unrecognized
Losses
Fair
Value
Non-mortgage-backed securities:
State or local housing agency obligations
$35,855 $ $(646)$35,209 
Non-mortgage-backed securities35,855  (646)35,209 
Mortgage-backed securities:
GSE MBS
228,941 188 (3,685)225,444 
Mortgage-backed securities228,941 188 (3,685)225,444 
TOTAL$264,796 $188 $(4,331)$260,653 

The amortized cost and fair values of held-to-maturity securities by contractual maturity as of March 31, 2024 and December 31, 2023 are shown in Table 3.10 (in thousands). Expected maturities of certain securities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment fees.

Table 3.10
03/31/202412/31/2023
Amortized
Cost
Fair
Value
Amortized
Cost
Fair
Value
Non-mortgage-backed securities:
Due in one year or less$ $ $ $ 
Due after one year through five years
    
Due after five years through ten years
35,855 35,240 35,855 35,209 
Due after ten years    
Non-mortgage-backed securities35,855 35,240 35,855 35,209 
Mortgage-backed securities221,381 218,698 228,941 225,444 
TOTAL$257,236 $253,938 $264,796 $260,653 

Allowance for Credit Losses on Available-for-Sale and Held-to-Maturity Securities: FHLBank evaluates available-for-sale and held-to-maturity investment securities for credit losses on a quarterly basis. As of March 31, 2024 and 2023, FHLBank did not recognize a provision for credit losses associated with available-for-sale investments or held-to-maturity investments.

Although certain available-for-sale securities were in an unrealized loss position, these losses are considered temporary as FHLBank expects to recover the entire amortized cost basis on these available-for-sale investment securities. FHLBank neither intends to sell these securities nor considers it more likely than not that it will be required to sell these securities before its anticipated recovery of each security's remaining amortized cost basis.

FHLBank's held-to-maturity and available-for-sale securities: (1) were all highly rated and/or had short remaining terms to maturity; (2) had not experienced, nor did FHLBank expect, any payment default on the instruments; (3) in the case of U.S. obligations, carry an explicit government guarantee such that FHLBank considers the risk of nonpayment to be zero; and (4) in the case of GSE debentures or MBS, the securities are purchased under an assumption that the issuers’ obligation to pay principal and interest on those securities will be honored, taking into account their status as GSEs.


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NOTE 4 – ADVANCES

General Terms: FHLBank offers fixed and variable rate advance products with different maturities, interest rates, payment characteristics and optionality. As of March 31, 2024 and December 31, 2023, FHLBank had advances outstanding at interest rates ranging from 0.43 percent to 7.20 percent and 0.42 percent to 7.20 percent, respectively. Table 4.1 presents advances summarized by redemption term as of March 31, 2024 and December 31, 2023 (dollar amounts in thousands). The redemption term represents the period in which principal amounts are contractually due. Carrying amounts exclude accrued interest receivable of $164,223,000 and $118,604,000 as of March 31, 2024 and December 31, 2023, respectively.

Table 4.1
 03/31/202412/31/2023
Redemption TermAmountWeighted Average Interest RateAmountWeighted Average Interest Rate
Due in one year or less$25,991,200 5.26 %$29,786,238 5.32 %
Due after one year through two years4,163,759 3.96 4,213,704 4.01 
Due after two years through three years4,484,972 4.26 3,882,479 4.22 
Due after three years through four years3,041,993 4.28 3,086,881 4.04 
Due after four years through five years2,553,218 3.93 2,837,481 4.03 
Thereafter1,766,882 3.08 1,863,519 3.04 
Total par value42,002,024 4.78 %45,670,302 4.85 %
Discounts(9,599) (10,276) 
Hedging adjustments(332,296) (215,257) 
TOTAL$41,660,129  $45,444,769  

FHLBank offers advances that may be prepaid without prepayment or termination fees on predetermined exercise dates (call dates) prior to the stated advance maturity (callable advances). In exchange for receiving the right to call the advance on a predetermined call schedule, the borrower may pay a higher rate for the advance relative to an equivalent maturity, non-callable advance. The borrower generally exercises its call options on these advances when interest rates decline (fixed rate advances) or spreads change (adjustable rate advances). FHLBank also offers fixed rate advances that include a put option held by FHLBank (putable advances). On the date FHLBank exercises its put option, the borrower has the option to prepay the advance in full without a fee or roll into another advance product. A putable advance carries a lower interest rate than a comparable-maturity fixed rate advance without the put feature. FHLBank would generally exercise its put option when interest rates increase. Other advances are prepayable with a prepayment fee that makes FHLBank economically indifferent to the prepayment.

Convertible advances allow FHLBank to convert an advance from one interest payment term structure to another. When issuing convertible advances, FHLBank purchases put options from a member that allow FHLBank to convert the fixed rate advance to a variable rate advance at the current market rate or another structure after an agreed-upon lockout period. A convertible advance carries a lower interest rate than a comparable-maturity fixed rate advance without the conversion feature. Convertible advances are no longer a current product offering; however, $113,400,000 remain outstanding at March 31, 2024.

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Table 4.2 presents advances summarized by redemption term or next call date and by redemption term or next put or conversion date as of March 31, 2024 and December 31, 2023 (in thousands):

Table 4.2
 Redemption Term
or Next Call Date
Redemption Term or Next Put or Conversion Date
Redemption Term03/31/202412/31/202303/31/202412/31/2023
Due in one year or less$27,025,889 $31,038,961 $27,889,150 $31,299,438 
Due after one year through two years4,087,129 3,920,260 4,556,509 4,552,204 
Due after two years through three years4,164,366 3,562,900 4,222,472 3,954,979 
Due after three years through four years2,629,860 2,678,103 2,705,993 2,750,881 
Due after four years through five years2,436,598 2,715,262 1,243,718 1,600,481 
Thereafter1,658,182 1,754,816 1,384,182 1,512,319 
TOTAL PAR VALUE$42,002,024 $45,670,302 $42,002,024 $45,670,302 

Interest Rate Payment Terms: Table 4.3 details additional interest rate payment and redemption terms for advances as of March 31, 2024 and December 31, 2023 (in thousands):

Table 4.3
 Redemption Term03/31/202412/31/2023
Fixed rate:  
Due in one year or less$16,838,100 $26,714,638 
Due after one year through three years6,578,816 6,034,768 
Due after three years through five years4,720,616 5,072,017 
Due after five years through fifteen years1,667,738 1,762,808 
Due after fifteen years27,842 28,659 
Total fixed rate29,833,112 39,612,890 
Variable rate:  
Due in one year or less9,153,100 3,071,600 
Due after one year through three years2,069,915 2,061,415 
Due after three years through five years874,595 852,345 
Due after five years through fifteen years68,802 69,552 
Due after fifteen years2,500 2,500 
Total variable rate12,168,912 6,057,412 
TOTAL PAR VALUE$42,002,024 $45,670,302 

Credit Risk Exposure and Security Terms: FHLBank manages its credit exposure to advances through an integrated approach that includes establishing a credit limit for each borrower. This approach includes an ongoing review of each borrower's financial condition, in conjunction with FHLBank's collateral and lending policies to limit risk of loss, while balancing borrowers' needs for a reliable source of funding. Using a risk-based approach and taking into consideration each borrower's financial strength, FHLBank considers the types and level of collateral to be the primary indicator of credit quality on advances. As of March 31, 2024 and December 31, 2023, FHLBank had rights to collateral on a borrower-by-borrower basis with an estimated value greater than its outstanding advances.

FHLBank continues to evaluate and make changes to its collateral guidelines, as necessary, based on current market conditions. As of March 31, 2024 and December 31, 2023, no advances were past due, on nonaccrual status, or considered impaired.

Based on the collateral held as security, FHLBank's credit extension and collateral policies, and repayment history on advances, no losses are expected on advances as of March 31, 2024 and December 31, 2023, and therefore no allowance for credit losses on advances was recorded.

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NOTE 5 – MORTGAGE LOANS

Mortgage loans held for portfolio consist of loans obtained through the MPF Program and are either conventional mortgage loans or government-guaranteed or -insured mortgage loans. Under the MPF Program, FHLBank purchases single-family mortgage loans that are originated or acquired by participating financial institutions (PFIs). These mortgage loans are credit-enhanced by PFIs or are guaranteed or insured by Federal agencies.

Mortgage Loans Held for Portfolio: Table 5.1 presents information as of March 31, 2024 and December 31, 2023 on mortgage loans held for portfolio (in thousands). Carrying amounts exclude accrued interest receivable of $47,526,000 and $45,669,000 as of March 31, 2024 and December 31, 2023, respectively.

Table 5.1
 03/31/202412/31/2023
Real estate:  
Fixed rate, medium-term1, single-family mortgages
$1,024,208 $1,055,326 
Fixed rate, long-term, single-family mortgages7,346,534 7,227,825 
Total unpaid principal balance8,370,742 8,283,151 
Premiums94,071 94,485 
Discounts(5,779)(5,591)
Deferred loan costs, net38 39 
Hedging adjustments(13,806)(13,840)
Total before allowance for credit losses on mortgage loans8,445,266 8,358,244 
Allowance for credit losses on mortgage loans(5,202)(5,531)
MORTGAGE LOANS HELD FOR PORTFOLIO, NET$8,440,064 $8,352,713 
                   
1    Medium-term defined as a term of 15 years or less at origination.
Table 5.2 presents information as of March 31, 2024 and December 31, 2023 on the outstanding unpaid principal balance of mortgage loans held for portfolio (in thousands):

Table 5.2
 03/31/202412/31/2023
Conventional loans$8,039,711 $7,953,624 
Government-guaranteed or -insured loans331,031 329,527 
TOTAL UNPAID PRINCIPAL BALANCE$8,370,742 $8,283,151 

Payment Status of Mortgage Loans: Payment status is the key credit quality indicator for conventional mortgage loans and allows FHLBank to monitor borrower performance. A past due loan is one where the borrower has failed to make a full payment of principal and interest within 30 days of its due date. Other delinquency statistics include nonaccrual loans and loans in process of foreclosure.

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Table 5.3 presents the payment status based on amortized cost as well as other delinquency statistics for FHLBank’s mortgage loans as of March 31, 2024 (dollar amounts in thousands):

Table 5.3
 03/31/2024
Conventional LoansGovernment
Loans
Total
Origination YearSubtotal
 Prior to 202020202021202220232024
Amortized Cost:1
   
Past due 30-59 days delinquent
$26,474 $3,131 $6,674 $8,573 $3,273 $ $48,125 $9,311 $57,436 
Past due 60-89 days delinquent
7,599 823 1,033 1,015 682  11,152 2,656 13,808 
Past due 90 days or more delinquent
12,021 1,322 1,360 703   15,406 3,225 18,631 
Total past due46,094 5,276 9,067 10,291 3,955  74,683 15,192 89,875 
Total current loans2,671,995 1,482,264 1,690,749 838,163 1,136,885 215,453 8,035,509 319,882 8,355,391 
Total mortgage loans$2,718,089 $1,487,540 $1,699,816 $848,454 $1,140,840 $215,453 $8,110,192 $335,074 $8,445,266 
Other delinquency statistics:   
In process of foreclosure2
$4,769 $153 $4,922 
Serious delinquency rate3
0.2 %1.0 %0.2 %
Past due 90 days or more and still accruing interest
$ $3,225 $3,225 
Loans on nonaccrual status4
$18,347 $ $18,347 
                   
1    Excludes accrued interest receivable.
2    Includes loans where the decision of foreclosure or similar alternative such as pursuit of deed-in-lieu has been reported. Loans in process of foreclosure are included in past due or current loans dependent on their delinquency status.
3    Loans that are 90 days or more past due or in the process of foreclosure expressed as a percentage of the total amortized cost for the portfolio class.
4    Includes $10,863,000 of conventional mortgage loans on nonaccrual status that did not have an associated allowance for credit losses because either these loans were previously charged off to the expected recoverable value or the fair value of the underlying collateral was greater than the amortized cost of the loans.



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Table 5.4 presents the payment status based on amortized cost as well as other delinquency statistics for FHLBank’s mortgage loans as of December 31, 2023 (dollar amounts in thousands):

Table 5.4
12/31/2023
Conventional LoansGovernment
Loans
Total
Origination YearSubtotal
Prior to 2019
2019
2020202120222023
Amortized Cost:1
   
Past due 30-59 days delinquent
$19,739 $7,135 $5,601 $5,955 $6,745 $2,746 $47,921 $10,327 $58,248 
Past due 60-89 days delinquent
5,013 1,319 479 931 2,047  9,789 2,972 12,761 
Past due 90 days or more delinquent
8,063 5,185 1,354 1,170 447  16,219 2,659 18,878 
Total past due32,815 13,639 7,434 8,056 9,239 2,746 73,929 15,958 89,887 
Total current loans1,770,552 971,328 1,506,877 1,720,492 852,858 1,128,557 7,950,664 317,693 8,268,357 
Total mortgage loans$1,803,367 $984,967 $1,514,311 $1,728,548 $862,097 $1,131,303 $8,024,593 $333,651 $8,358,244 
Other delinquency statistics:   
In process of foreclosure2
$6,008 $763 $6,771 
Serious delinquency rate3
0.2 %0.8 %0.2 %
Past due 90 days or more and still accruing interest
$ $2,657 $2,657 
Loans on nonaccrual status4
$19,383 $ $19,383 
                   
1    Excludes accrued interest receivable.
2    Includes loans where the decision of foreclosure or similar alternative such as pursuit of deed-in-lieu has been reported. Loans in process of foreclosure are included in past due or current loans dependent on their delinquency status.
3    Loans that are 90 days or more past due or in the process of foreclosure expressed as a percentage of the total amortized cost for the portfolio class.
4    Includes $12,502,000 of conventional mortgage loans on nonaccrual status that did not have an associated allowance for credit losses because either these loans were previously charged off to the expected recoverable value or the fair value of the underlying collateral was greater than the amortized cost of the loans.
Allowance for Credit Losses:
Conventional Mortgage Loans: Conventional loans are evaluated collectively when similar risk characteristics exist. Conventional loans that do not share risk characteristics with other pools are evaluated for expected credit losses on an individual basis. FHLBank determines its allowance for credit losses on conventional loans through analyses that include consideration of various loan portfolio and collateral-related characteristics, such as past performance, current economic conditions, and reasonable and supportable forecasts of expected economic conditions. FHLBank uses a third-party projected cash flow model to estimate expected credit losses over the life of the loans. This model relies on a number of inputs, such as both current and forecasted property values and interest rates as well as historical borrower behavior. The forecasts used in the calculation of expected credit losses cover the contractual terms of the loans rather than a reversion to historical trends after a forecasted period. FHLBank also incorporates associated credit enhancements, as available, to determine its estimate of expected credit losses.

Certain conventional loans may be evaluated for credit losses using the practical expedient for collateral dependent assets. A mortgage loan is considered collateral dependent when the borrower is experiencing financial difficulty and repayment is expected to be substantially through the sale of the underlying collateral. FHLBank may estimate the fair value of this collateral by applying an appropriate loss severity rate or by using third party estimates or property valuation model(s). The expected credit loss of a collateral dependent mortgage loan is equal to the difference between the amortized cost of the loan and the estimated fair value of the collateral, less estimated selling costs. FHLBank records a direct charge-off of the loan balance if certain triggering criteria are met. Expected recoveries of prior charge-offs, if any, are included in the allowance for credit losses.

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FHLBank established an allowance for credit losses on its conventional mortgage loans held for portfolio. Table 5.5 presents a roll-forward of the allowance for credit losses on mortgage loans for the three months ended March 31, 2024 and 2023.

Table 5.5
Three Months Ended
Conventional Loans03/31/202403/31/2023
Balance, beginning of the period$5,531 $6,378 
Net (charge-offs) recoveries(129)(140)
Provision (reversal) for credit losses(200)(402)
Balance, end of the period$5,202 $5,836 

Government-Guaranteed or -Insured Mortgage Loans: FHLBank invests in fixed rate mortgage loans that are insured or guaranteed by the Federal Housing Administration, the Department of Veterans Affairs, the Rural Housing Service of the Department of Agriculture, and/or the Department of Housing and Urban Development. The servicer provides and maintains insurance or a guarantee from the applicable government agency. The servicer is responsible for compliance with all government agency requirements and for obtaining the benefit of the applicable guarantee or insurance with respect to defaulted government-guaranteed or -insured mortgage loans. Based on FHLBank's assessment of its servicers and the collateral backing the loans, the risk of loss was immaterial; consequently, no allowance for credit losses for government-guaranteed or -insured mortgage loans was recorded as of March 31, 2024 and December 31, 2023. Furthermore, none of these mortgage loans have been placed on nonaccrual status because of the U.S. government guarantee or insurance on these loans and the contractual obligation of the loan servicer to repurchase the loans when certain criteria are met.


NOTE 6 – DERIVATIVES AND HEDGING ACTIVITIES

Table 6.1 presents outstanding notional amounts and fair values of the derivatives outstanding by type of derivative and by hedge designation as of March 31, 2024 and December 31, 2023 (in thousands). Total derivative assets and liabilities include the effect of netting adjustments and cash collateral.

Table 6.1
 03/31/202412/31/2023
 Notional
Amount
Derivative
Assets
Derivative
Liabilities
Notional
Amount
Derivative
Assets
Derivative
Liabilities
Derivatives designated as hedging instruments:      
Interest rate swaps$39,395,066 $154,124 $396,188 $44,804,870 $116,352 $410,595 
Total derivatives designated as hedging relationships
39,395,066 154,124 396,188 44,804,870 116,352 410,595 
Derivatives not designated as hedging instruments:
      
Interest rate swaps5,750,376 22,673 76 6,383,296 22,072 152 
Interest rate caps/floors804,000 2,874  304,000 698  
Mortgage delivery commitments58,625 182 1 41,641 133 5 
Total derivatives not designated as hedging instruments
6,613,001 25,729 77 6,728,937 22,903 157 
TOTAL$46,008,067 179,853 396,265 $51,533,807 139,255 410,752 
Netting adjustments and cash collateral1
 156,949 (394,188) 211,112 (409,892)
DERIVATIVE ASSETS AND LIABILITIES $336,802 $2,077  $350,367 $860 
                   
1    Amounts represent the application of the netting requirements that allow FHLBank to settle positive and negative positions and cash collateral, including accrued interest, held or placed with the same clearing agent and/or derivative counterparty. Cash collateral posted was $604,047,000 and $649,456,000 as of March 31, 2024 and December 31, 2023, respectively. Cash collateral received was $52,910,000 and $28,452,000 as of March 31, 2024 and December 31, 2023, respectively.
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FHLBank carries derivative instruments at fair value on its Statements of Condition. Changes in fair value of the derivative hedging instrument and the hedged item attributable to the hedged risk for designated fair value hedges are recorded in net interest income in the same line as the earnings effect of the hedged item.

Gains (losses) on fair value hedges include unrealized changes in fair value as well as net interest settlements. For the three months ended March 31, 2024 and 2023, FHLBank recorded net gains (losses) on derivatives and the related hedged items in fair value hedging relationships and the impact of those derivatives on FHLBank’s net interest income as presented in Table 6.2 (in thousands):

Table 6.2
Three Months Ended
03/31/2024
Interest Income/Expense
AdvancesAvailable-for-sale SecuritiesConsolidated Obligation Discount NotesConsolidated Obligation Bonds
Total amounts presented in the Statements of Income$591,987 $190,059 $227,541 $623,540 
Gains (losses) on fair value hedging relationships:
Interest rate contracts:
Derivatives1
$194,890 $145,687 $(3,054)$(84,391)
Hedged items2
(117,039)(88,253)713 6,947 
NET GAINS (LOSSES) ON FAIR VALUE HEDGING RELATIONSHIPS
$77,851 $57,434 $(2,341)$(77,444)

Three Months Ended
03/31/2023
Interest Income/Expense
AdvancesAvailable-for-sale SecuritiesConsolidated Obligation Discount NotesConsolidated Obligation Bonds
Total amounts presented in the Statements of Income$536,594 $116,836 $263,521 $461,882 
Gains (losses) on fair value hedging relationships:
Interest rate contracts:
Derivatives1
$(78,806)$(71,218)$16,658 $54,901 
Hedged items2
118,441 111,500 (25,891)(124,178)
NET GAINS (LOSSES) ON FAIR VALUE HEDGING RELATIONSHIPS
$39,635 $40,282 $(9,233)$(69,277)
                   
1    Includes net interest settlements in interest income/expense.
2    Includes amortization/accretion on closed fair value relationships in interest income.

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Table 6.3 presents the cumulative basis adjustments on hedged items designated as fair value hedges and the related amortized cost of the hedged items as of March 31, 2024 and December 31, 2023 (in thousands):

Table 6.3
03/31/2024
Line Item in Statements of Condition of Hedged Item
Carrying Value of Hedged Asset/(Liability)1
Basis Adjustments for Active Hedging Relationships2
Basis Adjustments for Discontinued Hedging Relationships2
Cumulative Amount of Fair Value Hedging Basis Adjustments2
Advances$14,035,734 $(324,193)$(8,103)$(332,296)
Available-for-sale securities6,728,262 (345,010) (345,010)
Consolidated obligation discount notes(2,381,347)3,026  3,026 
Consolidated obligation bonds(15,292,882)373,127 (5,841)367,286 
12/31/2023
Line Item in Statements of Condition of Hedged Item
Carrying Value of Hedged Asset/(Liability)1
Basis Adjustments for Active Hedging Relationships2
Basis Adjustments for Discontinued Hedging Relationships2
Cumulative Amount of Fair Value Hedging Basis Adjustments2
Advances$13,545,019 $(206,332)$(8,924)$(215,256)
Available-for-sale securities6,367,691 (256,757) (256,757)
Consolidated discount notes(3,874,550)2,313  2,313 
Consolidated obligation bonds(20,374,603)366,180 (5,937)360,243 
                   
1    Includes only the portion of carrying value representing the hedged items in fair value hedging relationships. For available-for-sale securities, amortized cost is considered to be carrying value (i.e., the fair value adjustment recorded in accumulated other comprehensive income (AOCI) is excluded).
2    Included in amortized cost of the hedged asset/liability.

Table 6.4 provides information regarding net gains (losses) on derivatives recorded in non-interest income (in thousands).

Table 6.4
 Three Months Ended
 03/31/202403/31/2023
Derivatives not designated as hedging instruments:
Economic hedges:
Interest rate swaps$774 $(8,286)
Interest rate caps/floors(604)(350)
Net interest settlements8,538 8,298 
Price alignment interest(125)(210)
Mortgage delivery commitments(55)23 
NET GAINS (LOSSES) ON DERIVATIVES$8,528 $(525)

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

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Bilateral derivative transactions executed on or after September 1, 2022, are subject to two-way initial margin requirements if aggregate uncleared derivative exposure to a counterparty exceeds a specified threshold. The initial margin is required to be held at a third-party custodian, and the secured party can only take ownership upon the occurrence of certain events, including an event of default due to bankruptcy, insolvency, or similar proceeding. As of March 31,2024, FHLBank was not required to pledge to or receive initial margin from bilateral derivative counterparties.

FHLBank utilizes two Derivative Clearing Organizations (Clearinghouse) for all cleared derivative transactions, LCH Limited and CME Clearing. At both Clearinghouses, initial margin is considered cash collateral. For cleared derivatives, the Clearinghouse determines initial margin requirements and generally, credit ratings are not factored into the initial margin. However, clearing agents may require additional initial margin to be posted based on credit considerations, including but not limited to credit rating downgrades. FHLBank was not required to post additional initial margin by its clearing agents as of March 31, 2024 and December 31, 2023.

FHLBank’s net exposure on derivative agreements is presented in Note 9.


NOTE 7 – DEPOSITS

FHLBank offers demand, overnight and short-term deposit programs to its members and to other qualifying non-members. A member that services mortgage loans may also deposit funds collected in connection with the mortgage loans, pending disbursement of these funds to the owners of the mortgage loans. FHLBank classifies these funds as other deposits. Deposits classified as demand and overnight pay interest based on a daily interest rate. Term deposits pay interest based on a fixed rate determined at the issuance of the deposit.

Table 7.1 details the types of deposits held by FHLBank as of March 31, 2024 and December 31, 2023 (in thousands):

Table 7.1
 03/31/202412/31/2023
Interest-bearing:  
Demand$355,651 $297,267 
Overnight425,100 391,900 
Term9,550 10,650 
Total interest-bearing790,301 699,817 
Non-interest-bearing:
Other56,327 52,383 
Total non-interest-bearing56,327 52,383 
TOTAL DEPOSITS$846,628 $752,200 


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NOTE 8 – CONSOLIDATED OBLIGATIONS

Consolidated Obligation Bonds: Table 8.1 presents FHLBank’s participation in consolidated obligation bonds outstanding as of March 31, 2024 and December 31, 2023 (dollar amounts in thousands):

Table 8.1
 03/31/202412/31/2023
Year of Contractual MaturityAmountWeighted
Average
Interest
Rate
AmountWeighted
Average
Interest
Rate
Due in one year or less$29,572,290 4.85 %$28,152,305 4.90 %
Due after one year through two years10,579,085 4.47 9,327,370 4.21 
Due after two years through three years4,123,125 2.14 4,294,125 2.01 
Due after three years through four years1,784,335 2.28 1,780,895 2.01 
Due after four years through five years1,261,500 3.73 1,467,440 2.96 
Thereafter4,505,255 2.78 4,387,255 2.63 
Total par value51,825,590 4.26 %49,409,390 4.15 %
Premiums12,969  12,874  
Discounts(2,621) (3,108) 
Concession fees(11,575)(11,424)
Hedging adjustments(367,286) (360,243) 
TOTAL$51,457,077  $49,047,489  

FHLBank issues optional principal redemption bonds (callable bonds) that may be redeemed in whole or in part at the discretion of FHLBank on predetermined call dates in accordance with terms of bond offerings. FHLBank’s consolidated obligation bonds outstanding as of March 31, 2024 and December 31, 2023 includes callable bonds totaling $18,261,300,000 and $22,940,000,000, respectively. Table 8.2 summarizes FHLBank’s consolidated obligation bonds outstanding by year of maturity, or by the next call date for callable bonds as of March 31, 2024 and December 31, 2023 (in thousands):

Table 8.2
Year of Maturity or Next Call Date03/31/202412/31/2023
Due in one year or less$41,832,590 $40,475,305 
Due after one year through two years7,266,785 6,503,370 
Due after two years through three years1,299,125 1,227,125 
Due after three years through four years589,335 362,895 
Due after four years through five years418,000 493,940 
Thereafter419,755 346,755 
TOTAL PAR VALUE$51,825,590 $49,409,390 

Table 8.3 summarizes interest rate payment terms for consolidated obligation bonds as of March 31, 2024 and December 31, 2023 (in thousands):

Table 8.3
03/31/202412/31/2023
Fixed rate$23,234,590 $28,093,390 
Simple variable rate26,964,000 19,524,000 
Step1,627,000 1,792,000 
TOTAL PAR VALUE$51,825,590 $49,409,390 

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

Table 8.4
Carrying ValuePar Value
Weighted
Average
Interest
Rate1
March 31, 2024$17,005,256 $17,167,240 5.10 %
December 31, 2023$20,743,249 $20,903,145 5.15 %
                   
1    Represents yield to maturity excluding concession fees.


NOTE 9 – ASSETS AND LIABILITIES SUBJECT TO OFFSETTING

FHLBank presents certain financial instruments, including derivatives, repurchase agreements and securities purchased under agreements to resell, on a net basis by clearing agent by Clearinghouse, or by counterparty, when it has met the netting requirements. For these financial instruments, FHLBank has elected to offset its asset and liability positions, as well as cash collateral received or pledged, including associated accrued interest.

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

Tables 9.1 and 9.2 present the fair value of financial assets, including the related collateral received from or pledged to clearing agents or counterparties, based on the terms of FHLBank’s master netting arrangements or similar agreements as of March 31, 2024 and December 31, 2023 (in thousands):

Table 9.1
03/31/2024
DescriptionGross Amounts
of Recognized
Assets
Gross Amounts
Offset
in the
Statements of
Condition
Net Amounts
of Assets
Presented
in the
Statements of
Condition
Gross Amounts
Not Offset
in the
Statement of
Condition1
Net
Amount
Derivative assets:     
Uncleared derivatives$173,821 $(173,090)$731 $(182)$549 
Cleared derivatives6,032 330,039 336,071  336,071 
Total derivative assets179,853 156,949 336,802 (182)336,620 
Securities purchased under agreements to resell3,925,000  3,925,000 (3,925,000) 
TOTAL$4,104,853 $156,949 $4,261,802 $(3,925,182)$336,620 
                   
1    Represents noncash collateral received on financial instruments that: (1) do not qualify for netting on the Statements of Condition; or (2) are not subject to an enforceable netting agreement (e.g., mortgage delivery commitments).

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Table 9.2
12/31/2023
DescriptionGross Amounts
of Recognized
Assets
Gross Amounts
Offset
in the
Statements of
Condition
Net Amounts
of Assets
Presented
in the
Statements of
Condition
Gross Amounts
Not Offset
in the
Statement of
Condition1
Net
Amount
Derivative assets:     
Uncleared derivatives$136,141 $(133,650)$2,491 $(133)$2,358 
Cleared derivatives3,114 344,762 347,876  347,876 
Total derivative assets139,255 211,112 350,367 (133)350,234 
Securities purchased under agreements to resell3,875,000  3,875,000 (3,875,000) 
TOTAL$4,014,255 $211,112 $4,225,367 $(3,875,133)$350,234 
                   
1    Represents noncash collateral received on financial instruments that: (1) do not qualify for netting on the Statements of Condition; or (2) are not subject to an enforceable netting agreement (e.g., mortgage delivery commitments).

Tables 9.3 and 9.4 present the fair value of financial liabilities, including the related collateral received from or pledged to counterparties, based on the terms of FHLBank’s master netting arrangements or similar agreements as of March 31, 2024 and December 31, 2023 (in thousands):

Table 9.3
03/31/2024
DescriptionGross Amounts
of Recognized
Liabilities
Gross Amounts
Offset
in the
Statements of
Condition
Net Amounts
of Liabilities
Presented
in the
Statements of
Condition
Gross Amounts
Not Offset
in the
Statement of
Condition1
Net
Amount
Derivative liabilities:     
Uncleared derivatives$392,818 $(390,741)$2,077 $(1)$2,076 
Cleared derivatives3,447 (3,447)   
Total derivative liabilities396,265 (394,188)2,077 (1)2,076 
TOTAL$396,265 $(394,188)$2,077 $(1)$2,076 
                   
1    Represents noncash collateral received on financial instruments that: (1) do not qualify for netting on the Statements of Condition; or (2) are not subject to an enforceable netting agreement (e.g., mortgage delivery commitments).

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Table 9.4
12/31/2023
DescriptionGross Amounts
of Recognized
Liabilities
Gross Amounts
Offset
in the
Statements of
Condition
Net Amounts
of Liabilities
Presented
in the
Statements of
Condition
Gross Amounts
Not Offset
in the
Statement of
Condition1
Net
Amount
Derivative liabilities:     
Uncleared derivatives$402,527 $(401,667)$860 $(5)$855 
Cleared derivatives8,225 (8,225)   
Total derivative liabilities410,752 (409,892)860 (5)855 
TOTAL$410,752 $(409,892)$860 $(5)$855 
                   
1    Represents noncash collateral received on financial instruments that: (1) do not qualify for netting on the Statements of Condition; or (2) are not subject to an enforceable netting agreement (e.g., mortgage delivery commitments).


NOTE 10 – CAPITAL

Capital Requirements: FHLBank is subject to three capital requirements under the provisions of the Gramm-Leach-Bliley Act (GLB Act) and the FHFA's capital structure regulation. Regulatory capital does not include AOCI but does include mandatorily redeemable capital stock.
Risk-based capital. FHLBank must maintain at all times permanent capital in an amount at least equal to the sum of its credit risk, market risk and operational risk capital requirements. The risk-based capital requirements are all calculated in accordance with the rules and regulations of the FHFA. Only permanent capital, defined as the amounts paid-in for Class B Common Stock and retained earnings, can be used by FHLBank to satisfy its risk-based capital requirement. The FHFA may require FHLBank to maintain a greater amount of permanent capital than is required by the risk-based capital requirement as defined, but the FHFA has not placed any such requirement on FHLBank to date.
Total regulatory capital. The GLB Act requires FHLBank to maintain at all times at least a 4.0 percent total capital-to-asset ratio. Total regulatory capital is defined as the sum of permanent capital, Class A Common Stock, any general loss allowance, if consistent with GAAP and not established for specific assets, and other amounts from sources determined by the FHFA as available to absorb losses.
Leverage capital. FHLBank is required to maintain at all times a leverage capital-to-assets ratio of at least 5.0 percent, with the leverage capital ratio defined as the sum of permanent capital weighted 1.5 times and non-permanent capital (currently only Class A Common Stock) weighted 1.0 times, divided by total assets.

Table 10.1 illustrates that FHLBank was in compliance with its regulatory capital requirements as of March 31, 2024 and December 31, 2023 (dollar amounts in thousands):

Table 10.1
 03/31/202412/31/2023
 RequiredActualRequiredActual
Regulatory capital requirements:    
Risk-based capital$777,733 $3,614,791 $746,439 $3,730,738 
Total regulatory capital-to-asset ratio4.0 %5.4 %4.0 %5.4 %
Total regulatory capital$2,946,572 $3,959,691 $2,997,879 $4,009,870 
Leverage capital ratio5.0 %7.8 %5.0 %7.8 %
Leverage capital$3,683,215 $5,767,087 $3,747,349 $5,875,238 

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Mandatorily Redeemable Capital Stock: FHLBank is a cooperative whose members own most of FHLBank’s capital stock. Former members (including certain non-members that own FHLBank capital stock as a result of merger or acquisition, relocation, charter termination, or involuntary termination of an FHLBank member) own the remaining capital stock to support business transactions still carried on FHLBank's Statements of Condition. Shares cannot be purchased or sold except between FHLBank and its members at a price equal to the $100 per share par value.

Table 10.2 presents a roll-forward of mandatorily redeemable capital stock for the three months ended March 31, 2024 and 2023 (in thousands):

Table 10.2
 Three Months Ended
 03/31/202403/31/2023
Balance, beginning of period$247 $280 
Capital stock subject to mandatory redemption reclassified from equity during the period
154,493 211,237 
Redemption or repurchase of mandatorily redeemable capital stock during the period
(154,537)(211,250)
Stock dividend classified as mandatorily redeemable capital stock during the period
2 2 
Balance, end of period$205 $269 

Excess Capital Stock: Excess capital stock is defined as the amount of stock held by a member (or former member) in excess of that institution’s minimum stock purchase requirement. FHFA rules limit the ability of FHLBank to create excess member stock under certain circumstances. For example, FHLBank may not pay dividends in the form of capital stock or issue new excess stock to members if FHLBank’s excess stock exceeds one percent of its total assets or if the issuance of excess stock would cause FHLBank’s excess stock to exceed one percent of its total assets. As of March 31, 2024, FHLBank’s excess stock was less than one percent of total assets.

Capital Classification Determination: The FHFA determines each FHLBank’s capital classification on at least a quarterly basis. If an FHLBank is determined to be other than adequately capitalized, that FHLBank becomes subject to additional supervisory authority by the FHFA. Before implementing a reclassification, the Director of the FHFA is required to provide an FHLBank with written notice of the proposed action and an opportunity to submit a response. As of the most recent review by the FHFA, FHLBank Topeka was classified as adequately capitalized.


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NOTE 11 – ACCUMULATED OTHER COMPREHENSIVE INCOME

Table 11.1 summarizes the changes in AOCI for the three months ended March 31, 2024 and 2023 (in thousands):

Table 11.1
Three Months Ended
Net Unrealized Gains (Losses) on Available-for-sale SecuritiesDefined Benefit Pension PlanTotal AOCI
Balance at December 31, 2022$(84,443)$173 $(84,270)
Other comprehensive income (loss) before reclassification:
Unrealized gains (losses)1,887 1,887 
Net current period other comprehensive income (loss)1,887  1,887 
Balance at March 31, 2023$(82,556)$173 $(82,383)
Balance at December 31, 2023$(118,944)$(27)$(118,971)
Other comprehensive income (loss) before reclassification:
Unrealized gains (losses)24,192 24,192 
Net current period other comprehensive income (loss)24,192  24,192 
Balance at March 31, 2024$(94,752)$(27)$(94,779)

NOTE 12 – FAIR VALUES

The fair value amounts recorded on the Statements of Condition and presented in the note disclosures have been determined by FHLBank using available market and other pertinent information and reflect FHLBank’s best judgment of appropriate valuation methods. GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., an exit price). Although FHLBank uses its best judgment in estimating the fair value of its financial instruments, there are inherent limitations in any valuation technique. Therefore, the fair values may not be indicative of the amounts that would have been realized in market transactions as of March 31, 2024 and December 31, 2023. Additionally, these values do not represent an estimate of the overall market value of FHLBank as a going concern, which would take into account future business opportunities and the net profitability of assets and liabilities.

Subjectivity of Estimates: Estimates of the fair value of advances with options, mortgage instruments, and derivatives with embedded options are subjective and require judgments regarding significant matters such as the amount and timing of future cash flows, prepayment speed assumptions, expected interest rate volatility, methods to determine possible distributions of future interest rates used to value options, and the selection of discount rates that appropriately reflect market and credit risks. The use of different assumptions could have a material effect on the fair value estimates.

Fair Value Hierarchy: The fair value hierarchy requires FHLBank to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The inputs are evaluated and an overall level for the fair value measurement is determined. This overall level is an indication of the market observability of the fair value measurement for the asset or liability. FHLBank must disclose the level within the fair value hierarchy in which the measurements are classified for all assets and liabilities.

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The fair value hierarchy prioritizes the inputs used to measure fair value into three broad levels:
Level 1 Inputs – Quoted prices (unadjusted) for identical assets or liabilities in active markets that FHLBank can access on the measurement date. An active market for the asset or liability is a market in which the transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
Level 2 Inputs – Inputs other than quoted prices within Level 1 that are observable inputs for the asset or liability, either directly or indirectly. If the asset or liability has a specified (contractual) term, a Level 2 input must be observable for substantially the full term of the asset or liability. Level 2 inputs include the following: (1) quoted prices for similar assets and liabilities in active markets; (2) quoted prices for similar assets and liabilities in markets that are not active; (3) inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates and yield curves that are observable at commonly quoted intervals and implied volatilities); and (4) inputs that are derived principally from or corroborated by observable market data by correlation or other means.
Level 3 Inputs – Unobservable inputs for the asset or liability. Valuations are derived from techniques that use significant assumptions not observable in the market, which include pricing models, discounted cash flow models using an unobservable discount rate, or similar techniques.

FHLBank reviews its fair value hierarchy classifications on a quarterly basis. Changes in the observability of the valuation inputs may result in a reclassification of certain assets or liabilities. There were no transfers of assets or liabilities between fair value levels during the three months ended March 31, 2024 and 2023.

Tables 12.1 and 12.2 present the carrying value, fair value and fair value hierarchy of financial assets and liabilities as of March 31, 2024 and December 31, 2023. FHLBank records trading securities, available-for-sale securities, derivative assets, and derivative liabilities at fair value on a recurring basis, and on occasion certain mortgage loans held for portfolio and certain other assets at fair value on a nonrecurring basis. FHLBank measures all other financial assets and liabilities at amortized cost. Further details about the financial assets and liabilities held at fair value on either a recurring or non-recurring basis are presented in Tables 12.3 and 12.4.

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The carrying value, fair value and fair value hierarchy of FHLBank’s financial assets and liabilities as of March 31, 2024 and December 31, 2023 are summarized in Tables 12.1 and 12.2 (in thousands):

Table 12.1
 03/31/2024
 Carrying
Value
Total
Fair
Value
Level 1Level 2Level 3
Netting
Adjustment and Cash
Collateral1
Assets:      
Cash and due from banks$31,237 $31,237 $31,237 $ $ $— 
Interest-bearing deposits2,016,198 2,016,198  2,016,198  — 
Securities purchased under agreements to resell
3,925,000 3,925,000  3,925,000  — 
Federal funds sold3,580,000 3,580,000  3,580,000  — 
Trading securities893,114 893,114  893,114  — 
Available-for-sale securities12,184,017 12,184,017  12,184,017  — 
Held-to-maturity securities257,236 253,938  218,698 35,240 — 
Advances41,660,129 41,681,151  41,681,151  — 
Mortgage loans held for portfolio, net of allowance
8,440,064 7,491,078  7,486,869 4,209 — 
Accrued interest receivable259,092 259,092  259,092  — 
Derivative assets336,802 336,802  179,853  156,949 
Liabilities:      
Deposits846,628 846,627  846,627  — 
Consolidated obligation discount notes
17,005,256 17,004,112  17,004,112  — 
Consolidated obligation bonds51,457,077 50,505,214  50,505,214  — 
Mandatorily redeemable capital stock
205 205 205   — 
Accrued interest payable335,993 335,993  335,993  — 
Derivative liabilities2,077 2,077  396,265  (394,188)
Other Asset (Liability):      
Industrial revenue bonds35,000 32,436  32,436  — 
Financing obligation payable(35,000)(32,436) (32,436) — 
                   
1    Represents the effect of legally enforceable master netting agreements that allow FHLBank to net settle positive and negative positions and also derivative cash collateral and related accrued interest held or placed with the same clearing agent or derivative counterparty.

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Table of Contents
Table 12.2
 12/31/2023
 Carrying
Value
Total
Fair
Value
Level 1Level 2Level 3
Netting
Adjustment
and Cash
Collateral1
Assets:      
Cash and due from banks$26,062 $26,062 $26,062 $ $ $— 
Interest-bearing deposits1,604,989 1,604,989  1,604,989  — 
Securities purchased under agreements to resell
3,875,000 3,875,000  3,875,000  — 
Federal funds sold2,080,000 2,080,000  2,080,000  — 
Trading securities908,608 908,608  908,608  — 
Available-for-sale securities11,753,453 11,753,453  11,753,453  — 
Held-to-maturity securities264,796 260,653  225,444 35,209 — 
Advances45,444,769 45,452,358  45,452,358  — 
Mortgage loans held for portfolio, net of allowance
8,352,713 7,493,015  7,490,867 2,148 — 
Accrued interest receivable204,243 204,243  204,243  — 
Derivative assets350,367 350,367  139,255  211,112 
Liabilities:     
Deposits752,200 752,209  752,209  — 
Consolidated obligation discount notes
20,743,249 20,743,707  20,743,707  — 
Consolidated obligation bonds49,047,489 48,096,791  48,096,791  — 
Mandatorily redeemable capital stock
247 247 247   — 
Accrued interest payable361,840 361,840  361,840  — 
Derivative liabilities860 860  410,752  (409,892)
Other Asset (Liability):      
Industrial revenue bonds35,000 32,695  32,695  — 
Financing obligation payable(35,000)(32,695) (32,695) — 
                   
1    Represents the effect of legally enforceable master netting agreements that allow FHLBank to net settle positive and negative positions and also derivative cash collateral and related accrued interest held or placed with the same clearing agent or derivative counterparty.

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Table of Contents
Fair Value Measurements: Tables 12.3 and 12.4 present, for each hierarchy level, FHLBank’s assets and liabilities that are measured at fair value on a recurring or nonrecurring basis on the Statements of Condition as of or for the periods ended March 31, 2024 and December 31, 2023 (in thousands).

Table 12.3
03/31/2024
TotalLevel 1Level 2Level 3
Netting
Adjustment and Cash
Collateral1
Recurring fair value measurements - Assets:
Trading securities:
GSE debentures$289,740 $— $289,740 $— $— 
GSE MBS
603,374 — 603,374 — — 
Total trading securities893,114 — 893,114 — — 
Available-for-sale securities:
U.S. Treasury obligations3,164,023 — 3,164,023 — — 
U.S. obligation MBS95,254 — 95,254 — — 
GSE MBS8,924,740 — 8,924,740 — — 
Total available-for-sale securities12,184,017 — 12,184,017 — — 
Derivative assets:     
Interest-rate related336,620 — 179,671 — 156,949 
Mortgage delivery commitments182 — 182 — — 
Total derivative assets336,802 — 179,853 — 156,949 
TOTAL RECURRING FAIR VALUE MEASUREMENTS - ASSETS
$13,413,933 $— $13,256,984 $— $156,949 
Recurring fair value measurements - Liabilities:
Derivative liabilities:
Interest-rate related$2,076 $— $396,264 $— $(394,188)
Mortgage delivery commitments1 — 1 — — 
Total derivative liabilities2,077 — 396,265 — (394,188)
TOTAL RECURRING FAIR VALUE MEASUREMENTS - LIABILITIES
$2,077 $— $396,265 $— $(394,188)
Nonrecurring fair value measurements - Assets2:
Impaired mortgage loans$4,246 $— $— $4,246 $— 
TOTAL NONRECURRING FAIR VALUE MEASUREMENTS - ASSETS
$4,246 $— $— $4,246 $— 
                   
1    Represents the effect of legally enforceable master netting agreements that allow FHLBank to net settle positive and negative positions and also derivative cash collateral, including related accrued interest, held or placed with the same clearing agent or derivative counterparty.
2    Includes assets adjusted to fair value during the three months ended March 31, 2024 and still outstanding as of March 31, 2024.

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Table 12.4
12/31/2023
TotalLevel 1Level 2Level 3
Netting
Adjustment
and Cash
Collateral1
Recurring fair value measurements - Assets:
Trading securities:
GSE debentures$288,438 $— $288,438 $— $— 
GSE MBS
620,170 — 620,170 — — 
Total trading securities908,608 — 908,608 — — 
Available-for-sale securities:
U.S. Treasury obligations2,937,868 — 2,937,868 — — 
U.S. obligation MBS107,535 — 107,535 — — 
GSE MBS8,708,050 — 8,708,050 — — 
Total available-for-sale securities11,753,453 — 11,753,453 — — 
Derivative assets:
Interest-rate related350,234 — 139,122 — 211,112 
Mortgage delivery commitments133 — 133 — — 
Total derivative assets350,367 — 139,255 — 211,112 
TOTAL RECURRING FAIR VALUE MEASUREMENTS - ASSETS
$13,012,428 $— $12,801,316 $— $211,112 
Recurring fair value measurements - Liabilities:
Derivative liabilities:
Interest-rate related$855 $— $410,747 $— $(409,892)
Mortgage delivery commitments5 — 5 — — 
Total derivative liabilities860 — 410,752 — (409,892)
TOTAL RECURRING FAIR VALUE MEASUREMENTS - LIABILITIES
$860 $— $410,752 $— $(409,892)
Nonrecurring fair value measurements - Assets2:
Held-to-maturity securities:
Impaired mortgage loans$2,178 $— $— $2,178 $— 
Real estate owned43 — — 43 — 
TOTAL NONRECURRING FAIR VALUE MEASUREMENTS - ASSETS
$2,221 $— $— $2,221 $— 
                   
1    Represents the effect of legally enforceable master netting agreements that allow FHLBank to net settle positive and negative positions and also derivative cash collateral, including related accrued interest, held or placed with the same clearing agent or derivative counterparty.
2    Includes assets adjusted to fair value during the year ended December 31, 2023 and still outstanding as of December 31, 2023.


NOTE 13 – COMMITMENTS AND CONTINGENCIES

Joint and Several Liability: As provided in the Bank Act or in FHFA regulations, consolidated obligations are backed only by the financial resources of the FHLBanks. FHLBank Topeka is jointly and severally liable with the other FHLBanks for the payment of principal and interest on all of the consolidated obligations issued by the FHLBanks. The par amounts for which FHLBank Topeka is jointly and severally liable were approximately $1,103,431,356,000 and $1,134,003,465,000 as of March 31, 2024 and December 31, 2023, respectively.

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Off-balance Sheet Commitments: Table 13.1 presents off-balance sheet commitments at March 31, 2024 and December 31, 2023 (in thousands). No allowance for credit losses was recorded on these commitments at March 31, 2024 and December 31, 2023.

Table 13.1
 03/31/202412/31/2023
Notional AmountExpire
Within
One Year
Expire
After
One Year
TotalExpire
Within
One Year
Expire
After
One Year
Total
Standby letters of credit outstanding$7,500,827 $23,617 $7,524,444 $7,242,988 $5,670 $7,248,658 
Advance commitments outstanding22,636 1,000 23,636 48,526 3,615 52,141 
Principal commitments for standby bond purchase agreements86,845 904,980 991,825 283,220 716,295 999,515 
Commitments to fund or purchase mortgage loans
58,625  58,625 41,641  41,641 
Commitments to issue consolidated bonds, at par
770,000  770,000 1,300,000  1,300,000 

Commitments to Extend Credit: FHLBank issues standby letters of credit on behalf of its members to support certain obligations of the members to third-party beneficiaries. These standby letters of credit are subject to the same collateralization and borrowing limits that are applicable to advances and are fully collateralized at the time of issuance with assets allowed by FHLBank’s Member Products Policy (MPP). Standby letters of credit may be offered to assist members and non-member housing associates in facilitating residential housing finance, community lending, and asset-liability management, and to provide liquidity. In particular, members often use standby letters of credit as collateral for deposits from federal and state government agencies. Standby letters of credit are executed for members for a fee. If FHLBank is required to make payment for a beneficiary's draw, the member either reimburses FHLBank for the amount drawn or, subject to FHLBank's discretion, the amount drawn may be converted into a collateralized advance to the member. However, standby letters of credit usually expire without being drawn upon. FHLBank's current outstanding standby letters of credit expire no later than 2027. Unearned fees as well as the value of the guarantees related to standby letters of credit are recorded in other liabilities and amounted to $2,451,000 and $2,367,000 as of March 31, 2024 and December 31, 2023, respectively. Advance commitments legally bind and unconditionally obligate FHLBank for additional advances up to 24 months in the future. Based upon management’s credit analysis of members and collateral requirements under the MPP, FHLBank does not expect to incur any credit losses on the outstanding letters of credit or advance commitments.

Standby Bond-Purchase Agreements: FHLBank has entered into standby bond purchase agreements with state housing authorities whereby FHLBank, for a fee, agrees to purchase and hold the authorities’ bonds until the designated marketing agent can find a suitable investor or the housing authority repurchases the bond according to a schedule established by the standby agreement. Each standby agreement dictates the specific terms that would require FHLBank to purchase the bond and typically allows FHLBank to terminate the agreement upon the occurrence of a default event of the issuer. The bond purchase commitments entered into by FHLBank expire no later than 2029, though some are renewable at the option of FHLBank. As of March 31, 2024 and December 31, 2023, the total commitments for bond purchases included agreements with two in-district state housing authorities. FHLBank was not required to purchase any bonds under any agreements during the three months ended March 31, 2024 and 2023.

Commitments to Purchase Mortgage Loans: These commitments that unconditionally obligate FHLBank to purchase mortgage loans from participating FHLBank Topeka members in the MPF Program are generally for periods not to exceed 60 calendar days. Certain commitments are recorded as derivatives at their fair values on the Statements of Condition. FHLBank recorded mortgage delivery commitment net derivative asset balances of $181,000 and $128,000 as of March 31, 2024 and December 31, 2023, respectively.

Commitments to Issue Consolidated Obligations: FHLBank enters into commitments to issue consolidated obligation bonds and discount notes outstanding in the normal course of its business. Most settle within the shortest period possible and are considered regular way trades; however, certain commitments are recorded as derivatives at their fair values on the Statements of Condition.


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NOTE 14 – TRANSACTIONS WITH STOCKHOLDERS

FHLBank is a cooperative whose members own most of the capital stock of FHLBank and generally receive dividends on their investments. In addition, certain former members that still have outstanding transactions are also required to maintain their investments in FHLBank capital stock until the transactions mature or are paid off. Nearly all outstanding advances are with current members, and the majority of outstanding mortgage loans held for portfolio were purchased from current or former members. FHLBank also maintains demand deposit accounts for members primarily to facilitate settlement activities that are directly related to advances and mortgage loan purchases.

Transactions with members are entered into in the ordinary course of business. In instances where members also have officers or directors who are directors of FHLBank, transactions with those members are subject to the same eligibility and credit criteria, as well as the same terms and conditions, as other transactions with members. For financial reporting and disclosure purposes, FHLBank defines related parties as FHLBank directors’ financial institutions and members with capital stock investments in excess of 10 percent of FHLBank’s total regulatory capital stock outstanding, which includes mandatorily redeemable capital stock.

Activity with Members that Exceed a 10 Percent Ownership in FHLBank Regulatory Capital Stock: Tables 14.1 and 14.2 present information on members that owned more than 10 percent of outstanding FHLBank regulatory capital stock as of March 31, 2024 and December 31, 2023 (dollar amounts in thousands). An officer of BOKF, N.A. currently serves on FHLBank’s board of directors.

Table 14.1
03/31/2024
Member NameStateTotal Class A Stock Par ValuePercent of Total Class ATotal Class B Stock Par ValuePercent of Total Class BTotal Capital Stock Par ValuePercent of Total Capital Stock
MidFirst BankOK$101,739 29.5 %$387,832 18.0 %$489,571 19.6 %
BOKF, N.A.OK3,766 1.1 302,947 14.1 306,713 12.3 
TOTAL$105,505 30.6 %$690,779 32.1 %$796,284 31.9 %

Table 14.2
12/31/2023
Member NameStateTotal Class A Stock Par ValuePercent of Total Class ATotal Class B Stock Par ValuePercent of Total Class BTotal Capital Stock Par ValuePercent of Total Capital Stock
MidFirst BankOK$35,473 12.7 %$443,345 19.0 %$478,818 18.4 %
BOKF, N.A.OK500 0.2 347,012 14.9 347,512 13.3 
TOTAL$35,973 12.9 %$790,357 33.9 %$826,330 31.7 %

Advance and deposit balances with members that owned more than 10 percent of outstanding FHLBank regulatory capital stock as of March 31, 2024 and December 31, 2023 are summarized in Table 14.3 (dollar amounts in thousands).

Table 14.3
03/31/202412/31/202303/31/202412/31/2023
Member NameOutstanding AdvancesPercent of TotalOutstanding AdvancesPercent of TotalOutstanding DepositsPercent of TotalOutstanding DepositsPercent of Total
MidFirst Bank$8,450,000 20.1 %$9,585,000 21.0 %$4,483 0.5 %$3,751 0.5 %
BOKF, N.A.6,700,000 16.0 7,675,000 16.8 39,187 4.6 22,325 3.0 %
TOTAL$15,150,000 36.1 %$17,260,000 37.8 %$43,670 5.1 %$26,076 3.5 %

BOKF, N.A. sold $8,797,000 mortgage loans into the MPF Program during the three months ended March 31, 2024. MidFirst Bank did not sell any mortgage loans into the MPF Program during the three months ended March 31, 2024 and 2023.

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Transactions with FHLBank Directors’ Financial Institutions: Table 14.4 presents information as of March 31, 2024 and December 31, 2023 for members that had an officer or director serving on FHLBank’s board of directors (dollar amounts in thousands). Information is only included for the period in which the officer or director served on FHLBank’s board of directors. Capital stock listed is regulatory capital stock, which includes mandatorily redeemable capital stock.

Table 14.4
 03/31/202412/31/2023
 Outstanding AmountPercent of TotalOutstanding AmountPercent of Total
Advances$6,931,278 16.5 %$270,308 0.6 %
Deposits$40,882 4.8 %$7,314 1.0 %
Class A Common Stock$7,617 2.2 %$4,314 1.5 %
Class B Common Stock316,460 14.7 14,924 0.6 
TOTAL CAPITAL STOCK$324,077 13.0 %$19,238 0.7 %

Table 14.5 presents mortgage loans acquired during the three months ended March 31, 2024 and 2023 for members that had an officer or director serving on FHLBank’s board of directors in 2024 or 2023 (dollar amounts in thousands). Information is only included for the period in which the officer or director served on FHLBank’s board of directors.

Table 14.5
Three Months Ended
03/31/202403/31/2023
AmountPercent of TotalAmountPercent of Total
Mortgage loans acquired$15,246 6.0 %$4,512 2.5 %


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NOTE 15 – TRANSACTIONS WITH OTHER FHLBANKS

From time to time, one FHLBank may transfer to another FHLBank the consolidated obligations for which the transferring FHLBank was originally the primary obligor but upon transfer the assuming FHLBank becomes the primary obligor. During the first quarter of 2023, FHLBank Topeka transferred debt obligations with a par amount of $1,000,000,000 to another FHLBank. There were no transfers of debt obligations to other FHLBanks during the three months ended March 31, 2024.
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Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is intended to assist the reader in understanding our business and assessing our operations both historically and prospectively. This discussion should be read in conjunction with our interim financial statements and related notes presented under Part I, Item 1 of this quarterly report on Form 10-Q and the annual report on Form 10-K for the year ended December 31, 2023, which includes audited financial statements and related notes for the year ended December 31, 2023. Our MD&A includes the following sections:
Selected Financial Data – a tabular summary of selected balances, financial ratios and other financial information;
Executive Level Overview – a general description of our business and financial highlights;
Financial Market Trends – a discussion of current trends in the financial markets and overall economic environment, including the related impact on our operations;
Critical Accounting Policies and Estimates – a discussion of accounting policies that require critical estimates and assumptions;
Results of Operations – an analysis of our operating results, including disclosures about the sustainability of our earnings;
Financial Condition – an analysis of our financial position;
Liquidity and Capital Resources – an analysis of our cash flows and capital position;
Risk Management – a discussion of our risk management strategies;
Recently Issued Accounting Standards; and
Legislative and Regulatory Developments.

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

Table 1
03/31/202412/31/202309/30/202306/30/202303/31/2023
Statement of Condition (as of period end):
Total assets$73,664,303 $74,946,985 $73,136,292 $72,859,560 $74,838,195 
Investments1
22,855,565 20,486,846 19,967,164 20,184,671 19,831,466 
Advances41,660,129 45,444,769 44,322,221 43,957,361 46,456,748 
Mortgage loans, net8,440,064 8,352,713 8,207,138 8,064,228 7,925,256 
Total liabilities69,799,596 71,056,333 69,244,674 68,963,074 70,972,748 
Deposits846,628 752,200 751,952 539,157 955,321 
Consolidated obligations, net2
68,462,333 69,790,738 67,991,607 67,944,534 69,487,247 
Total capital3,864,707 3,890,652 3,891,618 3,896,486 3,865,447 
Capital stock2,497,709 2,607,683 2,649,451 2,644,249 2,662,089 
Retained earnings1,461,777 1,401,940 1,371,586 1,336,066 1,285,741 
Statement of Income (for the quarterly period ended):
Net interest income136,141 119,072 114,908 121,667 104,403 
Other income (loss)13,916 6,382 10,927 19,025 11,613 
Other expenses23,423 29,268 23,649 21,946 22,145 
Income before assessments126,834 97,139 102,219 118,000 94,273 
Affordable Housing Program (AHP) assessments12,684 9,714 10,222 11,800 9,428 
Net income114,150 87,425 91,997 106,200 84,845 
Selected Financial Ratios and Other Financial Data (for the quarterly period ended):
Dividends paid54,313 57,071 56,477 55,875 52,209 
Weighted average dividend rate3
8.76 %8.84 %8.62 %8.31 %8.12 %
Dividend payout ratio4
47.58 %65.28 %61.39 %52.61 %61.53 %
Return on average equity11.96 %9.06 %9.39 %10.81 %8.96 %
Return on average assets0.62 %0.46 %0.49 %0.55 %0.46 %
Average equity to average assets5.19 %5.04 %5.18 %5.10 %5.09 %
Net interest margin5
0.74 %0.62 %0.61 %0.63 %0.56 %
Total capital ratio6
5.25 %5.19 %5.32 %5.35 %5.17 %
Regulatory capital ratio7
5.38 %5.35 %5.50 %5.46 %5.28 %
                   
1    Includes trading securities, available-for-sale securities, held-to-maturity securities, interest-bearing deposits, securities purchased under agreements to resell, and Federal funds sold.
2    Consolidated obligations are bonds and discount notes that we are primarily liable to repay. See Note 13 to the financial statements for a description of the par amount of consolidated obligations of all FHLBanks for which we are jointly and severally liable.    
3    Dividends paid in cash and stock on both classes of stock as a percentage of average capital stock eligible for dividends.
4    Ratio disclosed represents dividends declared and paid during the period as a percentage of net income for the period presented. FHFA regulation requires dividends be paid out of known income prior to declaration date.
5    Net interest income as a percentage of average earning assets.
6    GAAP capital stock, which excludes mandatorily redeemable capital stock, plus retained earnings and accumulated other comprehensive income (AOCI) as a percentage of total assets.
7    Regulatory capital (i.e., permanent capital and Class A Common Stock) as a percentage of total assets.

We are a regional wholesale bank that makes advances (loans) to, purchases mortgage loans from, and provides limited other financial services primarily to our members. Our mission is to be a reliable source of liquidity and low-cost funding for our members in support of residential mortgage lending and related housing and economic development needs of the communities served by our members. As an independent, member-owned cooperative, we seek to maintain a balance between our public purpose and our ability to provide adequate returns on the capital supplied by our members. Our members include commercial banks, savings institutions, credit unions, insurance companies, and community development financial institutions.

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First Quarter 2024 Financial Highlights:
Net interest income/margin: Net interest income increased $31.7 million to $136.1 million for the quarter ended March 31, 2024 compared to $104.4 million for the quarter ended March 31, 2023. The increase in net interest income was primarily attributed to improvements in funding and asset spreads combined with the increase in interest rates, including the impact of higher interest rates on fair value hedges. Net interest margin increased 18 basis points for the current quarter, from 0.56 percent for the quarter ended March 31, 2023 to 0.74 percent for the quarter ended March 31, 2024. Net interest spread increased 12 basis points, from 0.31 percent for the quarter ended March 31, 2023 to 0.43 percent for the quarter ended March 31, 2024.
Total assets: Total assets decreased from $74.9 billion as of December 31, 2023 to $73.7 billion as of March 31, 2024, driven by the $3.7 billion decrease in advances between periods, partially offset by an increase in short-term investments between periods. The average balance of interest-earning assets decreased $1.4 billion between the quarter ended March 31, 2024 and the same period in the prior year, driven by a $4.2 billion decrease in the average balance of advances, partially offset by a $2.4 billion increase in the average balance of short- and long-term investments.
Primary Mission Assets: Advances to members and housing associates and mortgage loans purchased from members are Primary Mission Assets because they are fundamental to the business and mission of FHLBank. The Primary Mission Asset ratio, as defined by the FHFA under its core mission achievement guidance, is calculated as average advances and average mortgage loans to average consolidated obligations (less certain U.S. Treasury securities), based on year-to-date averages. As of March 31, 2024 and December 31, 2023, our Primary Mission Asset ratio was 78 percent and 81 percent, respectively.
Advances: Advances decreased to $41.7 billion at March 31, 2024 compared to $45.4 billion at December 31, 2023, representing 56.6 percent of total assets as of March 31, 2024, compared to 60.6 percent as of December 31, 2023. The average balance of advances declined $4.2 billion, or 9.0 percent, to $42.4 billion for the quarter ended March 31, 2024 when compared to the prior year period. The decrease in the average balance of advances between periods was largely attributed to the funding needs of depository members. FHLBank continues to execute its liquidity mission by serving as a reliable source of liquidity and funding for members.
Mortgage loans: Mortgage loans held steady at $8.4 billion at both December 31, 2023 and March 31, 2024, representing 11.5 percent of total assets as of March 31, 2024, compared to 11.1 percent as of December 31, 2023. The average balance of mortgage loans increased $0.5 billion, or 6.2 percent, for the three months ended March 31, 2024 when compared to the prior year period. Interest income continues to be positively impacted by lower premium amortization and originations at interest rates higher than that of the existing portfolio.
Performance ratios: Return on average equity (ROE) increased to 12.0 percent for the quarter ended March 31, 2024 compared to 9.0 percent for the prior year quarter due to the increase in net income for the current quarter.
Dividends: The Class A Common Stock dividend rate of 4.75 percent per annum and the Class B Common Stock dividend rate of 9.50 percent per annum combined for a weighted average dividend rate for the quarter ended March 31, 2024 of 8.76 percent.

Financial Market Trends
The primary external factors that affect net interest income are market interest rates and the general state of the economy, as discussed in greater detail below.

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

Table 2
03/31/202403/31/202303/31/202412/31/2023
Market InstrumentThree-monthThree-monthEndingEnding
AverageAverageRateRate
Secured Overnight Financing Rate1
5.31 %4.50 %5.34 %5.38 %
Federal funds effective rate1
5.33 4.52 5.33 5.33 
Federal Reserve interest rate on reserve balances1
5.40 4.59 5.40 5.40 
3-month U.S. Treasury bill1
5.38 4.71 5.37 5.34 
2-year U.S. Treasury note1
4.49 4.36 4.62 4.25 
5-year U.S. Treasury note1
4.11 3.81 4.21 3.85 
10-year U.S. Treasury note1
4.15 3.65 4.20 3.88 
30-year residential mortgage note rate1,2
6.89 6.44 6.91 6.76 
                   
1    Source is Bloomberg.
2    Mortgage Bankers Association weekly 30-year fixed rate mortgage contract rate.

The Federal Open Market Committee (FOMC) held rates steady for the sixth consecutive time at its meeting in May 2024, as inflation remains above their two percent target. Recent indicators suggest that economic activity has been expanding at a solid pace with job gains remaining strong and the unemployment rate remaining low. The FOMC does not expect to reduce rates until inflation begins to move sustainably toward the two percent target.

We issue debt at a spread to U.S. Treasury securities; as a result, the level of interest rates impacts the cost of issuing FHLBank consolidated obligations and the cost of advances to our members and housing associates. The cost of issuing short-term debt has increased with the increases in market rates, but the high demand for short-term Agency debt has kept this spread to the comparable Treasury security relatively narrow. After months of temporary measures, legislation to fund the government through September 30, 2024 was signed on March 23, 2024, easing the threat of a government shutdown. Historically, the threat of a government shutdown has not had a significant impact on the demand for or cost to issue FHLBank debt.

Volatility in the capital markets can also impact the demand for and cost of debt issued by the FHLBanks. Efforts of the Federal Reserve Board to ease inflation have contributed to volatility in the financial markets, financial difficulties experienced by some depository institutions, and uncertainties about the economic outlook. Continued inflation and higher interest rates could impact economic growth and member demand for advances. For further discussion, see this Item 2 – “Financial Condition – Consolidated Obligations.”

Critical Accounting Policies and Estimates
The preparation of our financial statements in accordance with GAAP requires management to make a number of judgments, estimates, and assumptions that affect our reported results and disclosures. Several of our accounting policies are inherently subject to valuation assumptions and other subjective assessments and are more critical than others in terms of their importance to results. Given the assumptions and judgment used, we have identified the accounting for derivatives and hedging activities as a critical accounting estimate. Our financial condition and results of operations could be materially affected under different conditions or different assumptions related to this accounting estimate.

The accounting policies that management believes are the most critical to an understanding of our financial results and condition and require complex management judgment are described under Part II, Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates” in our annual report on Form 10-K, incorporated by reference herein. There were no material changes to our critical accounting policies and estimates during the quarter ended March 31, 2024.

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

Table 3
Increase (Decrease) in Earnings Components
Three Months Ended
03/31/2024 vs. 03/31/2023
Dollar ChangePercentage Change
Total interest income$159,493 19.0 %
Total interest expense127,755 17.4 
Net interest income31,738 30.4 
Provision (reversal) for credit losses on mortgage loans202 50.2 
Net interest income after mortgage loan loss provision31,536 30.1 
Net gains (losses) on trading securities(7,193)(80.1)
Net gains (losses) on derivatives9,053 1,724.4 
Other non-interest income443 14.0 
Total other income (loss)2,303 19.8 
Operating expenses1,447 8.3 
Other non-interest expenses(169)(3.6)
Total other expenses1,278 5.8 
AHP assessments3,256 34.5 
NET INCOME$29,305 34.5 %

Net income increased $29.3 million, or 34.5 percent, to $114.2 million for the three months ended March 31, 2024 compared to $84.8 million for the three months ended March 31, 2023. The increase in net income is substantially attributed to the increase in net interest income, partially offset by increases in affordable housing program (AHP) assessments and operating expenses. For detailed discussion relating to these fluctuations, see “Net Interest Income and Net Interest Margin,” and “Other Expenses” under this Item 2.

Net Interest Income and Net Interest Margin: Net interest income increased $31.7 million for the quarter, or 30.4 percent, from $104.4 million for the three months ended March 31, 2023 to $136.1 million for the three months ended March 31, 2024. Balance sheet composition, market interest rates and trends, and net interest spread affect net interest income and net interest margin on earning assets, including advances, mortgage loans, and investments. The increase in net interest income was primarily attributed to improvements in funding spreads resulting from the maturities of higher-costing debt. Asset spreads also improved, particularly on long-term investments and advances, combined with the impact of higher interest rates on fair value hedges.

Net interest margin increased 18 basis points for the current quarter, from 0.56 percent for the quarter ended March 31, 2023 to 0.74 percent for the quarter ended March 31, 2024. Net interest spread increased 12 basis points, from 0.31 percent for the quarter ended March 31, 2023 to 0.43 percent for the quarter ended March 31, 2024. The increase in net interest spread was partially due to shifts in balance sheet composition between advances and investments, with spread improvements in both asset categories, Net interest margin also benefited from the improvement in net interest spread. For further discussion of advances, mortgage loans, and consolidated obligations, see this Item 2 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Financial Condition.” Overnight investments also provided a positive contribution, as the yield increased more than the cost of the associated short-term debt.

Net interest income and net interest margin are also impacted by derivative and hedging activities, as net interest settlements on derivatives and the changes in fair values of hedged assets and liabilities and the corresponding derivative instruments designated in fair value hedging relationships are recorded in net interest income. For the current quarter, net interest income increased $48.4 million due to net interest settlements received on fair value hedges compared to $4.7 million for the same period in the prior year due to increases in interest rates between periods. Tables 4 and 5 present the impact of derivatives and hedging activities recorded in net interest income (in thousands):

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Table 4
 Three Months Ended 03/31/2024
 AdvancesInvestmentsMortgage LoansConsolidated Obligation Discount NotesConsolidated Obligation BondsTotal
Unrealized gains (losses) due to fair value changes
$1,218 $11,100 $— $577 $1,656 $14,551 
Net amortization/accretion of hedging activities
821  142 — 96 1,059 
Net interest received (paid)79,908 50,753  (2,975)(79,277)48,409 
Price alignment amount(4,096)(4,419)— 57 81 (8,377)
TOTAL$77,851 $57,434 $142 $(2,341)$(77,444)$55,642 

Table 5
 Three Months Ended 03/31/2023
 AdvancesInvestmentsMortgage LoansConsolidated Obligation Discount NotesConsolidated Obligation BondsTotal
Unrealized gains (losses) due to fair value changes
$(5,169)$6,073 $— $4,363 $(1,028)$4,239 
Net amortization/accretion of hedging activities
(536) 193 — — (343)
Net interest received (paid)49,018 37,890  (13,893)(68,288)4,727 
Price alignment amount(3,678)(3,681)— 297 39 (7,023)
TOTAL$39,635 $40,282 $193 $(9,233)$(69,277)$1,600 

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Average Balances and Yields: Table 6 presents average balances and annualized yields of major earning asset categories and the sources funding those earning assets (dollar amounts in thousands):

Table 6
 Three Months Ended
 03/31/202403/31/2023
 Average
Balance
Interest
Income/
Expense
YieldAverage
Balance
Interest
Income/
Expense
Yield
Interest-earning assets:      
Interest-bearing deposits$2,682,483 $36,001 5.40 %$2,723,021 $30,697 4.57 %
Securities purchased under agreements to resell
2,979,615 40,243 5.43 2,679,444 30,282 4.58 
Federal funds sold4,010,396 54,123 5.43 4,185,333 47,356 4.59 
Investment securities1,2
13,310,933 200,285 6.05 11,001,216 131,302 4.84 
Advances1,2
42,350,762 591,987 5.62 46,539,507 536,594 4.68 
Mortgage loans3,4
8,397,439 74,476 3.57 7,903,480 60,808 3.12 
Other interest-earning assets35,220 177 2.03 86,112 760 3.58 
Total earning assets73,766,848 997,292 5.44 75,118,113 837,799 4.52 
Other non-interest-earning assets216,881   354,894   
Total assets$73,983,729   $75,473,007   
Interest-bearing liabilities:      
Deposits$761,399 $9,730 5.14 %$711,639 $7,569 4.31 %
Consolidated obligations1:
      
Discount Notes17,158,106 227,541 5.33 24,155,363 263,521 4.42 
Bonds51,242,578 623,540 4.89 45,744,729 461,882 4.09 
Other borrowings44,165 340 3.10 54,997 424 3.13 
Total interest-bearing liabilities69,206,248 861,151 5.01 70,666,728 733,396 4.21 
Capital and other non-interest-bearing funds
4,777,481   4,806,279   
Total funding$73,983,729   $75,473,007   
Net interest income and net interest spread5
 $136,141 0.43 % $104,403 0.31 %
Net interest margin6
  0.74 %  0.56 %
                   
1    Interest income/expense and average rates include the effect of associated derivatives that qualify for fair value hedge accounting treatment.
2    Interest income includes prepayment/yield maintenance fees.
3    Credit enhancement income payments made to PFIs are netted against interest earnings on the mortgage loans. The expense related to these payments was $1.7 million and $1.6 million for the three months ended March 31, 2024 and 2023, respectively.
4    Mortgage loans average balance includes outstanding principal for non-performing conventional loans. However, these loans no longer accrue interest.
5    Net interest spread is the difference between the yield on interest-earning assets and the cost of interest-bearing liabilities.
6    Net interest margin is defined as net interest income as a percentage of average interest-earning assets.

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Changes in the volume of interest-earning assets and the level of interest rates influence changes in net interest income, net interest spread and net interest margin. Table 7 summarizes changes in interest income and interest expense (in thousands):

Table 7
 Three Months Ended
03/31/2024 vs. 03/31/2023
 Increase (Decrease) Due to
 
Volume1,2
Rate1,2
Total
Interest Income3:
   
Interest-bearing deposits$(463)$5,767 $5,304 
Securities purchased under agreements to resell3,634 6,327 9,961 
Federal funds sold(2,047)8,814 6,767 
Investment securities30,783 38,200 68,983 
Advances(51,361)106,754 55,393 
Mortgage loans3,969 9,699 13,668 
Other assets(338)(245)(583)
Total interest-earning assets(15,823)175,316 159,493 
Interest Expense3:
   
Deposits557 1,604 2,161 
Consolidated obligations:   
Discount notes(85,771)49,791 (35,980)
Bonds59,727 101,931 161,658 
Other borrowings(84)— (84)
Total interest-bearing liabilities(25,571)153,326 127,755 
Change in net interest income$9,748 $21,990 $31,738 
                   
1    Changes in interest income and interest expense not identifiable as either volume-related or rate-related have been allocated to volume and rate based upon the proportion of the absolute value of the volume and rate changes.
2    Amounts used to calculate volume and rate changes are based on numbers in dollars. Accordingly, recalculations using the amounts in thousands as disclosed in this report may not produce the same results.
3    Interest income/expense and average rates include the effect of associated derivatives that qualify for fair value hedge accounting treatment.


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Net Gains (Losses) on Derivatives: Tables 8 and 9 present the earnings impact of derivatives by financial instrument as recorded in other non-interest income (in thousands):


Table 8
 Three Months Ended 03/31/2024
 AdvancesInvestmentsMortgage LoansConsolidated Obligation Discount NotesConsolidated Obligation BondsTotal
Derivatives not designated as hedging instruments:
     
Economic hedges – unrealized gains (losses) due to fair value changes
$2,545 $(1,758)$— $(617)$— $170 
Mortgage delivery commitments— — (55)— — (55)
Economic hedges – net interest received (paid)
1,163 7,623 — (248)— 8,538 
Price alignment amount(62)(65)— — (125)
Net gains (losses) on derivatives3,646 5,800 (55)(863)— 8,528 
Net gains (losses) on trading securities hedged on an economic basis with derivatives
— 1,725 — — — 1,725 
TOTAL$3,646 $7,525 $(55)$(863)$— $10,253 

Table 9
 Three Months Ended 03/31/2023
 AdvancesInvestmentsMortgage LoansConsolidated
Obligation Discount Notes
Consolidated
Obligation Bonds
Total
Derivatives not designated as hedging instruments:
     
Economic hedges – unrealized gains (losses) due to fair value changes
$(169)$(11,423)$— $2,639 $317 $(8,636)
Mortgage delivery commitments— — 23 — — 23 
Economic hedges – net interest received (paid)
299 8,014 — 253 (268)8,298 
Price alignment amount(15)(186)— (16)(210)
Net gains (losses) on derivatives115 (3,595)23 2,876 56 (525)
Net gains (losses) on trading securities hedged on an economic basis with derivatives
— 8,953 — — — 8,953 
TOTAL$115 $5,358 $23 $2,876 $56 $8,428 

For the three months ended March 31, 2024, net gains and losses on derivatives resulted in an increase in net income of $8.5 million compared to a decrease of $0.5 million for the prior year period. The change between periods was attributed to fair value fluctuations resulting from an increase in the level of swap index rates.

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Table 10 presents the relationship between the hedged trading securities and the associated interest rate swaps that do not qualify for hedge accounting treatment by investment type (in thousands):

Table 10
Three Months Ended
03/31/202403/31/2023
Gains (Losses) on DerivativesGains (Losses) on Trading SecuritiesNetGains (Losses) on DerivativesGains (Losses) on Trading SecuritiesNet
U.S. Treasury obligations$— $— $— $(1,930)$1,774 $(156)
GSE debentures(1,629)1,303 (326)(2,870)2,023 (847)
GSE MBS475 422 897 (6,273)5,156 (1,117)
TOTAL$(1,154)$1,725 $571 $(11,073)$8,953 $(2,120)

Net Gains (Losses) on Trading Securities: Our trading portfolio is comprised primarily of fixed rate GSE debentures and fixed rate multifamily GSE MBS, with a small percentage of variable rate single-family GSE MBS. Periodically, we also invest in short-term securities and U.S. Treasury obligations classified as trading. In general, the fixed rate securities are related to economic hedges in the form of interest rate swaps that convert fixed rates to variable rates on the fixed rate securities and the related economic hedges. The fair values of the fixed rate GSE debentures are affected by changes in intermediate term interest rates and credit spreads and are swapped on an economic basis to the Secured Overnight Financing Rate (SOFR). The fair values of the fixed rate multifamily GSE MBS are affected by changes in mortgage rates and credit spreads are swapped on an economic basis to SOFR. The fair values of the U.S. Treasury obligations are affected by changes in intermediate term Treasury rates and swapped on an economic basis to the Overnight Index Swap rate (OIS) or SOFR.

All unrealized gains and losses related to trading securities are recorded in other income (loss) as net gains (losses) on trading securities; however, only gains and losses relating to trading securities that are related to economic hedges are included in Table 10. Unrealized gains (losses) fluctuate as the fair value of our trading portfolio fluctuates. There are a number of factors that can impact the fair value of a trading security including the movement in interest rates, changes in credit spreads, the passage of time, and changes in price volatility. Table 11 presents the major components of the net gains (losses) on trading securities (in thousands):

Table 11
 Three Months Ended
 03/31/202403/31/2023
Trading securities not hedged:
U.S. obligation MBS and GSE MBS$66 $31 
Total trading securities not hedged66 31 
Trading securities hedged on an economic basis with derivatives:
U.S. Treasury obligations— 1,774 
GSE debentures1,303 2,023 
GSE MBS422 5,156 
Total trading securities hedged on an economic basis with derivatives
1,725 8,953 
TOTAL$1,791 $8,984 

The unrealized gains on the securities in the trading portfolio for the current period reflect the changes in term Treasury and mortgage rates relative to the prevailing yields at the end of the prior period. In addition to interest rates and credit spreads, the value of these securities is affected by price convergence to par which results in a decrease in their current premium price (i.e., time decay).

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Other Expenses: Other expenses, which includes compensation and benefits and other operating expenses, were $23.4 million and $22.1 million for the quarters ended March 31, 2024 and 2023, respectively. The $1.3 million increase between years is due primarily to an increase in compensation and benefits expense and other operating expenses. Compensation and benefits expense increased due to hiring for new and open positions and higher incentive accruals based on incentive plan goal attainment. We expect modest increases in compensation and benefits expense for 2024 in anticipation of continued hiring for new and open positions. We also expect an increase in other operating expense for the next few years due to our voluntary grant programs to support affordable housing and community development initiatives throughout Colorado, Kansas, Nebraska, and Oklahoma.

Financial Condition
Overall: Table 12 presents the percentage concentration of the major components of our Statements of Condition:

Table 12
Component Concentration
03/31/202412/31/2023
Assets:
Cash and due from banks— %0.1 %
Interest-bearing deposits, securities purchased under agreements to resell and Federal funds sold12.9 10.1 
Investment securities18.0 17.2 
Advances56.6 60.6 
Mortgage loans, net11.5 11.1 
Other assets1.0 0.9 
Total assets100.0 %100.0 %
Liabilities:
Deposits1.1 %1.0 %
Consolidated obligation discount notes, net23.1 27.7 
Consolidated obligation bonds, net69.9 65.4 
Other liabilities0.6 0.7 
Total liabilities94.7 94.8 
Capital:
Capital stock outstanding3.4 3.5 
Retained earnings2.0 1.9 
Accumulated other comprehensive income (loss)(0.1)(0.2)
Total capital5.3 5.2 
Total liabilities and capital100.0 %100.0 %

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Table 13 presents changes in the major components of our Statements of Condition (dollar amounts in thousands):

Table 13
Increase (Decrease)
in Components
03/31/2024 vs. 12/31/2023
Dollar
Change
Percent
Change
Assets:
Cash and due from banks$5,175 19.9 %
Interest-bearing deposits, securities purchased under agreements to resell and Federal funds sold1,961,209 25.9 
Investment securities407,510 3.2 
Advances(3,784,640)(8.3)
Mortgage loans, net87,351 1.0 
Other assets40,713 6.4 
Total assets$(1,282,682)(1.7)%
Liabilities:  
Deposits$94,428 12.6 %
Consolidated obligation discount notes, net(3,737,993)(18.0)
Consolidated obligation bonds, net2,409,588 4.9 
Other liabilities(22,760)(4.4)
Total liabilities(1,256,737)(1.8)
Capital:
Capital stock outstanding(109,974)(4.2)
Retained earnings59,837 4.3 
Accumulated other comprehensive income (loss)24,192 20.3 
Total capital(25,945)(0.7)
Total liabilities and capital$(1,282,682)(1.7)%

Total assets decreased between periods, from $74.9 billion at December 31, 2023 to $73.7 billion at March 31, 2024, driven by the decrease in advances between those periods. Asset composition remained relatively consistent from December 31, 2023 to March 31, 2024, with a decrease in advance balances from 60.6 percent of total assets at December 31, 2023 to 56.6 percent at March 31, 2024. Federal funds sold contributed to the increase in short-term investments to 12.9 percent of total assets as of March 31, 2024 compared to 10.1 percent as of December 31, 2023. Total liabilities decreased $1.3 billion from December 31, 2023 to March 31, 2024, which corresponded to the decrease in assets, but the composition of debt shifted between periods. Consolidated obligation bonds and discount notes represented 70.3 percent and 29.7 percent of total consolidated obligations, respectively, at December 31, 2023 compared to 75.2 percent and 24.8 percent at March 31, 2024. This composition shift is mostly due to an increase in floating rate bonds and a decrease in discount notes. Total capital decreased $25.9 million, or 0.7 percent, from December 31, 2023 to March 31, 2024 due primarily to a decrease in required capital stock.

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Advances: Advances are one of the primary ways we fulfill our mission of providing liquidity to our members and constituted the largest asset on our balance sheet at March 31, 2024 and December 31, 2023. Advance par value decreased by 8.0 percent, from $45.7 billion at December 31, 2023 to $42.0 billion at March 31, 2024 (see Table 14). During March 2023, our members’ demand for advances increased temporarily in response to the stress placed on the banking industry and financial markets resulting from the financial difficulties experienced by some depository institutions. This stress has eased, so depository members are holding less on-balance sheet liquidity. The composition of the advance portfolio remains concentrated in advances that either reprice or mature on a relatively short-term basis; short-term fixed rate advances declined but line of credit and adjustable rate advances increased to 58.0 percent of the portfolio at March 31, 2024 compared to 39.0 percent as of December 31, 2023.

As of March 31, 2024 and December 31, 2023, 61.0 percent and 65.1 percent, respectively, of our members carried outstanding advance balances. Advance balances may be impacted by rising interest rates intended to curb inflationary pressures and the related inflationary effects on member balance sheets, including decreased loan demand and the inability to grow or retain deposit balances. Members also have access to other wholesale funding sources, which may impact the demand for advances on the basis of relative cost.

Rather than match-funding long-term, fixed rate advances, we elect to swap a significant portion of advances with longer maturities to short-term indices to synthetically create adjustable rate advances. When coupled with the volume of our short-term advances, advances that effectively re-price at least every three months represent 95.7 percent and 95.9 percent of our total advance portfolio as of March 31, 2024 and December 31, 2023, respectively. We anticipate continuing the practice of swapping advances with longer maturities to short-term indices.

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Table 14 summarizes advances outstanding by product (dollar amounts in thousands). An individual advance may be reclassified to a different product type between periods due to the occurrence of a triggering event such as the passing of a call date (i.e., from fixed rate callable advance to regular fixed rate advance) or conversion of an advance (i.e., from fixed rate convertible advance to adjustable rate callable advance).
 
Table 14
 03/31/202412/31/2023
 DollarPercentDollarPercent
Line of Credit:
Overnight line of credit1
$12,169,958 29.0 %$11,747,448 25.7 %
Adjustable rate:    
Standard advance products:    
Regular adjustable rate advances10,672,250 25.4 4,418,750 9.7 
Adjustable rate callable advances1,474,400 3.5 1,616,400 3.5 
Standard housing and community development advances:    
Adjustable rate callable advances22,262 0.1 22,262 0.1 
Total adjustable rate term advances12,168,912 29.0 6,057,412 13.3 
Fixed rate:    
Standard advance products:    
Short-term fixed rate advances2
1,564,687 3.7 12,313,627 27.0 
Regular fixed rate advances12,501,094 29.8 12,359,319 27.1 
Fixed rate callable advances68,402 0.2 68,402 0.2 
Fixed rate putable advances2,448,550 5.8 2,071,800 4.5 
Fixed rate convertible advances113,400 0.3 113,400 0.3 
Standard housing and community development advances:   
Regular fixed rate advances287,503 0.7 291,064 0.6 
Fixed rate callable advances458 — 458 — 
Total fixed rate term advances16,984,094 40.5 27,218,070 59.7 
Amortizing:    
Standard advance products:    
Fixed rate amortizing advances453,532 1.1 415,568 0.9 
Fixed rate callable amortizing advances17,992 — 18,367 — 
Standard housing and community development advances:   
Fixed rate amortizing advances194,849 0.4 202,036 0.4 
Fixed rate callable amortizing advances12,687 — 11,401 — 
Total amortizing advances679,060 1.5 647,372 1.3 
TOTAL PAR VALUE$42,002,024 100.0 %$45,670,302 100.0 %
                   
1    Represents fixed rate line of credit advances with daily maturities.
2    Represents non-amortizing, non-prepayable loans with terms to maturity from 3 to 93 days.

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Table 15 presents information on our five largest borrowers (dollar amounts in thousands). We do not expect to incur any credit losses on these advances based on our rights to collateral with an estimated fair value in excess of the book value of these advances. We have not experienced a credit loss on an advance since the inception of FHLBank.

Table 15
Borrower Name03/31/202412/31/2023
Advance
Par Value
Percent of Total
Advance Par
Advance
Par Value
Percent of Total
Advance Par
MidFirst Bank$8,450,000 20.1 %$9,585,000 21.0 %
BOKF, N.A.6,700,000 16.0 7,675,000 16.8 
United of Omaha Life Insurance Co.2,796,009 6.7 2,278,283 5.0 
Capitol Federal Savings Bank2,352,992 5.6 2,375,410 5.2 
Security Life of Denver Insurance Co.2,200,000 5.2 
TOTAL$22,499,001 53.6 %$23,795,209 52.1 %

Table 16 presents accrued interest income associated with the five borrowers with the highest interest income for the periods presented (dollar amounts in thousands). If the borrower was not one of our top five borrowers for whom we accrued the highest amount of interest income for one of the periods presented, the applicable columns are left blank.

Table 16
Three Months Ended
03/31/202403/31/2023
Borrower NameAdvance Income
Percent of Total
Advance Income1
Advance Income
Percent of Total
Advance Income1
MidFirst Bank$126,262 24.5 %$136,579 27.5 %
BOKF, N.A.94,638 18.4 52,275 10.5 
United of Omaha Life Insurance Co.25,113 4.9 16,928 3.4 
Security Life of Denver Insurance Co.24,774 4.8 
First United Bank & Trust Co.22,008 4.3 
Capitol Federal Savings Bank32,866 6.6 
FirstBank  17,031 3.4 
TOTAL$292,795 56.9 %$255,679 51.4 %
                   
1    Total advance income by borrower excludes: (1) changes in unrealized gains (losses) from qualifying fair value hedging relationships; (2) net interest settlements on derivatives hedging the advances; and (3) prepayment fees received.

MPF Program: The MPF Program is a secondary mortgage market alternative for our members, predominately utilized by the smaller institutions in our district. We participate in the MPF Program through the MPF Provider, a division of FHLBank Chicago. Under the MPF Program, participating members can sell us conventional and government residential mortgage loans.

The mortgage loan portfolio remained flat between periods, at $8.4 billion at December 31, 2023 and March 31, 2024. Mortgage rates have remained elevated, which has reduced origination volume and refinancing incentive for borrowers and slowed prepayments in recent periods, although purchase volume has continued to exceed principal repayments. Net mortgage loans as a percentage of total assets increased, from 11.1 percent as of December 31, 2023 to 11.5 percent as of March 31, 2024. The principal amount of new mortgage loans acquired and held on our balance sheet from our PFIs during the three months ended March 31, 2024 was $0.3 billion.

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Future growth in the MPF portfolio is a function of asset size and composition, most notably the balance of advances, and capital level, as growth in advances impacts our total assets and capital level, which allows the balance of mortgage loans to increase while maintaining our targeted Acquired Member Assets (AMA) risk tolerance. The other factors that may influence future growth in our mortgage loans held for portfolio include: (1) the level of interest rates and the shape of the yield curve; (2) the mortgage loan origination volume of current PFIs; (3) refinancing activity; (4) the relative competitiveness of MPF pricing to the prices offered by other buyers of residential mortgage loans; (5) a PFI's level of excess risk-based capital relative to the required risk-based capital charge associated with the PFI's credit enhancement obligations on MPF mortgage loans; and (6) the number of new and delivering PFIs.

Table 17 presents the outstanding balances of mortgage loans sold to us, net of participations, from our top five PFIs and the percentage of those loans to total mortgage loans outstanding (dollar amounts in thousands).

Table 17
 03/31/202412/31/2023
 Mortgage
Loan Balance
Percent of Total
Mortgage Loans
Mortgage
Loan Balance
Percent of Total
Mortgage Loans
Fidelity Bank$374,268 4.5 %$366,733 4.4 %
Farmers Bank & Trust364,381 4.4 338,745 4.1 
Tulsa Teachers Credit Union301,778 3.6 304,925 3.7 
West Gate Bank273,877 3.3 267,101 3.2 
Community National Bank & Trust226,989 2.7 226,466 2.7 
TOTAL$1,541,293 18.5 %$1,503,970 18.1 %

Two indications of credit quality are scores provided by Fair Isaac Corporation (FICO®) and loan-to-value (LTV) ratios. FICO is a widely used credit industry indicator to assess borrower credit quality with scores typically ranging from 300 to 850 with the low end of the scale indicating greater credit risk. The MPF Program requires a minimum FICO score of 620 for all conventional loans. LTV is a primary variable in credit performance. Generally speaking, a higher LTV ratio means greater risk of loss in the event of a default and also means higher loss severity. The weighted average FICO score and LTV recorded at origination for conventional mortgage loans outstanding as of March 31, 2024 was 750 and 74.6 percent, respectively. See Note 5 of the Notes to Financial Statements under Part I, Item 1 for additional information regarding credit quality indicators.

Allowance for Credit Losses on Mortgage Loans Held for Portfolio – The allowance for credit losses on mortgage loans decreased $0.3 million from December 31, 2023 to March 31, 2024. Delinquencies of conventional loans remained at low levels relative to the portfolio, at 0.9 percent of the amortized cost of total conventional loans at March 31, 2024 and December 31, 2023. We believe that policies and procedures are in place to effectively manage the credit risk on mortgage loans held for portfolio. See Note 5 of the Notes to Financial Statements under Part I, Item 1 for a summary of the allowance for credit losses on mortgage loans as well as payment status and other delinquency statistics for our mortgage loan portfolio.

Investments: Investments are used to manage interest rate and duration risk, enhance income, and provide liquidity and primary and secondary market support for the U.S. housing securities market. Total investments increased $2.4 billion from December 31, 2023 to March 31, 2024 driven by increases in U.S. Treasury obligations, MBS securities, interest bearing deposits, and Federal funds sold.

Short-term Investments – Short-term investments, which are used to provide funds for our members, maintain liquidity, meet other financial obligations such as debt servicing, and enhance income, consist primarily of reverse repurchase agreements, interest-bearing deposits, Federal funds sold, and certificates of deposit.

Within our portfolio of short-term investments, counterparty credit risk arises from unsecured exposures. Our short-term unsecured credit investments have maturities generally ranging between overnight and three months and may include the following types:
Interest-bearing deposits. Unsecured deposits that earn interest.
Federal funds sold. Unsecured loans of reserve balances at the Federal Reserve Banks between financial institutions that are made on either an overnight or term basis, but typically made on an overnight basis.
Certificates of deposit. Unsecured negotiable promissory notes issued by banks and payable to the bearer at maturity.

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Table 18 presents the carrying value of our unsecured credit exposure with private counterparties by investment type (in thousands). The unsecured investment credit exposure presented may not reflect the average or maximum exposure during the period as the balances presented reflect the balances at period end.

Table 18
03/31/202412/31/2023
Interest-bearing deposits$2,016,170 $1,604,423 
Federal funds sold3,580,000 2,080,000 
TOTAL UNSECURED INVESTMENT CREDIT EXPOSURE1
$5,596,170 $3,684,423 
                   
1    Excludes unsecured investment credit exposure to U.S. government, U.S. government agencies, instrumentalities, GSEs and supranational entities and does not include related accrued interest.
 
We actively monitor our credit exposures and the credit quality of our counterparties, including an assessment of each counterparty’s financial performance, capital adequacy, sovereign support and the current market perceptions of the counterparties. General macro-economic, political and market conditions may also be considered when deciding on unsecured exposure. As a result, we may further limit existing exposures.

We manage our credit risk by conducting pre-purchase credit due diligence and ongoing surveillance described previously and generally investing in unsecured investments of highly-rated counterparties. From time to time, we extend unsecured credit to qualified members by investing in overnight Federal funds issued by them. As of March 31, 2024, all unsecured investments were rated as investment grade based on NRSROs (see Table 21).

Table 19 presents the amount of our unsecured investment credit exposure by remaining contractual maturity and by the domicile of the counterparty or the domicile of the counterparty’s parent for U.S. branches and agency offices of foreign commercial banks as of March 31, 2024 (in thousands). We also mitigate the credit risk on investments by purchasing instruments that have short-term maturities.

Table 19
Domicile of CounterpartyOvernight
Domestic$2,446,170 
U.S. Branches and agency offices of foreign commercial banks: 
 Australia 1,050,000 
 Canada 1,050,000 
 Netherlands 400,000 
 United Kingdom
400,000 
 Germany
250,000 
Total U.S. Branches and agency offices of foreign commercial banks
3,150,000 
TOTAL UNSECURED INVESTMENT CREDIT EXPOSURE1
$5,596,170 
                   
1    Excludes unsecured investment credit exposure to U.S. government, U.S. government agencies, instrumentalities, GSEs and supranational entities, and does not include related accrued interest.

Unsecured credit exposure continues to be conservatively placed. In addition, we anticipate continued future investment in reverse repurchase agreements, which are secured investments. To enhance our liquidity position, we classify our unsecured short-term investment securities in our trading portfolio, which allows us to sell these securities if necessary.

Long-term investments – Our long-term investment portfolio consists primarily of GSE MBS and U.S. Treasury obligations. Our Risk Management Policy (RMP) restricts the acquisition of investments to highly rated long-term securities. Generally, fixed rate U.S. Treasury obligations are either classified as trading securities and economically swapped to variable rates or classified as available-for-sale securities and swapped to variable rates in qualifying fair value hedging relationships. In addition to serving as excellent collateral, U.S. Treasury obligations also help satisfy regulatory liquidity requirements. We also purchase fixed rate securities for duration and interest rate risk management.

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According to FHFA regulation, no additional MBS purchases may be made if the aggregate value of our MBS exceeds 300 percent of our regulatory capital. Further, quarterly increases in holdings of MBS are restricted to no more than 50 percent of regulatory capital. As of March 31, 2024, the aggregate value of our MBS portfolio represented 257 percent of our regulatory capital. We are below our regulatory threshold primarily due to an increase in regulatory capital despite increased MBS purchases in recent periods. We expect to be below our regulatory limit in the near-term but continue to remain opportunistic about future MBS purchases.

Major Security Types – Securities for which we have the ability and intent to hold to maturity are classified as held-to-maturity securities and recorded at carrying value, which is the net total of par, premiums, and discounts. We classify certain investments as trading or available-for-sale securities and carry them at fair value, generally for liquidity purposes, to provide a fair value offset to the gains (losses) on the interest rate swaps associated with swapped securities, and for asset/liability management purposes. Liquidity or other asset/liability management strategies may require periodic sale of these securities but they are not actively traded; most often, they are held until maturity or call date. Securities acquired as asset/liability management tools to manage duration risk, which may be sold when the duration exposure is within risk tolerances, are classified as trading or available-for-sale securities. Changes in the fair values of investments classified as trading are recorded through other income and the original premiums/discounts on these investments are not amortized.

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See Note 3 of the Notes to Financial Statements under Part I, Item 1 of this quarterly report for additional information on our different investment classifications including the types of securities held under each classification. The carrying values by contractual maturities of our investments as of March 31, 2024 are summarized by security type in Table 20 (dollar amounts in thousands) with certain weighted average yield metrics along with carrying values as of December 31, 2023. Expected maturities of certain securities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or yield maintenance fees.

Table 20
 03/31/202412/31/2023
 Due in
one year
or less
Due after
one year
through five years
Due after
five years
through 10 years
Due after
10 years
Carrying
Value
Carrying
Value
Trading securities:     
GSE debentures272,16117,579289,740 288,438 
GSE MBS111,434481,3566,2394,345603,374 620,170 
Total trading securities383,595498,9356,2394,345893,114 908,608 
Available-for-sale securities:
U.S. Treasury obligations3,164,0233,164,023 2,937,868 
U.S. obligation MBS95,25495,254 107,535 
GSE MBS135,7101,836,0533,782,3663,170,6118,924,740 8,708,050 
Total available-for-sale securities135,7105,000,0763,782,3663,265,86512,184,017 11,753,453 
Held-to-maturity securities:     
State or local housing agency obligations35,85535,855 35,855 
GSE MBS42,3961,815177,170221,381 228,941 
Total held-to-maturity securities42,39637,670177,170257,236 264,796 
Total securities519,3055,541,4073,826,2753,447,38013,334,367 12,926,857 
Interest-bearing deposits2,016,1982,016,198 1,604,989 
Federal funds sold3,580,0003,580,000 2,080,000 
Securities purchased under agreements to resell
3,925,0003,925,000 3,875,000 
TOTAL INVESTMENTS$10,040,503$5,541,407$3,826,275$3,447,380$22,855,565 $20,486,846 
Weighted average yields1:
Available-for-sale securities2.33 %2.89 %3.74 %4.72 %
Held-to-maturity securities— %2.93 %2.59 %1.70 %
                   
1    The weighted average yields are calculated as the sum of each debt security using the period end balances multiplied by the coupon rate adjusted by the impact of amortization and accretion of premiums and discounts, divided by the total debt securities in the applicable portfolio. The result is then multiplied by 100 to express it as a percentage.

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Securities Ratings – Tables 21 and 22 present the carrying value of our investments by rating as of March 31, 2024 and December 31, 2023 (in thousands). The ratings presented are the lowest ratings available for the security, issuer, or counterparty based on NRSROs, where available. Some counterparties for collateralized overnight borrowing are not rated by an NRSRO because they are not issuers of debt or are otherwise not required to be rated by an NRSRO. We also utilize other credit quality factors when analyzing potential investments including, but not limited to, collateral performance, marketability, asset class or sector considerations, local and regional economic conditions, and/or the financial health of the underlying issuer.

Table 21
03/31/2024
 
Carrying Value1
 Investment GradeUnratedTotal
 Triple-ADouble-ASingle-A
Interest-bearing deposits2
$— $28 $2,016,170 $— $2,016,198 
Federal funds sold2
— — 3,580,000 — 3,580,000 
Securities purchased under agreements to resell3
— 1,000,000 750,000 2,175,000 3,925,000 
Investment securities:     
Non-mortgage-backed securities:     
U.S. Treasury obligations— 3,164,023 — — 3,164,023 
GSE debentures— 289,740 — — 289,740 
State or local housing agency obligations
35,855 — — — 35,855 
Total non-mortgage-backed securities
35,855 3,453,763 — — 3,489,618 
Mortgage-backed securities:
     
U.S. obligation MBS— 95,254 — — 95,254 
GSE MBS— 9,749,495 — — 9,749,495 
Total mortgage-backed securities— 9,844,749 — — 9,844,749 
TOTAL INVESTMENTS$35,855 $14,298,540 $6,346,170 $2,175,000 $22,855,565 
                   
1    Investment amounts represent the carrying value and do not include related accrued interest receivable of $47.1 million at March 31, 2024.
2    Amounts include unsecured credit exposure with overnight maturities.
3    Amounts represent collateralized overnight borrowings.


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Table 22
12/31/2023
 
Carrying Value1
 Investment GradeUnratedTotal
 Triple-ADouble-ASingle-A
Interest-bearing deposits2
$87 $566 $1,604,336 $— $1,604,989 
Federal funds sold2
— — 2,080,000 — 2,080,000 
Securities purchased under agreements to resell3
— — 1,500,000 2,375,000 3,875,000 
Investment securities:     
Non-mortgage-backed securities:     
U.S. Treasury obligations— 2,937,868 — — 2,937,868 
GSE debentures— 288,438 — — 288,438 
State or local housing agency obligations
35,855 — — — 35,855 
Total non-mortgage-backed securities
35,855 3,226,306 — — 3,262,161 
Mortgage-backed securities:
     
U.S. obligation MBS— 107,535 — — 107,535 
GSE MBS— 9,557,161 — — 9,557,161 
Total mortgage-backed securities— 9,664,696 — — 9,664,696 
TOTAL INVESTMENTS$35,942 $12,891,568 $5,184,336 $2,375,000 $20,486,846 
                   
1    Investment amounts represent the carrying value and do not include related accrued interest receivable of $39.9 million at December 31, 2023.
2    Amounts include unsecured credit exposure with overnight maturities.
3    Amounts represent collateralized overnight borrowings.

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Table 23 details interest rate payment terms for the carrying value of our investment securities as of March 31, 2024 and December 31, 2023 (in thousands). We generally manage the interest rate risk associated with our fixed rate trading and available-for-sale securities by entering into interest rate swaps that convert the investment's fixed rate to a variable rate index (see Tables 29 and 30 under Part I, Item 3 – “Quantitative and Qualitative Disclosures About Market Risk).”

Table 23
03/31/202412/31/2023
Trading securities:
Non-mortgage-backed securities:
Fixed rate$289,740 $288,438 
Non-mortgage-backed securities289,740 288,438 
Mortgage-backed securities:
Fixed rate592,790 609,139 
Variable rate10,584 11,031 
Mortgage-backed securities603,374 620,170 
Total trading securities893,114 908,608 
Available-for-sale securities:
Non-mortgage-backed securities:
Fixed rate3,164,023 2,937,868 
Non-mortgage-backed securities3,164,023 2,937,868 
Mortgage-backed securities:
Fixed rate3,871,125 3,727,446 
Variable rate5,148,869 5,088,139 
Mortgage-backed securities9,019,994 8,815,585 
Total available-for-sale securities12,184,017 11,753,453 
Held-to-maturity securities:
Non-mortgage-backed securities:
Variable rate35,855 35,855 
Non-mortgage-backed securities35,855 35,855 
Mortgage-backed securities:
Fixed rate21,557 23,650 
Variable rate199,824 205,291 
Mortgage-backed securities221,381 228,941 
Total held-to-maturity securities257,236 264,796 
TOTAL$13,334,367 $12,926,857 

Deposits: Deposits are generally an insignificant source of funding. Total deposits increased $94.4 million from December 31, 2023 to March 31, 2024 primarily due to an increase in demand and overnight deposits. The level of deposits is driven by member demand for deposit products, which in turn is a function of the liquidity position of members. Factors that influence deposit levels include turnover in member investment and loan portfolios, changes in members’ customer deposit balances, changes in members’ demand for liquidity, and our deposit pricing as compared to other short-term market rates. Fluctuations in deposits have little impact on our ability to obtain liquidity. Historically, we have had stable and ready access to the capital markets through consolidated obligations and can replace any reduction in deposits with similarly or even lower priced borrowings.

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Consolidated Obligations: Consolidated obligations are the joint and several debt obligations of the FHLBanks and consist of bonds and discount notes. Consolidated obligations represent the primary source of liabilities we use to fund advances, mortgage loans and investments. As noted under Part I, Item 3 – “Quantitative and Qualitative Disclosures About Market Risk,” we use debt with a variety of maturities and option characteristics to manage our interest rate risk profile and maintain sufficient levels of liquidity. We make use of derivative transactions, executed in conjunction with specific consolidated obligation debt issues, to synthetically structure funding terms and costs.

Table 24 presents the carrying value of consolidated obligation bonds and discounts notes as of March 31, 2024 and December 31, 2023 (in thousands).

Table 24
03/31/202412/31/2023
Bonds:
Par value$51,825,590 $49,409,390 
Premiums12,969 12,874 
Discounts(2,621)(3,108)
Concession fees(11,575)(11,424)
Hedging adjustments(367,286)(360,243)
Total bonds51,457,077 49,047,489 
Discount Notes:
Par value17,167,240 20,903,145 
Discounts(158,479)(157,163)
Concession fees(479)(420)
Hedging adjustments(3,026)(2,313)
Total discount notes17,005,256 20,743,249 
TOTAL$68,462,333 $69,790,738 

Total consolidated obligations decreased $1.3 billion, or 1.9 percent, from December 31, 2023 to March 31, 2024 aligning with the decrease in total assets. The distribution between consolidated obligation bonds and discount notes shifted between periods, from 70.3 percent and 29.7 percent, respectively, at December 31, 2023 to 75.2 percent and 24.8 percent at March 31, 2024, respectively, mostly due to an increase in floating rate bonds and a decrease in discount notes. The decline in discount notes was primarily due to a decline in swapped discount notes that was partially offset by an increase in unswapped discount notes. Callable bonds are typically fixed or structured rate debt that pay higher coupons to investors because of the optionality held by the issuer. When a swap is called by the counterparty in a swapped callable bond transaction, we call the hedged bond. Unswapped callable bonds provide us with options to replace the bonds at lower costs if interest rates decline. Our funding mix generally is driven by asset composition, but we may also shift our debt composition as a result of market conditions that impact the cost of unswapped consolidated obligations and the cost of consolidated obligations swapped or indexed to SOFR or OIS. For additional information on market trends impacting the cost of issuing debt, see “Financial Market Trends”, “Liquidity and Capital Resources – Liquidity – Sources of Liquidity” and “Risk Management – Interest Rate Risk Management” under this Item 2.

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Liquidity and Capital Resources
Liquidity: We maintain high levels of liquidity to achieve our mission of serving as a dependable and economical funding source for our members and housing associates. As part of fulfilling our mission, we also maintain minimum liquidity requirements in accordance with certain FHFA regulations and guidelines and in accordance with policies established by management and the board of directors. Our business model enables us to manage the levels of our assets, liabilities, and capital in response to changes in member credit demand, membership composition, and market conditions. As such, assets and liabilities utilized for liquidity purposes can vary significantly in the normal course of business due to the amount and timing of cash flows as a result of these factors.

Sources and Uses of Liquidity – A primary source of our liquidity is the issuance of consolidated obligations. The capital markets traditionally have treated FHLBank obligations as U.S. government agency debt. As a result, even though the U.S. government does not guarantee FHLBank debt, we generally have comparatively stable access to funding at relatively favorable spreads to U.S. Treasury rates. We are primarily and directly liable for our portion of consolidated obligations (i.e., those obligations issued on our behalf). In addition, we are jointly and severally liable with the other FHLBanks for the payment of principal and interest on the consolidated obligations of all FHLBanks. Our uses of liquidity primarily include repaying called and maturing consolidated obligations for which we are the primary obligor, issuing advances, and purchasing investments and mortgage loans. We also use liquidity to repay member deposits, pledge collateral to derivative counterparties, and redeem or repurchase capital stock. Our other sources of liquidity include our short-term liquidity portfolio, deposit inflows, repayments of advances and mortgage loans, maturing investments, trading and available-for-sale investments, other secured and unsecured borrowings, interest income, or the sale of unencumbered assets.

During the three months ended March 31, 2024, proceeds (net of premiums and discounts) from the issuance of bonds and discount notes were $19.5 billion and $109.4 billion, respectively, compared to $19.0 billion and $101.0 billion for the three months ended March 31, 2023. The difference between the proceeds from bonds and discount notes reflects the cumulative effect of using short-term discount notes to fund short-term advances and our short-term liquidity portfolio. High demand for Agency debt has kept the spread to U.S. Treasury obligations relatively narrow. Our ability to issue debt remains robust, but volatility in the capital markets can impact the demand for and cost of debt issued by the FHLBanks.

Our short-term liquidity portfolio consists of cash, short-term investments, and long-term investments with remaining maturities of one year or less. Short-term investments may include Federal funds sold, interest-bearing demand deposits, reverse repurchase agreements, and certificates of deposit. The short-term liquidity portfolio remained flat between periods, at $10.0 billion as of December 31, 2023 and $10.1 billion as of March 31, 2024. The maturities of our short-term investments are structured to provide periodic cash flows to support our ongoing liquidity needs. To enhance our liquidity position, short-term investment securities (i.e., marketable certificates of deposit) are also classified as trading when held so that they can be readily sold should liquidity be needed immediately.

Investment securities on our balance sheet are also a source of potential liquidity. U.S. Treasury obligations, GSE debentures, and GSE MBS can be sold or pledged as collateral for financing in the securities repurchase agreement market. In addition to balance sheet sources of liquidity, we have established lines of credit with numerous counterparties in the Federal funds market as well as with the other FHLBanks. We expect to maintain a sufficient level of liquidity for the foreseeable future.

During the three months ended March 31, 2024, advance disbursements totaled $86.1 billion compared to $218.9 billion for the prior year period which reflects the decrease in member utilization of advances compared to the prior year period, especially short-term advances. During March 2023, our members’ demand for advances increased temporarily in response to the stress placed on the banking industry and financial markets resulting from the financial difficulties experienced by some depository institutions. Investment purchases (excluding overnight investments) totaled $0.8 billion in the first quarter of 2024 compared to $0.6 billion in the same period in 2023. Payments on maturing and retired consolidated obligation bonds and discount notes were $17.1 billion and $113.0 billion, respectively, for the three months ended March 31, 2024 compared to $12.1 billion and $104.9 billion for the prior year period.

Capital: Total capital decreased $25.9 million, or 0.7 percent, from December 31, 2023 to March 31, 2024 due to a decrease in capital stock (see Table 25), partially offset by an increase in retained earnings. We strive to manage our average capital ratio above our minimum regulatory and RMP requirements in an effort to ensure that we have the ability to issue additional consolidated obligations should the need arise. Excess capital capacity ensures we are able to meet the liquidity needs of our members and/or repurchase excess stock either upon the submission of a redemption request by a member or at our discretion for balance sheet or capital management purposes.

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Our activity-based stock purchase requirements are consistent with our cooperative structure; members’ stock ownership requirements and the dollar amount of dividends paid to members generally increase as their activities with us increase. To the extent that a member’s asset-based stock purchase requirement is insufficient to cover the member’s activity-based stock purchase requirement, the member is required to purchase Class B Common Stock. We believe the value of our products and services is enhanced by dividend yields. Factors that affect members’ willingness to enter into activity with us and purchase additional required activity-based stock include, but are not limited to, our dividend rates, the risk-based capital weighting of our capital stock, and alternative investment or borrowing opportunities available to our members.

Table 25 provides a summary of member capital requirements under our current capital plan as of March 31, 2024 and December 31, 2023 (in thousands):

Table 25
Requirement03/31/202412/31/2023
Asset-based (Class A Common Stock only)$184,484 $184,901 
Activity-based (additional Class B Common Stock)1
2,027,466 2,182,176 
Total Required Stock2
2,211,950 2,367,077 
Excess Stock (Class A and B Common Stock)285,964 240,853 
Total Regulatory Capital Stock2
$2,497,914 $2,607,930 
Activity-based Requirements:
  
Advances3
$1,885,081 $2,050,911 
Letters of credit18,811 18,122 
AMA assets (mortgage loans)4
250,158 247,490 
Total Activity-based Requirement2,154,050 2,316,523 
Asset-based Requirement (Class A Common Stock) not supporting member activity1
57,900 50,554 
Total Required Stock2
$2,211,950 $2,367,077 
                   
1    Class A Common Stock, up to a member’s asset-based stock requirement, will be used to satisfy a member’s activity-based stock requirement before any Class B Common Stock is purchased by the member.
2    Includes mandatorily redeemable capital stock.
3    Advances to housing associates have no activity-based requirements because housing associates cannot own FHLBank stock.
4    Non-members previously required to purchase AMA activity-based stock are subject to the stock requirement in place at the time their membership ended as long as there are unpaid principal balances outstanding.

We are subject to various capital requirements under provisions of the GLB Act, the FHFA’s capital structure regulation and our RMP. See Item 1 – “Business – Capital, Capital Rules and Dividends” for details on the various capital requirements. We have been in compliance with each of the capital rules and requirements at all times, as applicable, since the implementation of our capital plan. See Note 10 of the Notes to Financial Statements under Part I, Item 1 for additional information and compliance as of March 31, 2024 and December 31, 2023.

Capital Distributions: Dividends may be paid in cash or capital stock as authorized by our board of directors. Quarterly dividends can be paid out of current and previous unrestricted retained earnings, subject to FHFA regulation and our capital plan.

Dividends paid to members totaled $54.3 million for the three months ended March 31, 2024 compared to $52.2 million for the same period in the prior year. The weighted average dividend rate was 8.76 percent for the three months ended March 31, 2024, which represented a dividend payout ratio of 47.6 percent. For the three months ended March 31, 2023, the weighted average dividend rate was 8.12, percent which represented a dividend payout ratio of 61.5 percent. The dividend payout ratio represents dividends declared and paid during a period as a percentage of net income for the period, although FHFA regulation requires dividends be paid out of known income prior to the declaration date. For example, dividends declared and paid in March 2024 were based on income during the three months ended February 29, 2024. (See Part I, Item 1 – “Business – Capital, Capital Rules and Dividends” in our annual report on Form 10-K for the year ended December 31, 2023 for other factors that contribute to the level of dividends paid.)

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In accordance with our capital plan, we must pay holders of Class A Common Stock the dividend parity threshold (DPT) rate before paying a higher rate to holders of Class B Common Stock. The DPT is a dividend rate expressed as a percentage per annum up to which the dividends paid per share on Class A Common Stock and Class B Common Stock must be equal. The DPT effective for dividends paid during the first quarter of 2023 was equal to the average overnight Federal funds effective rate minus 100 basis points. On March 24, 2023, the board of directors revised the DPT as the average effective overnight Federal funds rate for a dividend period minus 200 basis points. This DPT was effective beginning in the second quarter of 2023 and will continue to be effective until such time as it may be changed by the board of directors. When the overnight Federal funds effective rate is below 2.00 percent, the DPT is zero for that dividend period (DPT is floored at zero). Table 26 presents the dividend rates per annum paid on capital stock under our capital plan for the quarterly periods listed below:

Table 26
Applicable Rate per Annum03/31/202412/31/202309/30/202306/30/202303/31/2023
Class A Common Stock4.75 %4.75 %4.50 %4.00 %3.75 %
Class B Common Stock9.50 9.50 9.25 9.00 8.75 
Weighted Average1
8.76 8.84 8.62 8.31 8.12 
Dividend Parity Threshold:
Average effective overnight Federal funds rate5.33 %5.33 %5.26 %4.99 %4.52 %
Spread to index(2.00)(2.00)(2.00)(2.00)(1.00)
TOTAL (floored at zero percent)3.33 %3.33 %3.26 %2.99 %3.52 %
                   
1    Weighted average dividend rates are dividends paid in cash and stock on both classes of stock divided by the average of capital stock eligible for dividends.

We anticipate that our stock dividends on Class A Common Stock and Class B Common Stock will remain at or near current dividend rates throughout 2024. Historically, dividend rates have moved directionally with short-term interest rates. Market conditions and movements in short-term interest rates can be unpredictable, and adverse market conditions may result in lower dividend rates in future quarters. If there is a change to the DPT in the future, the capital plan requires that we provide members notice of that change 90 days prior to a dividend payment.

Under the capital plan, all dividends paid in the form of capital stock must be paid in the form of Class B Common Stock. We expect to continue paying dividends primarily in the form of capital stock, but future dividends may be paid in cash. The payment of cash dividends instead of stock dividends should not have a significant impact from a liquidity perspective, as the subsequent redemption of excess stock created by stock dividends would utilize liquidity resources in the same manner as a cash dividend. FHFA regulation prohibits any FHLBank from paying a stock dividend if excess stock outstanding will exceed one percent of its total assets after payment of the stock dividend.

Risk Management
Active risk management continues to be an essential part of our operations and a key determinant of our ability to maintain earnings to return an acceptable dividend to our members, support our affordable housing mission, and meet retained earnings thresholds. See Part II, Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Risk Management” in our Form 10-K for information on our enterprise risk management program. A separate discussion of market risk is included under Part I, Item 3 – “Quantitative and Qualitative Disclosures About Market Risk” of this Form 10-Q.

Interest Rate Risk Management: Interest rate risk is the risk that relative and absolute changes in interest rates may adversely affect an institution's financial condition and performance. The goal of an interest rate risk management strategy is not necessarily to eliminate interest rate risk, but to manage it by setting, and operating within, an appropriate framework and limits. We generally manage interest rate risk by acquiring and maintaining a portfolio of assets and liabilities and entering into related derivative transactions to limit the expected mismatches in duration and market value of equity (MVE) sensitivity. See Part I, Item 3 - “Quantitative and Qualitative Disclosures About Market Risk” for additional information on interest rate risk measurement.


Recently Issued Accounting Standards
See Note 2 of the Notes to Financial Statements under Part I, Item 1 – "Financial Statements" for a discussion of recently issued accounting standards.

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Legislative and Regulatory Developments
Significant regulatory actions and developments for the period covered by this report not previously disclosed are summarized below.

FHFA’s Review and Analysis of the Federal Home Loan Bank System. On November 7, 2023, FHFA issued a written report titled “FHLBank System at 100: Focusing on the Future,” presenting its review and analysis of the FHLBank System and the actions and recommendations that it plans to pursue in service of its vision for the future of the FHLBank System. The report focused on four broad themes: (1) the mission of the FHLBank System; (2) the FHLBank System as a stable and reliable source of liquidity; (3) housing and community development; and (4) FHLBank System operational efficiency, structure, and governance. FHFA expects to continue a multi-year, collaborative effort with the FHLBanks, their member institutions, and other stakeholders to address the recommended actions in the report and has stated that it can implement some of the recommendations from the report through ongoing supervision, guidance, or rulemaking, as well as through statutory changes by proposing specific requests for Congressional action.

In April 2024, FHFA provided an update on its plan to implement the report’s recommendations and announced key priorities for 2024. Among others, these priorities include (1) clarifying the FHLBank System mission; (2) aligning eligibility requirements for different types of FHLBank members; (3) streamlining requirements related to the Affordable Housing Program; and (4) strengthening FHLBank evaluation of member creditworthiness. FHFA stated that it would maintain transparency and continue robust stakeholder engagement during the implementation process, including seeking input on FHLBank mission achievement and members’ connection to housing and community development.

FHLBank continues to monitor FHFA’s efforts to implement the recommendations from the report, and we are not able to predict what actions will ultimately result, the timing or extent of any actions or changes, or the ultimate effect on FHLBank or the FHLBank System in the future. We plan to continue to engage with FHFA and other stakeholders in an effort to ensure that the FHLBank System remains well positioned to serve our members and their communities.

FHFA Final Rule on Fair Lending, Fair Housing, and Equitable Housing Finance Plans. On April 29, 2024, FHFA released its final rule that specifies requirements related to FHLBanks’ compliance with fair housing and fair lending laws and related regulations, including the Fair Housing Act and the Equal Credit Opportunity Act and prohibitions on unfair or deceptive acts or practices under the Federal Trade Commission Act. The final rule (i) addresses the enforcement authority of FHFA; (ii) articulates standards related to the board of directors’ oversight of fair housing, fair lending, and principles of equitable housing; and (iii) requires each FHLBank to annually report actions it voluntarily takes to address barriers to sustainable housing opportunities for underserved communities (“Equitable Housing Report Requirements”). The final rule will become effective 60 days after the date it is published in the Federal Register, except that the Equitable Housing Report Requirements will become effective on February 15, 2026. FHLBank is continuing its review of the final rule and evaluating the impact it may have on FHLBank and its operations.



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Item 3: Quantitative and Qualitative Disclosures About Market Risk

Market risk is the risk that changes in market value may adversely affect our financial condition and performance. Interest rate risk is a component of market risk and represents our most significant market risk exposure. Interest rate risk is the risk that the market value of our asset, liability, and derivative portfolios will be negatively impacted by interest rate volatility or that earnings will be affected significantly by interest rate changes. We manage interest rate risk through the characteristics of our portfolio of assets and liabilities and by using derivative transactions to limit duration mismatches and reduce MVE sensitivity. Matching the duration of assets with the duration of liabilities funding those assets is accomplished through the use of different debt maturities and embedded option characteristics, as well as the use of derivatives, primarily interest rate swaps, interest rate caps, and interest rate floors. Interest rate swaps increase the flexibility of our funding alternatives by providing cash flows or characteristics that might not be as readily available or cost-effective if obtained in the standard GSE debt market.

Duration of Equity: DOE aggregates the estimated sensitivity of market value for each of our financial assets and liabilities to changes in interest rates. A positive DOE results when the duration of assets and designated derivatives is greater than the duration of liabilities and designated derivatives, indicating a degree of interest rate risk exposure in a rising interest rate environment. A negative DOE results in the opposite scenario, indicating a degree of interest rate risk exposure in a declining interest rate environment. Higher DOE numbers, whether positive or negative, indicate greater volatility of market value in response to changing interest rates. A decline in market value does not necessarily translate directly into a decline in income, especially for entities that do not trade financial instruments. Changes in market value may indicate trends in income over longer periods, and knowing the sensitivity of our market value to changes in interest rates provides a measure of the interest rate risk we take.

Under the RMP, our base case DOE is generally limited to a range of ±5.0 assuming current interest rates. In addition, our DOE is generally limited to a range of ±7.0 assuming an instantaneous parallel increase or decrease in interest rates of 200 basis points. During periods of extremely low interest rates, the FHFA requires that the FHLBanks employ a constrained down shock analysis to limit the evolution of forward interest rates to positive non-zero values. Since our market risk model imposes a positive non-zero boundary on post-shock interest rates, no additional calculations are necessary to meet this FHFA requirement when applicable. When DOE exceeds the limits established by the RMP, corrective actions taken may include: (1) the purchase of interest rate caps, interest rate floors, or other derivatives; (2) the sale of assets; and/or (3) the addition to the balance sheet of assets or liabilities having characteristics that are such that they counterbalance the excessive duration observed.

Table 27 presents our DOE in the base and the up and down 200 basis point interest rate shock scenarios:

Table 27
Duration of Equity
DateUp 200 Basis PointsBaseDown 200 Basis Points
03/31/20243.32.31.3
12/31/20233.32.11.2
09/30/20233.22.21.9
06/30/20232.31.62.0
03/31/20231.81.82.4

The primary factors contributing to the net changes in duration from December 31, 2023 to March 31, 2024 were: (1) the relative change in interest rates and the relative level of mortgage rates during the period along with variable rate CMOs and their effective cap levels; (2) the increase in percent of total assets represented by the fixed rate mortgage loan portfolio during the period; and (3) asset/liability actions taken by management throughout the period, including the continued issuance of discount notes and short-term variable rate consolidated obligations to fund advance activity and the addition of interest rate cap positions. The increase in interest rates and the relative level of shorter-term interest rates during the period impacted the implied forward rates and the valuation of the variable rate CMO investments with lower effective interest rate caps. To reduce the impact of the general duration lengthening from the variable rate CMO investments with lower effective interest rate caps, stand-alone interest caps were purchased during the quarter. While the base and +200 interest rate shock scenarios increased or remained stable, the addition of the stand-alone interest rate caps tempered additional duration extension in both scenarios.

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In addition, the relative changes in interest rates and mortgage rates during the period caused the mortgage loan portfolio contribution to duration to lengthen more than the associated liabilities, contributing to the increase in the asset sensitive DOE profile in the base case. The mortgage loan portfolio generally has a longer duration profile in the interest rate shock scenarios contributing to the asset-sensitive DOE in the up and down 200 basis point shock scenarios, including the increasing asset-sensitive DOE in the up 200 basis point scenario. However, the prepayment sensitivity and market value changes in our mortgage portfolio currently align well with our non-swapped callable debt portfolio in these scenarios generating a relatively stable sensitivity profile in the interest rate shock scenarios.

The change in interest rates during the period generally lengthened the duration profile for both the fixed rate mortgage loan portfolio and the associated unswapped callable consolidated obligation bonds funding these assets. With the increase in our mortgage loan portfolio balance, the net impact was a slight increase as a percentage of total assets during this period, as discussed in Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Financial Condition – MPF Program” so the duration profile changed as expected as prepayments decreased slightly for both new production mortgage loans, as well as the outstanding fixed rate mortgage loan portfolio.

To effectively manage these changes in the mortgage loan portfolio (including new production and prepaid loans) and related sensitivity to changes in market conditions, unswapped callable consolidated obligation bonds that either matured or were called were generally replaced with reissuance of unswapped callable consolidated obligation bonds with relatively long maturities and short lock-out periods (generally three months to one year). Generally, changes in the profile of the liability portfolio corresponds with the expected duration profile of the new fixed rate mortgage loans, all else being equal, and positions the balance sheet for future changes in rates, including changes in interest rate increases where the mortgage loan portfolio will likely lengthen in duration as expected prepayments slow. For further discussion of the call and reissuance of consolidated obligation bonds, see Item 7 – “Management's Discussion and Analysis of Financial Condition and Results of Operations – Financial Condition – Consolidated Obligations.” The combination of these factors contributed to the net DOE changes in all scenarios during the period.

Duration gap is the difference between the duration of our assets and the duration of our liabilities. Our base duration gap was 1.5 months and 1.3 months for March 31, 2024 and December 31, 2023, respectively.

Market Value of Equity
MVE is the net value of our assets and liabilities. Estimating sensitivity of MVE to changes in interest rates is another measure of interest rate risk. The RMP measures our market value risk in terms of the MVE in relation to total regulatory capital stock outstanding (TRCS). TRCS includes all capital stock outstanding, including stock subject to mandatory redemption. As a cooperative, we believe using the TRCS results is an appropriate measure because it reflects our market value relative to the book value of our capital stock. Our RMP stipulates MVE shall not be less than: (1) 100 percent of TRCS under the base case scenario; or (2) 90 percent of TRCS under a ±200 basis point instantaneous parallel shock in interest rates. Table 28 presents MVE as a percent of TRCS. As of March 31, 2024, all scenarios are well above the specified limits and much of the relative level in the ratios during the periods covered by the table can be attributed to the relative level of the fixed rate mortgage loan and associated funding portfolio market values along with the relative level of outstanding capital.

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The MVE to TRCS ratios can be impacted by the market value of equity sensitivity and level of capital outstanding based on our capital management approach. The relative level of advance, mortgage loan, and letters of credit balances, which trigger required stock, and excess stock as of March 31, 2024 (see Table 25 under Part I, Item 2 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources - Capital”) contributed to the MVE levels as of March 31, 2024. These relationships and associated risk sensitivity primarily generate the changes in the MVE/TRCS levels and produce the changes in the ratios in all interest rate scenarios in the table below.

Generally, a positive duration position accompanied by rising interest rates would negatively impact the base market value of equity (numerator). Likewise, as capital increases, the MVE/TRCS ratio declines since the capital level is the denominator in the ratio. While the change in interest rates contributed to the overall impact on base MVE during the period, the changes were limited with the ratio maintaining consistent levels in the base case and interest rate shock scenarios during the period.

Table 28
Market Value of Equity as a Percent of Total Regulatory Capital Stock
DateUp 200 Basis PointsBaseDown 200 Basis Points
03/31/2024147155161
12/31/2023145153157
09/30/2023136144150
06/30/2023143148154
03/31/2023143148154

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Detail of Derivative Instruments by Type of Instrument by Type of Risk
Various types of derivative instruments are utilized to mitigate the interest rate risks described in the preceding sections as well as to better match the terms of assets and liabilities. Tables 29 and 30 present the notional amount and fair value amount (fair value includes net accrued interest receivable or payable on the derivative) for derivative instruments by hedged item, hedging instrument, hedging objective and accounting designation (in thousands):

Table 29
03/31/2024
Hedged ItemHedging InstrumentHedging ObjectiveAccounting DesignationNotional AmountFair Value Amount
Advances
Fixed rate non-callable advancesPay fixed, receive variable interest rate swapConvert the advance’s fixed rate to a variable rate indexFair Value Hedge $11,546,832 $3,535 
Fixed rate convertible advancesPay fixed, receive variable interest rate swapConvert the advance’s fixed rate to a variable rate index and offset option risk in the advanceFair Value Hedge 113,400 3,393 
Fixed rate putable advancesPay fixed, receive variable interest rate swapConvert the advance’s fixed rate to a variable rate index and offset option risk in the advanceFair Value Hedge 2,448,550 9,668 
Fixed rate non-callable advancesPay fixed, receive variable interest rate swapConvert the advance’s fixed rate to a variable rate indexEconomic Hedge201,039 1,072 
Firm commitment to issue a fixed rate advanceForward settling interest rate swapProtect against fair value riskFair Value Hedge23,636 15 
Investments
Fixed rate non-MBS available-for-sale investmentsPay fixed, receive variable interest rate swapConvert the investment’s fixed rate to a variable rate indexFair Value Hedge3,300,000 (2,948)
Fixed rate MBS available-for-sale investmentsPay fixed, receive variable interest rate swapConvert the investment’s fixed rate to a variable rate indexFair Value Hedge3,964,319 55,612 
Fixed rate non-MBS trading investmentsPay fixed, receive variable interest rate swapConvert the investment’s fixed rate to a variable rate indexEconomic Hedge 293,000 
Fixed rate MBS trading investmentsPay fixed, receive variable interest rate swapConvert the investment’s fixed rate to a variable rate indexEconomic Hedge 611,255 21,227 
Adjustable rate MBS with embedded capsInterest rate capOffset the interest rate cap embedded in a variable rate investmentEconomic Hedge 804,000 2,874 
Mortgage Loans Held for Portfolio
Fixed rate mortgage purchase commitmentsMortgage purchase commitmentProtect against fair value riskEconomic Hedge 58,625 181 
Consolidated Obligation Discount Notes
Fixed rate non-callable consolidated obligation discount notes with tenors less than 6 monthsReceive fixed, pay variable interest rate swapConvert the discount note's fixed rate to a variable rateEconomic Hedge4,645,082 297 
Fixed rate non-callable consolidated obligation discount notes with tenors of 6 to 12 monthsReceive fixed, pay variable interest rate swapConvert the discount note's fixed rate to a variable rateFair Value Hedge 2,365,029 1,832 
Consolidated Obligation Bonds
Fixed rate non-callable consolidated obligation bondsReceive fixed, pay variable interest rate swapConvert the bond’s fixed rate to a variable rate indexFair Value Hedge 4,333,000 (12,901)
Fixed rate callable consolidated obligation bondsReceive fixed, pay variable interest rate swapConvert the bond’s fixed rate to a variable rate index and offset option risk in the bondFair Value Hedge 10,153,300 (231,014)
Callable step-up/step-down consolidated obligation bondsReceive variable interest rate with embedded features, pay variable interest rate swapReduce interest rate sensitivity and repricing gaps by converting the bond’s variable rate to a different variable rate index and/or to offset embedded options risk in the bondFair Value Hedge 1,147,000 (69,256)
TOTAL$46,008,067 $(216,412)

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Table 30
12/31/2023
Hedged ItemHedging InstrumentHedging ObjectiveAccounting DesignationNotional AmountFair Value Amount
Advances
Fixed rate non-callable advancesPay fixed, receive variable interest rate swapConvert the advance’s fixed rate to a variable rate indexFair Value Hedge$11,315,760 $(2,205)
Fixed rate convertible advancesPay fixed, receive variable interest rate swapConvert the advance’s fixed rate to a variable rate index and offset option risk in the advanceFair Value Hedge113,400 4,215 
Fixed rate putable advancesPay fixed, receive variable interest rate swapConvert the advance’s fixed rate to a variable rate index and offset option risk in the advanceFair Value Hedge2,071,800 (9,227)
Fixed rate non-callable advancesPay fixed, receive variable interest rate swapConvert the advance’s fixed rate to a variable rate indexEconomic Hedge201,138 834 
Firm commitment to issue a fixed rate advanceForward settling interest rate swapProtect against fair value riskFair Value Hedge52,141 
Investments
Fixed rate non-MBS available-for-sale investmentsPay fixed, receive variable interest rate swapConvert the investment’s fixed rate to a variable rate indexFair Value Hedge3,050,000 (4,065)
Fixed rate MBS available-for-sale investmentsPay fixed, receive variable interest rate swapConvert the investment’s fixed rate to a variable rate indexFair Value Hedge3,766,473 48,363 
Fixed rate non-MBS trading investmentsPay fixed, receive variable interest rate swapConvert the investment’s fixed rate to a variable rate indexEconomic Hedge293,000 (26)
Fixed rate MBS trading investmentsPay fixed, receive variable interest rate swapConvert the investment’s fixed rate to a variable rate indexEconomic Hedge628,027 20,659 
Adjustable rate MBS with embedded capsInterest rate capOffset the interest rate cap embedded in a variable rate investmentEconomic Hedge304,000 698 
Mortgage Loans Held for Portfolio
Fixed rate mortgage purchase commitmentsMortgage purchase commitmentProtect against fair value riskEconomic Hedge41,641 128 
Consolidated Obligation Discount Notes
Fixed rate non-callable consolidated obligation discount notes with tenors less than 6 monthsReceive fixed, pay variable interest rate swapConvert the discount note's fixed rate to a variable rateEconomic Hedge5,261,131 453 
Fixed rate non-callable consolidated obligation discount notes with tenors of 6 to 12 monthsReceive fixed, pay variable interest rate swapConvert the discount note's fixed rate to a variable rateFair Value Hedge3,727,296 911 
Consolidated Obligation Bonds
Fixed rate non-callable consolidated obligation bondsReceive fixed, pay variable interest rate swapConvert the bond’s fixed rate to a variable rate indexFair Value Hedge4,599,000 (18,313)
Fixed rate callable consolidated obligation bondsReceive fixed, pay variable interest rate swapConvert the bond’s fixed rate to a variable rate index and offset option risk in the bondFair Value Hedge14,797,000 (241,011)
Callable step-up/step-down consolidated obligation bondsReceive variable interest rate with embedded features, pay variable interest rate swapReduce interest rate sensitivity and repricing gaps by converting the bond’s variable rate to a different variable rate index and/or to offset embedded options risk in the bondFair Value Hedge1,312,000 (72,918)
TOTAL$51,533,807 $(271,497)

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

Management, with the participation of the President and Chief Executive Officer (CEO), our principal executive officer, and the Chief Accounting Officer, our principal financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of March 31, 2024. Based upon that evaluation, the CEO and Chief Accounting Officer have concluded that our disclosure controls and procedures were effective at a reasonable assurance level as of March 31, 2024.

Changes in Internal Control Over Financial Reporting
There has been no change in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the fiscal quarter ended March 31, 2024 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Part II. OTHER INFORMATION

Item 1: Legal Proceedings
We are subject to various pending legal proceedings arising in the normal course of business. After consultation with legal counsel, management does not anticipate that the ultimate liability, if any, arising out of these matters will have a material adverse effect on our financial condition or results of operations. Additionally, management does not believe that we are subject to any material pending legal proceedings outside of ordinary litigation incidental to our business.

Item 1A: Risk Factors
There have been no material changes to the risk factors previously disclosed in our annual report on Form 10-K filed on March 11, 2024, and such risk factors are incorporated by reference herein.

Item 2: Unregistered Sales of Equity Securities and Use of Proceeds
Not applicable.

Item 3: Defaults Upon Senior Securities
None.

Item 4: Mine Safety Disclosures
Not applicable.

Item 5: Other Information
None.

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Item 6: Exhibits
Exhibit
No.
Description
Exhibit 3.1 to the FHLBank’s registration statement on Form 10, filed May 15, 2006, and made effective on July 14, 2006 (File No. 000-52004), Federal Home Loan Bank of Topeka Articles and Organization Certificate, is incorporated herein by reference as Exhibit 3.1.
Exhibit 3.1 to the Current Report on Form 8-K, filed October 26, 2022, Federal Home Loan Bank of Topeka Amended and Restated Bylaws, is incorporated herein by reference as Exhibit 3.2.
Exhibit 4.1 to the Annual Report on Form 10-K, filed March 20, 2020, Federal Home Loan Bank of Topeka Capital Plan.
Certification of President and Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of President and Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer) pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INSInline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)
101.SCHInline XBRL Taxonomy Extension Schema Document
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document
101.LABInline XBRL Taxonomy Extension Label Linkbase Document
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document
104Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)
*     Represents a management contract or a compensatory plan or arrangement.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 Federal Home Loan Bank of Topeka
  
  
May 9, 2024By: /s/ Jeffrey B. Kuzbel
DateJeffrey B. Kuzbel
 President and Chief Executive Officer
May 9, 2024By: /s/ Amy J. Crouch
DateAmy J. Crouch
First Vice President and Chief Accounting Officer

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